During his first term, President Trump’s tariffs were an $80 billion tax on consumers, with most of these tariffs persisting under the Biden administration. The bill is looking to be higher this time as tariffs are being applied more broadly.
Until now, the pharmaceutical industry has primarily avoided the direct effects of these levies. That is changing in Trump’s second term, with tariffs set to increase the cost of medicine along with everything else.
This time, Trump’s tariffs target not just specific industries but broadly increase costs on a wide range of imports, including pharmaceuticals.
Trump has announced additional 25 percent tariffs on Canada and Mexico, and a 10 percent rate for China. The only exception to this was increasing the tariff on Canadian oil by 10 percent instead of 25 percent. While the tariffs with Canada and Mexico have been delayed, they have not been canceled.
During the presidential campaign, he signaled an interest in as much as a 20 percent tariff on all imports and is already talking about additional tariffs on the European Union. Tariffs are, at their core, a tax on imports — and while supporters often argue that they hit foreign businesses, the reality is that the burden falls squarely on U.S. consumers.
In 2023, U.S. pharmaceutical imports totaled $177.85 billion. If tariff rates averaged 20 percent, it would add nearly $36 billion to the cost of these medicines. While some consumers might forgo purchases in response to higher prices, this cost-cutting measure comes at the expense of their health. Research shows that price increases typically hit lower-income Americans hardest, leaving them with no choice but to skip necessary medications.
Proponents of tariffs often justify them as a means of reshoring manufacturing jobs. In the pharmaceutical industry, some argue that reliance on low-cost production in countries like China and India is problematic. However, tariffs are an inefficient and costly tool to address this.
Measured by volume, China and India were the first and third-largest suppliers of pharmaceuticals to the United States in 2023, respectively. However, when measured by value, U.S. production of active pharmaceutical ingredients (API) is far more significant. In 2019, the U.S. produced 54 percent of the APIs used in the medicines consumed domestically, while China provided only 6 percent. Ireland, by contrast, supplied 19 percent.
The Census Bureau’s trade data show that China played an even smaller role in pharmaceuticals overall, accounting for less than 4 percent of the total market in 2023. Seven countries, including Ireland, Germany and Singapore, provided more pharmaceutical imports by value than China.
The additional 10 percent, or even the proposed 60 percent, rate on Chinese goods will likely shift more imports to India — a country with even lower manufacturing costs. Even with a global tariff, U.S. manufacturers would still face steep challenges competing with China and India, where wages are far lower — five times less in China and 30 times less in India. While the United States does benefit from higher labor efficiency, tariffs alone would not be enough to make U.S. production of low-cost generics competitive. Higher tariff rates would burden consumers with higher prices on essential medications, undermining the very purpose of affordable generics.
Tariffs could also harm U.S.-based pharmaceutical manufacturers. A blanket tariff including pharmaceuticals would likely violate the World Trade Organization’s Pharma Agreement, which ensures many drugs remain tariff-free. This could provoke retaliation from other nations, threatening America’s position as the world’s third-largest exporter of pharmaceuticals.
Secure medical supply chains are crucial, but tariffs are not the answer. With drug prices nearly three times higher than in other OECD countries, further price hikes driven by tariffs would worsen the situation for American consumers — particularly those already struggling to afford their medications.
