NEW YORK (AP) — An executive order signed by President Donald Trump on Thursday could impose significant tariffs on certain patented drugs, as high as 100%, on companies that fail to reach agreements with the administration in the coming months.
Companies agreeing to a “most favored nation” pricing deal and investing in U.S. facilities to produce patented drugs and their ingredients will avoid tariffs. Firms without a pricing agreement but undertaking U.S. projects will face a 20% tariff, which is set to rise to 100% after four years.
A senior administration official, who chose to remain anonymous, informed reporters during a press call that companies have a few months to negotiate before the 100% tariffs are enforced—120 days for larger firms and 180 days for others. Although specific companies or drugs at risk were not disclosed, the administration has successfully negotiated 17 pricing agreements with major pharmaceutical manufacturers, with 13 companies having signed.
The executive order, as stated by Trump, aims to counteract the “threatened impairment of the national security posed by imports of pharmaceuticals and pharmaceutical ingredients.” This development coincides with the first anniversary of Trump’s “Liberation Day,” when he introduced extensive import taxes affecting nearly every country, which previously unsettled the stock market. The Supreme Court overturned these “Liberation Day” tariffs in February.
Concerns have been raised regarding the upcoming tariffs. Stephen J. Ubl, CEO of PhRMA, a pharmaceutical trade group, warned that taxes on innovative medicines could escalate costs and risk billions in U.S. investments. He emphasized the significant role of the U.S. in biopharmaceutical manufacturing and noted that medications from other countries predominantly come from “reliable U.S. allies.”
Since the start of his second term, Trump has initiated numerous import taxes and has continually promised high tariffs on foreign-made drugs. The administration has used the threat of new tariffs to negotiate deals with major companies such as Pfizer, Eli Lilly, and Bristol Myers Squibb, resulting in commitments to lower prices for new drugs.
Some countries have negotiated trade agreements with the U.S. to limit drug tariffs. The EU, Japan, Korea, and Switzerland will have a 15% tariff on patented pharmaceuticals, aligning with previously agreed rates for most goods. The U.K. will encounter a 10% tariff, which could reduce to zero under future trade deals. The U.K. previously secured a 0% tariff rate for British medicines exported to the U.S. for at least three years.
Trump also updates metal tariffs
Additionally, Trump announced an update to the 50% tariffs on imported steel, aluminum, and copper. Starting Monday, these tariffs will be calculated based on the “full customs value” of the purchase price paid by U.S. customers for foreign metals, aiming to prevent importers from circumventing higher fees.
Products made entirely of steel, aluminum, and copper will continue to incur a 50% tariff for most countries. However, the method of calculating tariffs for derivative metals, or products partially made of these metals, will change. For items where metal constitutes less than 15% of their total weight, such as a perfume bottle cap, only country-specific tariffs will apply. For products containing more metal, a 25% tariff will be applied to the total value.
Accumulating sectoral taxes
The latest orders demonstrate Trump’s continued use of sectoral duties. He invoked Section 232 of the 1962 Trade Expansion Act to levy these tariffs, the same authority used to impose import taxes on cars, lumber, and kitchen cabinets. More product-specific import taxes are anticipated in the future.
This approach follows a Supreme Court decision that invalidated tariffs imposed by Trump using the 1977 International Emergency Economic Powers Act. Although the February 20 ruling dealt a significant setback to Trump’s economic strategy, he still possesses considerable options to continue imposing tariffs. Beyond sectoral duties, Trump also implemented a 10% tariff on all imports under a separate legal authority shortly after the Supreme Court’s ruling, although it can only last for 150 days. Approximately two dozen states have contested the new tariffs.
Trump contends that these steep import taxes are essential to recover wealth allegedly “stolen” from the U.S., reduce the longstanding trade deficit, and rejuvenate domestic manufacturing. However, he has also resorted to tariffs amid personal grievances or in response to political critiques. The disruption to the global supply chain has proven costly for businesses and households already strained by rising expenses.
