What happened
President Trump signed an executive order on 2 April imposing a baseline 100% tariff on all imported patented pharmaceutical products. The order gives large companies 120 days and smaller firms 180 days to comply or face the full tariff.
Companies can qualify for reduced rates. Those that sign Most Favoured Nation pricing deals with the Department of Health and Human Services and onshoring agreements with the Commerce Department pay 0%. Those that commit to building US manufacturing pay 20%, rising to 100% after four years if construction is not completed.
Why it matters: The order is designed to force multinational drugmakers to shift production to the US and match their lowest global prices domestically, a significant shift in trade policy affecting the pharmaceutical supply chain.
The case for tariffs
The White House framed the measure as bolstering national security and reducing dependence on foreign pharmaceutical manufacturing. Products from allied nations with existing trade agreements, including the EU, Japan, South Korea, and Switzerland, qualify for a reduced 15% rate.
More than a dozen major drugmakers, including Eli Lilly, Pfizer, and Novo Nordisk, had already signed pricing deals with the administration since November 2025 and are exempt for three years. The executive order formalises leverage the White House has been applying informally.
Orphan drugs, animal health products, and specialty drugs meeting urgent public health needs are exempt.
The case against
Consumer advocates warned the tariffs could drive up drug costs and cause shortages if companies do not comply before the deadlines. The real pressure falls on mid-tier and generic manufacturers that have not yet negotiated exemptions.
ING analysts assessed the tariffs “will have a limited effect on the sector” precisely because most major companies have already cut deals. The order may function more as a formalisation of existing arrangements than a genuine market disruption.
The executive order sits alongside 50% tariffs on imported steel, aluminium, and copper, creating compounding cost pressures across multiple industries.
What happens next
The administration expects more companies to announce reshoring plans before the July deadline. The 15% rate for allied nations may become the landing zone for many European manufacturers. No congressional or legal challenges have been announced, but both remain possible.