On Thursday, Sept. 25, President Donald Trump announced new tariffs of 100% on pharmaceutical products imported into the United States starting Oct. 1, but said there would be exceptions made for companies investing in U.S. manufacturing. The announcement comes as the result of a national security investigation under Section 232 of the Trade Expansion Act of 1962 initiated in April.
Earlier in the week, the Trump administration also formally announced that it had begun a new Section 232 national security investigation into imports of “personal protective equipment, medical consumables, and medical equipment, including devices,” soliciting public comments through Oct. 17.
The following alert summarizes the Trump administration initiatives and outlines the potential impact for the pharmaceutical and medical device industries.
100% Tariffs on “Branded and Patented” Pharmaceutical Products
On September 25 in a Truth Social post, President Trump announced “a 100% Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America.” According to the president’s post, “‘IS BUILDING’ will be defined as, ‘breaking ground’ and/or ‘under construction.’”
There are many questions about how the tariff and the exemption for products that will be produced at U.S. manufacturing facilities will be implemented. For example, the government did not set a threshold monetary value of investment required to avoid the duties. It also remains unclear whether the exemption will apply to APIs or precursors that need to be imported for the drug to be manufactured in U.S. facilities. Furthermore, it’s not clear whether there is more to come from the Section 232 investigation into pharmaceuticals. While the new tariffs announced by President Trump apply strictly to branded and patented pharmaceutical products based on the contents of the President’s post, generic drugs and their components (active pharmaceutical ingredients (APIs) and chemical precursors) remain subject to the ongoing Section 232 national security investigation into pharmaceutical imports, which could still result in additional duties on a broader set of pharmaceutical products. The Commerce Department is expected to release guidance in the coming days to clarify the scope of the tariffs and the exceptions.
The president’s announcement marks a clear escalation in his approach to pharmaceutical sector tariffs, given his comments as recent as August that indicated tariffs on pharmaceutical products would start “small” and later increase over the course of one to two years, to as high as 150%‒250%.
Already, pharmaceutical manufacturers are seeking to clarify whether their domestic manufacturing investments will qualify for tariff relief. A number of large pharmaceutical manufacturers have announced investments of tens of billions of dollars in U.S. manufacturing and hope to avoid exposure to these new duties. Additionally, pharmaceutical manufacturers with products sourced from the European Union and Japan expect to rely on a 15% cap on Section 232 pharmaceutical tariffs established as part of the U.S.-EU Framework on an Agreement on Reciprocal, Fair, and Balanced Trade and U.S.-Japan Agreement.
Separately, the Trump administration is also advancing a Most-Favored-Nation (MFN) drug pricing initiative, which aims to tie U.S. drug prices for certain pharmaceutical products to the lowest price available in peer Organisation for Economic and Co-operation Development (OECD) countries. On Sept. 25, the White House submitted a proposed rule, called “the Global Benchmark for Efficient Drug Pricing (GLOBE) Model,” to the Office of Management and Budget (OMB) for review. Details on the proposed rule have not been released, but the rule is expected to reduce reimbursement for certain drugs in federal health programs. Though distinct from the tariff regime, the MFN pricing rule adds another layer of pressure on the pharmaceutical industry. Publication of the proposed rule may come as soon as the week of Sept. 29.
National Security Probe into Medical Devices
On Sept. 26, the Commerce Department publicly posted a national security investigation that was initiated on Sept. 2 into imports of medical devices and related health care equipment under Section 232 of the Trade Expansion Act. The probe covers a wide range of products, including, but not limited to pacemakers, insulin pumps, blood glucose monitors, imaging machines and other durable medical tools.
The Commerce Department is evaluating whether reliance on foreign suppliers for these items poses a threat to U.S. national security, particularly in light of what the Commerce Department describes as a threat of export restrictions by major trading partners, including the potential for “foreign nations to weaponize their control over supplies of PPE, medical consumables, and medical equipment (including devices).”
Public comments are being accepted through Oct. 17. No immediate trade actions have been announced, but the investigation likely signals future tariffs, potentially phased in over time. Under Section 232 of the Trade Expansion Act, the Commerce Department has 270 days from the date the investigation is initiated, or until May 30 in this instance, to make a final determination, though action could come sooner, as has been the case in the separate pharmaceutical investigation. If the agency concludes that imports in the medical device and equipment sector pose a national security risk, the administration could impose tariffs, quotas or other trade restrictions on a wide range of health care equipment impacting manufacturers, hospitals, health care providers, distributors and other supply chain partners, potentially raising costs and disrupting supply chains. The administration has expressed concern that relying too much on foreign imports for these important products is itself a national security risk. Companies that produce or rely on these products may wish to consider filing comments during the public comment period and having discussions with policymakers in the Executive Branch and Capitol Hill.
