Biopharma: A 'Safe Haven' As Tariff Turmoil Rages On?

As trade tensions heat up, one sector might have the immunity investors need – biopharma. JPMorgan analyst Chris Schott sees the industry as a relative “safe haven” despite looming pharmaceutical-specific tariffs, thanks to its high-margin business model and operational flexibility.

Tariffs Loom, But Biopharma Stands Strong

While the White House has not revealed details on pharma-related tariffs, broader trade restrictions announced today have put investors on edge. Schott acknowledges that some uncertainty will linger until the Section 232 pharmaceutical-specific tariffs are fully outlined in the coming weeks. However, he believes the sector has the tools to weather any potential impact.

Biopharma companies benefit from low capital expenditure intensity and high gross margins, making them more resilient in adjusting to cost pressures. Many also can shift intellectual property and manufacturing to the U.S. if needed while finding cost efficiencies elsewhere.

When Will The Impact Be Felt?

For now, companies appear to have time on their side. Schott anticipates that any direct financial impact from tariffs will likely hit in 2026 rather than 2025, as firms work through existing inventory already in the U.S. That gives the sector a buffer period to assess the extent of the tariffs and adapt accordingly.

Actionable ETFs For Investors

Investors looking to capitalize on biopharma’s defensive positioning amid tariff uncertainty may consider iShares U.S. Pharmaceuticals ETF IHE and SPDR S&P Pharmaceuticals ETF XPH. These funds provide exposure to leading drugmakers who are expected to navigate potential trade disruptions more smoothly than other industries.

Key Questions Still Remain

Several unknowns still need to be addressed: What will the tariff levels be by country? Will they target low-cost active pharmaceutical ingredients (APIs) or final drug products with higher cost implications? Will these tariffs remain in place in the long term?

Schott expects companies to shed more light on these issues in their upcoming earnings calls.

Until then, while tariffs shake the broader market, biopharma appears to have taken its medicine – staying strong while others scramble.

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