Pharma Industry Faces Jitters As Trump Hints At Historic Tariffs, BofA Outlines Probable Timeline

U.S. President Donald Trump, on Tuesday, disclosed plans for a "major tariff" on foreign pharmaceuticals.

"We're going to be announcing very shortly a major tariff on pharmaceuticals… when they hear that they will leave China, they will leave other places because… most of their product is sold here," Trump expressed at a National Republican Congressional Committee dinner.

He also told reporters on board his Air Force One plane that "pharma" tariffs would arrive "at a level that you haven't really seen before," saying these would be announced "in the near future," BBC report added.

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When President Trump announced tariffs last week, he excluded pharmaceuticals from the new tariffs, likely a relief for the industry under pressure following his prior comments suggesting a 25% tariff on pharmaceutical imports.

On Wednesday, in a surprise announcement from President Donald Trump, a 90-day pause on tariffs for countries that have not retaliated against U.S. trade measures.

The news ignited a broad risk-on rally, catapulting major indices to multi-month highs and sending volatility plunging.

Trump's latest Truth Social post slammed China for showing "a lack of respect" and declared an immediate 125% tariff hike on Chinese goods.

"At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A. and other Countries is no longer sustainable or acceptable," he said.

He praised the over 75 countries that, in his words, "have not, at my strong suggestion, retaliated in any way, shape, or form."

As a reward, those countries would benefit from a temporary 10% reciprocal tariff and a 90-day pause on additional duties.

The biopharma industry has historically been shielded from tariffs, including during Trump's first term.

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Although Trump didn't provide many details, his remarks have unsettled buyers, especially those who depend on medicines from India. India provides nearly half of all generic drugs used in the U.S., helping cut billions from healthcare costs.

The U.S. is a major market, buying about a third of India's $13 billion in yearly drug exports.

Indian drug companies warn that if tariffs are added, they'd have to raise prices—which could increase healthcare costs in the U.S.

Even though some companies like Cipla and Dr. Reddy's Laboratories Ltd RDY have factories in the U.S., most say it's too expensive to move production for low-profit generic drugs.

BofA Securities analyst says if the Trump administration plans to impose tariffs on the pharmaceutical industry, it would likely do so through a "Section 232 investigation" under the Trade Expansion Act of 1962 to determine whether importing certain goods threatens national security.

The typical timeline for a Section 232 investigation is about a year. If the same timeline applied here, tariffs on drug imports likely wouldn't take effect until late in the year—at the earliest.

It's unclear whether the Section 232 investigation into the drug industry is about to start, but based on recent comments from the administration, it seems possible. However, launching an investigation doesn't guarantee that tariffs will follow.

As the first quarter 2025 earnings season starts soon, analyst Tim Anderson says it will be worth watching whether companies discuss potential tariffs during earnings calls.

That said, any actual earnings impact likely wouldn't show up until sometime after 2025, which could leave investors with more questions than answers.

Wedbush analyst Daniel Ives on Tuesday wrote that "saying we can just make this in the USA" understates how complex the supply chain in Asia really is—and how electronics, chips, semiconductors, hardware, and smartphones have been built for U.S. consumers over the past 30 years."

Shares of major drugmakers such as Gilead Sciences Inc GILD, Merck & Co Inc MRK, Eli Lilly And Co LLY, AstraZeneca Plc AZN, Roche Holdings AG RHHBY, Sanofi SA SNY, Novartis AG NVS, Argenx SE ARGX, UCB SA UCBJY UCBJF, Novo Nordisk A/S NVO, Regeneron Pharmaceuticals Inc. REGN GSK Plc GSK and Pfizer Inc PFE fell on Wednesday, only reverse course later after the 90-day tariff pause.