Companies in the EU, Japan, Korea and Switzerland face a lower, capped tariff rate under existing trade agreements with the US.
President Donald Trump signed an executive order on Thursday that could impose long-threatened tariffs of up to 100% on certain patented drugs from companies that do not reach agreements with his administration in the coming months.
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Companies that have signed a “most favoured nation” pricing deal and are actively building facilities in the US to bring production of patented pharmaceuticals and their ingredients onshore will have a 0% tariff.
For those that do not have a pricing deal but are building such projects in the US, a 20% tariff will apply, rising to 100% within four years.
A senior administration official told reporters on a press call that companies still have months to negotiate before the 100% tariffs take effect — 120 days for larger companies, and 180 days for others.
The official, speaking on condition of anonymity to preview the executive order before it was issued, did not identify any companies or drugs at risk of being hit by the increased tariffs but noted the administration had already reached 17 pricing deals with major drugmakers, 13 of which have signed.
In the order, Trump wrote that he deemed such actions necessary “to address the threatened impairment of the national security posed by imports of pharmaceuticals and pharmaceutical ingredients.”
It comes on the first anniversary of Trump’s so-called Liberation Day, when the president unveiled sweeping new import taxes on nearly every country in the world, sending the stock market reeling.
Those “Liberation Day” tariffs were among the duties the Supreme Court overturned in February.
Some warned of the consequences of the tariffs announced on Thursday. Stephen J. Ubl, CEO of the pharmaceutical industry trade group PhRMA, said taxes “on cutting-edge medicines will increase costs and could jeopardise billions in US investments."
He pointed to America’s already large footprint in biopharmaceutical manufacturing and noted medicines sourced from other countries “overwhelmingly come from reliable US allies.”
Trump has launched a barrage of new import taxes on America’s trading partners since the start of his second term and has repeatedly pledged that very high tariffs on foreign-made drugs were forthcoming.
But the administration has also used the threat of new levies to strike deals with major companies — like Pfizer, Eli Lilly and Bristol Myers Squibb — over the last year, with promises of lower prices for new drugs.
Beyond company-specific rates, a handful of countries have reached trade frameworks with the US to further cap tariffs on drugs sent to the US.
The EU, Japan, Korea and Switzerland will see a 15% US tariff on patented pharmaceuticals, matching previously agreed rates for most goods, and the UK will get 10% — which Thursday’s order noted would “then reduce to zero” under future trade agreements.
The UK previously said it had secured a 0% tariff rate for all British medicines exported to the US for at least three years.
Trump also unveils update to metal tariffs
In addition, on Thursday, Trump rolled out an update on his 50% tariffs on imported steel, aluminium, and copper.
Starting Monday, tariff rates on those metals will be calculated based on the “full customs value” of what US customers pay when buying foreign metal under the latest order, which administration officials say will prevent importers from other countries from avoiding higher payments.
Products fully made of steel, aluminium and copper will continue to be tariffed at 50% for most countries.
But the administration is also changing how tariffs are calculated for derivative metals — or finished goods that contain some of these metals, but are not made entirely of them.
For a product with metal that amounts to less than 15% of its entire weight (like the cap on a perfume bottle), only country-specific tariffs will now apply, officials told reporters on Thursday.
But for products with more metal, such as a largely steel washing machine, they said a 25% tariff will apply to the whole value.
More sectoral taxes are expected
Thursday’s orders are the latest example of Trump turning to sector-specific duties. The president used Section 232 of the 1962 Trade Expansion Act to impose the levies, the same authority he cited to impose import taxes on cars, lumber and even kitchen cabinets.
And many expect to see more product-specific import taxes in the future.
That's because a ruling from the Supreme Court struck down tariffs Trump imposed using another law — the 1977 International Emergency Economic Powers Act — to immediately slap tariffs on any country, at nearly any level.
While the 20 February court decision marked a significant blow to Trump's economic agenda, the president still has plenty of options to keep taxing imports aggressively.
Beyond sectoral levies, Trump also imposed a 10% tariff on all imports under a separate legal power just hours after the Supreme Court’s ruling, but that duty can only last for 150 days. Some two dozen states have already challenged the new tariffs.
Trump has argued his steep new import taxes are necessary to bring back wealth that was “stolen” from the US. He says they will narrow America’s decades-old trade deficit and bring manufacturing back to the country. But Trump has also turned to tariffs amid personal grudges, or in response to political critics. And disrupting the global supply chain has proven costly for businesses and households that are already strained by rising prices.
