Trump pushes pharma tariffs, but exemptions limit impact

Donald Trump went ahead with his long-awaited tariffs on branded drug imports last week. But a raft of exemptions will narrow their impact. The Trump regime announced the sector-specific tariffs to signal that it's pursuing tariffs as a trade balancing tool despite the US Supreme Court's strike-down of sweeping emergency tariffs by the president.

He is free to impose tariffs on specific imports and to counteract unfair trade practices. This is the way the regime is moving, having studied drug imports for close to a year after Trump's April 2, 2025, 'Liberation Day' tariff blitz. Separate investigations are on for steel, copper and aluminium, and the US is changing the way tariffs are to be calculated to avoid windfall gains to overseas producers.

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In the case of pharmaceuticals, the 100% tariffs will not apply to companies that make investment commitments in the US. Major global drugmakers have struck deals to set up manufacturing plants in the US by the end of Trump's second term.

Separately, the new tariffs do not apply to countries that have negotiated with the US for better terms. So, branded drugs from the EU, Japan, South Korea, Switzerland and Britain will be exempt from the 100% levy. Other drugmakers have been given a window to reach agreements with the US. This eliminates a large portion of branded drugs imported into the US from the newly announced tariffs, which is essentially leverage for negotiation.

Generics do not fall into the ambit of the latest tariff order. This should keep the Indian pharmaceutical industry largely out of harm's way. Since India is still negotiating a tariff deal with the US, Indian drugmakers exporting branded medicine to the US will have to understand how the new structure affects them.

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There is some leeway to companies based on their size to secure a positive tariff dispensation. The US objective of bringing more manufacturing onshore involves higher production costs. Every case will have to be independently reviewed to gauge impact in the corporate balance sheet.