Veriton Investment

Trump Pharma Tariff Plan Looks Like Reprieve for Many Drugmakers

(Bloomberg) -- President Donald Trump’s plan to impose a 100% tariff on branded and patented drug imports was greeted with a shrug by many investors, who are betting his exemptions for companies with US manufacturing will soften any blow.

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While Trump’s move threatens to double the cost of some imported treatments if construction on US manufacturing plants hasn’t begun by Oct. 1, many big drugmakers already have US plants or are building them.

“All big pharma companies have a US presence and almost all have announced large investments in the years to come,” Vontobel analyst Sibylle Bischofberger Frick said in a note. “Will that prevent their drugs from tariffs? In our view, yes.”

Merck & Co., Novo Nordisk A/S and Eli Lilly & Co. are among firms that have started US builds since 2023, with construction sites in Delaware, North Carolina and Texas, respectively. The projects are aimed at anchoring supply chains inside US borders and supporting blockbuster medicines in cancer, diabetes and immunology.

Others, including Novartis AG and Sanofi SA, have announced large US investments, though it isn’t clear how far those projects have progressed.

Drugmakers’ shares were little changed in Europe on Friday, with a few, such as GSK Plc, even edging higher. Denmark’s Novo Nordisk was an outlier, declining as much as 3.1%.

“The actual comment from the President is direct but its impact may be somewhere between nebulous and negligible,” Mizuho Securities health-care specialist Jared Holz said in a note. “All major players have some production presence domestically and almost all have announced increased investment directly tied towards local manufacturing.”

Bloomberg Intelligence economists Nicole Gorton-Caratelli and Maeva Cousin estimate the new duties could hit about $220 billion of US pharmaceutical imports and lift the average tariff rate by 3.3 percentage points.

Still, Trump released few details and substantial uncertainty remains, including whether countries or regions that have struck trade deals with the US will avoid the new levy.

For example, a European Union spokesman on Friday said the bloc agreed terms in its framework trade deal with the US that tariffs on its pharmaceutical, semiconductor and lumber exports won’t exceed 15%.

Overall, Trump’s announcement looks like a “win” for the pharmaceutical industry, Jefferies analysts said in a note.

--With assistance from Sonja Wind, Naomi Kresge, Alberto Nardelli, Lisa Pham, Jason Gale, Amber Tong, Kanoko Matsuyama and Blaise Robinson.