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President Donald Trump announced the raising of tariffs on pharmaceutical products in a presidential proclamation issued on April 2.
The tariffs are set to take effect later this year, barring additional executive action. However, they are seen as a negotiating tool with both the private sector and trade partners, meaning more changes could come. They stem from an investigation initiated under Section 232 of the Trade Expansion Act of 1962, a more established presidential tariff authority than those the Supreme Court ruled against in February.
The pharmaceutical tariffs are more complicated than other product-specific tariffs, such as those on steel, aluminum, copper, timber, lumber and auto parts. Pharmaceutical products from the EU, Japan, the United Kingdom, Switzerland, South Korea and Liechtenstein are exempted due to previous agreements. Generic and orphan drugs also are exempted from the new tariffs, as are select treatments, including nuclear medicines and plasma treatments.
Companies that made agreements with the administration to provide drugs at lower cost, as well as move production and research and development to the U.S., are also exempted from the 100% rate, for now. Plans for onshoring and pricing must be negotiated with the Department of Commerce and the Department of Health and Human Services. The secretaries for both departments will publish criteria for onshoring plans in the Federal Register.
Under terms of the proclamation:
- Patented pharmaceutical products and ingredients from non-exempt companies or countries will face a 100% tariff
- Imports for companies with approved plans will face a 20% tariff, which will increase to 100% in four years
- The agreed broad duty agreement with trade partners listed in the proclamation supersedes the new pharmaceutical rates, if that rate is lower than the 20% or 100% imposed by the April 2 pharmaceutical proclamation.
Companies without approved onshoring plans will face a 100% tariff beginning on July 31. Tariffs for companies with onshoring and pricing agreements will begin on Sept. 29.
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