NEW YORK – President Donald Trump enacted an executive order on Thursday, introducing potential pharmaceutical tariffs that could reach as high as 100% on certain patented drugs. This move targets companies that fail to negotiate agreements with his administration in the upcoming months.
Under the order, pharmaceutical companies that enter a “most favored nation” pricing agreement and are actively working to establish production facilities in the United States will be exempt from tariffs. However, companies that have not secured a pricing deal but are still investing in U.S. facilities will face a 20% tariff, which could escalate to 100% within four years.
A senior administration official, who requested anonymity, explained during a press briefing that companies have a window of several months to negotiate before the implementation of the 100% tariffs. Specifically, larger companies have 120 days, while others have 180 days. Although the official did not disclose which companies or drugs might be affected by the increased tariffs, it was noted that the administration has already secured 17 pricing agreements with leading drug manufacturers, with 13 agreements signed.
In the executive order, Trump justified these measures as essential to counteract national security risks posed by the importation of pharmaceuticals and their ingredients. This announcement coincides with the first anniversary of Trump’s “Liberation Day,” which introduced comprehensive import tariffs that initially unsettled the stock market. Notably, these “Liberation Day” tariffs were later overturned by the Supreme Court in February.
The newly announced tariffs have sparked concern. Stephen J. Ubl, CEO of the pharmaceutical trade group PhRMA, cautioned that imposing taxes on innovative medicines could drive up costs and threaten substantial U.S. investments. He highlighted that a significant portion of medicines sourced internationally originates from dependable U.S. allies.
Since the start of his second term, Trump has aggressively pursued new import taxes against America’s trade partners, frequently promising high tariffs on foreign-made drugs. Nevertheless, the administration has leveraged the threat of such tariffs to secure agreements with major pharmaceutical companies, including Pfizer, Eli Lilly, and Bristol Myers Squibb, aiming for reduced prices on new drugs.
Beyond company-specific rates, a handful of countries have reached trade frameworks with the U.S. to further cap tariffs on drugs sent to the U.S. The EU, Japan, Korea and Switzerland will see a 15% U.S. tariff on patented pharmaceuticals, matching previously agreed rates for most goods, and the U.K. will get 10% — which Thursday’s order noted would “then reduce to zero” under future trade agreements. The U.K. previously said it secured a 0% tariff rate for all British medicines exported to the U.S. for at least three years.
Trump also unveils update to metal tariffs
In addition Thursday, Trump rolled out an update on his 50% tariffs on imported steel, aluminum and copper. Starting Monday, tariff rates on those metals will be calculated based on the “full customs value” of what U.S. customers pay when buying foreign metal under the latest order, which the administration officials claimed will keep importers from other countries from escaping higher payments.
Products fully made of steel, aluminum and copper will continued to be tariffed at 50% for most countries. But the administration is also shifting 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 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 piling up
Thursday’s orders reflect the latest example of Trump tapping into sectoral duties. The president used Section 232 of the 1962 Trade Expansion Act to impose the levies, the same authority he cited to slap import taxes on cars, lumber and even kitchen cabinets. And many expect to see more product-specific import taxes down the road.
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 Feb. 20 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 mere hours after the Supreme Court’s ruling, but that duty can only last for 150 days. Some two dozen states already challenged the new tariffs.
Trump has argued his steep new import taxes are necessary to bring back wealth that was “stolen” from the U.S. 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 upending the global supply chain has proven costly for businesses and households that are already strained by rising prices.
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