Pharma stocks sink on threats that they won’t be spared from tariffs much longer
President Trump said he would impose tariffs on pharmaceuticals, then he didn’t, and now he said he will. Investors are queasy.
Pharmaceutical stocks are dipping after President Trump suggested they won’t be spared by tariffs for much longer.
Drugmakers were spared from the first round of tariffs that went into effect on Wednesday, despite Trump consistently saying the industry was a priority. Pharmaceutical products are normally excluded from tariffs under a World Trade Organization agreement that the US signed in 1994.
But speaking at a dinner for the National Republican Congressional Committee on Tuesday evening, Trump told a crowd of lawmakers that pharmaceuticals will soon be hit with “major” tariffs. Companies like Pfizer, Eli Lilly, and Johnson & Johnson sank in premarket trading.
“When they hear that, they will leave China,” he said. “They will leave other places because they have to sell — most of their product is sold here and they’re going to be opening up their plants all over the place.”
Trump: "We're gonna tariff our pharmaceuticals ... we're going to be announcing very shortly a major tariff on pharmaceuticals." pic.twitter.com/AzewiYDoHC
— Aaron Rupar (@atrupar) April 9, 2025
Though the president’s comments focused on China, the companies most likely to reshore any operations to the US are the aforementioned European drugmakers. They tend to produce research-based name-brand drugs that carry high margins in the US. Bloomberg reported yesterday that European drugmakers are asking the bloc for some favors to convince them not to jump ship and move to the US.
Generic drugs, on the other hand, tend to be imported from India, where labor is cheap. Since the margins are so thin on those drugs, generic drugmakers said they don’t have many levers to pull besides raising prices. Active pharmaceutical ingredients, the chemical components within those finished medicines, predominantly come from China.
Pharmaceutical goods have generally been excluded from the tariffs imposed on China that started in 2018.
Just last week, the initial wave of tariffs briefly worried industry onlookers (myself included!) only for those concerns to be dismissed as premature. After all, what kind of fool anticipates that tariffs on pharmaceuticals would happen when the administration said they would?
