Former US President Donald Trump has revived global trade tensions by declaring plans to impose significant tariffs on imported pharmaceuticals and active pharmaceutical ingredients (APIs). This move is intended to bolster domestic manufacturing, however, has raised alarms about potential disruptions in the global drug supply chain and increased medication costs for consumers.
This move arose when Trump announced a 10% tariff on other imports the previous week, as a move to return manufacturing to the US. The new “reciprocal” tariffs with a duty of 104% on goods coming in from China took effect on Wednesday (9th April), escalating an international trade war and further shaking markets.
APIs at the Heart of Global Pharma
APIs are the biologically active components of drugs and the base of almost all medications, ranging from common painkillers to life-saving cancer treatments. A maximum of these ingredients are manufactured in India and China, which makes the global pharma sector extremely reliant on cross-border supply chains.
What’s Behind the Tariff Plan?
The US has generally imported enormous amounts of finished drugs from India, Europe, and China without customers paying tariffs, though APIs used to produce medicines can face some imposed duties.
Trump recently said, while speaking during a fundraiser dinner, “We’re going to be announcing very shortly a major tariff on pharmaceuticals. And when they hear that, they will leave China.” Trump similarly told the reporters aboard his Air Force One plane previous week that “pharma” tariffs would arrive “at a level that you haven’t really seen before,” hinting these will be announced “in the near future.”
The US imports a $213bn (£168bn) value of medicines in 2024 which is over two and a half times the total value a decade before. His remarks have shaken buyers, particularly those who are depending on Indian imports. India provides almost half of all US generics, or low-priced versions of popular drugs, costing the country billions of dollars in healthcare.
A Sudden Storm for the Indian Pharma Industry
The announcement of potential tariffs has already affected the Indian stock market with a sharp decline. As India is known as the “pharmacy of the world,” is also a major exporter of API’s and generic drugs to the U.S. The country supplies almost 40% of the generic drugs consumed in the US, with API exports forming the backbone of this supply. India exports around a third of its $13 billion a year to the U.S. Currently, Americans pay less or no duty on imports of Indian drugs in contrast to the almost 11% duty Indians pay to import American drugs.
Indian drug manufacturers threaten to hike prices as tariffs increase bills. Tariffs would pressure Indian drug companies to increase costs, potentially translating to higher medical bills in the US. Indian pharmaceutical companies such as Dr. Reddy’s Laboratories and Cipla have their plants in the US; however, most companies have said moving production is not viable for less-margin generic drugs.
Concerns among European Drug makers
European pharmaceutical companies are on alert. The European Federation of Pharmaceutical Industries and Associations (EFPIA) has cautioned that such tariffs would interfere with global supply chains and limit access to vital medicines. There is also fear that these actions would trigger retaliatory tariffs, further fueling trade tensions. The EFPIA is signified by leading pharma companies such as Novartis, Bayer, and Novo Nordisk. These are the manufacturers of the diabetes type 2 drug Ozempic, cautioned of risks among increasing tariffs on Europe’s role as a leading player in global pharmaceutical production. The EU’s biggest pharmaceuticals exporter to the US in 2024, at a stated value of $127 billion (£100 billion).
Global Supply Chains Under Pressure
International pharmaceutical players such as GSK and Pfizer have their operations in several countries, including Ireland and Germany, so new tariffs would affect several segments of the supply chain.
Conclusion
Trump’s suggestion to impose tariffs on pharmaceutical imports and APIs has raised considerable fear among global stakeholders. Although intended to make local manufacturing stronger, the possibility of higher drug prices, supply chain disruptions, and strained trade relations is a serious issue. While the situation is unfolding, governments and industry leaders globally will have to navigate these problems to guarantee ongoing access to essential medicines. For the time being, the API market stands at an intersection between politics and world healthcare needs.
