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In February of this year, the U.S. Supreme Court struck down tariffs imposed by the Trump administration under the International Emergency Economic Powers Act, giving the pharmaceutical industry a brief sigh of relief. However, on Thursday, April 2, the White House announced that it would impose 100% tariffs on certain patented drugs and active ingredients under Section 232 of the Trade Expansion Act of 1962, unless the companies involved can reach agreements with the government. This new policy rests on a more solid legal foundation, is less likely to be overturned, and aligns with the Trump administration's push for domestic U.S. manufacturing of pharmaceuticals.

"This announcement aligns with the administration's emphasis on 'reshoring' and strengthening critical supply chains, including pharmaceutical supply chains," said Blake Harden, executive director and senior principal trade policy advisor at the Washington Council of EY, in an email. "There is no doubt that this measure will have far-reaching implications for brand-name drugs and their active pharmaceutical ingredients."

The February tariffs were imposed under the International Emergency Economic Powers Act of 1977, a path widely questioned by industry experts and ultimately rejected by the courts. The new tariffs, by contrast, are based on Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on specific imported goods when the Commerce Department determines that those imports threaten national security.

"Applying Section 232 tariffs to pharmaceuticals is a dramatic escalation, signaling that 'national security' is now interpreted to include supply chain resilience for critical medicines," noted Pete Mento, director of global trade advisory services at Baker Tilly. "It's not entirely surprising, but directly applying it to the pharmaceutical industry is new territory. At a macro level, this is not just about tariffs—it's about supply chain control. The U.S. is essentially signaling that it is no longer willing to rely on foreign production for critical pharmaceutical inputs."

The new tariffs include exemptions for generic drugs and biosimilars. Companies such as Pfizer and AstraZeneca, which have already reached pricing and localization agreements with the government, may not have to pay any tariffs until 2029. Companies that have only reached localization agreements will face a 20% tariff.

The prospect of avoiding tariffs could push more companies to the negotiating table. According to Reuters, the U.S. has so far reached agreements with 17 pharmaceutical manufacturers.

An unstable tariff environment

The latest tariff announcement comes as the industry is still dealing with the fallout from the overturned IEEPA tariffs. The day before the announcement, Mento described the tariff policy environment as "complete chaos." He said, "A friend put it this way: it's like living in Yellowstone—one day a bear breaks in and destroys your house. That bear could come back at any time."

Adding to the chaos is the issue of roughly $166 billion in potential tariff refunds. Companies were supposed to receive refunds, but the refund process remains unclear. Mento said many pharmaceutical companies may choose not to file claims due to a lack of internal expertise and compliance concerns.

History suggests that Section 232 tariffs may be difficult to reverse. The Trump administration has already used this path to impose tariffs on steel, aluminum, and other products. "I've never met a politician who doesn't love revenue," Mento said—and tariffs generate revenue. President Biden had the opportunity to fully repeal the Section 232 tariffs from Trump's first term but chose not to.

But the pharmaceutical industry is a very different environment. "The industry has strong lobbying power, global interdependence, and sensitivity to patient costs," Mento said in an email. "So while the policy may exist in some form, I expect adjustments, exemptions, and significant pressure to soften the edges."

Pressure on the industry is building. "Many companies can't quickly shift production," Mento said. "Building or certifying new manufacturing facilities—especially in the U.S.—can take years, not months. So in the short term, this could mean higher costs that must be absorbed somewhere in the system."

Mento also expressed skepticism about whether tariffs can accelerate supply chain diversification in the long term. "It may not necessarily be full reshoring, but more 'friend-shoring' and regional redundancy," he said. "Companies will start to look more closely at where their APIs and intermediates come from, and whether they are overexposed to any single country."

He added that this could mean revisiting procurement contracts and pricing models, mapping supply chains in greater detail, and assessing whether there is sufficient cost justification to move production to—or back to—the U.S.

"The real takeaway is that this is not a short-term trade action—it is part of a broader shift in how the U.S. thinks about economic security. For the pharmaceutical industry, this means the rules of the game are changing, and the impact will be felt for years, not quarters," Mento said.