Photo by Christine Sandu on Unsplash

On April 2, 2026, President Trump signed a proclamation invoking Section 232 of the Trade Expansion Act of 1962 to impose tariffs on patented pharmaceutical imports and active pharmaceutical ingredients (APIs). Unfortunately, this policy risks producing the opposite of its intended effect – raising costs for American patients, kneecapping the domestic industry it seeks to protect, weakening U.S. global competitiveness, and stifling vital innovation.

The proclamation establishes a 100% default tariff rate on all covered patented drugs. It also includes several conditions that lower the rate:

  • 20% for companies with approved onshoring plans (goes back to 100% after 4 years)
  • 15% on products from the EU, Japan, South Korea, and Switzerland
  • 10% for products from the United Kingdom
  • 0% for companies with approved onshoring plans and most-favored-nation (MFN) deals
  • 0% for orphan drugs, nuclear medicines, fertility treatments, cell/gene therapies, etc.

The tariff structure creates a concerning market dynamic. Companies that secure MFN pricing agreements with HHS face a zero-tariff rate. Those without such agreements face rates as high as 100%. Tying tariff relief directly to pricing concessions blurs the line between trade policy and drug pricing policy, pressuring companies into government pricing deals as the cost of avoiding punishing rates. This is a significant intervention in the market and its downstream effects deserve serious scrutiny.

To be clear, Section 232 is not without purpose. Reducing dependence on adversarial nations – particularly China – for critical pharmaceutical inputs is a legitimate national security objective. But a blunt tariff regime that hits allies as readily as adversaries is a faulty tool.

A significant majority of imported pharmaceutical products come from Europe: in 2023, the U.S. imported $203 billion of pharmaceutical imports, 73% of which came from Europe – specifically, Ireland, Germany, and Switzerland. Further, the problem of dependence is overstated. Over half of the active pharmaceutical ingredients consumed in the U.S. are produced domestically.

Tariffs on pharmaceuticals and pharmaceutical ingredients harm U.S. patients. Over 60% of adults in the U.S. are currently taking at least one prescription medicine. Of those who take prescription medications, 40% report a household income of under $40,000 and 29% report a household income of $40,000 to $89,999. Of those people, nearly 30% report having difficulty affording their prescription drugs. Of those taking 4 or more prescription medicines, 37% report having difficulty affording them.

According to Fred Kleinsinger, MD, medication nonadherence is thought to cause “at least 100,000 preventable deaths and $100 billion in preventable medical costs per year.” Affordability, of course, is a major contributing factor to adherence.

As Michael Baker of the American Action Forum notes, “a 24-week course of generic cancer medication could see a cost increase by as much as $10,000 under a 25 percent tariff.”

At a time when the Trump Administration has rightly made it a goal to lower the cost of prescription drugs, such a significant increase in prices would force millions of Americans into precarious financial situations.

Tariffs on pharmaceuticals and pharmaceutical ingredients harm the U.S. pharmaceutical industry. Those who defend tariffs say they want to protect U.S. manufacturers. Ironically, these tariffs would do the very opposite.

The biopharmaceutical sector supports over 1.05 million direct jobs and 3.88 million indirect jobs, totaling nearly 5 million American jobs. These workers are employed at more than 1,500 different manufacturing facilities in the United States. The industry exceeds $800 billion in direct output and contributes $850 billion in output through suppliers and other sectors, totaling more than $1.65 trillion – 3.6% of all U.S. output.

Many of the pharmaceutical products imported by American companies are not finished products: instead, production is completed here in the U.S., supplying many of the aforementioned jobs. As Irish trade minister Simon Harris notes, 80% of imports from Ireland are not finished products:

“The situation with pharma is more complex than it is often presented. About 80% of what US pharma companies export back to the US from Ireland is not the finished product, it goes into American factories, it creates jobs for American workers.”

Tariffs also create uncertainty, causing companies to struggle to forecast demand after changes in pricing. The inability to accurately order the correct amount of product will have inevitable implications on their supply chains and, potentially, their ability to operate.

Further, tariffs could impact pharmaceutical companies’ ability to launch first in the United States. Typically, American patients gain access to new medicines first, with other countries lagging by years.

According to research by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The U.S. had access to 90 percent of these cures, a rate far greater than comparable foreign countries. By comparison, the United Kingdom had access to 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.

With heightened costs from tariffs, this may no longer be the case.

Just a 25% tariff increases production costs by $15.1 billion and the cost of imported finished medicines by $35.7 billion, threatening companies’ ability to make further investments in manufacturing and research.

According to EY-Parthenon’s April 2025 CEO Outlook Survey on Life Sciences, the simple threat of tariffs on pharmaceutical products and ingredients has led to 88% of life science CEOs redrafting strategic investment plans: 60% say they delayed a planned investment, 52% say they relocated operations to another market, and 20% stopped a planned investment.

Tariffs on pharmaceuticals and pharmaceutical ingredients stunt innovation and, thus, weaken U.S. global competitiveness. In drug development, the risk is already very high. During an average drug development process, a manufacturer must invest an average of $2.6 billion and spend 11.5 to 15 years in research and development. Even then, most drug development programs fail.

As detailed by the Information Technology & Innovation Foundation (ITIF), of the 5,000 to 10,000 compounds screened during basic drug discovery phases, 250 molecular compounds (2.5 to 5 percent) make it to preclinical testing. Of the 250 molecular compounds, 5 make it to clinical testing. Thus, as little as 0.05 percent of drugs make it from drug discovery to clinical trials. Of the few medicines that make it to clinical testing, only about 12% of medicines that begin clinical trials are approved for introduction by the FDA.

Even if a drug is approved, it is likely that the profits from said drug will not recoup its R&D costs. Increasing this risk with tariffs will eliminate a significant amount of investment in drug development. Ironically, in an effort to buttress national security, this outcome would make the U.S. less competitive on a global scale.

Reduced U.S. investment in drug development does not occur in a vacuum, but against a backdrop of rapidly accelerating Chinese biotech ambition. As the Information Technology and Innovation Foundation demonstrates:

  • Clinical trial activity in China more than doubled from 2,979 trials in 2017 to 6,497 trials in 2021. In contrast, the United States saw only a 10 percent increase during this time, from 4,557 to 5,008 trials.
  • Chinese oncology trials grew 146 percent from 1,040 in 2017 to 2,564 in 2021, the highest for any country. In the United States, oncology clinical trials grew from 1,664 in 2017 to 1,690 in 2021, a 1.56 percent increase.
  • China increased its global share of value-added pharmaceuticals output from roughly 5.6 percent in 2002 to 24.2 percent in 2019.
  • From 2013 to 2023, the number of biotech PCT patents awarded to Chinese entities increased by more than 720 percent, from 266 to 1,920, exceeding the European Union’s annual number starting in 2021. The number of patents awarded to U.S. filers over the same period increased by 67 percent.
  • China’s share of global biotechnology venture capital raised grew from a mere 3.5 percent in 2010 to 18.9 percent in 2020. At the same time, the U.S. share declined from about 68.6 percent to 62.1 percent.

If China continues to outpace the U.S. in biotechnological innovation growth, investment dollars will divert away from American manufacturers to Chinese manufacturers. If the future’s most important cures are made by and controlled by the Chinese government, the security concerns will be immense.

While the Administration is well within its rights to use available tools, including Section 232, to address genuine supply chain vulnerabilities tied to adversarial nations, the current proclamation is too broad. These rates penalize allies, punish patients, hurt the industry it aims to protect, and undermine the American innovation ecosystem that has made the U.S. so dominant. The Administration should narrow the proclamation’s scope to adversarial suppliers, exempting allied trading partners whose products flow into American factories.