In a bold move to bolster domestic manufacturing, President Donald Trump announced a new 100 percent tariff on all branded or patented pharmaceutical imports starting October 1. Alarm is mounting over the flood of overseas drugs. With imports projected to increase to almost $233 billion by 2024, it was this favorite decision. The tariff will not apply to companies that have already started building manufacturing facilities in the U.S.
Trump has consistently argued that tariffs are the key to spurring investments in factories across the U.S. In his most recent announcement, he made clear that he is looking for pharmaceutical companies to set up manufacturing in the U.S. “The reason for this is the large scale ‘FLOODING’ of these products into the United States by other outside Countries,” he said.
Impact on Pharmaceutical Industry
The effect of the new tariff will be especially pronounced in the pharmaceutical industry. This sector is one of Australia’s largest services export markets to the U.S., estimated at around A$1.6 billion for 2023-24. Australian company CSL manufactures and exports plasma and blood products. For these small creators, these new tariffs might loom large as insurmountable hurdles. CSL has already established U.S. production capacity. They run or control hundreds of blood collection centers, and a plasma processing facility in Illinois and a vaccines plant in North Carolina.
And under Trump’s somewhat eccentric interpretation of things, companies that begin building new manufacturing plants in the U.S. would be exempt from such tariffs. This is true even with the risk of higher costs stemming from those very tariffs. “There will, therefore, be no Tariff on these pharmaceutical products if construction has started,” he stated.
In addition to drugs, Trump announced hefty tariffs on steel, aluminum, and a variety of other goods. He imposed a punishing 50 percent tariff on bathroom vanities and a 30 percent tariff on upholstered furniture. He plans to impose 25 percent tariffs on heavy-duty trucks and 50 percent on kitchen cabinets as part of a broader trade strategy.
Economic Implications
Meanwhile, the U.S. finds itself with extremely high inflation, which has spiked from an annual rate of 2.3% in April to 2.9% over the last year. The new tariffs would plunge us even deeper into this economic conflict. Industry opponents have claimed these policies will raise costs to consumers. As far as Trump is concerned, there’s no inflation, folks, move right along.
The increased tariffs may cause drug manufacturers to re-evaluate their supply chain and production decisions. Many companies may see the need to invest in domestic manufacturing to avoid the steep penalties associated with importing their products.
