【By Observer Net, Wang Yi】The long-anticipated drug tariffs threatened by President Trump have finally "dropped the shoe". On September 25 local time, Trump announced on his self-created social media platform "Truth Social" that starting from October 1, the United States will impose a 100% tariff on all imported brand or patented drugs, unless the relevant companies build pharmaceutical factories in the United States.
Additionally, he also imposed a 50% tariff on all kitchen cabinets, bathroom cabinets and related products, a 30% tariff on upholstered furniture; and a 25% tariff on heavy trucks produced outside the United States.
Bloomberg of the United States reported on September 26 that these measures are a rapid expansion of the "tariff system" established by Trump, and he is exercising executive power in an unprecedented way. The New York Times of the United States also pointed out on the 25th that the new wave of tariffs may affect various economic sectors from healthcare, housing to logistics, and people have already begun to worry about the upcoming rise in drug prices and shortages of key medicines.
"Tariffs only threaten the money invested in American manufacturing."
After the announcement of the tariffs, the stock prices of the pharmaceutical industry were the first to be pressured. Novo Nordisk's shares fell by 3.1% at one point, GlaxoSmithKline of the UK dropped by 1.1%, AstraZeneca of the UK fell by 1.6%. CSL of Australia saw its stock price drop to a six-year low, Sumitomo Pharmaceutical of Japan fell more than 3%, and pharmaceutical stock indices in Hong Kong, China and India also showed varying degrees of declines.
Bloomberg said that the tariffs imposed by Trump on branded drugs could raise the average tariff rate in the United States by 3.3 percentage points. Reuters analyzed that this move would not only lead to higher prices for American consumers, but could also "shadow global economic growth and paralyze business decisions around the world".
After returning to the White House, Trump repeatedly publicly stated that he wanted to impose tariffs on imported drugs. In August this year, Trump told CNBC, an American consumer news and business channel, that he would initially impose a "small tariff" on drugs, then increase the rate to 150% within a period of one to one and a half years, and then further increase it to 250%.
Trump's threats made the pharmaceutical industry feel the coming crisis. They lobbied heavily to seek exemptions while announcing investments and expansions in the US. Novo Nordisk is building a new factory covering 1.4 million square feet (about 130,000 square meters) in North Carolina, USA. Eli Lilly, an American pharmaceutical company, announced plans to build four new production bases in the US earlier this year.
In his statement on the 25th, Trump specifically mentioned that companies that had started construction of pharmaceutical factories in the United States would not be subject to tariffs. Bloomberg believes that this might slightly ease the impact of the new tariffs. The New York Times also found that the new drug tariffs did not include generic drugs, only targeting brand-name drugs, which could be a victory for Indian generic drug manufacturers because they have thin profit margins and cannot afford to move their production to the US.
However, even with these exemptions, a 100% drug tariff could significantly increase costs. The Association of the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry lobbying organization, stated late on the 25th that these tariffs threaten the manufacturing investments planned by pharmaceutical companies in the US.
In a statement, PhRMA pointed out, "Tariffs put these plans at risk because every dollar spent on tariffs cannot be invested in American manufacturing or used for the development of future treatments."
Leerink Partners, an American investment bank, also stated in a report released late on the 25th that it was difficult to predict the risks that small pharmaceutical companies might face.
Moreover, in recent years, the United States has greatly increased its reliance on imported drugs. If pharmaceutical companies cannot prove that they have started construction of production bases in the United States, the tariffs will double the cost of importing medicines into the US. Data from the United Nations Commodity Trade Statistics Database shows that in 2024, the value of medicine imports into the United States was nearly twice as high as ten years ago, reaching $213 billion.
Top 10 countries of medicine import in the United States in 2024, Reuters map
Bloomberg pointed out that the countries most affected by Trump's move are Singapore and Switzerland. Japan, the EU and the UK recently reached agreements with the US on setting maximum benchmark tariffs on specific products such as medicines, but have not yet reached formal rates. Trump's latest statement also did not elaborate on this.
According to Reuters, Japanese Minister for Economic Revitalization Akira Akazawa responded on the 26th that the agreement between the EU and the US stipulates that the US will impose a 15% tariff on its medicines, and Japan also agreed in its trade agreement that its tariff rate will not exceed that of other countries including the EU. Currently, the Japanese government is still assessing the relationship between the new tariffs and existing agreements.
"The current consideration of enterprises is: make business decisions after Trump leaves office."
On the same day, Trump also announced that he would impose a 50% tariff on all kitchen cabinets, bathroom cabinets and related products, a 30% tariff on upholstered furniture, and a 25% tariff on heavy trucks produced outside the United States.
The New York Times analysis pointed out that in recent years, the share of furniture, kitchen cabinets and bathroom cabinets imported into the US has been increasing, and the tariffs may impose a heavy burden on consumers as well as home builders.
Data shows that in 2024, the US furniture import volume reached $25.5 billion, of which 60% came from Vietnam and China. The Wood and Handicraft Association of Dong Nai province in Vietnam said, "We were very shocked when we heard this news, and the decision to impose additional tariffs is unfair."
Reuters reported that when Trump announced in August this year that he would impose new tariffs on furniture, he claimed that this move would "bring furniture businesses back to the US", but data from the US government show that the number of jobs in the domestic furniture manufacturing industry has been halved since 2000, leaving only about 340,000 people.
Additionally, regarding the truck tariffs, most trucks sold in the US are produced in the US. The only major foreign source is Mexico. Mexican government data show that in 2024, the total value of heavy vehicle parts imported from Mexico to the US reached nearly $12.8 billion, accounting for 28% of total imports.
Mexico protested, stating that the average content of US-made components in trucks exported to the US is 50%, and therefore does not constitute a "security threat".
The US Chamber of Commerce also urged the US Department of Commerce in May not to impose tariffs on trucks, as the top five import sources of the US are Mexico, Canada, Japan, Germany and Finland, "they are all allies or close partners of the US and do not pose a threat to US national security".
Notably, in imposing this round of tariffs, Trump bypassed Congress and used Section 232 of the Trade Expansion Act. According to this law, the President of the United States has the authority to impose tariffs on key goods deemed to be related to "national security". Previously, the Trump administration has used this provision to investigate semiconductors, critical minerals, wind power equipment, aircraft, etc., and on the 25th, it also launched a 232 investigation on imported medical devices, robots and industrial machinery.
The New York Times said that Trump used the 232 clause to impose tariffs because his tariff policy is facing legal challenges. The US International Trade Court and the Federal Circuit Court of Appeals previously ruled that Trump's use of the International Emergency Economic Powers Act to issue a series of tariffs through executive orders without congressional approval was illegal, as this law did not grant Trump the power to implement "fentanyl tariffs" and "reciprocal tariffs".
The US Supreme Court will make a ruling this month. If it makes a ruling unfavorable to Trump, similar to lower courts, the Trump administration will be forced to revoke the relevant tariffs, but the tariffs imposed under the 232 clause will not be affected. The Progressive Policy Institute, a US think tank, estimates that before Trump announced the new round of tariffs on the 25th, the tariffs imposed or proposed by the US government under the 232 clause had covered one-third of the US's imported products.
"The global supply chain is very complex, and the pharmaceutical industry is the most complex. It is not as simple as workers tightening a few screws to manufacture an iPhone," said Evan Seigerman, an analyst at BMO Capital Markets. He added that tariffs have little effect on attracting manufacturing back to the US, and most pharmaceutical companies now consider that they may wait until the turbulent Trump term ends before making permanent production decisions.
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