[Source/Observer Network, Xiong Chaoyi] After throwing tariff punches at almost every industry, US President Trump has threatened to impose tariffs on medicines, claiming that this move will attract pharmaceutical production back to the United States. But is this really the case?
On April 14 local time, Politico EU reported that despite Trump's previous statement at an event of the National Republican Congressional Committee (NRCC) last week, where he claimed that heavy medicine tariffs would force pharmaceutical manufacturers to leave China and other countries: "They must sell here in the US, as this is the main market, and then factories around the world will reopen." However, his idea may turn out to be a disappointment.
The report pointed out that in 2024, medicines were the largest export product from the EU to the US, with a value of approximately $127 billion. Trade experts believe that manufacturing cannot shift overnight, especially the pharmaceutical industry, which is subject to various regulatory restrictions. This transfer requires even more time. Think tank scholars also believe that building new factories takes a lot of time and incurs extremely high costs, which hinders the relocation of pharmaceutical companies.
In particular, given the current uncertainty of Trump's tariff policy, many large pharmaceutical companies he hopes to attract are likely to choose actions that better suit their own interests - enduring the tariffs and waiting for the storm to pass.
Regarding Trump's attempt to seize control of generic drug production from India and China, research institutions are not optimistic either, believing that producing in the US, where labor and production costs are higher, will lead to price increases. Industry organization executives warned: "If the US acts alone, it will be difficult to establish a competitive production system and strategic autonomy, and tariffs will ultimately increase the cost of medicine for American patients."
In 2024, medicines were the largest export product from the EU to the US, with an export volume of $127 billion. Politico EU
Analysts from ING (Dutch International Group) said that some well-known brand-name pharmaceutical companies have left the US for Ireland and enjoyed favorable tax policies. However, for them, it is indeed necessary to continue existing in the US, not only because the US is a huge pharmaceutical market, but also because "the time for innovative drugs to hit the market is relatively short."
ING wrote in a brief: "Given their global business and higher profit margins, tariffs may cause some reshuffling in their supply chains."
However, regarding Trump's argument that pharmaceutical tariffs will trigger a large-scale production return, Justine Fassion, an international trade lawyer from Sidley, stated: "Manufacturing cannot shift overnight."
"Pharmaceutical production is subject to various regulatory restrictions, so moving production from one country to another may take time," Fassion said in an interview with Politico EU earlier this year.
Marta Wosińska, a senior researcher at the Brookings Institution, said that building a manufacturing plant from scratch usually takes three to five years, most of which is spent on permitting procedures related to local utilities, waste disposal, and other community issues. She noted in a briefing: "The challenge with permits lies in the significant differences in permits across locations, increasing the risk of delays."
Moreover, rebuilding production bases is extremely expensive.
Recently, infrastructure expansion by major pharmaceutical companies in the US has accelerated: Eli Lilly announced a $23 billion multi-facility investment plan, Merck's new factory worth $1 billion in North Carolina has just come online, Novo Nordisk is expanding its formulation filling capacity with a $4.1 billion investment in the same region, and Johnson & Johnson invested $2 billion in building a biologics factory.
However, experts point out that due to the 25% tariff imposed by the Trump administration on steel, a key material for industrial construction, project costs may further increase. "The same concerns apply to manufacturing equipment, which is mostly stainless steel," Wosińska added in her report.
In 2024, the quantity of various pharmaceutical products imported from the US by the EU and exported from the EU to the US (in kilograms). Politico EU
In early April, the European Federation of Pharmaceutical Industries and Associations (EFPIA), a pharmaceutical industry trade lobbying group, warned during crisis consultations with European Commission President Ursula von der Leyen that pharmaceutical research, development, and manufacturing might shift to the US.
This comes as EU institutions are about to begin negotiations on a milestone revision of pharmaceutical regulations, which will also adjust the current high-profit patent protection system. The organization also implied that if Europe could "implement rapid and thorough policy reforms," such industrial migration could be avoided.
In an email statement, the organization emphasized that reforms should "strengthen rather than weaken European intellectual property protection" and "create a competitive EU market that can attract, value, and reward innovation like leading economies in patient care."
Alexander Natz, Secretary General of the European Confederation of Pharmaceutical Entrepreneurs (EUCOPE), which represents medium-sized pharmaceutical enterprises, candidly admitted: "Most of our member companies do not have production bases in the US and cannot hastily build factories within two months." He pointed out that small and medium-sized pharmaceutical companies typically only hold one or two innovative products, and "cannot offset the impact of tariffs on product A by adjusting the sales of product B—especially when product A is completely produced outside the tariff zone."
Even for large pharmaceutical companies that Trump hopes to attract, returning may not be worthwhile. "These tariff policies may not be permanent," Jeremy Leonard, Managing Director of Oxford Economics' Industry Services, analyzed. He believes that enduring the tariffs and waiting for the storm to pass may better suit the interests of businesses.
He argued that pharmaceutical companies are more likely to cut R&D spending rather than relocate production lines, pointing out: "Indeed, some companies will perform such cost calculations, but frankly speaking, I don't think there will be a tsunami effect of industrial return."
Ned Hux, a partner in PwC's pharmaceutical and life sciences tax practice, pointed out that what truly prompts companies to relocate is not tariffs, as Trump hinted when naming Ireland. "Targeted tax incentives, simplified regulatory approval processes, and priority government procurement can effectively enhance the attractiveness and competitiveness of domestic US production."
He added: "These methods provide an active way to strengthen US pharmaceutical independence without disrupting global trade relations."
Although Trump criticized Ireland for using tax incentives and other policies to attract large pharmaceutical companies, he also claimed that he hoped to transfer generic drug production from India and China to make drugs cheaper for Americans. However, ING warned that producing in the US will lead to price increases because labor and production costs are higher in the US than in India.
Research published by Medicines for Europe, a European generic drug industry lobbying organization, shows that among nearly 700 approved API raw materials (active pharmaceutical ingredients) in the US market, Europe is the sole supplier. Adrian van den Hoven, the organization's managing director, warned: "If the US acts alone, it will be difficult to establish a competitive production system and strategic autonomy. The chain reaction of tariffs will ultimately increase the cost of medicine for American patients."
This article is an exclusive contribution from Observer Network and cannot be reprinted without permission.
Original source: https://www.toutiao.com/article/7493152666445447715/
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