U.S.-China Biotech Tensions and the Shifting Pharma Landscape

The U.S.-China biotech rivalry has escalated into a critical inflection point for global pharmaceutical markets. President Donald J. Trump's proposed restrictions on Chinese medicines—ranging from experimental treatments to active pharmaceutical ingredients (APIs)—threaten to upend supply chains, reshape innovation dynamics, and redefine investment flows. These measures, embedded in a broader strategy to counter China's role in the opioid crisis and protect U.S. biotechnology, reflect a stark shift in trade and regulatory priorities. Yet, as with all geopolitical interventions in complex industries, the consequences are neither straightforward nor uniformly negative.

Disruptions to Supply Chains and Drug Availability

The Trump administration's draft executive order to restrict Chinese-invented experimental treatments could sever a vital pipeline for U.S. pharmaceutical companies. Major firms like Pfizer and AstraZeneca have relied on low-cost, high-potential therapies from China for conditions such as cancer and heart diseaseTrump Weighs Crackdown on Medicines From China^[1]. By cutting off this pipeline, the administration risks exacerbating drug shortages and driving up costs. Tariffs on Chinese APIs—some as high as 245%—could further strain generic drug manufacturers, which operate on narrow margins and already face 70% of current shortagesTariffs and U.S. Drug Prices | Johns Hopkins^[2]. According to a report by the Tax Foundation, these tariffs may force companies to restructure global supply chains, a costly and time-consuming process that could delay access to affordable medicationsTrump Pharma Tariffs Would Raise Drug Prices for ...^[3].

The administration's recent closure of de minimis exemptions for low-value imports from China underscores its intent to tighten controlsFact Sheet: President Donald J. Trump Closes De Minimis Exemptions for Low-Value Imports from China^[4]. While this aligns with broader efforts to combat synthetic opioid trafficking, it also signals a broader skepticism toward Chinese pharmaceutical inputs. For U.S. firms, the result is a dual challenge: higher production costs and the need to diversify suppliers, which may not be feasible for smaller players.

Innovation Under Pressure

The proposed restrictions highlight a paradox in U.S. biotech strategy. On one hand, the administration seeks to shield domestic innovation from perceived Chinese threats. Investors like Peter Thiel and Sergey Brin have lobbied for such measures, framing China's biotech advancements as an existential riskTrump Weighs Crackdown on Medicines From China^[1]. On the other, U.S. firms have benefited from Chinese R&D, particularly in oncology and rare diseases. For instance, Novartis and Merck secured multibillion-dollar licensing deals with Chinese firms like Argo Biopharma and Jiangsu Hengrui in 2025Inside Biotech: China's Licensing Boom Collides with U.S. Pullback^[5]. These partnerships reflect China's transition from a generics manufacturer to a global innovation hub.

The administration's policies, however, are creating regulatory uncertainty. Federal funding for biomedical research faces cuts, and the proposed BIOSECURE Act could restrict collaborations with Chinese entitiesInside Biotech: China's Licensing Boom Collides with U.S. Pullback^[5]. Meanwhile, Trump's emphasis on domestic manufacturing—through favorable capital deductions for U.S. facilities—aims to incentivize reshoring. Yet, as Delve Insight notes, shifting production to the U.S. is both expensive and time-consuming, with no guarantee of offsetting the loss of Chinese-sourced innovationsNavigating U.S. Tariffs in 2025: Impacts on Pharma & Healthcare^[6].

Investment Flows and Geopolitical Realignment

The U.S.-China biotech rivalry is reshaping global investment patterns. Chinese firms now account for nearly a third of global out-licensing activity, a 66% year-over-year increase in 2024Inside Biotech: China's Licensing Boom Collides with U.S. Pullback^[5]. This surge reflects China's growing R&D capabilities and its ability to attract partnerships from Western firms. Conversely, U.S. biotech investment has retrenched, with venture capital and IPO activity slowing amid regulatory and geopolitical risks. A Jefferies report highlights a 57% drop in biotech funding in May 2025, partly attributed to Trump's policiesBiotech Funding Plummets 57% to $2.7 Billion as Trump Policies Shake Investor Confidence^[7].

For investors, the challenge lies in balancing risk and opportunity. While U.S. firms may benefit from reshoring incentives and reduced competition from Chinese imports, they also face higher costs and innovation bottlenecks. Conversely, Chinese biotechs are capitalizing on their global partnerships and cost advantages. As the industry evolves, non-U.S., non-Chinese players—such as Australian firms—are positioning themselves as neutral hubs for R&D and manufacturingInside Biotech: China's Licensing Boom Collides with U.S. Pullback^[5].

Navigating the New Normal

The Trump administration's policies are creating a fragmented yet dynamic pharmaceutical landscape. For U.S. investors, the key risks include supply chain disruptions, regulatory unpredictability, and the loss of access to Chinese innovations. However, opportunities exist in domestic manufacturing, niche therapeutic areas, and partnerships with non-China biotech hubs. Chinese firms, meanwhile, are leveraging their R&D momentum to expand globally, despite U.S. pushback.

The ultimate outcome will depend on how effectively firms adapt to these shifts. Those that prioritize supply chain resilience, regulatory agility, and strategic partnerships may thrive, while others risk obsolescence. As the Section 232 investigation into pharmaceutical tariffs unfolds, clarity will emerge—but for now, the industry must navigate a landscape defined by tension and transformation.