Merck Faces $2 Billion Sales Costs Due to Tariffs, Q1 Revenue Drops 2%

Merck, a leading pharmaceutical company, has announced that it expects an additional $2 billion in sales costs this year due to the impact of tariff policies. The company disclosed this information during its first-quarter earnings report for 2025, released on April 24. The tariff-related costs will primarily be recorded in sales expenses, negatively affecting the gross profit margin. The tariff impacts encompass the tariffs imposed by the U.S. government on imported goods from other nations, as well as the tariffs imposed by foreign governments on U.S. exports.

Merck's sales revenue for the first quarter of 2025 was $155 billion, a 2% decrease compared to the same period last year. The company's main product, Keytruda, continued to show growth, with sales reaching $72 billion, a 4% increase year-over-year. However, the overall sales decline was primarily due to a significant drop in sales of the HPV vaccines Gardasil and Gardasil 9, which saw a 41% decrease to $13 billion.

The pharmaceutical giant's announcement comes at a time of escalating global trade tensions, with the U.S. government implementing tariffs on a wide range of imported goods. These tariffs are part of a broader trade policy aimed at protecting domestic industries and reducing the trade deficit. However, the increased costs associated with these tariffs are putting pressure on companies like Merck, which rely on global supply chains and international trade.

The impact of tariffs on Merck's operations extends beyond the additional $2 billion in sales costs. The company also faces the potential for further tariff-related expenses in the future, as trade tensions continue to evolve. This uncertainty makes it challenging for Merck to accurately forecast its financial performance and plan for the future. In response to the tariff policies, Merck has been exploring various strategies to mitigate the impact on its operations. These strategies include adjusting its supply chain, seeking alternative sourcing options, and engaging in discussions with policymakers to advocate for a more favorable trade environment.

The tariff policies have also raised concerns about the potential impact on the broader pharmaceutical industry. As one of the largest pharmaceutical companies in the world, Merck's experience with tariffs could serve as a bellwether for other companies in the sector. The increased costs and uncertainty associated with tariffs could lead to higher prices for consumers, reduced investment in research and development, and potential disruptions in the supply of critical medications.

In conclusion, Merck's announcement of an additional $2 billion in sales costs due to tariff policies highlights the significant impact that trade tensions can have on global companies. As the trade landscape continues to evolve, it will be important for companies like Merck to remain agile and adaptable, while also advocating for policies that promote a more stable and predictable trade environment. The company has projected its full-year global sales to be between $641 billion and $656 billion, with an effective tax rate ranging from 15.5% to 16.5% under non-GAAP principles.