Pharmaceutical Industry at Risk: US-EU Trade Deal Impacts Tariff Exemption for Medicines

The US and EU have reached a trade deal that includes a 15% tariff on branded pharmaceutical products imported from the EU. This disrupts the long-standing exemption of medicines from tariffs and could result in a $13bn to $19bn loss for the pharmaceutical industry. The tariffs could increase drug development, manufacturing, and distribution costs, and may force companies to divert research and development budgets to mitigate the impact. Pharmaceutical companies are investing in US manufacturing to reduce exposure, but the tariffs could still hinder innovation and pipeline investment.

The US and EU have reached a trade deal that includes a 15% tariff on branded pharmaceutical products imported from the EU, marking a significant shift from the long-standing exemption of medicines from tariffs. This new tariff could result in a loss of $13 billion to $19 billion for the pharmaceutical industry [1].

The baseline 15% tariff rate, separate from the sector-specific tariffs proposed by President Donald Trump, will be applied to pharmaceutical imports and almost all goods entering the US from the EU. However, the exact definition of "pharmaceuticals" under the trade deal remains unclear, and certain generic drugs may be excluded [1].

The trade deal is expected to increase drug development, manufacturing, and distribution costs, potentially forcing companies to divert research and development budgets to mitigate the impact. Pharmaceutical companies are already investing in US manufacturing to reduce exposure to the tariffs, but the long-term effects on innovation and pipeline investment remain uncertain [1].

While the 15% tariff rate is seen as a better-than-expected outcome by analysts, it is still not ideal. The tariffs could scramble supply chains, impact R&D investment, and ultimately harm patient access to medicines on both sides of the Atlantic [1].

The US trade group Pharmaceutical Research and Manufacturers of America (PhRMA) noted that the pharmaceutical industry shares President Trump’s goal to revitalize American manufacturing but warned that tariffs on medicines run counterproductive to this goal. The industry has been grappling with the threat of potential pharmaceutical tariffs since 2025, but the expected drug duties were exempted during Trump’s “Liberation Day” tariff reveal in early April, leading to a holding pattern [1].

Apple, which has seen a surge in iPhone sales, is also facing a $1.1 billion tariff burden next quarter due to revised import regulations under the Trump administration. The company has been shifting its manufacturing strategy to cushion the impact, with a significant portion of iPhones sold in the US now assembled in India [2].

References:
[1] https://www.fiercepharma.com/manufacturing/trumps-pharmaceutical-tariffs-materialize-last-new-us-eu-trade-deal
[2] https://www.thehansindia.com/technology/tech-news/apple-hits-3-billion-iphones-sold-amid-surge-in-sales-but-tariff-costs-loom-993135