US Imposes 100% Tariffs on Patented Drugs

On the first anniversary of “Liberation Day,” US President Donald Trump has taken a landmark decision targeting foreign pharmaceutical companies that failed to comply with price control agreements. Under an executive order , the US government will levy import tariffs of up to 100% on such firms, citing the need to promote domestic manufacturing and safeguard national security . Companies that establish manufacturing units within the United States, however, may receive certain exemptions.

Companies that negotiate a Most Favoured Nation (MFN) pricing agreement with the US government and build pharmaceutical plants domestically will face no tariffs . Those that construct plants in the US without such agreements will initially be subjected to a 20% tariff , which could rise to 100% over the next four years . Large pharmaceutical companies have been given 120 days to negotiate, while smaller firms have 180 days . The government has already held discussions with 17 major companies , including Pfizer and Eli Lilly, with 13 firms signing agreements so far.

Trump’s administration has also set special tariffs for certain allied nations . Patented drugs from the European Union, Japan, South Korea, and Switzerland will face 15% tariffs , while those from Britain will incur 10% , with a potential reduction to zero in the future. Trump argues that these measures will boost domestic production and lower prices in the US, while pharmaceutical experts warn that imported quality medicines may become more expensive.

The move could produce mixed outcomes for India’s pharmaceutical sector . Indian exporters of patented drugs and raw materials may face a 100% tariff , potentially raising drug costs and reducing competitiveness in the US market. However, Indian firms that establish manufacturing units in the US or negotiate price agreements may enjoy exemptions. Companies heavily dependent on the US market now face a strategic choice: build plants domestically or pay steep tariffs .

Since beginning his second term, Trump has consistently imposed heavy tariffs on imports. On the previous Liberation Day, similar tariffs caused turbulence in global stock markets. In February, the US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act , prompting Trump to rely on Section 232 of the Trade Expansion Act of 1962 , citing national security risks to impose sector-specific tariffs.

The new policy also affects steel, aluminium, and rare metals . Starting Monday, a 50% tariff will apply. Rules now calculate tariffs based on the total value of goods. Items with less than 15% metal content (e.g., perfume caps) will face standard country-specific tariffs, while products with more than 15% metal (e.g., washing machines) will face a 25% tariff on the full price .

Trump defends the tariffs as a means to prevent foreign exploitation of American wealth and reduce trade deficits. However, economists warn that supply chains will be disrupted, raising the cost of essential goods. Already, more than 20 US states have challenged these tariffs in court. The new pharmaceutical tariffs could further burden patients reliant on imported medicines .