How Trump's Tariffs Could Impact the Pharma Supply Chain
Tariffs have long been a key factor in global trade, shaping supply chains, production costs and investment decisions. By altering the flow of goods and materials, they can create both challenges and opportunities for businesses.
As companies adapt to shifting trade policies, the broader impact on market dynamics and economic stability remains a critical consideration.
US President Donald Trump’s proposed tariffs on imports—25% on Canada and Mexico (paused for 30 days) and 10% on China—are set to disrupt countless industries, including pharmaceuticals.
According to data and analytics specialist GlobalData, the move could worsen drug shortages, raise costs and force manufacturers to rethink market strategies.
Tariffs are also expected to impact foreign direct investment (FDI) from the US into these countries, as well as Europe.
Impact on foreign direct investment
US pharmaceutical FDI is already shifting. GlobalData’s FDI Database reports a 53% drop in outbound US pharmaceutical FDI in 2024, equating to a US$3.4bn decline.
In contrast, inbound FDI surged by 837% to US$6.6bn, indicating that US biopharma firms are pulling back from key manufacturing and clinical trial locations.
FDI from Europe to the US rose 787% to US$5.4bn between 2023 and 2024, while US outbound FDI to Canada fell sharply from US$1.1bn to zero. These trends highlight growing concerns among pharmaceutical companies about geopolitical uncertainty and the rising cost of cross-border trade.
Ophelia Chan, Senior Business Fundamentals Analyst at GlobalData, warns that the tariffs will increase drug prices for US patients, worsen existing shortages and force manufacturers to seek alternative markets.
"With a fragile global supply chain, high costs and China’s key role in the global supply network, the US healthcare system faces added strain," she explains.
Generic and biosimilar drug manufacturers, which often operate on tight profit margins, could struggle with the added costs, further complicating supply chain stability.
Tariffs drive reassessment of global strategies
While President Trump's administration aims to encourage domestic manufacturing, imposing tariffs on key trading partners like Canada, Mexico and China could make outsourcing less cost-effective.
US pharmaceutical companies might therefore need to reconsider their global operations and supply chain strategies.
Investors, meanwhile, are taking a cautious approach, as Ophelia notes: "Amid trade uncertainty, investors may delay new investments until policies are clearer and observe how other countries respond to Trump's tariffs before making further decisions."
The potential for similar EU tariffs remains uncertain, but Trump has hinted at a possible trade deal with the UK. However, the UK could find itself drawn into broader trade tensions if negotiations escalate.
Long-term implications for the pharmaceutical industry
Trump's proposed tariffs pose significant risks for the pharmaceutical sector, raising costs, increasing inflation and limiting patient access to essential medicines.
In response, biopharmaceutical firms may consider shifting manufacturing and clinical trials to the US or other countries not affected by the tariffs.
However, the full impact remains unclear. As companies assess their options, the industry faces an uncertain future.
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