The new tariffs regime and the new Federal Orders by the US Trump administration: first initial thoughts on certain legal and operational impacts for EU pharmaceutical business
President Trump has announced specific tariffs on pharmaceutical products within next weeks. The expected tariffs will affect the import of certain pharmaceutical products and will have a strong impact on both the EU and US markets. Indeed, in the recent decades, US manufacturing in the pharmaceutical industry has declined significantly and the production of most of the so-called active ingredients in medicines has shifted to China and other countries (largely because of lower labor costs and other parts of the process). Among the adverse effect of the new tariff’s regime in fact there will be the disruption of the supply chain, an increase in price for Americans patients but above all the dependence with other regions like China. The expected tariffs will also lead to a high risk of EU retaliation which may cause further disruptions in access to medicines.
In addition to the expected tariffs on pharmaceutical products, Trump has also taken steps to promote domestic production of critical medicines. In particular, during May, President Trump signed two Executive Orders to increase domestic production of medicines, streamlining regulatory requirements for domestic manufacturing plants and taking steps to lower prescription drugs prices.
The new US tariffs regime and the reaction of global economies
As mentioned, President Trump has announced new tariffs on the import of pharmaceutical products. In response of this trade-war scenario initiated by the Trump administration, the major European and global economies are currently trying to understand the impact of such measures and how they may react effectively. Some countries have already considered introducing their own trade tariffs in retaliation to Trump’s aggressive policy (including China) or have raised their concerns for the violation of international trade agreements (such as the United States-Mexico-Canada Agreement)[1]. For its part, the European Union – following the failed attempt to reach the Transatlantic Trade and Investment Partnership (TTIP) agreement that was ultimately supposed to introduce a US/EU free trade area – has started an internal debate to assess possible reactions to the new US tariff policy and decided to suspend any decision until the scenario is better defined as the US administration decided to suspend the enforcement of main announced trade measures for a period of 90 days.
Nonetheless, on the operational side, in relation to the tariffs currently being enforced in the European Union (that are: 25% on steel and aluminium and automotive and a basic “ad valorem” tariff of 10% net of the possible presence of a minimum of 20% US-made parts), US importers must exercise extreme caution to avoid the potential risk of applying an incorrect rates relating to the new tariffs in force. In this landscape pharmaceuticals are excluded from any baseline tariffs for the moment. Nonetheless, the EU industry is already assessing any potential impact arising from future scenarios also considering the recent federal orders signed by the Trump administration on May 5, 2025, and on May 12, 2025.
What will be the possible impact of US tariffs?
The expected tariffs will have a significant impact on the EU and US pharmaceutical market in terms of financial consequences for both markets as well as serious repercussion on patients’ health. In this contest, it’s worth mentioning the position paper drafted by the Medicines for Europe association[2] , an association representing the industries operating in the equivalent and biosimilar medicines sector. The Position Paper shows how the imposition of new tariff regimes may adversely affect trade relations between the European Union and the United States of America, which, until now, have largely benefited from significant cooperation between the two continents, also given that that the European Union is a key supplier of generic medicines and active ingredients to the United States.
With this regard, the adverse effect of the new tariff’s regime include:
- Disruption of the supply chain: the disruption of the supply chain due to new duties being imposed on pharmaceuticals and active ingredients imported to the United States, which would aggravate an already stressed supply chain and lead to concerning drug shortages. In this regard, the US has been benefiting from support from the EU in shortage emergencies[3]. The tariffs would therefore exacerbate the existing shortage in the US and contribute to a huge wave of additional shortages including for most products in the essential medicines list.
- Dependence with other regions: an increased dependence on other regions, such as China which would ultimately put national security at risk. Indeed, for many medicines and active pharmaceuticals ingredients, the EU is the only alternative to other regions and as the US would need many years to build its own manufacturing from scratch this would trigger serious considerations in relation to US strategic autonomy and nation security.
- Increase in price for Americans patients: the tariffs will increase healthcare costs for American patients as tariffs will almost immediately be added to the cost of medicines in the US affecting insurance premiums or direct payments and frustrate any effort to reduce drug costs. This would also undermine the huge effort made by the European industry to support the US to lower medicine costs over the years.
- Risk of EU retaliation: the introduction of tariffs would create a risk of retaliation from the European Union which may cause further disruptions in access to medicines in both Europe and the United States.
- Competitiveness for generic and biosimilar manufacturers: the impact on competitiveness for generic and biosimilar manufacturers, who operate on very low margins and are unable to absorb such additional costs.
- Reduced access to treatment: a reduced access to treatment for patient due to increased costs, something which would obviously entail serious public health implications.
The new Federal Orders to reduce regulatory barriers to domestic pharmaceutical manufacturing
While waiting for the announced tariffs, President Donald Trump has taken further measures to increase domestic production of critical medicines as well as boosting US pharmaceutical market reducing prescription drug prices.
More specifically, President Trump has signed an Executive Order on May 5, 2025, aimed at boosting domestic pharmaceutical manufacturing. This initiative is designed to streamline the approval processes for domestic manufacturing plants, making it easier and faster for these facilities to get up and run. The FDA has been instructed to eliminate unnecessary requirements and increase fees and inspections for foreign plants, thereby encouraging more domestic production.
Additionally, the Environmental Protection Agency (EPA) is tasked with accelerating the construction of facilities for manufacturing prescription drugs and active pharmaceutical ingredients. This move is intended to ensure that the U.S. can produce essential medications domestically, reducing dependency on foreign pharmaceuticals and enhancing national security. To further facilitate this process, federal agencies must designate a single point-of-contact to coordinate permit applications, ensuring an efficient and streamlined process.
In a separate Executive Order of May 12, 2025, President Trump has taken steps to lower prescription drug prices in the U.S. and prevent foreign countries from benefiting unfairly from American pharmaceutical innovation. This order aims to align U.S. prescription drug prices with those in similar developed nations, ensuring that Americans are not paying disproportionately high prices for medications.
Amongst measures to ensure price transparency, the order establishes mechanisms for Americans to buy these drugs directly from manufacturers at “Most-Favored-Nation” prices. The order also expands efforts to reduce drug prices to include Medicaid, in addition to Medicare, potentially leading to significant savings for both programs. Furthermore, the order facilitates importation programs and increases the availability of generic and biosimilar medicines, enhancing competition in the pharmaceutical market and driving down prices.
This order has not an immediate impact as it is actually addressed to federal agencies to define a pathway for future changes in the regulatory framework and leaves many open points with regard, for instance, to its scope, the implementation timeline and the enforcement mechanism.
Nevertheless, these new orders might have several consequences for the global pharmaceutical pricing strategy and in particular for the EU market. On one hand the EU might face increased competition from the U.S. pharmaceutical industry, which could benefit from streamlined regulations and faster approval processes. This could potentially lead to a shift in investment and production away from Europe.
On the other hand, the EU might be concerned about the potential compromise in quality and safety standards if the U.S. reduces inspections and regulatory requirements. Furthermore, lowering drug prices in the U.S. could reduce the revenue of pharmaceutical companies, potentially leading to decreased investment in research and development. This might also affect global pharmaceutical innovation, including in the EU, as companies may have less capital to invest in new drug development.
Finally, actions to prevent foreign countries from undercutting U.S. market prices could lead to trade disputes and increase tensions with the EU and potentially lead to retaliatory actions.
[1] This led Canada to initiate a dispute before the WTO last March, challenging a violation of the 1994 General Agreement on Tariffs and Trade (GATT) and the WTO Trade Facilitation Agreement (TFA); case WT/DS634/1.
[2] https://www.medicinesforeurope.com/wp-content/uploads/2025/04/Medicines-for-Europe-Position-Paper-US-Tariffs-7-April-2025-1.pdf
[3] The Position Paper of the Medicines for Europe points out the 106 medicines on the US FDS shortage list, 71% of shortage mitigation supplies come from outside the US, including from European Industry
