This article is part of the “Trade Pills” series, a column that provides brief, periodic updates on trade and sanctions-related topics.
In the initial trade-war scenario initiated by the Trump administration through the imposition of an upward policy of tariffs, 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 and specific sectors including pharmaceuticals) US importers must exercise extreme caution to avoid the potential risk of applying an incorrect rates relating to the new tariffs in force. On their hands, EU exporters will likely be required to be extremely diligent in providing the correct support for declaration and import purposes. As a matter of fact, one of the most significant tools that could be used by the US administration to intensify the effects of the new customs policy is an increased use of the False Claims Act (FCA), which prohibits the deliberate and improper circumvention of any financial obligation to the federal government. Customs frauds could thus become another front in the tariff war opened by the Trump administration.
Customs classification will therefore be essential for assigning the correct tariff code describing the nature and characteristics of the goods. In the European Union, the Combined Nomenclature (the “HS codes”) is used for this classification and allows the identification of the applicable duties. Correctly assigning the customs code is a legal requirement entailing significant fiscal and operational consequences for companies. For this reason, that companies often decide to delegate these activities to a third party (such as a forwarding company or similar). An error in the classification of goods may result in the imposition of penalties, an order to pay customs duties retroactively, in the import ban, or may endanger the status of “authorised” and “registered” exporter or “authorised economic operator” (AEO). Therefore, it will be very important for companies to adopt a structured approach by making sure to use the correct entries and to draft customs documentation with utmost accuracy, in order to minimise the risk of penalties or litigation. Companies should also bear in mind that customs authorities may review, ex-post, import declarations and challenge errors in the classification of goods, with significant enforcement consequences in duty policy: as mentioned above, for US importers these consequences may also entail the involvement of the FCA.
Moving on to the market segments currently excluded from the imposition of import tariffs, amongst which pharmaceuticals, 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. The adverse effect of the new tariffs regime include: (a) 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; (b) an increased dependence on other regions, such as China, which would ultimately put national security at risk; (c) an increased drug costs for American patients, affecting insurance premiums or direct payments and frustrate any effort to reduce drug costs (d) a risk of retaliation from the European Union which may cause further disruptions in access to medicines in both Europe and the United States; (e) the impact on competitiveness for generic and biosimilar manufacturers, who operate on very low margins and are unable to absorb such additional costs; and finally, (f) a reduced access to treatment for patient due to increased costs, something which would obviously entail serious public health implications.
[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
