On Tuesday, President Donald Trump informed CNBC’s ‘Squawk Box’ that the proposed tariffs on drugs/pharmaceuticals imported into the United States could reach as high as 250%, which is the highest rate he has ever mentioned. He indicated that he wanted to start out with a small tariff on pharmaceuticals, but within a period of one year or perhaps a year and a half, he would want to ramp up the level to 150% and then to 250%.
That being said, the president has a history of making threats about tariffs but then backing away from them, so whether we will see consequences of pharmaceutical tariffs being imposed at the 250% level remains uncertain. Earlier in July, Trump had even put forward the terms of a 200% tariff on pharmaceuticals.
In April, the Trump administration launched a Section 232 investigation regarding pharmaceutical goods. It is this legal authority that allows the Secretary of Commerce to conduct an investigation into the impact of tariffs on drug imports on national security. The tariffs on drug imports are the president’s means to push drug manufacturers to set up production facilities in the United States, especially at a time when domestic drug manufacturing has declined drastically over the past few decades.
In the recent past, companies of the size of Eli Lilly and Johnson & Johnson have declared new investments into the U.S., ostensibly as a gesture of goodwill towards the President. “We want pharmaceuticals made in our country,” Trump explained to CNBC. An imposition of such tariffs on drug imports would severely undermine an already struggling pharmaceutical industry-who says the imposition of such tariffs will raise costs, hamper investments in the U.S., disrupt the supply chain of medicines, and ultimately endanger the welfare of the patients.
Already, pharmaceutical companies are dealing with the ramifications of the drug pricing policies instigated by Trump, which, they allege, threaten to undermine profits and capacity to invest in R&D. This was especially in light of Trump’s executive order in May reinstating a very controversial act, the so-called most favored nation policy. And most certainly to name a new Federal Reserve Governor and Jobs Data Chief amid economic tensions.