“Starting October 1st, 2025, we will be imposing a 100% Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” the president said on social media.  “‘IS BUILDING’ will be defined as, ‘breaking ground’ and/or ‘under construction.’ There will, therefore, be no Tariff on these Pharmaceutical Products if construction has started.”

The bad news: the drug tariffs will be “a meaningful commercial hit for US consumers,” according to Oxford Economics’ analyst Louise Loo. Exporters in China, Vietnam, and Malaysia will also be affected by a separate Section 232 probe that Trump ordered into whether the medical products they supply represent a national security vulnerability. 

The good news: There are several loopholes in Trump’s proposal that mean the impact of the new taxes may be limited.

This morning, Asian drug companies saw their market caps trimmed as traders bailed out of foreign drug stocks. 

“Investors got a fresh reminder about the trade war, and the impact has already been evident in Asian markets. For instance, pharmaceutical companies have been among the worst performers this morning in Japan’s Nikkei (-0.46%), with losses for Chugai Pharmaceutical (-5.12%) and Sumitomo Pharma (-5.21%),” Jim Reid and the team at Deutsche Bank told clients today.

In Europe, Denmark’s Novo Nordisk fell 0.43%. Switzerland’s Roche was marginally down. France’s Sanofi, counterintuitively, was up 0.33% premarket (but that’s probably a dead cat bounce because it lost nearly 3% the day before).

In the U.S., by contrast, Pfizer rose 0.64% premarket. Eli Lilly was up 1.13%. Bristol-Myers Squibb grew 0.65%.

On its face, 100% tariffs look harsh. “Asia supplies just over 20% of US pharmaceutical imports by value, a meaningful commercial hit for U.S. consumers at face value,” Oxford’s Loo wrote. But that implies the White House will be forced to relax some standards, she said. “We therefore expect the US to follow up with announcements detailing protections for some categories of products, blunting the effective tariff burden.”

The loopholes that will blunt the impact of the new tariffs are:

Generic drugs are not included.Companies that can show an in-progrerss construction site can be excluded.Companies in Japan and Korea “are effectively shielded by trade-deal safeguards,” Loo added.

UBS’s Paul Donovan said the same: “The 100% pharmaceutical tariff applies only to branded drugs, and constructing a factory may lead to an exemption. Many pharmaceutical companies have facilities in the U.S., so it may be relatively easy to superficially expand those facilities to avoid tariffs being applied.”

In fact, many U.S. companies may already be shielded. A dozen or more drug companies have promised to spend $350 billion this year in manufacturing and R&D in the U.S., according to the Wall Street Journal. 

Nonetheless, Big Pharma is officially unhappy. “[Drug] companies continue to announce hundreds of billions in new U.S. investments,” a spokesperson for the Pharmaceutical Research and Manufacturers of America told the WSJ. “Tariffs risk those plans because every dollar spent on tariffs is a dollar that cannot be invested in American manufacturing or the development of future treatments and cures.”