The U.S. Department of Commerce announced on April 14, 2025, that it had initiated, as of April 1, 2025, a Section 232 investigation under the Trade Expansion Act of 1962 to determine the effects on national security of imports of pharmaceuticals and pharmaceutical ingredients, including "finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items."
Status of Pharmaceutical Tariffs Today
Pharmaceutical products specifically listed in Annex 2 of Executive Order (EO) 14257 are currently exempt from global and reciprocal tariffs on imported products. The 10 percent global tariffs for all nonexempt imported products took effect on April 5, 2025, and the country-specific increased reciprocal tariffs for 57 trading partners were implemented on April 9, 2025, following the issuance of EO 14257 of April 2, 2025, titled "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits." Effective April 10, 2025, tariff rates for other nations (excluding China) were reduced to 10 percent until July 8, 2025.
The exemption of pharmaceutical products is likely to be only a short-term reprieve, as President Donald Trump has consistently stated that the pharmaceutical industry will be subject to industry-specific tariffs. The initiation of the Section 232 investigation by the Commerce Department tracks with that intent and will provide the Trump Administration's conclusive rationale for levying tariffs on pharmaceutical products and ingredients. To inform the investigation, the Commerce Department is interested in public comments on the following:
- the current and projected demand for pharmaceuticals and pharmaceutical ingredients in the U.S.
- the extent to which domestic production of pharmaceuticals and pharmaceutical ingredients can meet domestic demand
- the role of foreign supply chains, particularly of major exporters, in meeting U.S. demand for pharmaceuticals and pharmaceutical ingredients
- the concentration of U.S. imports of pharmaceuticals and pharmaceutical ingredients from a small number of suppliers and the associated risks
- the impact of foreign government subsidies and predatory trade practices on U.S. pharmaceuticals industry competitiveness
- the economic impact of artificially suppressed prices of pharmaceuticals and pharmaceutical ingredients due to foreign unfair trade practices and state-sponsored overproduction
- the potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over pharmaceuticals supplies
- the feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance
- the impact of current trade policies on domestic production of pharmaceuticals and pharmaceutical ingredients and whether additional measures, including tariffs or quotas, are necessary to protect national security
- any other relevant factors
What's Next
By law, the Commerce Department must complete investigations initiated under Section 232 and present the findings, as well as any recommendations, to President Trump within 270 days. President Trump has 90 days to determine whether to accept the findings. If President Trump chooses to accept the findings, he has 15 days to implement actions to adjust imports deemed to threaten national security. President Trump must also provide a written notice to Congress within 30 days regarding the actions to be taken.
Expect all steps – the completion of the report, presentation of the findings to President Trump and his determination – to be completed on an accelerated timeline, given President Trump's focus on enhancing domestic manufacturing and reducing U.S. reliance on foreign drug supply chains. Commerce Secretary Howard Lutnick previously said pharmaceutical tariffs would be announced "in the next month or two." President Trump similarly stated pharmaceutical tariffs would be announced "very shortly."
What products will remain exempt from tariffs and the number of tariffs imposed remain to be seen. Several large pharmaceutical companies have announced plans to expand their manufacturing and research footprints in the U.S., with some making sizable investments in states such as New Jersey, North Carolina and Massachusetts. Though the Trump Administration may look favorably upon these investments and potentially provide a lower tariff rate on certain pharmaceutical products, it is seemingly unlikely that entities will be fully exempted from tariffs over the long term. All entities within the drug supply chain are at risk of destabilization if and when tariffs are implemented on pharmaceutical products or ingredients.
Companies that manufacture or import pharmaceuticals or pharmaceutical ingredients should consider submitting comments to ensure the Trump Administration has the most accurate information prior to making a tariff decision.
