After months of signaling, the Department of Commerce disclosed on April 14 that it had begun an investigation into the national security impacts of importing pharmaceuticals, pharmaceutical ingredients and derivative products. A Federal Register notice indicated that an investigation initiated under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862) began on April 1.
President Donald Trump has repeatedly suggested that his administration would impose tariffs on pharmaceutical imports. The exclusion of pharmaceuticals from the “reciprocal” and “baseline” tariffs announced on April 2—and amended on April 9—heightened expectations that a Section 232 investigation was imminent. While Section 232 investigations can take up to 270 days, the Trump administration has included a relatively short 21-day window for public comment and could move to impose tariffs soon after that window ends on May 7.
The Trump administration has shown a willingness to provide exceptions to and negotiate the future of the “reciprocal” and “baseline” tariffs imposed under the International Emergency Economic Powers Act (IEEPA). However, to date it has been reluctant to provide similar relief from sector-specific tariffs imposed under Section 232, which it views as a method of “reshoring” production in targeted sectors to the United States.
This alert takes a closer look at the Department of Commerce’s investigation on pharmaceutical imports and provides insight into the administration’s next steps.
Section 232 Investigation Begins
On April 1, the Department of Commerce’s Bureau of Industry and Security (BIS) initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on the national security of imports of pharmaceuticals and pharmaceutical ingredients, including their derivative products. Specifically, this includes “finished generic and non-generic drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients (APIs) and key starting materials, and derivative products of those items.”
The Trump administration’s action reflects long-standing concerns over the heavy reliance on the foreign production of APIs and finished pharmaceuticals, particularly from countries like China, India and Ireland. This dependence has raised fears that Americans could face shortages of critical medications. By leveraging the threat of tariffs, President Trump has consistently prioritized addressing national security worries and revitalizing domestic manufacturing in this vital sector, aiming to safeguard supply chains and create American jobs.
Since retaking office in January, President Trump has relied on Section 232 to increase tariffs on steel and aluminum that he first imposed during his first term. He also relied on a Section 232 investigation completed in 2019 to impose tariffs on automobiles and auto parts. The rate for all three sectors is currently 25%. Investigations into imports of copper, lumber, semiconductors (including smartphones and other electronics), as well as critical minerals remain ongoing and will likely result in tariffs.
Request for Public Comments
The agency is interested in obtaining the public’s views related to issues that affect the national security of the pharmaceutical industry, which includes the:
- current and projected demand for pharmaceuticals and pharmaceutical ingredients in the United States;
- extent that domestic production of pharmaceuticals and pharmaceutical ingredients can meet domestic demand;
- role of foreign supply chains, particularly of major exporters, in meeting U.S. demand;
- concentration of U.S. imports of pharmaceutical and pharmaceutical ingredients from a small number of suppliers and its potential risks;
- impact of foreign government subsidies and predatory trade practices on the U.S. pharmaceutical industry’s competitiveness;
- economic impacts of artificially suppressed pharmaceutical prices due to foreign unfair trade practices and state-sponsored overproduction;
- potential for export restrictions by foreign nations and weaponizing their control over supplies;
- feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce foreign reliance; and
- impact of current trade policies on domestic production of pharmaceuticals and pharmaceutical ingredients and whether including additional measures, like tariffs or quotas, are necessary to protect national security.
Process and Timeline
Imposing tariffs under Section 232 requires the Department of Commerce to determine that the goods in question are “being imported into the United States in such quantities or under such circumstances as to threaten to impair national security.” This term is not defined in the statute, providing the administration with wide latitude to act.
This determination enables the president to impose tariffs of up to 50% above the existing rate that applies to the goods in question. However, as discussed above, the second Trump administration has been consistent—to date—in imposing 25% tariffs through Section 232. President Trump has suggested in comments to the press that tariffs on pharmaceuticals would also be set at 25%.
While Section 232 investigations can take up to 270 days, the Trump administration has included a relatively short 21-day window for public comment and could move to impose tariffs soon after that window ends on May 7.
Exclusions Legally Possible But Currently Appear Unlikely
There is clear precedent for an exclusions process under Section 232; however, such a process is not statutorily mandated. President Trump provided exclusions to steel and aluminum tariffs during his first term but has moved to end existing exclusions since retaking office.
Trump administration officials have expressed concerns that providing even a limited number of exclusions to Section 232 tariffs on other sectors will open the door to a vast number of additional exclusions, undermining the goal of “reshoring” production in targeted sectors to the United States. However, in recent days President Trump has floated the idea of providing the auto industry “flexibility” to give the industry more time to reshore production.
Stakeholder Reactions
In the hours after the investigation was launched, the White House emphasized that President Trump has long been clear about the importance of reshoring manufacturing that is critical to U.S. national and economic security. White House spokesperson Kush Desai said the Trump administration is committed to working on “Trump time” to secure a prosperous economic future and restore American strength, further reinforcing a likely expeditious timeline. Department of Commerce Secretary Howard Lutnick previously indicated that pharmaceuticals are “going to be part of making sure we reshore core national security items,” emphasizing the need to “make medicine in this country.”
Stakeholders were quick to voice concerns over the potential for tariffs to hit the pharmaceutical sector, and experts have warned widely that tariffs are expected to raise prices for consumers. Depending on the final details of the pharmaceutical plan, some predict that generic drugs, which are often made in India and have low profit margins, could cost more or lead to shortages if generic manufacturers find the tariffs too costly.
Specifically, the American Society of Health-System Pharmacists noted it was less concerned over price increases because of tariffs and more that generic manufacturers may start to drop out of the market, which would exacerbate existing drug shortages. If tariffs render their business unprofitable, they are more incentivized to drop out. The Association for Accessible Medicines (AAM), which represents biosimilar and generic drug manufacturers, also warned it could harm patient access, deepen existing drug shortages and raise prices, emphasizing it would “only amplify the problems existing in the U.S. market for affordable medications.” AAM urged the White House to consider exemptions for essential and short-supply medicines. The Indian Pharmaceutical Alliance also said manufacturers of generics account for 1.2% of total U.S. health care costs but represent 90% of all prescriptions in the country, adding that the industry is already operating on razor-thin margins and cannot tolerate tariffs.
Before the investigation launched, the Pharmaceutical Research and Manufacturers of America (PhRMA) met with President Trump to commit to revitalizing domestic manufacturing but emphasized that pharmaceuticals should be excluded from tariffs, as it would lead to higher drug prices and the potential shortage of essential medicines. Several large pharmaceutical companies have also already committed to boosting production in the United States, announcing plans to invest in manufacturing sites across the United States, bolster research and development sites and add U.S. jobs.
On the Horizon
President Trump has repeatedly adjusted his tariff plans in recent weeks, creating waves of uncertainty across the economy. The White House may issue a formal announcement or fact sheet providing more details on the Section 232 investigation into pharmaceuticals, but those materials are not necessary for the process to move forward. Ultimately, the president could test the limits of his Section 232 authority to impose the pharmaceutical tariffs as quickly as possible, as signaled by the very short public comment period on the Commerce Department’s notice. While the Section 232 investigation continues in the coming weeks, the administration is also taking steps to target drug manufacturers via executive order.
