On April 1st, the Trump administration investigationWhether importing drugs poses national security risks.
Considering a relatively short periodPublic CommentsThe answer seems to be a natural conclusion. Customs duties are expectedMid May. These obligations are not just a waste of financially. It slams the US healthcare system.
Furthermore, unlike the “mutual” tariffs announced on April 2nd, Commerce Secretary Howard Lutnick says These “sectoral” tariffs are not listed on the negotiation table for bilateral trade consultations. The plan appears to be to make them long-term, including issuing them under Section 232 of the Trade Expansion Act of 1962, issuing them under the International Emergency Economic Force Act, and opening them up to legal challenges.
In addition to drugs, Trump also calls for a section 232 investigation semiconductorand Important minerals. He argues that the US is overly dependent on imports of all three and bets that departmental tariffs can turn things around.
Like semiconductors and important minerals, this does not happen immediately with drugs. And it’s very expensive. Probably outrageous.
Unlike semiconductors and important minerals, hitting a large tariff on drugs puts the lives of American patients at risk.
Please note that since 1994, almost all US drug imports are tax-free under the World Trade Organization. Pharmaceutical agreement. The new tariffs will wreak havoc in the pharmaceutical supply chain.
PWC estimateA 25% tariff will incur an additional $76 billion in the economy. Yale Budget Lab I’ll find itThis same import duties will increase the price of the drug by up to 10.5%.
It’s getting worse. Generic drugs explained 90%Of the US-filled prescriptions, they could be drawn from the market. in letterFor Jamieson Greer and the representative of Commerce Secretary Lutnick, 26 House Democrats warned that generic drug vendors told them that a 25% tariff would lead to halting the sale of 60 drugs in the United States.
Patient access to branded medications is also hit. The tariffs raise legitimate concerns about the economic viability of continuing to import completed medicines and key inputs.
Eli Lily CEO I explained itfor example, absorbing some of the costs of tariffs will need to be reduced in research and development. This will undermine innovation and thereby undermine America’s national security in medicine.
In short, tariffs work cross-purpose to aim to increase patient access to more affordable medicines. This should pause to Trump. He prioritized this goal in his first term and as he clearly committed now, Presidential OrderOn April 15th, they called for a lower drug price.
A national security concern is that foreign countries could block drug exports to the United States.
But China explained Only 6%Of the 2023 US drug imports, by value, the US produces most of the drugs domestically and buys other drugs from a long list of allies, mainly from Ireland, Germany, Switzerland, Singapore, and not from the enemy.
Drug imports from China surged during COVID. However, as a study by the Peterson Institute Reportwhich reflects short-term capacity restrictions on products that have been suspended by the US.
Imports fell again when American companies began to ramble over more innovative anti-viral agents. None of this was spurred by customs duties.
And despite the headlines, Almost everythingActive pharmaceutical ingredients of drugs consumed in the US are produced domestically (53%) or from Europe (33%). The story about China is not true in the case of more active pharmaceutical ingredients than medicines more generally.
There is a Covid-era template for building to protect the supply chain of medicines among allies.
New Zealand and Singapore in 2020I negotiated a dealOn the trade in medicines and medical products. It ultimately called for the elimination of tariffs, non-regional barriers and export restrictions among alliances, including Australia, Canada and others.
Agreements in line with these policies do much more to strengthen US national security than tariffs that cannot distinguish between allies and enemies.
The inability to do tariffs on pharmaceuticals is to increase our competitiveness in relation to things like Ireland. If this is what Trump is trying to achieve, he should follow his first term interest in switching from trade policy to tax policy and strengthening intellectual property rights at home and abroad.
Mark L. Bush is Professor Carl F. Landgar of International Business Diplomacy at the Walsh Ministry of Foreign Affairs at Georgetown University.
