• Pharmaceutical industry organizations are advocating for alternatives to tariffs, such as incentives for domestic production, to secure the U.S. drug supply chain.
• The U.S. relies heavily on foreign supply chains, particularly China and India, for active pharmaceutical ingredients (APIs) and generic drugs, creating potential vulnerabilities.
• Analysis suggests tariffs could increase drug costs significantly, harm innovation, and may not be the most effective way to address trade imbalances or promote domestic manufacturing.

In response to a Section 232 investigation, the pharmaceutical industry and related organizations are engaging with the Trump administration to discuss the potential impact of tariffs on pharmaceutical imports. The core concern revolves around balancing national security interests, maintaining affordable drug prices, and fostering innovation within the pharmaceutical sector. The industry is proposing alternative strategies such as incentivizing domestic manufacturing, addressing unfair trade practices, and investing in advanced pharmaceutical production technologies. These discussions highlight the complex interplay between trade policy, healthcare costs, and national security.

• What: The U.S. government is considering tariffs on pharmaceutical imports under Section 232, prompting industry responses and concerns about drug prices, supply chains, and innovation.
• Who: Key players include the Trump administration, pharmaceutical industry organizations (AAM, PhRMA, BIO), the Information Technology and Innovation Foundation (ITIF), pharmaceutical companies, and foreign suppliers (especially in China and India).
• When: The events are centered around a Section 232 investigation in May 2025, with ongoing discussions and filings of public comments.
• Where: The events concern the U.S. pharmaceutical market and its global supply chains, with a particular focus on the role of China and India.

The potential imposition of tariffs on pharmaceutical imports has sparked significant debate. While the Trump administration aims to bolster domestic manufacturing and reduce reliance on foreign suppliers, particularly China, the industry argues that tariffs could lead to increased drug prices, reduced competitiveness, and hindered innovation. ITIF's analysis suggests that a more effective approach would involve targeted investments in advanced manufacturing technologies, incentives for domestic production, and addressing unfair trade practices by countries like China. The debate highlights the tension between national security concerns and economic considerations in shaping pharmaceutical trade policy.

However, we don’t believe tariffs are the right mechanism. Rather, “enhanced” tax incentives—or an extension of the Tax Cuts and Jobs Act—are “better tools” to spur U.S. growth.

The discussion surrounding pharmaceutical tariffs underscores the complexities of securing the U.S. drug supply chain while maintaining affordability and fostering innovation. While the Trump administration considers tariffs as a potential tool, industry stakeholders advocate for alternative approaches that incentivize domestic production, address unfair trade practices, and invest in advanced manufacturing technologies. The ongoing debate suggests that a multifaceted strategy, rather than tariffs alone, may be necessary to achieve a resilient and competitive U.S. pharmaceutical sector.