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Trump’s New Tariffs: How They Could Weaken Big Pharma’s Profitability and Supply Chains

Emilia Wright | February 4, 2025

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Trump’s Tariffs May Adversely Affect Big Pharma’s Bottom Line

In a bid to fulfill his election promise, President Donald Trump recently announced a set of steep tariffs targeting imports from Canada, Mexico, and China. Slated to begin on February 4, the tariffs impose a 25% levy on goods from Canada and Mexico, while imports from China will face a 10% tariff. According to a press release from the White House, the administration claims these tariffs are necessary to address what it deems a “national emergency” concerning illegal immigration and drug-related issues. However, the specifics regarding the scope and rationale behind these tariffs remain vague.

Potential Effects on the Biopharma Industry

The biopharmaceutical industry, featuring major players like Johnson & Johnson, AstraZeneca, Novo Nordisk, and Roche, is likely to experience significant challenges due to these tariffs. Analysts believe that the tariffs on Chinese goods could be particularly problematic considering the industry’s increasing reliance on the Asian market for drug development and sourcing.

As reported by Seeking Alpha analyst Edmund Ingham, there has been a notable uptick in licensing deals with Chinese biotechnology firms, evidenced by 10 separate transactions last year alone—surpassing the total from the previous four years. While some experts initially suggested that the biopharma sector might be insulated from such tariffs, caution is now warranted, particularly concerning relationships with Chinese companies.

Concerns About Supply Chains and Drug Shortages

China has emerged as a key supplier of active pharmaceutical ingredients (APIs), and the introduction of tariffs could lead to significant disruptions in what is already a strained global supply chain. John Murphy, CEO of the Association for Accessible Medicines, emphasized that tariffs could exacerbate existing drug shortages, negatively impacting patient care in the United States.

The Healthcare Distribution Alliance has echoed these concerns and has urged the Trump administration to consider excluding pharmaceutical products from the tariffs altogether. As the global supply chain becomes increasingly vital for U.S. medications—from raw ingredients to finished products—these tariffs threaten to complicate an already delicate balance.

Impact on Major Pharma Companies

Among the prominent pharmaceutical manufacturers, both Johnson & Johnson and AstraZeneca are expected to face significant ramifications from these tariffs due to their active collaborations with Chinese enterprises. For example, Johnson & Johnson has partnered with Nanjing-based Legend Biotech on the development of CAR T therapy known as Carvykti. Similarly, AstraZeneca completed a $1 billion acquisition of Gracell Biotechnologies, a Chinese cell therapy specialist, in December 2023.

Ingham also pointed out that European pharmaceutical companies such as Novo Nordisk and Roche could be significantly affected as well. Since these companies manufacture drugs overseas, the newly imposed tariffs will raise their cost of goods sold, squeezing their profit margins. Stephen Ayers, another Seeking Alpha analyst, noted that these companies might attempt to offset increased costs by passing them onto consumers, potentially leading to higher drug and healthcare prices. However, he warned that this might result in reduced demand for these products due to price sensitivity among consumers.

Mixed Views from Analysts

While some analysts are concerned about the tariffs’ impact on the biopharmaceutical sector, others, like ONeil Trader from Seeking Alpha, expect a more measured impact on large pharmaceutical companies. Trader argues that many of these established firms possess geographically diversified supply chains capable of adapting to the new tariffs. He also noted an expansion in U.S. manufacturing facilities in recent years and anticipates this trend will accelerate as companies look to mitigate tariff impacts.

Conclusion

As the tariffs set to be enacted on February 4 loom, big pharmaceutical companies find themselves in a precarious position. While some analysts predict substantial challenges in the face of increased costs and a potentially strained supply chain, others believe that established companies may adapt through diversified manufacturing strategies. Ultimately, this geopolitical landscape could redefine how global pharmaceutical companies navigate partnerships, production, and pricing strategies in the coming years.