Trump’s Trade War Shake-Up: How U.S. Tariffs Could Disrupt Global Pharma

Trump’s tariff policies reshape global trade, with new duties on pharmaceutical imports from China and Europe threatening supply chains and profit margins. While Canada and Mexico have temporarily avoided additional tariffs, uncertainty over U.S. trade policies puts multinational biopharma companies at risk of higher costs and supply chain disruptions. As the pharmaceutical industry braces for economic fallout, analysts warn that increased tariffs will drive up drug prices, impact innovation, and force companies to rethink their global manufacturing strategies.

Tariff Impact on Biopharma: Supply Chain Disruptions, Rising Costs, and Strained U.S. Manufacturing

China has already found itself at the center of Trump’s tariff policies, with a 10% tariff on all Chinese imports triggering immediate retaliatory measures from Beijing. If similar tariffs are applied to Europe, the global trade landscape could shift dramatically, exacerbating economic uncertainty. 

The tariffs on China could disrupt biopharma, which has increasingly turned to the country for promising drug candidates. This is reflected in a surge of licensing deals with Chinese biotechs. In 2024, Chinese pharmaceutical companies significantly increased their international out-licensing activities. While exact figures for the entire year are not yet available, data from January 2024 indicates a substantial rise, with 18 out-licensing deals recorded—a 260% increase compared to the same month in 2023.

This surge reflects a broader trend of Chinese biotechs expanding their global presence through partnerships and licensing agreements. Notably, in 2023, there were 70 out-licensing deals involving Chinese companies, with a disclosed aggregate deal value surpassing US$35 billion. The momentum continued into 2024, with Chinese assets representing 31% of U.S. biopharmaceutical licensing deals. This trend underscores China’s growing influence in the global pharmaceutical industry, driven by efficient drug development processes and a focus on innovative therapies.

China: U.S. Tariffs Threaten Biopharma Collaborations and CAR-T Development

China has emerged as a major source of active pharmaceutical ingredients (APIs) and promising drug candidates. Analysts have warned that large biopharma companies like Johnson & Johnson (J&J), AstraZeneca, Novo Nordisk, and Roche could face challenges. For example, J&J’s collaboration with Legend Biotech in China could experience difficulties due to the tariffs. They co-develop the CAR T therapy Carvykti for multiple myeloma. 

Similarly, AstraZeneca’s $1 billion acquisition of Gracell Biotechnologies, a Chinese cell therapy firm, could be impacted. AstraZeneca acquired Gracell Biotechnologies’ investigational cell therapy GC012F, a dual-targeting autologous CAR-T therapy for multiple myeloma, other hematologic cancers, and autoimmune conditions like systemic lupus erythematosus. AstraZeneca also gained Gracell’s FasTCAR platform for CAR-T development. After closing the deal in Q1 2024, Gracell became a wholly owned AstraZeneca subsidiary with operations in both the U.S. and China.

Europe: Higher Costs Loom for Novo Nordisk and Roche Amid Tariff Impact, Increasing Healthcare Costs that Lower Demand

European pharma companies like Novo Nordisk and Roche, which produce drugs abroad, are also likely to be impacted by the new tariffs. The increased costs from these duties could reduce their profit margins, potentially resulting in higher drug prices for consumers and decreased demand. However, some analysts, such as ONeil Trader, suggest that these large firms have diversified supply chains and may be able to absorb the costs or adapt without seeing significant negative effects.

Seeking Alpha analyst Stephen Ayers highlighted that firms like Novo Nordisk and Roche “could face significant impacts” because they “manufacture drugs overseas,” making Trump’s new duties a potential threat to their profitability.

“Tariffs on imports would increase the total cost of goods sold and reduce margins,” Ayers explained in the report. He warned that these companies might attempt to offset these additional costs by passing them on to consumers, ultimately raising drug and healthcare costs. “While this may happen to some extent, increasing the product’s cost is likely to result in lower demand,” he added.

Re-Shoring Manufacturing: A Strategy to Offset Tariff Impact

To mitigate the impact of these tariffs, U.S.-based biopharma companies might consider “re-shoring” their manufacturing operations. By building more production plants within the U.S., these companies could avoid the added costs associated with importing from China. This shift could alter the traditional reliance on overseas manufacturing, potentially leading to changes in supply chain dynamics for major pharmaceutical companies.

Some predict an increase in U.S.-based manufacturing. This could help mitigate the financial strain caused by tariffs on foreign imports. While this shift in production would require substantial time and investment, it could ultimately reduce reliance on overseas manufacturing and align production closer to the U.S. market.

The tariffs also raise concerns about the exacerbation of existing drug shortages, particularly in the generics and biosimilars sectors. The Association for Accessible Medicines and the Healthcare Distribution Alliance (HDA) have expressed worries that these tariffs will further disrupt an already stressed global supply chain, leading to higher drug prices and worsening shortages. The HDA has urged for pharmaceutical products to be exempt from these tariffs to prevent further strain on the industry and to protect patients who rely on affordable medications.

As Trump moves forward with his trade war strategy, the EU faces mounting pressure to respond. The potential tariffs threaten to disrupt major industries, weaken economic growth, and strain international trade relations. Whether the EU retaliates with countermeasures or seeks diplomatic resolutions, the global economic landscape stands on the brink of yet another turbulent period.

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Author

Bernice Lottering