The US tariffs on pharmaceuticals, which came into effect on 1 October 2025, are set to reshape international pharmaceutical trade. The tariffs are imposed on branded and patented drugs unless manufacturers are actively building production facilities on American soil. In a new sector brief, Coface analyses the far-reaching consequences of this trade policy on branded pharmaceuticals.
While the 100% tariffs on imported brand-name drugs have dominated headlines, the report reveals that exemptions tied to domestic manufacturing largely shield major pharmaceutical firms, shifting the burden to smaller foreign producers and reshaping global pharmaceutical trade dynamics.
This move, part of the administration’s “America First” industrial strategy, is designed to reshore manufacturing, reduce the trade deficit, and pressure companies to lower drug prices.
However, Coface’s analysis suggests that the policy may entrench the dominance of big pharma while creating significant challenges for smaller international players.
“This is not just a domestic policy, it’s a global shockwave,” said Joe Douaihy, Coface economist.
“While large pharmaceutical firms have the capital and foresight to adapt, smaller branded drugmakers, particularly in Asia and Europe, face steep barriers to market access and survival.”
Global implications
Big pharma gets bigger
Major pharmaceutical companies have already pledged over $350bn in US manufacturing investments for 2025–2030.
Many have facilities under construction or operational, qualifying them for tariff exemptions.
This entrenches their market dominance and creates a double barrier for challengers: high capital requirements and punitive tariffs.
Asia, you in danger girl
Smaller branded pharmaceutical firms in China, South Korea, Singapore, and Australia, often with only one or two FDA-approved drugs, are disproportionately exposed.
Lacking the resources to rapidly establish US operations, many face revenue losses, potential market exit, and reduced innovation in niche therapeutic areas.
EU and Japan: Under pressure
Under recent bilateral trade agreements, EU and Japanese drugmakers benefit from a capped tariff rate of 15%.
While this offers some relief, it still raises costs and could erode competitiveness against firms with US-based production.
Generics, APIs are safe (for now)
Generic drugs and active pharmaceutical ingredients (APIs), which account for 90% of US prescriptions but only 13% of spending, are exempt from tariffs.
This protects key suppliers like India and Mexico, for now.
Future trade tensions or national security concerns could bring these segments under scrutiny.
Most favoured
Despite the tariffs, US drug prices are unlikely to rise due to exemptions and domestic production caveats.
However, international pharmaceutical companies remain under pressure from US policies like the Inflation Reduction Act and Most Favoured Nation pricing, which aim to lower costs through negotiation and regulation.
Coface’s regional risk assessments for the pharmaceutical sector reflect the
uneven impact:
- Asia-Pacific: Low risk overall, but high exposure for small, branded firms.
- Latin America, EMEA, North America, Western Europe: Medium risk, with varying degrees of exposure based on trade ties and production footprints.
