Exemptions for U.S. plant construction and existing expansion plans temper immediate fallout, but uncertainty remains for smaller firms
Shares of major pharmaceutical companies ticked higher Friday as Wall Street parsed the implications of President Donald Trump’s announcement that the U.S. will impose 100% import tariffs on pharmaceuticals beginning Oct. 1. The tariffs would exclude products from companies that are “breaking ground” or “under construction” on U.S. manufacturing facilities—language that appeared to shield firms already investing domestically.
Investors pushed up the stocks of established drugmakers with announced U.S. expansions. Merck (MRK) and Eli Lilly (LLY) both rose more than 1% in premarket trading, while Johnson & Johnson posted a modest gain. Analysts said the moves reflect relief that many of the industry’s largest players will likely avoid the brunt of the new duties.
“Thursday’s announcement shouldn’t have a material impact on the big drugmakers, given their construction plans,” Jefferies analyst Akash Tewari wrote, highlighting that several companies had already committed to U.S. manufacturing footprints. Market participants also noted firms appear to have begun stockpiling medicines earlier this year in anticipation of trade disruptions.
Still, significant questions remain. David Risinger of Leerink Partners warned smaller companies could be vulnerable to the tariffs, though he cautioned it is difficult to predict which ones. He also raised legal and practical uncertainties: Will the administration’s action withstand court challenges, and how will regulators define terms such as “breaking ground” or “under construction” when applying exemptions?
Observers have speculated the tariffs could be a negotiating tactic tied to a spring investigation into how imported drugs and ingredients affect national security. If so, the measure may be as much political leverage as permanent policy.
For now, the market reaction suggests the largest, well-capitalized drugmakers—many already advancing domestic production—should weather the change. Yet if enforcement details are tightened or smaller suppliers find themselves exposed, the long-term landscape for drug sourcing and costs in the U.S. could shift materially.
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