Global Pharmaceutical Companies Amid Tariff Siege: Navigating Supply Chain Restructuring and Innovation Under U.S. Import Tariffs

On April 2, 2025, the Trump administration in the United States announced a 10% tariff on imported pharmaceuticals, while exempting critical medical supplies such as anticancer drugs and insulin.

This policy appears to offer a “reprieve,” but it conceals hidden pitfalls—the tariff barriers on active pharmaceutical ingredient (API) intermediates still pose a fatal threat. Take Denmark’s Novo Nordisk as an example: its blockbuster weight-loss drug, semaglutide, relies on key intermediates imported from China, and the inclusion of existing tariffs would drive up costs by nearly one-quarter.

This “selective exemption” strategy forces multinational pharmaceutical companies into a dilemma: either bear the cost pressures or accelerate the relocation of their supply chains.

As Redburn Atlantic analyst Baker stated, "When the U.S. government becomes the largest payer, tariffs will ultimately translate into a burden on taxpayers."

Although the Trump administration’s tariff policy excluded finished pharmaceutical products from the list of items subject to additional tariffs, tariff barriers on active pharmaceutical ingredient (API) intermediates still pose a critical threat. Ninety percent of the API market in the United States relies on imports, with 60% sourced from China. This deep dependency means that any tariff adjustments could trigger significant “spillover effects.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) has lobbied Congress to pass the Drug Supply Chain Security Act, calling for a permanent exemption for “critical APIs.” The lobbying materials for the bill explicitly state: “Failure to act will expose American patients to a dual crisis of drug shortages and soaring prices.”

On February 20, in response to Trump’s indication that a 25% tariff might be imposed on imported pharmaceutical products, a spokesperson for the European Federation of Pharmaceutical Industries and Associations (EFPIA) offered a highly cautious remark regarding the potential tariff adjustment policy: “We will only comment when this actually happens, rather than engage in speculation.”

A prudent response clearly demonstrates a cautious stance. In fact, the impact of tariff policies on the supply chains of European and global pharmaceutical companies is medium- to long-term in nature.

Amid tariff pressures, global pharmaceutical companies are launching a wave of supply chain restructuring. Eli Lilly has announced a $27 billion investment to build four new factories in the United States over the next five years, while Johnson & Johnson is adding $55 billion to expand its biologic drug production capacity. However, constructing new facilities that meet FDA standards takes 5–10 years, with individual costs exceeding $2 billion, making them unaffordable for small and medium-sized enterprises. Japanese pharmaceutical firms, meanwhile, are adopting a “China Plus One” strategy; SK Biopharmaceuticals has established dual production bases in the United States and France to diversify risks.

Against this backdrop, technological innovation may become the key for pharmaceutical companies to break through.

The United States’ “Reshoring” Strategy Faces Structural DilemmasA shortage of 120,000 domestic bioprocess engineers has compelled companies to offer salary premiums to attract talent from India and China. Although Pfizer and Merck & Co. are accelerating production expansion, small and medium-sized enterprises are being forced out of the market due to cost pressures.

Taking small and mid-sized biotechnology companies in the United States as an example, their average R&D costs are nearly 50% higher than those of multinational pharmaceutical companies, and tariff policies have further squeezed their survival space.

EU member states have divergent definitions of “critical medicines”—Germany insists on classifying insulin as a strategic commodity, while France focuses on drugs for rare diseases, resulting in limited policy synergy.

Chinese pharmaceutical companies are breaking through with a dual-track strategy of “technology + market.” Hengrui Medicine has accelerated R&D through AI (with R&D expenses reaching RMB 8.228 billion in 2024) while speeding up the global expansion of its innovative drugs (overseas revenue reached RMB 716 million in 2024, a year-on-year increase of 16.07%). WuXi Biologics has enhanced production capacity efficiency through continuous manufacturing processes and is also accelerating its international R&D and production layout.

Yet policy uncertainty remains the biggest variable.

The U.S. midterm elections could overturn existing tariff policies, causing pharmaceutical companies’ investments to go to waste. If the Democratic Party regains control of Congress in 2026, it may advance the Biosecurity Act into law, further restricting Chinese pharmaceutical firms’ participation in the U.S. supply chain. China has filed a complaint with the WTO regarding tariffs on active pharmaceutical ingredients (APIs); a favorable ruling would compel the United States to amend Section 301. The contest over technical standards is equally critical—the European Union plans to introduce a “pharmaceutical carbon tariff,” imposing additional taxes on drugs with high carbon footprints.

According to the Sullivan analysis report, the global small-molecule CDMO market size is projected to reach $124.3 billion in 2025, with the Chinese market accounting for approximately 20%.

In the biologics CDMO sector, growth is expected to be even faster, driven by ADCs and cell therapies; however, regional service providers (such as Samsung Biologics and Catalent) remain dominated by Europe and the United States.

Tariff barriers are accelerating technological transformation within pharmaceutical companies. The extent to which various segments of the pharmaceutical industry will be affected by uncertain tariff policies in the future remains unknown. However, it is certain that pharmaceutical companies will increase their focus on technical patents related to the research and development and production of innovative drugs in the short to medium term.

Undoubtedly, the tariff storm triggered by Trump is rewriting the survival logic of the entire pharmaceutical industry. Whether it is the shift in pharmaceutical companies’ supply chains or the strategic layout of independently developed innovative drugs, every policy change corresponds to specific measures taken by these companies. As the saying goes, “a slight move can affect the whole situation,” reshaping the new landscape of the pharmaceutical sector.