Fear Grips European Pharma Industry Over Potential 25% Tariffs

The potential tariffs on imported drugs could reach up to 25%, as stated by the chief economist of Germany’s pharmaceutical industry association (VFA), Claus Michelsen. The only possible way to avoid these tariffs, according to him, is for major European pharmaceutical companies to invest in the U.S. ‘The automotive industry had success with this strategy during Trump’s first term,’ Michelsen emphasized in Wirtschaftswoche, noting that companies like Roche and Novartis are considering multi-billion-dollar investments in the U.S. ‘At least that’s the hope,’ he added. The question remains whether Trump can be convinced quickly, given that moving large-scale production to the U.S. is not feasible in the short term, as highlighted by the VFA’s chief economist. Currently, Roche and Novartis have announced plans to invest $50 billion and $23 billion respectively over the next five years in the U.S. ‘These are already significant amounts. However, what’s crucial is that a political agreement is needed. The U.S. and the European Commission must find a common solution to the trade conflict, and the EU proposal to eliminate all tariffs is the right direction,’ Michelsen analyzed. Trump aims to reduce the U.S.’s reliance on foreign drug imports, particularly from China and India, and decrease the trade deficit by imposing tariffs, according to Michelsen. While increased investment in the U.S. helps, it poses a significant burden on Europe if investments continue to shift there. The U.S. Department of Commerce is investigating whether national security is at risk due to high drug imports. If imposed, tariffs would severely impact companies whose manufacturing facilities are primarily in Europe, leading to lost sales or profit margins. In the worst-case scenario, exports may no longer be worthwhile, affecting patients worldwide. Mutual dependencies exist; the U.S. relies heavily on European vaccines, immunological products, insulin, antibiotics, and certain blood products. Conversely, Europe depends on drugs and precursor substances from the U.S. Should exports to the U.S. become unviable, cheaper generic drugs from China could flood the European market, potentially increasing dependency but also posing challenges for established manufacturers.