U.S. announces pharmaceutical tariffs under Section 232: what it means for biotech companies

The U.S. Administration has issued an Executive Order imposing tariffs on certain branded (patented) medicines under Section 232 of the Trade Expansion Act of 1962, which allows import restrictions on national security grounds. The measure is justified by concerns over U.S. dependence on medicines, active pharmaceutical ingredients, and strategic inputs manufactured abroad, which the text considers a vulnerability. Currently, around 53% of patented drugs sold in the U.S. are produced outside the country, and only 15% of protected active ingredients are manufactured domestically.

In this context, President Donald Trump proposes tariffs of up to 100% on medicines manufactured outside the U.S., excluding generic drugs, as a way to incentivize domestic production and curb high drug prices. However, lower tariffs are provided for countries with trade agreements: 15% for the European Union (EU), Switzerland, Japan, and South Korea, and 10% for the United Kingdom, with the possibility of reducing this to zero if a specific pricing agreement is reached with London.

The order also establishes exemptions for orphan drugs of particular therapeutic sensitivity, radiopharmaceuticals, plasma-derived therapies, fertility treatments, cell and gene therapies, antibody-drug conjugates, and pharmaceutical and biotechnological solutions addressing chemical, biological, radiological, or nuclear threats—provided there is a trade and security agreement between the countries or the products respond to urgent U.S. public health needs.

Although the maximum tariff is not directly applied, the European industry is not shielded from commercial pressure. Companies with a strong export presence in the U.S., as well as manufacturing facilities in EU countries, will face a significant impact. In comparison, the United Kingdom is in a more advantageous position due to its lower tariff rate and specific pricing agreements, which could influence competitiveness vis-à-vis EU exporters.

The Executive Order also serves as a tool for industrial pressure and price policy. Companies that agree to relocate or expand production in the U.S. and enter into pricing agreements under the Most Favoured Nation (MFN) model may benefit from reduced tariffs: up to 20% for approved relocation plans and temporary zero tariffs if commitments to R&D investment in the U.S. are also included. These benefits are temporary and expire in 2030, at which point tariffs could rise to 100%.

The aim of these measures is not only to protect domestic production but also to shape the behavior of large pharmaceutical companies, encouraging investment in the U.S. and pricing agreements by using tariffs as a negotiation lever. It should be noted that these measures are legally supported by Section 232 national security investigations and are not affected by recent Supreme Court rulings limiting the president’s emergency tariff powers.

At the Spanish Bioindustry Association (AseBio), we consider that this Executive Order creates a complex scenario for the European biotechnology industry, particularly for companies with strong export exposure to the U.S. and manufacturing operations in the EU. While the highest tariffs do not directly apply to the EU, commercial pressure and regulatory uncertainty may affect strategic planning and the competitiveness of our companies in the U.S. market.

Additionally, the Executive Order allows for many of its measures to be reviewed unilaterally by the U.S. government, adding further uncertainty regarding their impact.

AseBio will continue to monitor developments closely and work at both national and European levels to help our member companies adapt and mitigate potential impacts, with the aim of safeguarding the interests of the biotechnology industry.