Experts doubt Trump's drug tariffs will lower prices or boost security

U.S. President Donald Trump has recently threatened high tariffs on imported pharmaceuticals, claiming the move would lower drug prices and enhance America's national security.

However, industry insiders argue that both goals are unlikely to be achieved, given the complexities of the global supply chain and high production costs in the United States. They say the tariff policy itself introduces further uncertainty for U.S. pharmaceutical companies.

Following the pharma tariff threat, healthcare stocks across the U.S. generally fell on August 1.

On July 31, Trump sent letters to the CEOs of 17 major pharmaceutical companies, demanding that they slash drug prices within 60 days or face consequences. The move comes after previous threats to impose tariffs as high as 200 percent on imported pharmaceuticals.

Several major U.S. pharmaceutical companies have since announced plans to increase domestic investment to avoid potential tariffs. Johnson & Johnson plans to invest $55 billion to strengthen local production and R&D, while Eli Lilly announced a $27 billion investment to build four new plants in the U.S. Additionally, British pharmaceutical giant AstraZeneca has committed $50 billion to expand its drug manufacturing in the U.S. The total planned investment by pharmaceutical companies in the U.S. is now estimated to exceed $250 billion.

However, experts believe these investments are unlikely to reduce the country's reliance on foreign-made essential drugs and ingredients, nor are they expected to lower healthcare costs for American consumers.

Erin Fox, associate chief pharmacy researcher at the University of Utah Health, said the pharmaceutical industry is already highly globalized, with many raw materials and finished drugs sourced from around the world.

A complex supply chain, she noted, cannot be fully relocated with a single executive order from the White House, according to China Media Group.

Some pharmaceutical companies see domestic investment as a significant financial risk, she added, noting that the cost of building and operating a new plant in the U.S. is astronomical, and the potential returns are disproportionately low, making such investments unprofitable.

The process of establishing a complete supply chain takes several years, but the inconsistency and uncertainty of U.S. tariff policies make it difficult for companies to commit to such long-term projects, Fox said.

The Trump administration's promise to lower drug prices is also unlikely to materialize, according to experts.

CNN quoted Stephen Farrelly, head of Global Healthcare at ING, as saying that even if pharmaceutical companies successfully build plants in the U.S., costs for labor, electricity, and transportation are significantly higher than in other countries – meaning "Made in America" drugs may not lead to lower prices.

Facing high tariffs, generic drug manufacturers – who operate on very thin profit margins and make up a large portion of the U.S. market – are more likely to leave the country than move their factories back to it, Farrelly said.