What Trump’s Tariffs on Pharmaceuticals Would Mean for Asia
- Bridges M&C team
- 3 days ago
- 9 min read
US tariffs threaten Asia’s pharma exports, but regional innovation and collaboration could offer sustainable growth alternatives.
Pharmaceutical imports were initially exempt from President Trump's first set of so-called reciprocal tariffs in early April but Federal Register filings on the 14 April showed the administration has launched probes into imports of pharmaceuticals as a first step towards imposing tariffs on the sector; on the grounds that extensive reliance on foreign production of medicines is a national security threat
Pharmaceuticals are the latest sector that the administration is trying to target for tariffs via the use of Section 232 of the Trade Expansion Act of 1962, which grants the US president the authority to adjust imports if they are deemed to threaten national security. This provision allows the president to impose tariffs or other trade restrictions without needing the approval of congress, the arm of government that usually makes tariff decisions.
President Trump’s justification for so-called sectoral tariffs is to boost domestic production of goods, in this case medicines, which he says are critical to national security.
Pharmaceutical manufacturing is not in decline
Previously President Trump has imposed tariffs on sectors where domestic manufacturing was in decline such as steel and cars, so one might think that the pharmaceutical manufacture in the US is also in decline. But it isn’t.
In fact, since 2018 the number of pharmaceutical manufacturing facilities in the US has grown by more than 50%. The value of pharmaceuticals manufactured in the US over the same period has more than doubled. In 2024, its estimated value was US$634.32 billion, and it was projected to grow at a 5.72% compound annual growth rate (CAGR) from 2025 to 2030, reaching approximately US$883.97 billion by 2030.
In fact, the same day the administration filed their probe with the Federal Register, Novartis announced plans to invest US$23 billion in building infrastructure in the US over five years, with plans to build seven new manufacturing facilities and create thousands of jobs.
Although the administration may claim otherwise, there can have been no connection between Trump’s desire to impose tariffs on pharmaceuticals and the timing of the announcement. There will have been years of planning, budgeting, and negotiating with the state governments hosting the new facilities before Novartis made the announcement, and few in any of the new facilities will be completed before the end of Trump’s second term in January 2029.
Much of that additional value in pharmaceutical manufacturing in the US has been driven by the development of new technologies and medicines such as the rapid growth of biologics and biosimilars, and advancements in drug discovery and development, particularly in areas such as mRNA technologies and gene therapies, as well as a growing focus on personalized medicine. In recent years, the US has become the major player in the development and manufacture of novel, high-end and high-value medications.
Threat to US Dominance?
It is unclear exactly what national emergency the Trump administration imagines threaten the sector. While it is true that the US is the world’s biggest market for pharmaceuticals, spending well over US$700 billion a year on buying medications, that is dwarfed by the total value of the pharmaceutical sector in the US which was already around US$2.8 trillion in 2021.
A 2021 survey of the top 10 pharmaceutical manufacturing countries ranked the US firmly in first place with 40% of global market share, followed by China at just 11%; no other country broke into double digits. The US also leads in pharmaceutical research and development (R&D), accounting for 45% of global spending—again trailed by China at 11%, with no other nation close behind. Given these numbers, is the US pharmaceutical sector truly under threat?
Some analysts think there might be some things that could threaten the US dominance of the sector. In his first 80 days in office, President Trump’s administration has cut funding and staffing levels at the Food and Drug Administration (FDA), the body that regulates human and veterinary drugs, and biological products such as vaccines. The FDA also plays a crucial role in authorizing and overseeing clinical studies and drug research, and approving drugs for use. Cuts to their funding and staffing levels are likely to significantly slow down those processes.
The Trump administration has also attempted to reduce funding for medical research, particularly through cuts to the National Institutes of Health (NIH). For instance, it proposed a significant reduction in "indirect costs," which are funds used for essential research infrastructure like lab equipment, utilities, and support staff.
These cuts sparked widespread concern among researchers and institutions, as they threatened to disrupt ongoing projects and hinder scientific progress. The scientific community has expressed fears that such actions could undermine decades of advancements in medical research. Much of such early-stage research is either cosponsored by pharmaceutical companies or the preliminary findings are picked up and developed into actual drugs by pharmaceutical companies.
Universities, the public sector, and pharmaceutical companies collaborate to drive drug research and development through a mix of funding, expertise, and infrastructure.
Universities contribute cutting-edge research, often funded by government grants. They focus on early-stage discoveries, such as identifying new drug targets or testing novel compounds. While the public sector plays a crucial role in funding and regulating research, agencies like the NIH and FDA in the US provide grants and oversee clinical trials to ensure safety and efficacy.
The pharmaceutical industry then brings the resources needed to scale up production and navigate regulatory approvals. While universities focus on scientific breakthroughs, pharmaceutical companies refine and commercialize these discoveries.
However, significant cuts to federal healthcare funding, including reductions in NIH grants and FDA workforce layoffs, have raised concerns about stifling early-stage research and regulatory oversight. These changes could slow down drug discovery and development, ultimately impacting public health.
The Department of Government Efficiency (DOGE) has also impacted the FDA and NIH, and other health agencies. Established as one of the first acts of the Trump administration upon coming to power in 2025, with billionaire Elon Musk at the helm, DOGE is tasked with streamlining federal operations, reducing redundancy, and optimizing the workforce. However, this initiative has sparked controversy, especially regarding its impact on the FDA and NIH. Critics argue that DOGE's restructuring efforts, including layoffs and budget cuts, could destabilize healthcare systems and hinder medical research.
The potential impact of pharmaceutical tariffs on Asia
Singapore, which exports advanced medicines to the US, could be seriously impacted by the tariffs despite having an existing free trade agreement, the US-Singapore Free Trade Agreement (USSFTA) with the country. As a free trade partner, Singapore could in theory, ask for exemption from the unilateral imposition of tariffs that violate the letter and spirit of the USSFTA. Unlike many other trading partners, the US does not run a trade deficit with Singapore. In fact, the US goods trade surplus with Singapore was US$2.8 billion (S$3.7 billion) in 2024, an 84.8% increase over 2023’s US$1.3 billion, something President Trump is either unaware of or simply does not care about.
Singapore is one of most developed pharmaceutical markets in Asia. Major American pharmaceutical companies such as Amgen, AbbVie, Pfizer, and Merck all have manufacturing operations in Singapore, and Eli Lilly has an R&D facility.
Many big-name European pharmaceutical companies also have facilities in Singapore. Having invested billions in to their facilities and signed long-term agreements with the Singapore government it is unlikely that such companies will pack up and relocate to the US, but they might have to look for new markets for some of their products.
Singapore would certainly not be the only country affected if the US does impose tariffs on pharmaceutical imports. The impact on Asia could be significant, particularly for countries that export large volumes of generic drugs and medical supplies to the US.
Pharmaceutical companies in Asia may need to restructure their supply chains, potentially shifting production to other regions to avoid tariffs. However, the Trump administration seems intent on imposing tariffs universally so it is hard to imagine where companies could shift to.
Trump’s stated goal is to encourage pharmaceutical firms to relocate production to the US to bypass tariffs, which would definitely negatively impact jobs and investments in Asia. But as we have already discussed, the building of a production facility in the US would be a very long-term project, and would almost certainly take longer than Trump’s remaining time in office. A new facility to produce the latest high-tech and high-value medications might just be financially viable but who would be willing to invest in a plant to produce generic drugs with very narrow profit margins?
Generic drug production
Even for companies manufacturing generics on a vast scale in India the profit margins are very tight. Sun Pharmaceutical Industries Limited (Sun Pharma) is the largest pharmaceutical company in India and the fourth or fifth largest specialty generic pharmaceutical company in the world. It sells pharmaceutical formulations and active pharmaceutical ingredients (APIs) in more than 100 countries across the globe; with the US accounting for around 30% of their sales, but could it, or would it, be willing and able to build a plant in the US to manufacture generics? And if it did manage to do so, how much more would those drugs cost American patients?
Indian manufacturers large and small who are reliant on exports to the US would face huge challenges if tariffs are imposed. With already tight profit margins, most will be unable to absorb much of the tariffs themselves so the American importers of their products will have to pay the tariffs on the products they import, and they too will probably have to pass most of the extra cost on to their customers. Eventually, the-end users, the patients who actually need those drugs will end up paying the cost of the tariffs.
In general, Asian exporters would either have to absorb the tariffs, reducing their margins, or pass on the cost, making their products less competitive in the US. American importers might have to reduce orders from Asia, leading to declines in export volumes; in which case countries such as India and China could see slowdowns in pharma manufacturing, particularly in the generics sector, where price competition is fierce.
But in the medium to long-term there might be some upsides to the shakeup of the industry status quo that the tariffs would undoubtedly cause.
Drive to strengthen domestic and regional ecosystems in Asia
Governments and pharmaceutical leaders in the region now have an opportunity, perhaps even an imperative, to reduce overdependence on Western markets and double down on developing their domestic and regional ecosystems. The rapidly growing healthcare demand across Southeast Asia, for instance, offers untapped potential for companies to refocus their energy and innovation closer to home.
There could also be opportunity for increased regional cooperation, particularly through trade frameworks such as Regional Comprehensive Economic Partnership (RCEP), that could make Asia more self-sustaining and resilient. RCEP is a trade agreement which already includes 15 Asia-Pacific countries: Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, and is the world's largest free trade agreement by GDP and population.
With revenue streams from the US under pressure, Asian pharmaceutical companies may be compelled to invest more aggressively in innovation, automation, and digital transformation to stay globally competitive.
Asian governments and companies might be forced into trade diversification and strategic realignment. They may try to diversify export destinations and work to increase trade with the EU, Africa, and Latin America.
Many of the RCEP countries, particularly the Southeast Asia (SEA) ones have been experiencing a rising demand for pharmaceutical products in recent years. Rapidly growing middle classes and the introduction of universal healthcare systems in many countries has created huge growth potential which has been bolstered by strong government initiatives and public and private investments in the pharmaceutical and healthcare industries. Even before Trump became president, factors such as pricing pressure, patent protection, and regulatory frameworks which were slowing down growth in more established markets had international pharmaceutical companies increasingly looking at SEA's untapped potential.
While Asian countries have been building up their capacities as manufacturers of generics and as contract manufacturers for big name Western pharmaceutical companies many have also remained heavily reliant on Western pharmaceutical imports, particularly for advanced medications. But that could change if there was more focus on domestic and regional markets, and more cooperation at government level on R&D and regulatory alignment.
The 2022 ASEAN Pharmaceutical Regulatory Policy (APRP) adopted by the Association of Southeast Asian Nations (ASEAN) could be an example of the way forward. The APRP lays out the framework for further integrating the region's pharmaceutical markets, and striving to synchronize regulations and safety standards between national regulators. It is helping to attract international players to the Southeast Asian pharmaceutical market while supporting local companies by facilitating approval processes and intra-regional trade.
For Asia the long-term solution to Trumps tariffs might be to ignore them. Rather than imposing counter tariffs, or making concessions in negotiations, or struggling to sell products at reduced margins in the US, it might be better to focus on developing international and particularly regional trade and cooperation to reduce dependence on the American market and grow local ones.
Article by John Battersby, Senior Account Director, Bridges M&C
Comments