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Companies without an exemption or agreement will have to absorb the import costs, rethink where they manufacture, or pass the increase on to buyers, who already balk at drug prices: 82% of U.S. adults said the cost of prescription drugs is unreasonable in a KFF poll conducted Feb. 24 to March 2. Building a new manufacturing facility can cost up to $2 billion and take five to ten years, and small biotechs typically rely on contract manufacturers, the trade organization BIO said in its May 2025 comments to Commerce.
“As Section 232 tariffs extend beyond the largest manufacturers, mid-sized and smaller drugmakers and importers are facing greater exposure,” said Chris Young, principal, trade and customs at KPMG, in an emailed statement. “What a company pays will depend on its onshoring and pricing commitments, product mix and sourcing, so near-term cost and compliance work has to sit alongside longer-term manufacturing and supply chain decisions.”
The Trump administration initially imposed the tariffs under Section 232 of the Trade Expansion Act of 1962, which allows import restrictions on national-security grounds. Its stated goal is to reduce dependence on overseas drug production and encourage U.S. manufacturing. Companies with approved onshoring plans can receive a 20% rate, which rises to 100% on April 2, 2030. Companies that pair an onshoring plan with a most-favored-nation drug-pricing agreement can qualify for zero tariffs through Jan. 20, 2029, according to KPMG’s summary of the proclamation. Country arrangements set lower rates: products from the EU, Japan, South Korea, Switzerland and Liechtenstein face 15%, and UK-origin products face zero through Jan. 19, 2029 under a pricing arrangement with the U.S.
BIO has challenged the policy’s implications for innovation. In an April statement, president and CEO John F. Crowley said “tariffs divert scarce resources away from research and development,” and argued the policy would delay new treatments and weaken American biotech against China’s rising industry.
A Commerce Department notice published Sept. 23 provides a significant exemption for research. Covered products and ingredients imported solely for clinical trials, R&D or other noncommercial use receive a 0% additional tariff. Specialty medicines, including cell and gene therapies and antibody-drug conjugates, also qualify for zero tariffs when they come from a jurisdiction with a trade and security framework agreement or meet an urgent U.S. health need.
Outside these Section 232 tariffs for now are generic medicines and biosimilars, and the April proclamation directs Commerce to assess within a year whether to extend them to generics. Trump separately announced in July a phased plan for imported generics, with no duties through July 2028, then 100%, rising to 200% a year later.
Filed Under: Legal precedents and interpretations
