Pharma Stocks Jump as Trump Announces 100% Tariffs on Imports/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Pharmaceutical stocks climbed Friday after President Donald Trump unveiled plans for 100% tariffs on imported drugs, set to begin Oct. 1. The tariffs won’t apply to companies currently building U.S. manufacturing plants — a category that includes Merck, Eli Lilly, and Johnson & Johnson, all of which have announced domestic expansion projects. Analysts say the impact on large drugmakers may be limited, though generic manufacturers and smaller firms could face greater risks.
Key Details
- Tariff Plan: 100% import taxes on pharmaceuticals starting Oct. 1.
- Exemption: Companies with U.S. facilities “breaking ground” or “under construction.”
- Winners: Merck (+1%), Eli Lilly (+1%), Johnson & Johnson (slight gain).
- Analyst View: Jefferies says big pharma should absorb costs; smaller firms and generics face pressure.
- Concerns: Legal challenges and vague enforcement terms (“breaking ground,” “under construction”).
- Market Context: S&P 500 also edged higher Friday morning.
Market Analysis
Shares of Merck & Co., Eli Lilly & Co., and Johnson & Johnson traded higher Friday as investors digested Trump’s aggressive tariff stance. The announcement extends months of speculation, though Trump had previously hinted at delays to give companies time to stockpile and shift supply chains.
Analysts believe the exemptions for new U.S. plants — along with big pharma’s high profit margins — shield the largest firms from major disruption.
“This shouldn’t have a material impact on the big drugmakers,” Jefferies analyst Akash Tewari noted.
However, the move could squeeze generic manufacturers that lack margin flexibility, raising costs for patients. Smaller companies without U.S. expansion projects may also be exposed, according to David Risinger of Leerink Partners, who added that the policy’s survival in court remains uncertain.
Brand-name drug companies also have fat profit margins that can provide some flexibility to make investments and absorb tariff costs. Manufacturers of cheaper generic drugs — which account for most U.S. prescriptions — do not. Researchers and patient advocates have worried about the impact of any tariffs on those companies.
David Risinger of Leerink Partners said smaller drugmakers also may be vulnerable to the new taxes, although he noted that it was hard to predict which ones.
He said several questions remain unanswered after Thursday’s announcement. Those include whether the action will survive legal challenges and how the phrases “breaking ground” and “under construction” are defined for tariff enforcement.
Risinger also questioned whether the new taxes might be a negotiating tactic tied to an investigation the administration launched in the spring over how importing drugs and their ingredients affects national security.
Shares of Merck and Lilly both climbed more than 1% Friday morning, while J&J’s stock rose slightly. The S&P 500 also edged slightly higher.
Risks Ahead
- Legal Challenges: Experts question whether the order can withstand lawsuits.
- Tariff Enforcement: Definitions of “breaking ground” and “under construction” remain unclear.
- Negotiation Tool?: Analysts suspect the tariffs could be tied to an ongoing national security probe into drug imports.
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