April 2nd Tariffs Proclamation Increases Pressure on US Pharma Imports
Chris Shilling, 10- April-2026
On April 2, 2026 President Trump issued a Presidential Proclamation invoking Section 232 of the Trade Expansion Act of 1962 to impose sweeping new tariffs on imports of patented pharmaceuticals and active pharmaceutical ingredients (APIs). Section 232 authorises the President to restrict imports of goods that threaten to impair national security; this is the first time in the statute’s history that it has been deployed against the pharmaceutical sector.
The Proclamation establishes a default 100% ad valorem duty on a list of patented pharmaceuticals and associated APIs (~120 HTSUS codes); generics, biosimilars, orphan drugs, US-origin products and some specialty categories are exempted (~400 codes). Reduced rates are available to companies and countries that have entered into qualifying bilateral trade agreements, onshoring commitments, or Most Favored Nation (MFN) pharmaceutical pricing agreements with the US government. Generic/biosimilar exemption will be reviewed within one year.
The tariffs the administration’s drive to reduce US reliance on foreign manufacturing and bring US drug prices in line with international benchmarks through the ‘TrumpRx’ and MFN pricing frameworks.
Section 232 Authority
Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) authorises the President to restrict imports of goods that threaten to impair national security, following a formal investigation and affirmative determination by the Secretary of Commerce. Previously, this authority had been used for steel, aluminium, automobiles, and copper. Its extension to pharmaceuticals represents a significant expansion of the statute’s scope into the healthcare sector.
The Department of Commerce initiated its investigation into pharmaceuticals and APIs on April 1, 2025, which delivered the following key findings:
- Approximately 53% of patented pharmaceutical products distributed in the United States are produced abroad.
- Only 15% of patented APIs by volume are domestically produced, creating an import reliance that limits US access to life-saving medications in the event of global supply chain disruptions.
- A self-sufficient domestic manufacturing base is ‘vital for national defense & public health.’
The Secretary found that imports of patented pharmaceuticals and APIs are occurring ‘in such quantities and under such circumstances as to threaten to impair the national security of the United States,’ satisfying the statutory threshold for Presidential action.
Negotiation and Review Timeline
- 90-day status report (July 1, 2026): Commerce and HHS must update the President on the progress of ongoing MFN and onshoring negotiations.
- 1-year review of generic exemption (April 2027): Commerce must inform the President of any circumstances warranting tariff action on generic pharmaceuticals and their ingredients.
- January 20, 2029: 0% MFN + onshoring rate expires; companies revert to 20% onshoring rate.
- April 2, 2030: 20% onshoring rate increases to 100% — companies that have not completed onshoring will face full tariff burden.
The Tariff Rate Structure
The Proclamation creates a complex, multi-tiered tariff framework. The applicable rate for any given company or product depends on the country of origin, the company’s agreement status, and the nature of the pharmaceutical product. The structure is designed to reward domestic production commitments and pricing concessions with progressively lower duty rates.
| Category | Rate | Qualifying Conditions | Notes |
|---|---|---|---|
| Default Rate | 100% | All patented pharmaceuticals / APIs with no qualifying agreement or trade deal | Applies from July 31 (Annex III companies) or Sept 29, 2026 (all others) |
| Trade Deal Partners | 15% | EU, Japan, South Korea, Switzerland, Liechtenstein | Capped per existing pharmaceutical commitments in bilateral agreements |
| United Kingdom | 10% -> 0% | UK, per finalised pharmaceutical pricing agreement | Full elimination possible; USTR confirmed deal finalisation April 2, 2026 |
| Onshoring Plan | 20% | Companies with Commerce Dept-approved plan to move production to the US | Rate rises to 100% on April 2, 2030; four-year transition window |
| Onshoring + MFN Pricing | 0% | Companies with both approved onshoring plan and HHS MFN pricing agreement | Zero rate expires January 20, 2029 |
| Specialty / Orphan Products | 0% | Orphan drugs, nuclear medicines, plasma therapies, fertility, cell/gene therapies, ADCs, CBRN countermeasures, animal health products | Conditioned on HHS determination re: trade/security framework or urgent health need |
| Generics / Biosimilars | Exempt | Generic pharmaceuticals and biosimilars; also US-origin products | Exemption to be reviewed within one year; generic manufacturers should monitor closely |
Note: If a product is subject to more than one rate under the Proclamation, the lowest applicable rate applies. The Section 232 tariff does not stack on top of existing Column 1 HTSUS rates — importers pay the higher of the two.
What is covered under Annex I?
The Annex I list (~120 specific 10-digit HTSUS codes across Organic Chemicals and Pharmaceutical Products includes:
- Finished dosage-form medicaments covering for anti-infectives, antineoplastics, cardiovascular drugs, dermatologicals, respiratory agents, and more.
- Biologics under heading 3002, including antisera, monoclonal antibodies, vaccines, and cell therapy products.
- Drug-specific HTSUS suffixes including antihistamines, anti-infectives, antidepressants, cardiovascular agents, and CNS agents.
The Section 232 tariff does not stack with existing Column 1 HTSUS rates. Instead, importers pay the higher of (a) the applicable Section 232 rate or (b) the Column 1 MFN rate. If multiple rates apply under the Proclamation itself, the lowest applicable rate governs.
What is exempt under Annex IV?
Annex IV identifies over 400 HTSUS codes that are subject to the action but carry a 0% tariff rate, effectively exempt. Notably, products classified under Annex IV codes are also exempt from the worldwide Section 122 tariffs (currently at 10%), providing a double exemption benefit.
In addition to US-origin pharmaceutical products, the exempt list also include:
- FDA-approved generic pharmaceuticals and biosimilars and their associated ingredients, including biosimilar products.
- All drugs and associated ingredients where every approved indication is designated as an orphan drug under the Orphan Drug Act, (subject to HHS determination)
- Nuclear medicines, plasma-derived therapies, fertility treatments, cell and gene therapies, antibody drug conjugates, and medical countermeasures related to CBRN threats.
- Pharmaceutical products for animal health.
- Vitamin codes (heading 2936), most broad-spectrum antibiotics (ampicillin, streptomycins, tetracyclines, erythromycin), and cortisone-family steroids are placed in Annex IV with a 0% rate.
Strategic and Commercial Implications
- Supply Chain Disruption and Decoupling: Companies currently reliant on global manufacturing hubs face a clear choice: absorb a 100% cost increase on US imports, or commit to the capital-intensive process of building domestic capacity. Reports suggest approximately $400 billion in new domestic pharmaceutical investment commitments have already been announced.
- Transfer Pricing and Customs Valuation: Since the duties are calculated on an ad valorem basis (as a percentage of goods value), they will significantly increase the ‘landed cost’ of products, directly affecting transfer pricing strategies and customs valuation approaches.
- Tariff Classification Risk: The granularity of the Annex I versus Annex IV distinction at the 10-digit HTSUS level means that the classification of an imported pharmaceutical will determine whether it faces a 100% tariff or 0%. Misclassification could result in significant underpayment with penalty exposure, or unnecessary overpayment.
- Compliance Timeline: The tariff structure is explicitly designed to ratchet upward over time. Even companies with the most favourable 0% rate today will revert to 20% in January 2029 and then 100% by April 2030 unless domestic production buildout is completed.
- Generic Manufacturers: Generic drugs and biosimilars are currently exempt, but the one-year reassessment provision means this is not guaranteed. Given that the US generics market is heavily dependent on APIs sourced from India and China, any extension of Section 232 tariffs to generics would have profound implications for drug pricing and access.
Country-by-Country Impact Analysis
The following table sets out the tariff treatment applicable to each major pharmaceutical-producing country or region, drawing on analysis by Foley Hoag and supplemented with insights from other sources. The applicable rate for any given import will ultimately depend on whether a company-level agreement (MFN + onshoring) provides a lower rate than the country-level rate.
| Country / Region | Tariff Rate | Basis & Conditions | Key Implications |
|---|---|---|---|
| European Union | 15% | Existing bilateral trade deal; rate capped per pharmaceutical-related commitments | Major pharma exporters (Germany, Ireland, France, Belgium) face significant new duties; significant impact on EU-based multinationals |
| Japan | 15% | Existing bilateral trade deal; rate capped per pharmaceutical-related commitments | Major API and finished-dose exporter; Japanese pharma companies face new cost pressures in the US market |
| South Korea | 15% | Existing bilateral trade deal; rate capped per pharmaceutical-related commitments | Growing pharmaceutical exporter; increased cost exposure for Korean firms supplying the US |
| Switzerland / Liechtenstein | 15% | Existing bilateral trade deal; rate capped per pharmaceutical-related commitments | Home to major global pharma companies (Novartis, Roche); significant impact despite reduced rate |
| United Kingdom | 10% -> 0% | Agreement in principle reached Dec 1, 2025; USTR announced finalization April 2, 2026. Rate could reduce to 0% under finalized pharmaceutical pricing deal. | UK-based companies benefit from the most favourable bilateral rate; pathway to duty-free treatment |
| Countries with MFN + Onshoring Agreements | 0% | Companies with both an approved onshoring plan and MFN pharmaceutical pricing agreement with HHS; zero rate valid until January 20, 2029 | 13 companies already listed in Annex II with executed agreements; additional companies (e.g. Pfizer, Regeneron, GSK/ViiV, J&J) reportedly in active negotiations |
| Companies with Onshoring Plan Only | 20% -> 100% | Approved Commerce Dept. onshoring plan required; 20% rate rises to 100% on April 2, 2030 | Four-year window to complete domestic manufacturing transition; rising tariff creates escalating urgency |
| All Other Countries (Default) | 100% | No qualifying agreement or trade deal in place; default tariff rate applies from July 31 or Sept 29, 2026 | Includes major API source countries such as China and India unless company-specific agreements are negotiated; highest possible cost burden |
| China / India (Unnamed) | 100%* | No bilateral trade deal or MFN arrangement in place; subject to full default rate unless company-specific agreements reached. *Also subject to any existing AD/CVD duties. | Particularly impactful given China and India's dominant role in global API supply chains; significant disruption risk for companies reliant on these sources |
Sources
This report is based on analysis from the following sources, all published in April 2026:
- EY Tax News Update: ‘New tariffs imposed on pharmaceuticals following Section 232 investigation’ (April 2, 2026)
- Mayer Brown: ‘Trump Administration Implements Tariffs on Imported Patented Medication and Pharmaceutical Ingredients under Section 232 of the Trade Expansion Act of 1962’ (April 6, 2026)
- Foley Hoag LLP: ‘Executive Order Imposing Section 232 Tariffs on Pharmaceuticals and Pharmaceutical Ingredients’ (April 8, 2026)
- Jones Day: ‘A Tough Dose: 100% Tariffs Target Foreign-Manufactured Brand-Name Pharmaceuticals’ (April 8, 2026)
- ArentFox Schiff: ‘A Hard Pill to Swallow: 100% Tariffs Hit Pharma’ (April 9, 2026)
- Thompson Hine SmarTrade: ‘President Trump Announces Section 232 Tariffs on Pharmaceuticals and Active Pharmaceutical Ingredients’ (April 6, 2026)
- White House Presidential Proclamation: ‘Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States’ (April 2, 2026)
Disclaimer
Disclaimer: This report is prepared for informational purposes only and does not constitute legal advice. Companies affected by these measures should consult qualified legal and customs compliance counsel.
