The U.S. Tariff Attack on U.S. Biotech

“Beijing this month rolled out a five-year plan to dominate the global biotech industry. Hard to believe, but President Trump is assisting Xi Jinping at the same time by hitting U.S. biotech companies with new tariffs. This will raise drug prices for Americans and drive more investment to China.

 

Mr. Trump in April announced tariffs of up to 100% on patented medicines and their ingredients. The border taxes are set to take effect Tuesday, causing panic in the U.S. biotech industry.

 

Most large drug makers have cut deals with the Administration that waive tariffs in return for increasing U.S. manufacturing and selling some products to Medicaid at the lowest cost available in developing countries. Details aren't public, but companies say the financial hit will be limited. Not so the tariff hit to biotech.

 

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The tariff threat is intended to push small biotech companies to strike similar deals.

 

But most of these companies fund research and development from the sales of one or two medicines that treat small numbers of patients. Sharply discounting their drugs would make it harder to invest in new cures.

 

They also can't easily "on-shore" manufacturing. More than 90% rely on third-party manufacturers. It's not economic for companies with small product portfolios to spend billions of dollars on manufacturing plants. Contract manufacturers have expanded abroad in recent decades because of lower costs and less burdensome regulation. In the U.S., it typically takes about seven years to build a new bio-manufacturing facility, compared to two in China and three in Ireland. Blame the U.S. permitting morass and Food and Drug Administration red tape.

 

Full corporate expensing in last year's tax bill and proposed FDA reforms to fast-track reviews of new plants could encourage more manufacturing in the U.S., but new plants can't be built overnight.

 

The Trump team conceded these realities by providing tariff exemptions for rare disease drugs, cell and gene therapies, antibody conjugates that provide molecularly targeted chemotherapy, fertility treatments and nuclear medicines. Yet the Commerce Department didn't provide guidance on how these exemptions will apply until last week.

 

Its guidance has created more confusion. Biotech companies will have to apply for exemptions for each individual product, regardless of whether it meets one of the specified categories, and explain "why the import meets an urgent U.S. health need." Urgent will be in the eyes of the bureaucrats who rarely act with urgency.

 

"The rationale can include information such as the type of disease the product treats and an assessment of alternative therapies or lack of alternative therapies for the type of disease the product treats, the number of U.S. patients that use the product, and whether or not the product is available in other jurisdiction," the guidance says.

 

Commerce says it will consult with the U.S. Trade Representative and Health and Human Services Department to "determine if the requested product meets an urgent U.S. health need" and that it "will make an individual, fact-specific, company-specific decision for each request." Lobbyists, on your mark, go.

 

How long will all this take? Who knows, but companies worry they'll be stuck paying the tariff first and later seeking refunds if their exemption request is approved. The guidance also fails to clarify technical questions, such as whether ingredients used in a rare disease drug and in other products are categorically exempt. Tariff rates will vary based on agreements that Mr. Trump has negotiated with trade partners, which he could change on a whim.

 

One small company says tariff compliance could consume 2% to 4% of its working capital before it commercializes its first medicine. That means less money for research. It's hard enough developing a new drug. Tariffs add more uncertainty that will discourage investment in U.S. biotech. Another win for Mr. Xi.

 

Mr. Trump is invoking national security under Section 232, but his tariff exemptions for companies that agree to "most-favored nation" pricing deal show his real motivation is lower drug prices. His biotech tariffs will raise them. America doesn't want to rely on China for critical medicines like antibiotics, but industry-wide tariffs resemble the medieval treatment of applying leeches to bleed a patient.” [1]

 

1. The U.S. Tariff Attack on U.S. Biotech. Wall Street Journal, Eastern edition; New York, N.Y.. 28 Sep 2026: A16.