The news: President Trump amended an executive order to include generic drugs among the products eligible for lower tariffs. Generic pharmaceuticals could get lower-than-established reciprocal tariff rates if trading partners make deals, per a White House memo.

Japan appears to be an early beneficiary of the policy overhaul. Its generic pharmaceuticals and ingredients imports won’t be subject to tariffs, according to last week’s US-Japan agreement for 15% baseline tariffs.

Zooming out: Trump has threatened tariff rates of up to 250% on all pharmaceutical products and would likely be put into effect gradually over 1 to 2 years. Trump’s tariff plays are meant to spur more drug manufacturing in the US, and among Big Pharmas that tactic seems to be working.

• 15 leading pharma companies have committed more than $270 billion in US manufacturing and R&D projects over the next 5 to 10 years, per a recent report from JLL.
• However, generic drugmakers like Sandoz and Teva say they already offer low US drug prices and can’t afford to build expensive manufacturing facilities in the US like high-margin brand-name drug companies, per Bloomberg.

Why it matters: Generic drugs account for about 90% of US prescriptions, and the vast majority (88%) are imported from other countries.

• A deal with the European Union last month caps tariffs on generics and active pharmaceutical ingredients from Europe at 15%.
• The extended generic tariff relief could apply to countries that are leading suppliers of US generic drugs and ingredients. India is the largest, accounting for 35%, and China supplies 8%, per a US Pharmacopeia analysis of 2024 imports.
• The EU manufactures 18% of US generics, and the US makes up 12%, per USP.

Our take: Pharma companies, and especially generic drugmakers with slim profit margins, can breathe another sigh of relief. But that doesn’t mean they should step back from US manufacturing pledges where possible. Trump's new generic tariff deals are good news for patients, too, as lower-cost generic drugs are one bright spot amid increasingly pricey healthcare costs.

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