Trump Announces Tariffs on Imported Generic Drugs

Former President Donald Trump, via Truth Social, announced plans to impose a 100% tariff on imported generic drugs starting August 2028, with the potential to increase it to a maximum of 200%. This move is seen as an attempt to force the reshoring of generic drug production within the United States. However, given that generic drugs account for over 90% of prescriptions in the U.S., there is a significant risk that global pharmaceutical companies, unable to absorb the increased costs, will discontinue supply rather than relocate production. This could lead to a collapse of the U.S. healthcare supply chain and shortages of essential medicines, raising concerns in the market.

Generic Pharmaceutical Companies Face Low-Margin Challenges

In the past, companies like AbbVie and Pfizer, which develop branded pharmaceuticals, secured tariff exemptions by agreeing to most-favored-nation pricing and other tax benefits. However, unlike branded pharmaceutical companies that enjoy high profit margins due to patent exclusivity, generic pharmaceutical companies operate on very low profit margins and rely on price competitiveness for survival. According to an analysis by Jefferies, if the tariffs are applied to the import of active pharmaceutical ingredients (APIs), it will have a devastating impact on the entire industry. This could lead companies like Sandoz and Apotex, which rely heavily on imports, to cancel product approvals due to unsustainable costs.

Differentiated Impact Based on Company-Specific Supply Chain Structures

Depending on the specific guidelines of the tariff policy, the impact on generic companies will vary. If the tariffs are applied only to finished products and not to API imports, companies with domestic manufacturing bases, such as Amphastar and ANI Pharmaceuticals, will be relatively less affected. On the other hand, companies with high reliance on overseas manufacturing, such as Apotex of Canada and Dr. Reddy's of India, will be significantly impacted. Immediately after the announcement, Apotex's stock price fell by 9%, and Dr. Reddy's (7%) and Sandoz (3%) also declined, demonstrating the market's negative reaction.

Legal Challenges and Uncertainties Regarding Policy Implementation

Despite this aggressive threat, there are legal questions about whether the policy can actually be implemented. In February 2026, the U.S. Supreme Court ruled that former President Trump's unilateral imposition of tariffs using emergency powers was unconstitutional. Therefore, this generic drug tariff policy is also likely to be blocked by the judiciary unless it receives legislative support from Congress or has a clear legal basis. Investors should carefully consider the upcoming negotiations with Congress and the specific legal mechanisms of the executive order before making investment decisions, rather than reacting to simple political statements.