Autumn in Washington has brought with it a peculiarly American mix of theatre and threat. President Donald Trump has unveiled a 100 per cent tariff on branded and patented pharmaceuticals, due to take effect on October 1st. The measure is meant to force drug manufacturing back onshore. But as with so many tariff salvos, the risks look larger than the supposed rewards.
Nigel Green, chief executive of deVere Group, a large international financial advisory firm, warns that the new duty will ricochet through the global health economy.
“A tariff of this magnitude on high-value medicines will ripple through every part of the global health economy,” he argues. Rather than reviving domestic industry, he believes it will discourage investment, worsen inflationary pressures and push mobile capital toward friendlier shores. Markets, as ever, are voting with their feet.
The timing could scarcely be worse
America’s annual pharmaceutical imports now exceed $200bn, reflecting a finely tuned global supply system where active ingredients and components cross borders multiple times before ending up in a pill bottle. To imagine this vast lattice could be rebuilt overnight is fanciful. “You can’t rebuild decades of specialised infrastructure overnight,” Green observes drily. Patients may soon discover that the price of “America First” is higher co-payments at the pharmacy.
Already analysts expect prescription prices to creep up within months, as importers and distributors pass along the new levy. That would deliver another unwelcome shove to inflation, just as the Federal Reserve is gingerly beginning to cut rates. Green sees a “weaker dollar and firmer pricing power in non-US pharmaceutical hubs” as investors reallocate. In other words, capital will not sit about waiting for Washington to change its mind.
The pharmaceutical front is also only one theatre in a broader campaign. The Trump administration has widened national-security probes into robotics, medical devices and industrial machinery. The message to global investors is clear enough: America is prepared to weaponise tariffs across strategic sectors. Retaliation from trading partners seems almost certain. For fund managers with long horizons, the uncertainty itself is the problem.
Not surprisingly, emerging markets with robust life-sciences industries are attracting a fresh look. Investors are sniffing around economies with stable trade regimes and open markets, where policy risk feels less capricious. Their currencies could benefit too, while equity flows tilt toward companies insulated from Washington’s trade wars. “The instinct is to move toward reliability,” says Green.
Research pipelines could be hit
The second-order effects are not trivial. Drug development depends on smooth global inputs. If those flows are interrupted, research pipelines could falter, delaying treatments and raising costs. Knock-on effects would ripple to healthcare providers, insurers and ultimately workers whose productivity suffers when medicine becomes scarce.
America’s reputation as a scientific hub also takes a knock. “Restricting access to world-class ingredients and expertise will not strengthen the US,” Green cautions. “It will encourage global talent and capital to deepen their commitments elsewhere.”
The logistical hurdles to Trump’s grand plan are daunting. Building state-of-the-art pharmaceutical plants takes years and billions. Expertise cannot be conjured by presidential decree. In the meantime, shortages and higher costs look inevitable. Markets grasp this better than politicians. As Green notes, “capital hates uncertainty.” By slapping a sudden, sweeping tariff on a critical sector, Washington may have guaranteed the opposite of what it intends: not the reshoring of drug production, but the offshoring of investment.
Investors, in short, are unlikely to wait for the president’s next tweet. They are already heading for the exits.