In a dramatic turn in U.S. trade policy, the White House has announced that the sweeping pharmaceutical import tariffs recently unveiled will not fully apply to countries that already have negotiated trade agreements with the United States. This carve-out offers critical relief to many U.S. trading partners facing potential exposure to 100 percent tariffs on branded drugs.
The New Tariff Regime: A Recap
On September 25, 2025, President Donald Trump announced that, effective October 1, the United States would impose a 100 percent tariff on branded or patented pharmaceutical imports — unless exceptions apply. The stated goal: push global pharmaceutical manufacturers to build production capacity inside the United States and reduce reliance on foreign supply chains.
However, from the outset, the policy was accompanied by caveats. One key condition for exemption is that the manufacturer must be “actively building” a U.S. facility (i.e. construction underway or ground broken) by the effective date.
But perhaps more consequential is the limitation placed on the application of the new tariffs for nations already bound by U.S. trade pacts.
The Trade-Deal Exception
According to a White House spokesperson, the newly announced pharmaceutical tariffs will not apply in full to exporters from countries that already have U.S. trade agreements. Instead, the United States will honor the lower, pre-existing caps negotiated under those agreements, often at or below 15 percent in the case of drugs.
For example:
Under the recently announced U.S.–EU trade framework, pharmaceutical imports from EU countries will be subject to a tariff ceiling of 15 percent. Japan, likewise, is believed to be covered by similar arrangements, limiting its exposure to the newly threatened 100 percent tariff.
Thus, the “full force” of the 100 percent levy is effectively reserved for exporters from countries with no preexisting trade deal or whose trade agreements do not cover pharmaceuticals.
Strategic Implications & Reactions
1. Shielding Key Allies
The exemption for trade-deal partners is a diplomatic hedge. It softens the blow for major economies with which the United States maintains formal trade pacts — notably the EU and Japan — and limits the risk of triggering full-scale trade retaliation.
The EU, for instance, has already expressed confidence that the 15 percent tariff cap negotiated in its trade deal will protect its pharmaceutical exports from facing steeper penalties.
2. Pressure on Non-deal Countries
Countries without U.S. trade deals — or whose agreements lack robust pharma protections — now face heightened pressure. They must either negotiate new terms quickly, invest in U.S.-based manufacturing to qualify for exemptions, or risk seeing their pharmaceutical exports taxed at punitive rates.
For exporters in jurisdictions like Singapore, which do not have pharma-specific carve-outs in its U.S. trade agreement, the stakes are high. Singapore’s pharmaceutical firms have already begun petitioning the U.S. for clarity or preferential treatment.
3. Impact on Global Pharma Strategy
Multinational pharma companies now have incentives to re-evaluate their supply chains and investment footprints:
Firms with existing U.S. operations or expansion plans may be advantaged, as they can more credibly meet the “active building” criterion for tariff exclusion. Exporters may shift to generic drugs or non-patented formulations, which are less likely to face the steepest tariffs. Trade-deal negotiation becomes even more strategic. Countries may push for stronger pharma clauses in bilateral or multilateral agreements. Manufacturers in non-deal countries might be forced to choose between high U.S. tariff exposure or costly U.S. capital investments.
4. Legal, Political, and Logistical Ambiguities
Several open questions and risks remain:
How exactly will the U.S. define which “trade deals” merit the exemption? Will partial or older agreements count? Could the U.S. reinterpret or renegotiate existing pacts to weaken caps? The interplay between the new tariffs and ongoing national security investigations (e.g. under Section 232) may complicate final implementation. Legal challenges are likely, especially from exporters arguing discrimination or breach of trade pact obligations.
Looking Ahead
With October 1 looming, the White House faces pressure to spell out detailed criteria, compliance rules, and timelines. Exporters in non-deal countries must move quickly to negotiate exemptions or ramp up U.S. investment. Meanwhile, pharmaceutical firms will be watching closely to see how the administration balances protectionism with trade diplomacy.
This compromise — exempting trade-deal partners from the full burden — is a tactical shift, reflecting the reality that imposing 100 percent tariffs across the board would be too disruptive. It leaves intact the core objective — incentivizing onshore manufacturing — while preserving strategic relationships with key allies already bound by agreements.
