Trump Hits Imports with Big New Taxes: 100% Tariff on Branded Drugs
US President Donald Trump has announced a major new set of import taxes, known as tariffs. The biggest is a 100% tax on branded or patented drugs brought into the US. This new rule starts on October 1st. There is one main way for companies to avoid the tax: they must be building a factory in the US.
President Trump also announced other tariffs targeting specific industries:
- A 25% import tax on all heavy-duty trucks.
- A 50% tax on kitchen and bathroom cabinets.
The President explained the move on his Truth Social platform, saying the taxes are needed because other countries are “FLOODING” the US market with these products. He argues this protects US manufacturers and jobs. These changes come even though many US companies have asked the White House not to add more tariffs.
The Drug Tariff: Not as Simple as It Looks
While a 100% tax sounds huge, experts say the actual impact might be smaller than expected.
Neil Shearing, chief economist at Capital Economics, pointed out that the drug tariff is “not quite as big a move as it appears at first sight.”
This is because the rule has two important exceptions:
- The tariff does not apply to generic drugs (non-branded drugs).
- Companies that are building factories in the US are also protected.
Shearing noted that most of the world’s largest drug companies already make some products in the US or have recently announced plans to build new facilities. This helps them avoid the tax.
Global Concerns and Company Plans
European officials believe existing agreements with the US mean their drug exports should be protected from any tariffs higher than 15%. The European drug industry group has called for talks to ensure the new tariffs do not hurt patients in Europe or the US.
The UK is a major exporter of drugs to the US, sending over $6 billion worth of products last year. Following the announcement, a UK spokesperson said the government is “actively engaging with the US” because they know this will worry the industry.
Major UK pharmaceutical firms are already prepared:
- GlaxoSmithKline (GSK) already has US factories and recently promised to invest $30 billion in the US over the next five years.
- AstraZeneca also has US plants and plans to invest $50 billion in the country by 2030.
William Bain from the British Chambers of Commerce believes these massive investments in US manufacturing should protect the companies from the new taxes.
Suggested Image Query: Modern pharmaceutical manufacturing plant interior, close up
Why Companies are Investing in the US
The need to invest in the US is a major reason why some drug companies have recently moved money away from the UK. Jane Sydenham, an investment director at Rathbones, explained the situation.
She said the main reason for these decisions is not that the UK is a “low growth economy,” but rather “Donald Trump’s agenda and the uncertainty that’s creating.” Companies must invest in the US to deal with the threat of these new tariff proposals.
Taxes on Trucks and Furniture
The new tariffs cover more than just drugs:
- Heavy-Duty Trucks: The 25% tax is meant to help US companies like Peterbilt and Mack Trucks compete better.
- Cabinets and Furniture: The 50% tax on cabinets, and a 30% tax on upholstered furniture (starting next week), aim to reduce high levels of imports that hurt US furniture makers.
Swedish furniture company Ikea said they are “closely monitoring” the situation and that the tariffs make doing business “more difficult.”
Warning of Higher Prices for Consumers
The new tariffs have been criticized by US business groups, including the US Chamber of Commerce. They pointed out that many parts for heavy trucks come from countries like Mexico, Canada, and Germany. They warned it is “impractical” to suddenly source all those parts domestically, which will lead to higher costs for the truck industry.
Trade expert Deborah Elms from the Hinrich Foundation said that while the taxes help US producers, they are “terrible” for consumers because prices are likely to rise. She suggested that these taxes could also be a way for the President to secure government money while his broader global tariffs are being challenged in court.
