Trump’s Tariffs

US President Donald Trump’s implementation of tariffs, particularly on China, Mexico, and Canada, has dominated news headlines recently. The second Trump administration believes that the tariffs are his primary weapon in the war against opioid-related overdose deaths and “the scourge of fenatanyl” in particular. 

White House staff have alleged that the chemicals that go into fentanyl are produced in China, developed in Canadian labs, and distributed around the US by Mexican gangs. Trump claims he is implementing tariffs as a means of ousting shadowy players involved in this complex tripartite system, and protecting vulnerable US citizens. 

However, the tariffs are not unique to black market fentanyl supply chains. As well as threatening further tariffs on European allies, a 10 percent tariff on Chinese imports will affect manufacturers of generic medicines.

John Murphy, CEO, Association for Accessible Medicines, said, “Tariffs on products from Canada, Mexico, and China could increase already problematic drug shortages. Generic manufacturers simply can’t absorb new costs. Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater. The overall value of all generic sales in the US has gone down by $6.4 billion in five years despite growth in volume and new generic launches. Tariffs would make this much worse.”

The Healthcare Distribution Alliance is also skeptical of the tariffs and has expressed concern about the negative impacts they will incur on pharmaceutical supply chains and patients: “Tariffs on pharmaceuticals would strain the pharmaceutical supply chain and could adversely affect American patients, whether through increased medical product costs or manufacturers leaving the market. Accordingly, we ask the administration to consider establishing exemptions for pharmaceutical products and long implementation timelines to maintain the safe and efficient delivery of approximately 10 million medicines and healthcare products every day.”

Some US-based stakeholders are looking to bring more API manufacturing operations to US shores. The Missouri-based API Innovation Center, for example, received $9.55 million from the state in January to do just that. A 2024 white paper prepared by the API Innovation Center outlines a national strategy to reshore at least 25 percent of small molecule API production to the US by 2030. The current dependency on China and India for APIs, according to the report, is being viewed as a national security risk because of supply chain vulnerabilities, quality issues, and geopolitical uncertainties.

Around 83 percent of the top 100 generic medicines prescribed in the US have no domestic API source, the white paper adds, and more than 90 percent of common antivirals and antibiotics also rely on imported APIs. Whilst US API production has decreased by 61 percent in the past ten years, India and China have seen dramatic increases in their production capacities. So what’s stopping the US from generating its own APIs?

Low profit margins and high production costs mean US manufacturers struggle to compete with low-cost foreign suppliers, and the FDA's slow approval process for alternative manufacturing methods has also been viewed as a cause for discouragement in investment. Add to this a lack of incentive and a limited workforce, and you have a perfect storm resulting in a dependency on offshore production.

Industry-based experts would prefer an incremental reshoring strategy to tariffs on overseas producers, with the API Innovation Center advising:

• new technologies to replace outdated batch manufacturing
• streamlined approvals processes for US manufacturers
• federal government support for API production (including the purchasing power of Medicare)
• critical drug list based on supply risk
• national buffer inventory for critical medicines
• scaling up continuous manufacturing and other modern processes
• sustainable drug supply chain management plan
• diversification of API sourcing across the US and its strategic allies.

Interestingly, the US’s two closest and most important strategic allies remain Canada and Mexico. Therefore, whilst the reshoring of API manufacturing is crucial for US health security, significant investment, perhaps policy changes, and industry collaboration are more important in building a robust and sustainable supply chain than the alienation of one's friends and neighbors.