Pharma Braces for Tariff Impact: EU Firms Face Challenges, US Investment Surges
The pharmaceutical industry braces for potential tariff impacts. The White House has set an October 1 effective date, but specific products remain unclear. European companies, while exempt from certain tariffs, face challenges and opportunities.
Tariffs on APIs could cause production bottlenecks and cash flow volatility, though the impact would be less severe than on finished drugs. Smaller producers and specialists may struggle with credit deterioration. The financial impact depends on targeted products and innovation compromise.
Larger, investment-grade pharma companies are better equipped to absorb extra costs, unlike smaller players facing heightened credit risk. Tariffs on finished drugs would hit European companies' profitability hardest due to their significant cost structure. A weaker US dollar could further compress margins for European companies reporting in euros or Swiss francs.
US capital expenditure commitments raise questions about efficient capital allocation and could crowd out R&D spending. European companies have pledged around US$170bn in US investment to increase production and qualify for tariff exemptions, reshaping supply chains in response to US tariff plans.
While European pharmaceutical companies are exempt from certain US tariffs, they face potential production challenges, credit risks, and margin compression. Investment in US production is accelerating, reshaping supply chains and securing tariff exemptions. The industry awaits clarity on targeted products and the full financial impact.
