‘Relatively few details’: US pharma tariffs stoke uncertainty

In a Truth Social post last Friday (26 September), US President Donald Trump announced that the US would impose a 100 per cent tariff on branded pharmaceutical products from 1 October (EDT), with carve-outs for companies that were building manufacturing plants in the US.

“Starting October 1st, 2025, we will be imposing a 100 per cent Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” Trump wrote.

“There will, therefore, be no Tariff on these Pharmaceutical Products if construction has started.”

Ben Udy, lead economist at Oxford Economics Australia, told Accounting Times that there was still significant uncertainty regarding the pharmaceutical tariffs, who they would apply to and how material their impacts would be on Australian exporters.

“We have relatively few details on what exactly is going to be within this tariff. So it’s not clear if all pharmaceutical products are going to be included in this tariff. Australia mostly exports liquids like blood and vaccines to the US,” Udy said.

“It’s not what I imagine Trump is often thinking of when he says pharmaceuticals, which could include things like pills.”

Approximately 91 per cent of Australia’s pharmaceutical exports to the US in 2024 consisted of blood, antisera, cultures, vaccines and other immunological products, data from Oxford Economics’ TradePrism showed.

Udy noted that these were likely not the sort of products that Trump was intending to target with the pharmaceutical tariffs, and therefore certain carve-outs could be on the table.

“I expect that the final policy will have a lot of carve-outs both for specific companies and for specific products within pharmaceuticals that will limit the fallout from the imposition of these tariffs,” he said.

In 2024, approximately 47 per cent of Australia’s pharmaceutical exports went to the US market, Oxford Economics’ TradePrism has shown. A worst case scenario, with few tariff carve-outs, could result in a significant hit to some Australian pharmaceutical exporters.

Regardless, given that the US market makes up a comparatively small share of Australia’s export market, Udy predicted that even a worst case pharmaceutical tariff scenario would have limited impacts on Australia’s macroeconomy.

“Exports to the US only make up around 4 per cent of Australia’s total exports. So looking specifically at pharmaceutical exports to the US, it’s a pretty small share,” he explained.

Udy also pointed out that CSL, Australia’s largest pharmaceutical exporter, already had manufacturing plants based in the US and therefore could possibly avoid the tariff. This would further minimise the tariffs’ effect on Australia’s economy.

“[CSL] may get an exemption to that tariff. We don’t know exactly the parameters that Trump is going to put around those rules yet. So it’s quite unclear,” Udy said.

“CSL does account for the majority of Australian pharmaceutical exports. I’m sure there are some smaller players who do not have any manufacturing in the US and in that case, those exporters may face tariffs.”

AMP chief economist, Dr Shane Oliver, said that it would be difficult to gauge the impact of US pharmaceutical tariffs on Australia, as many large drug companies had already established US facilities.

“The impact of the pharmaceutical tariffs on Australia is unclear but is likely to be small. Last year, Australia exported $2.1 billion of pharmaceuticals to the US. Only 6 per cent of this was medicines, which is less than 0.01 per cent of GDP,” he wrote in a market update on Friday (26 September).

“The bulk of it was blood products from CSL and it’s unclear how much of that would be branded or patented, and CSL has indicated it does not expect to be impacted given its heavy US manufacturing presence. But even if all of our pharmaceutical exports are impacted, the effect on the economy would be minor as last year they were less than 0.1 per cent of GDP and much would be diverted to other markets.”