Stocks of the world’s largest pharmaceutical companies fell on Wednesday after Donald Trump’s pledge yesterday to impose “significant” tariffs on pharmaceutical imports. The US president’s announcement, coupled with the implementation of a new country-by-country “retaliation” package, escalated uncertainty in markets and raised concerns about the impact on a globalised and interdependent supply chain.

Although pharmaceuticals were exempted from the first phase of the new tariffs that went into effect last week, Washington now appears to be directly targeting the industry. The Trump administration argues that the measures will encourage companies to move their production to the United States – an argument that neither analysts nor the companies themselves agree with.

Shares plunge and analysts’ reservations

Shares of US pharmaceutical giants such as Gilead Sciences, Pfizer, Merck, and Eli Lilly fell between 2% and 4% in pre-market trading on Wednesday. It was a similar picture in Europe, where the SXDP health-care stock index lost 5%, recording its biggest daily drop since March 2020.

Shares of AstraZeneca, GSK, Roche, Sanofi, and Novartis were also in negative territory, losing between 5% and 6.5%. Despite the fall, Barclays analysts point out that some of them, such as Roche and Sanofi, may better absorb the shocks thanks to their global manufacturing network and increased US capabilities.

BMO Capital Markets analyst Evan Zeigerman said “we are opposed to imposing tariffs on pharmaceuticals – they will hardly succeed in bringing production back to the US” and added that due to the complexity of the supply chain, the industry is unlikely to make radical changes, especially since the measures are implemented through emergency powers that could expire with Trump’s term or congressional action.

The EU and India’s exports

The impact was not limited to the US or European markets. In India, the Mumbai Stock Exchange’s pharmaceutical index closed down 2%, dragging the broader Nifty 50 index down 0.6%. Shares of IPCA Laboratories, Glenmark Pharma, and Biocon were down as much as 5.5%.

India primarily exports generic drugs to the US, which accounts for a third of the country’s total pharmaceutical exports.

It is noted that the European Union’s exports of medical products to the US reached €90 billion in 2023, according to Eurostat data. Barclays reported that Europe is responsible for 80% of the US trade deficit in the biopharmaceutical sector.