Global pharmaceutical stocks experienced a major disruption following an unexpected announcement from US President Donald Trump late Thursday.
Branded and patented drugs imported into the United States will face a sweeping 100% tariff starting October 1, a policy aimed at incentivizing domestic manufacturing.
While pharmaceutical stocks around the world saw widespread sell-offs on Friday, the market’s reaction was not uniform.
Shares listed in the Asia-Pacific region tumbled significantly, with some companies experiencing declines exceeding 5%.
In stark contrast, the sector in Europe remained relatively stable, with most stocks seeing only marginal losses and several major players, including Novartis and GSK, trading positively.
This divergence suggests Asian and EU companies are poised to weather the new tariffs very differently.
How pharma tariffs affect European drugmakers
The relatively muted response among European pharma stocks stems from strategic decisions made well before the tariff news broke.
Many of the continent’s leading drug exporters have proactively committed to substantial manufacturing investments in the United States since President Trump secured a second term.
Companies that initiate the construction of US plants are explicitly exempt from the forthcoming duties.
This forward-thinking approach has served as a critical defense.
AstraZeneca, for instance, saw its shares trade marginally higher on Friday after having pledged a massive $50 billion investment into the US through to 2030.
Roche, whose shares remained flat, had similarly announced plans to inject $50 billion into the country over five years, expecting to create 12,000 new jobs for research and manufacturing.
Switzerland’s Novartis, which has committed $23 billion to its US presence, also closed higher.
As AstraZeneca CEO Pascal Soriot noted over the summer, “Our investment is reflecting our belief in the growth of this country. We want to contribute to this.”
Furthermore, recent trade agreement between the European Union and the US provides additional safeguard, ensuring the effective tariff ceiling for EU pharmaceutical exports will not exceed 15%, an assurance described by an EU Commission spokesperson as an “insurance policy.”
How pharma tariffs affect Asian drugmakers
The market reaction in Asia on Friday was far more pronounced, reflecting a higher degree of uncertainty regarding the impact of the new tariffs.
Despite supplying over 20% of US pharmaceutical imports by value, the exact implications for different companies across the region remain opaque.
The overall sentiment among analysts, however, suggests that the sector may not face the full brunt of the tariffs.
Louise Loo, head of Asia economics at Oxford Economics, anticipates that the US will likely issue follow-up announcements detailing specific product category protections, effectively mitigating the full tariff burden.
Furthermore, not all Asian nations are equally exposed. Japan and South Korea, for example, are expected to be shielded from the duties due to existing trade agreements.
India, a major player in the global market, is likely to avoid the additional tariff as its primary exports are generic drugs, which are generally not covered under the announcement targeting branded and patented products.
Conversely, Singapore, which specializes in high-value patented medicines, faces the most significant risk unless its companies move quickly to secure exemptions by establishing active US manufacturing investments.
The pronounced stock market falls in the region indicate investors are factoring in this uneven vulnerability and the time needed for companies to adjust their supply chains.
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