Trump to impose 100% tariff on generic drugs from 2028

Generic drugmakers have two years to move production to the US or face a 100% import duty starting in August 2028.

President Donald Trump will impose a 100% tariff on imported generic medicines from August 2028, giving pharmaceutical companies a two-year window to relocate production to the US or face escalating penalties that reach 200% a year later. The phased schedule, announced Tuesday on Truth Social, exempts generic drugs, biosimilars and related ingredients from tariffs until Aug. 1, 2028, after which the 100% levy applies for one year before rising to 200% in August 2029.

"This is done in order to RESHORE Generic Pharmaceutical Production into America, with a penalty to those Companies that decide not to build Plant and Equipment within the stated period of time given to them," Trump wrote.

The announcement builds on an April 2 proclamation that imposed a 100% tariff on patented pharmaceuticals under Section 232 while initially exempting generics and biosimilars. Larger drugmakers received 120 days before that rate takes effect, while smaller companies that rely on contract manufacturers received 180 days. More than a dozen major drugmakers — including Eli Lilly, Pfizer and Novo Nordisk — have already struck deals with Trump to lower prices under his "most favored nation" policy, which ties US drug prices to cheaper rates abroad and exempts those companies from tariffs for three years.

The stakes are significant for India, whose companies supply nearly 50% of all generic medicines consumed in the US, according to trade data. The US accounts for about a third of India's annual pharmaceutical exports, mostly cheaper versions of popular drugs. China dominates the upstream supply of active pharmaceutical ingredients such as amoxicillin and heparin, creating a two-tier supply chain vulnerability that the tariffs aim to address.

Reshoring Push and Supply Chain Realignment

Trump's tariff escalation is designed to accelerate the reshoring of generic drug manufacturing, a sector where US dependence on foreign production has grown for decades. The previous administration's 100% tariff on Chinese medical goods in 2018 reduced bilateral trade in that category by roughly $3 billion over 12 months, according to Census Bureau data, though it did not trigger significant onshoring of pharmaceutical production.

Companies that commit to building manufacturing facilities in the US can qualify for tariff exemptions, the president said. The administration views the combination of escalating duties and investment incentives as a mechanism to force structural change in an industry where production decisions are driven by cost differentials of 30% to 50% between US and overseas facilities, according to industry estimates.

Market and Pricing Implications

The tariff schedule creates a binary choice for generic drugmakers: invest in US manufacturing capacity within two years or face a cost structure that would effectively double import prices by 2028 and triple them by 2029. For Indian generic manufacturers operating on thin margins — typically 10% to 15% net — a 100% tariff would eliminate profitability on US sales unless production is relocated.

Trump has also reiterated that drugmakers can avoid tariffs entirely by agreeing to his most-favored-nation pricing policy, which would require them to charge US buyers no more than patients in other high-income countries. That approach, combined with the tariff timeline, creates parallel pressure on both pricing and production location.

The policy's impact will depend on whether drugmakers can build US manufacturing capacity within the two-year grace period. Pharmaceutical facility construction typically takes three to five years from site selection to regulatory approval, suggesting that companies may need to begin investments immediately or seek expedited permitting to meet the 2028 deadline.

This article is for informational purposes only and does not constitute investment advice.