United States Economy Faces New 100% Tariff on Imported Generic Drugs from 2028
President Donald Trump announced a phased tariff plan on imported generic pharmaceutical drugs that sets a 0% rate for two years starting August 1 to encourage domestic production before raising tariffs to 100% and then 200%, a development that directly affects the United States economy as the country prepares for major shifts in pharmaceutical supply chains. [1] More than 90% of medicines sold in the US are generics. [1] The policy applies only to generic drugs; patented, branded or innovative drugs remain unchanged. [1]
Trump's Phased Tariff Announcement on Generic Drugs
President Donald Trump said on Tuesday that all generic drugs brought into the US will continue to have a tariff of 0% for two years starting from August 1, after which the tariff rate will be raised to 100% for one year and to 200% thereafter. [1] "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 said in a post on Truth Social. [1] On Tuesday, Trump announced a new 100 per cent sector-specific tariff on imported generic drugs to take effect from August 2028, with that level rising to 200 per cent in 2029. [2] For now, the US leader said the tariff on generic drugs would be cut to zero from August 2026, in an effort to build a window for the onshoring of such pharmaceutical production to the United States. [2] President Donald Trump on Tuesday announced a phased tariff plan for imported generic drugs, giving manufacturers two years to move production to the United States before steep import duties take effect. [5]
Rationale and Impact on Drug Manufacturing
Trump has been pressuring drugmakers through his most-favoured-nation drug pricing policy to lower prices to what people pay in other high-income countries. [1] The world's biggest drugmakers signed deals with the US government last year that exempted billions of dollars of drugs from tariffs. [1] Trump signed an executive order in April imposing 100% tariffs on branded pharmaceuticals imported into the US unless manufacturers agree to government drug pricing deals or commit to making their products domestically. [1] More than 90% of medicines sold in the US are generics, according to the US Food and Drug Administration. [1] The policy on patented, branded or innovative drugs will remain unchanged, Trump said. [1] Trump's move aims to reshore generic pharmaceutical production to the United States with penalties for companies that do not build plants domestically. [5]
Context Within Broader Tariff Strategy
The announcement comes as the 10% global tariff expires this week and new tariffs targeting forced labor issues in 60 trading partners are prepared. [2] The Trump administration has prepared fresh tariffs targeting 60 trading partners over their alleged failures to act against forced labor, as officials push to rebuild the US leader's trade agenda after legal setbacks. [2] Trump imposed a 10 per cent global duty this year after a swath of his tariffs were struck down by the Supreme Court in February, but this levy expires on Friday. [2] Analysts expect that new tariffs over forced labour concerns - set between 10 per cent and 12.5 per cent - would replace these temporary duties. [2] Separate tariffs include a 50% levy on many Canadian products in 30 days and a 25% duty on certain Brazilian goods. [2] Washington announced a fresh 25 per cent duty on certain Brazilian goods last week, and on Monday unveiled a 50 per cent levy on many Canadian products to take effect in 30 days. [2]
Reactions from Trading Partners
Canadian Prime Minister Mark Carney said Tuesday that he was looking at "all options" adding that he and Trump had agreed to "intensify discussions" in the coming weeks on a possible deal. [2] The EU previously said that it considers tariffs imposed on these grounds "unjustified". [2] US plans for a 25 per cent tariff on Brazilian goods over accusations of unfair trade practices have separately drawn a sharp rebuke from the Latin American giant. [2] The levy is due to take effect Wednesday, while shaping up as a major campaign flashpoint just months before Brazil's presidential election. [2] A range of products like beef, coffee and certain aircraft parts will be exempted, as will some goods that the United States does not produce. [2] The American Chamber of Commerce for Brazil recently warned that Washington's measure places Brazil among countries "facing the most restrictive conditions for access to the US market," affecting more than US$11 billion in exports. [2]
Link to USMCA and Ongoing Negotiations
Washington's planned 50 per cent tariff on Canada also comes as US-Mexico talks over a North American free trade pact intensify. [2] Washington recently declined to extend the accord in its current form. [2] Greer is set to travel to Mexico from Wednesday to Friday for discussions linked to a joint review of the US-Mexico-Canada Agreement (USMCA). [2] But negotiations with Canada have proceeded at a slower pace. [2] Carney on Tuesday did not suggest that he would head to Washington for talks. [2] Some lawyers see Trump's use of an untested legal provision - Section 338 of the Tariff Act of 1930 - as a means to gain leverage over Canada in USMCA negotiations. [2] Trade lawyer Dave Townsend of Dorsey & Whitney added that higher tariffs "appear to be aimed at encouraging an agreement between Canada and the United States, or in retaliation for the failure to reach such agreement, or both." [2] The question, he said, is whether both sides will start a "cycle of escalation and retaliation". [2] Crucially, Trump's latest salvo will not exempt affected Canadian products entering his country under the USMCA. [2] Trump told reporters Tuesday that the Canada tariffs were unrelated to his earlier threats over wildfire smoke that descended into the United States. [2]
What to watch next: Greer told CNBC that new action on forced labour will cover the majority of US trade, with the moves likely to reignite trade tensions, and a 10 per cent tariff rate would hit US imports from partners including Canada, the European Union, Mexico, Taiwan and the United Kingdom while goods from over 40 other major economies like China, India and Japan face a 12.5 per cent levy. [2]
