Introduction
Last week, Donald Trump’s daring threat to impose tariffs of up to 25% on drugs imported by the United States has cast a shadow. This reckless move not only underestimates global dependence on the U.S., but also jeopardizes the health of millions of Americans in an economic power play.
Pharmaceutical Giants’ Response
While global pharmaceutical giants aren’t overly concerned, they’ve outlined contingency plans. Albert Bourla, CEO of Pfizer, stated during a quarterly earnings call, “We should not have tariffs,” but warned, “If there are tariffs, we have detailed contingency plans to minimize the impact.” Similarly, Pascal Soriot, CEO of AstraZeneca, emphasized from London that most of their medications for the U.S. are already locally produced, backed by a $3.5 billion investment in manufacturing and research.
Preparations by Major Pharma Companies
Bourla highlighted Pfizer’s 10 plants in the U.S., ready to shift production if tariffs are implemented. Soriot underscored AstraZeneca’s strong manufacturing footprint in the U.S., supported by a $3.5 billion investment. Other giants, like Johnson & Johnson and Novartis, are proactively committing to expand their U.S. presence.
Potential Impact on the U.S. Pharmaceutical Market
The U.S. imports 70% of active pharmaceutical ingredients from China and 40% of generic drugs from India, filling nine out of ten prescriptions. Abrupt tariff implementation would not only drive up drug prices, affecting consumers, employers, and programs like Medicare and Medicaid, but could also trigger a crisis of essential drug shortages, from antibiotics to hospital treatments.
Mexico’s Opportunity Amidst Uncertainty
Mexico: A Potential Player on the Global Stage
Amidst the uncertain chaos, Mexico could capitalize on Trump’s missteps by strengthening its national pharmaceutical industry and making a historic leap into the U.S. market. This opportunity hinges on government support and avoiding poorly timed projects like the plant requirement.
Mexico’s Current Pharmaceutical Exports
Mexico exports only 4.2% of its pharmaceutical production to the U.S. ($70.4 million in 2023), with more significant markets in Central and South America, and Europe. Rafael Gual of Canifarma and Larry Rubin of AMIIF agree that the impact is not catastrophic. “The U.S. depends on us as much as we depend on them,” Rubin notes, with medical device production being the most intertwined sector with the northern neighbor.
Global Pharmaceutical Investment Shift
The unmissable golden opportunity is that tariffs on China and India could redirect global pharmaceutical investment towards Mexico. Under the USMCA, Mexico positions itself as a nearshoring destination with competitive costs and strategic location. The Mexican government is reinforcing this ambition by developing the Felipe Ángeles International Airport (AIFA) as a cargo hub for key sectors, including pharmaceuticals.
Key Questions and Answers
- What is the potential impact of Trump’s tariff threat on the U.S. pharmaceutical market? The immediate effect could be a surge in drug prices, affecting consumers, employers, and safety-net programs. Moreover, it might trigger shortages of essential medications, from antibiotics to hospital treatments.
- How might Mexico benefit from this situation? Mexico could attract more pharmaceutical investment due to tariffs on China and India. With its strategic location, competitive costs, and government support, Mexico could strengthen its national pharmaceutical industry and make inroads into the U.S. market.
