Background

On April 2, Trump announced that wide-ranging tariffs, including a minimum 10% tariff on all countries, would go into effect. The White House also announced individualized reciprocal tariffs that would go into effect for dozens of countries with which the United States has a large trade deficit.

According to the Department of Treasury, the tariffs were calculated by taking the trade deficit the United States has with a country, dividing it by the country's exports to the United States, and multiplying that number by 0.5.

A 25% automobile tariff previously announced by Trump is also set to go into effect, and Trump signed an executive order to close the "de minimis loophole" — which is a trade policy signed into law by Congress allowing shipments valued at less than $800 to be duty-free — for Chinese imports.

Trump pauses most reciprocal tariffs

On Wednesday, Trump announced in a post on Truth Social that he authorized "a 90 day pause, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately."

Trump said in the post that "more than 75 countries" contacted U.S. officials to negotiate after he unveiled his new tariffs last week. Department of Commerce Secretary Howard Lutnick confirmed it was "definitively" not the markets that caused Trump to pause the tariffs, but rather the requests by so many nations to negotiate.

Trump defended his pause of the reciprocal tariffs by saying they were a sign of his flexibility. "You have to have flexibility. I could say, 'Here's a wall, and I'm going to go through that wall. I'm going to go through it no matter what,'" he said. "Sometimes you have to be able to go under the wall, around the wall or over the wall."

Trump says 'major' pharma tariffs are coming soon

Meanwhile, on Tuesday, Trump announced that pharmaceutical imports will soon be subject to "major" tariffs as part of an effort to drive manufacturing back to the United States.

"We're going to be announcing very shortly a major tariff on pharmaceuticals," Trump said at a dinner of the National Republican Congressional Committee. "And when they hear that, they will leave China. They will leave other places because they have to sell — most of their product is sold here and they're going to be opening up their plants all over the place."

While Trump didn't provide any details on the scope of the tariffs or the timing of the announcement, he has previously suggested a 25% or higher levy on pharmaceutical imports, though Reuters reported that drugmakers are lobbying the White House to phase any such tariffs in stages. To this point, pharmaceuticals have been exempted from the tariffs Trump has announced.

According to FDA, just 28% of manufacturers of active pharmaceutical ingredients are in the United States as of August 2019. Roughly 72% of manufacturers supplying the U.S. market are overseas, with 13% of them in China.

Reasons for this shift outside of the United States "include the fact that most traditional drug production processes require a large factory site, often have environmental liabilities and can utilize a low-cost labor force," according to FDA.

According to experts, how much patients in the United States feel the effects of pharmaceutical tariffs would depend on whether the pharmaceutical companies will pass the costs on to others within the medical system.

"If the tariff cost can be passed on to consumers, the pharmaceutical companies will happily do that," said Brad Setser, a senior fellow at the nonpartisan Council on Foreign Relations. However, if insurers balk at paying higher prices because of tariffs, drugmakers may have to absorb the costs themselves, which would largely undo tax advantages they acquired by moving abroad, Setser added.

"You could get a standoff," he said, as each side maneuvers for leverage. "If it leads to people being denied drugs because they can't afford them, that's a tragedy."

Marta Wosińska, a senior fellow at the Brookings Institution, said that any increase in drug prices would be most felt by patients taking brand-name, patent-protected medications with higher list prices, affecting people with high-deductible health plans.

"It would show up in higher premiums for health insurance," she said, especially for employer-sponsored plans that have fewer protections against cost increases than Medicare and Medicaid.

Wosińska said she's also concerned about the impact of tariffs on companies that make generic injectable drugs that operate on very small margins.

"What I worry about is we actually are going to see some manufacturers walking away from this market and saying, 'I can't make money,'" she said, adding that while companies generally try to avoid exiting a market and causing a shortage, it could be different if they're able to blame it on tariffs.