“We’ve simplified it,” said a senior administration official, who was granted anonymity per the terms of a press call. “Made it much more simple to import to America.”
But the official also said the move would eliminate the “windfall” companies receive as a result of “artificially reducing their price” of production and then charging U.S. consumers far more.
The announcements come on the one-year anniversary of what the president deemed “Liberation Day,” the date on which he imposed a set of sweeping tariffs on U.S. trading partners that rattled the worldwide economy and were eventually ruled unconstitutional by the Supreme Court.
They signal the approach the White House is taking in the wake of that ruling, turning to sector-specific tariffs as well as methodical trade investigations, instead of the economic emergency law it used widely (and often impulsively) last year, but which a majority of justices ruled was illegal. The moves also underscore that the president is not backing down from his tariff policies, even as voters have increasingly expressed concern about their impact on affordability.
The pharmaceutical tariffs are the result of a Commerce Department investigation launched last year into the national security implications of producing drugs overseas. Trump threatened last July to levy tariffs as high as 200 percent on pharmaceuticals, spurring countries as well as drug companies to strike agreements with the Trump administration to lower their costs.
As a result, pharmaceuticals from the European Union, Japan, South Korea and Switzerland, which will face a 15 percent tariff, the administration official confirmed Thursday, while imports from the United Kingdom will face a 10 percent duty.
Major drugmakers including Pfizer, Merck, Bristol Myers Squibb and Astra Zeneca that struck their own deals with the White House will not face any tariffs on imports. Under those confidential agreements, pharmaceutical companies broadly agreed to offer many of their medicines to Medicaid at what is known as “most-favored nation” prices — which are calculated based on prices paid in other wealthy countries.
Drugmakers also agreed to launch new drugs in the U.S. at those pricing levels in the future — a lever that the Trump administration believes will be consequential in controlling costs over time. And they committed to build new facilities in the U.S.
The administration official said Thursday that companies that have not yet struck similar deals with the Commerce Department could still do so and lower their tariff rates to 20 percent.
In recent months, the Trump administration has pushed lawmakers on Capitol Hill to codify the deals with pharmaceutical companies in legislation, but it is unclear how much traction the idea has among Republicans who historically have been opposed to price controls.
“We’ve allowed other countries to make the drugs, and therefore we’re beholden to these other countries making the drugs,” the administration official said Thursday. “We need to make sure our drug supply is protected, secure and domestic.”
The administration has made the same arguments regarding steel and other industrial metals, which have been decimated in recent decades by competition from cheaper imports. Last spring, the administration expanded a 25 percent tariff on steel and aluminum to all countries — which it then doubled last summer. In late July, Trump imposed a 50 percent tariff on imports of copper.
The administration last August dramatically expanded what products are covered by the steel and aluminum tariffs, catching importers by surprise and irritating major trading partners. The net was so vast that things like the metal ring in a floss container triggered tariffs, according to Eugene Laney, the president of the American Association of Exporters and Importers.
The European Union made lowering the duties on steel and aluminum a key factor in its vote last month to approve lower tariffs on U.S. industrial products — part of the deal Trump struck with European Commission President Ursula von der Leyen last summer.
The U.S. will also now exempt products that contain less than 15 percent by weight of foreign steel, aluminum or copper from additional tariffs. Products that contain more than 15 percent of the metals will be subject to a flat 25 percent tariff on the full value of the product, instead of basing the tariff on the percentage of the product made up of the foreign metals.
The changes to steel and aluminum tariffs will be welcomed by trade protectionists, who have pushed for months for adjustments to the tariffs to ensure that importers aren’t artificially lowering their prices. The senior administration official said foreign companies were “basically fooling the system” and they were trying to eliminate those loopholes.
“We did not receive the tariff revenue we expected, because the world artificially reduced their claimed cost of steel coming into America,” the senior administration official said. “We’re just getting rid of the artificial nature. And basically, it didn’t change the outcome price, it just put more money into the pockets of the exporters.”
The administration official said the 25 percent should have no material economic difference, but The Committee for a Responsible Federal Budget, a think tank focused on federal fiscal policy, has estimated that a similar format will effectively raise tariff costs, potentially allowing the administration to collect up to $70 billion in additional revenue.