US-EU trade deal’s 15% tariff on pharmaceuticals gets mixed response from analysts
A 15% tariff rate on pharmaceuticals imposed under a new U.S.-EU trade agreement is getting mixed responses from Wall Street analysts, as the biopharma industry tries to assess the financial impacts from the levies.
Under the trade framework announced over the weekend, EU pharmaceuticals imported to the U.S. will be subject to 15% tariffs, excluding “zero-for-zero tariffs” on certain generic drugs. European Commission President Ursula von der Leyen in a statement said the deal between the world’s two largest economies “creates certainty in uncertain times” with a “single 15% tariff rate for the vast majority of EU exports.”
According to Eurostat, medicines and pharmaceutical products were the EU’s largest export to the U.S. last year — totaling approximately $120 billion — with Germany as the largest extra-EU exporter of these products.
Germany’s Association of Research-Based Pharmaceutical Companies warned on Monday of “drastic” consequences for the industry, as the new tariff rate is likely to result in significant additional costs for manufacturers and for pharmaceuticals “means a break with the practice of duty-free exports, which has so far applied within the framework of the WTO and bilateral agreements.”
However, the European Federation of Pharmaceutical Industries Associations (EFPIA) was more cautious in its response, saying that it continues to review announcements on the US-EU trade deal as “key implications for the pharmaceutical sector remain uncertain.”
Merck CEO Robert Davis in a second-quarter 2025 earnings call on Tuesday said the drugmaker needs to see “more clarity” from the Trump administration on the agreement with the EU.
“It’s still not clear exactly how this relates relative to the 232 investigation and the timing,” Davis said. “Until there’s further guidance, I can’t really speak to it.”
Initiated under Section 232 of the Trade Expansion Act, the U.S. Department of Commerce is investigating the feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance, and whether pharma-specific tariffs are necessary. The probe is expected to conclude soon.
Davis said even if the 15% tariff was implemented immediately, it would have “minimal impact” on Merck “based on all the work we’ve done around inventory management and moving our manufacturing to the U.S. — we’re very well-positioned overall.”
However, EFPIA Director General Nathalie Moll in a statement called tariffs on pharmaceuticals a “blunt instrument that will disrupt supply chains, impact on investment in research and development, and ultimately harm patient access to medicines on both sides of the Atlantic.”
Moll added there are more effective means than tariffs “to secure pharmaceutical investment in research, development and manufacturing, rebalance trade and ensure a fairer distribution of how global pharmaceutical innovation is financed.”
Analysts weigh in
Wall Street analysts project that the flat-rate tariffs of 15% on branded pharmaceuticals could increase industry costs by $13 billion to $19 billion annually, according to reporting by Reuters.
ING analyst Diederik Stadig estimates that these levies could add $13 billion to the industry’s expenses without any mitigation efforts, while Bernstein analyst Courtney Breen pegged the additional costs at $19 billion for the sector — though she noted that biopharma companies might be able to gain relief through measures such as stockpiling drug products.
However, Jefferies analysts in a Monday note to investors said they do not expect the 15% tariff rate on pharmaceuticals will have a significant financial impact on large biotech companies, given that a majority have manufacturing based in the U.S. and others such as Amgen have a “meaningful” amount of non-European manufacturing operations.
Jefferies analysts believe the 15% tariff rate “is (+) for biotech and provides clarity on tariffs in a major manufacturing region + should be manageable and overall looks to be ‘less bad’ than expected.”
At the same time, Jefferies analysts noted that the U.S.-EU trade deal will not take effect until the Commerce Department probe into whether pharma-specific tariffs are necessary concludes, while ensuring that tariffs will not exceed 15% on pharmaceuticals exported from Europe.
“This matters because some Pharma/Biotech companies may have meaningful manufacturing operations in Europe + tariffs are expected to be applied to the ‘transfer price’ of the good which is generally higher than cost of goods,” according to Jefferies analysts.
Amgen and Biogen
In a March note to investors, Jefferies analysts found that Amgen and Biogen had the most “foreign exposure” to potential tariffs due to manufacturing operations outside the U.S. and their receiving tax benefits from overseas operations.
In Monday’s update, the analysts pointed to the fact that Amgen has European manufacturing operations in Ireland and the Netherlands.
“We estimate a potential single digit impact to [earnings per share - EPS] which assumes <50% of U.S. sales are manufactured in Europe and the tariff is otherwise applied to the U.S. price as a ‘proxy’ for the transfer price (would likely be conservative),” the analysts wrote, while noting that Amgen recently announced an approximate $2 billion manufacturing investment in Ohio and North Carolina.
Jefferies analysts called out Biogen’s manufacturing operations in North Carolina and Switzerland, with the comment that approximately 75% of the company’s 2024 U.S. product revenue is attributable to domestic manufacturing.
Last year, Biogen also initiated a tech transfer process to enable the manufacture of Alzheimer’s disease medication Leqembi in the U.S., the analysts wrote, who estimate a “conservative” potential single-digit EPS impact.
