As part of his push to reshore drug manufacturing, President Donald Trump this week threatened in a Truth Social post that all generic drugs imported to the United States will be tariff-free for another two years — after which a 100% tariff would be imposed, and a 200% tariff will kick in one year later. It’s a policy reversal that could have dire effects for the U.S. drug supply chain, which relies on low-cost generics manufactured in other countries.

In April, Trump signed an executive order imposing a 100% tariff on patented pharmaceutical products and ingredients imported to the U.S. At the time, generic drugs were not subject to Trump’s duty. However, he has reassessed that trade policy decision.

“Effective August 1st, 2026, all Generic Drugs being brought into the United States will continue to have a TARIFF of ZERO PERCENT for a two year period of time, after which the TARIFF will be raised to 100% for a one year period of time, and 200% thereafter,” Trump wrote. “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.”

While generic drugs account for approximately 90% of all medicines prescribed in the U.S., manufacturers continue to deal with a tough business environment where declining reimbursement, fragile supply chains, and persistent race-to-the-bottom pricing have created chronic shortages and limited domestic capacity.

Stefan Schneider, pharma Analyst at Bank Vontobel AG, told Reuters that the Trump administration is looking to reverse the shift of generic drug manufacturing to lower-cost countries, which would raise prices for generics in the U.S. Schneider noted that Trump’s tariffs would primarily impact China and India, where most generic drugs and their ingredients are manufactured.

India’s generics manufacturers

U.S. generic drugs largely rely on active pharmaceutical ingredients (APIs) manufactured in India, according to an analysis last month by US Pharmacopeia (USP).

The Indian Pharmaceutical Alliance (IPA), which includes 23 generic pharma companies, has warned that “adding tariffs on America’s affordable medicine partners in India would make it even worse” for U.S. patients. India’s generics manufacturers “operate under razor-thin margins” and “if large tariffs are imposed, they will trigger substantially more drug shortages, cause greater U.S. dependence on China for life-saving medications, and delay Indian companies’ investments in America,” according to IPA.

Salil Kallianpur, founder of Arks Knowledge Consulting, in a LinkedIn post made the case that Indian pharma companies will “likely need to accelerate U.S.-based manufacturing, expand CDMO partnerships, or navigate trade negotiations for exemptions,” adding that in the long run the policy will “reshape U.S. healthcare economics, as absorbing high tariffs or building domestic plants could ultimately drive up drug prices for American consumers.”

Nonetheless, Trump insisted in his social media post this week that “the objective of this Policy is to protect the people of the United States” and that his “Policy on Patented, Branded, or Innovative Drugs, which has been so successful, will remain as is” while “Pharmaceutical Facilities are being built, at a level never seen before, all over the United States of America.”

The economics of generic drug manufacturing

Given market dynamics, doubt remains that Trump’s tariff threat will prompt generic drugmakers to follow suit and make investments in U.S. manufacturing infrastructure, as Big Pharma companies have pledged hundreds of billions of dollars in domestic capital expenditures.

Earlier this year, Leerink Partners analysts cited comments by Catalent CEO Alessandro Maselli that large-scale reshoring of generics into the U.S. is “far less likely because the economics are simply too difficult, with U.S. manufacturing costs likely making generics 30-40% more expensive in a healthcare system that is already under cost pressure.”

Ronald Piervincenzi, CEO of USP, testified last year before Congress that “current generic drug payment policies and practices encourage purchasers to choose manufacturers largely based almost solely on lowest price.”

John Murphy III, CEO of the Association for Accessible Medicines (AAM), the Washington, D.C.-based trade group representing manufacturers and distributors of generic drugs, argues that the economics of U.S. generics manufacturing matter most.

“We have been paying about the same amount on an annual basis for generic medicines over the past 10 years, but the volume supplied to the U.S. market has grown exponentially,” Murphy told Pharma Manufacturing. “Until we address the fact that we simply do not pay enough for a resilient supply chain in generic medicines, we’re never going to be able to fix the core problems.”