Trump Threatens Pharma Tariffs Soon. Why the Stocks Are Looking Healthy.

President Donald Trump, flanked by U.S. Secretary of Commerce Howard Lutnick, spoke to reporters Tuesday about tariffs on pharmaceuticals. (ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

President Donald Trump keeps saying tough drug tariffs are just around the corner, but they’re looking less and less like a problem for pharma stocks.

The latest warnings came late Tuesday when the president said that the pharma tariffs he has been promising since early this spring will finally be announced by the end of the month.

Drug stocks barely budged on the news. Merck and Pfizer were up slightly on Wednesday, while Eli Lilly was up 2.5%, and Johnson & Johnson , which announced strong second-quarter results early in the morning, was up more than 6%.

It isn’t that investors think Trump won’t eventually impose the sector-specific drug tariffs. But in the months since the White House started talking about putting high tariffs on drug imports, the perceived threat they pose to drug company earnings has sharply diminished.

“Tariffs schmariffs,” Jefferies analyst Akash Tewari wrote in a July 9 note.

One big reason they’re shrugging off the threats is that Trump is now suggesting the tariffs will start low before steeply ramping up in order to give drugmakers time to bring manufacturing into the U.S. In April, when he initially suggested the tariffs could be as high as 200%, Trump left the impression that the penalty would arrive all at once.

Trump now says that the higher rates won’t arrive until after a grace period of “a year or so.” That pushes off the tariff’s impact and leaves open the possibility that intervening events take the higher rates off the table.

Meanwhile, the big pharma company’s own mitigation work has created an even fluffier cushion. In the first quarter of the year, drug companies sped up their imports in a dramatic surge that was big enough to push the U.S. trade deficit to record levels in March.

Companies imported more than $50 billion worth of pharmaceuticals to the U.S. in March, compared with $19.4 billion in the same month in 2024. By the end of May, $159.2 billion worth of pharmaceuticals had been imported to the U.S. this year, nearly 70% more than the amount of drug imports by the end of May the prior year.

That stockpiling will give drugmakers even more time before they begin to feel the impact of the threatened tariffs. In a note on Wednesday, Leerink Partners analyst David Risinger wrote that drugmakers have packed enough into their stockpiles to insulate them from the tariffs for between six and 18 months, depending on the product.

Add that to the year or more of tariff phase-in Trump has promised, and the 200% tariff begins to feel like a remote threat.

In his July 9 note, Jefferies’ Tewari wrote that the companies could have two to three years before bearing the brunt of the tariffs, taking into account both the impact of the delayed implementation and the stockpiling.

That could give them enough time to move manufacturing into the U.S., which many of them have already begun to work toward.

“It seems like tariffs have gone from being a major overhang for [healthcare] to something that could be more manageable,” Tewari wrote.

The details of the drug tariff plan matter, and surprises in implementation could change the outlook. For now, though, it looks like investors can safely look past the tariff headlines and focus on the drugmakers’ fundamentals.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com