Finally, Tariffs the Stock Market Likes. Why Pharma Levies May Do the Trick.

Pfizer CEO Albert Bourla looks on as President Donald Trump announces TrumpRx in the Oval Office on Sept. 30. (BRENDAN SMIALOWSKI/AFP via Getty Images)

About the author: Christopher Tang is a distinguished research professor at UCLA.

The stock market often reacts negatively to President Donald Trump’s trade announcements. But it has finally responded favorably, to a 100% tariff on brand name and patented drugs.

Unlike the broad reciprocal tariffs announced on April 2, which triggered a market crash, Trump’s new drug tariffs, announced in conjunction with a new government-run drug sales platform last month, seems to have boosted investor confidence. Stocks of major pharmaceutical firms, including Eli Lilly, GSK, Merck, Novartis, Johnson & Johnson, and Pfizer , rose.

The market’s reaction suggests enthusiasm for the administration’s multifaceted strategy to overhaul the pharmaceutical industry. Investors are betting the tariff will incentivize drug companies to invest in American production facilities and that the drug sales platform, TrumpRx, can solve the intractable cost of medication. Rightly so. As the U.S. economy remains uncertain, investors are warranted to be more eager to invest in healthcare because of its less-discretionary nature.

There is good reason to believe drug tariffs will be more productive in encouraging onshoring than Trump’s other tariffs. Reshoring pharmaceutical supply chains tends to be less disruptive than reshoring high-tech supply chains, which typically involve complex, multitiered supplier networks. In contrast, the drug supply chain is relatively compact—spanning raw materials, active pharmaceutical ingredients, formulation, packaging, and distribution.

Recent advances, such as continuous manufacturing and modular production units, have made domestic drug production more scalable and cost-effective. And although skilled labor shortages persist in the U.S., pharmaceutical training demands are lower than those in high-tech sectors. Amgen, Eli Lilly, Johnson & Johnson, Roche, AstraZeneca, GSK, and Novartis have already committed roughly $350 billion to expand U.S. manufacturing capabilities.

But the tariffs’ impact could be more muted than hoped for. Due to existing trade agreements, drugs from the EU and Japan face only a 15% tariff. Generics and drug ingredients from India and China, where the U.S. sources roughly half its raw drug materials, are largely exempt from the new tariff. It also risks further entrenching big pharma, which can afford to move its manufacturing and shift supply chains on whim. To avoid stifling competition, the administration should allow tariff exemptions for smaller firms that choose to contract with U.S.-based manufacturers.

In tandem with the tariff, the administration rolled out TrumpRx, a website designed to offer Americans access to discounted cash prices on select medications.

TrumpRx takes aim at pharmacy-benefit managers (PBMs). Originally created in the 1960s to manage drug benefits, PBMs now dominate the U.S. pharmaceutical pricing landscape. Entities like CVS Caremark, Express Scripts, and OptumRx control nearly 80% of the market and use rebate-driven incentives, spread pricing, and opaque contracts that inflate drug costs and reduce transparency.

TrumpRx gives consumers a way to bypass these intermediaries with a direct-to-consumer platform. (This might offer savings for the uninsured and underinsured, but its impact will likely be limited for those with comprehensive insurance coverage.)

Its success also depends on broader pharmaceutical participation and consumer adoption. So far, Pfizer and Amgen are the only pharmaceutical companies to agree to join TrumpRx. Pfizer said it plans to offer discounts of up to 85% on some medications. This strategic move positions the companies to gain early access to Medicare and Medicaid markets—potentially expanding their future market share.

With TrumpRx, the administration is also trying to correct the fact that consumers pay far more for drugs in the U.S. than elsewhere. Companies often launch their drugs in the U.S. first, at whatever price they want, before negotiating lower prices abroad.

So to actually bring down drug prices, the Trump administration will have to coordinate with European governments and mandate simultaneous drug launches in the U.S. and Europe. It isn’t clear how feasible that type of complex negotiation—and requisite diplomacy—will be.

Investors seem to have faith that the drug tariffs and TrumpRx will stimulate domestic manufacturing, reduce drug prices, enhance access to essential medications, and improve public-health. They should take note that TrumpRx’s potential impact is uncertain, since it depends so heavily on voluntary industry participation.

However, if executed effectively, these initiatives could indeed make Americans healthier and reshape the future of pharmaceutical policy in the U.S.

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