Silke Mayr A major trade clash between the United States and Europe has been narrowly avoided—for now. In a move welcomed by the pharmaceutical industry, the White House decided not to include medicines in its latest round of tariffs. Other goods, like semiconductors, lumber, copper, and energy, were also left out.
This decision came after heavy concern earlier this year. Back in February, Washington floated the idea of placing a 25% tariff on imported drugs. The suggestion caused alarm on both sides of the Atlantic, especially in countries with strong ties to U.S. pharmaceutical companies.
“The immediate danger has passed, but we are not out of the woods yet,” said one senior EU official.
Ireland, Belgium, and Germany at High Risk
Ireland, which has become a hub for American drugmakers, was particularly at risk. Companies like Pfizer, Johnson & Johnson, Eli Lilly, AbbVie, and Bristol-Myers Squibb have large production sites in the country. The Irish economy relies heavily on pharmaceutical exports, especially to the U.S.
In 2024 alone, the EU exported $127 billion (€117 billion) worth of pharmaceutical products to the U.S., making it the region’s top export in that sector. A tariff hike would have hit this trade hard, hurting both European businesses and American patients who depend on imported drugs.
Law professor Billy Melo Araujo from Queen’s University Belfast said, “If these tariffs return to the table, Ireland could face real trouble. This sector employs 45,000 people in Ireland and sends more than €72 billion in drugs to the U.S.”
Belgium, another major player in the pharma world, exported more than $73 billion worth of drugs in just the first ten months of 2024. Around 25% of that went straight to the U.S. The country’s pharma sector now makes up about 15% of its total exports.
“We’re breathing a bit easier for now, but there’s still a cloud hanging over us,” said David Gering, a spokesperson for Belgium’s pharma industry.
EU Keeps a Close Eye on U.S. Moves
Even though the White House stepped back from taxing medicines, the European Commission is staying alert. Officials believe that future actions from the U.S. could still target the sector. Already, the U.S. has taken steps against other industries, including cars, aluminum, and steel.
An unnamed EU trade official said, “We see clear signs the U.S. may still investigate pharmaceuticals and semiconductors next. We can’t let our guard down.”
To prepare, Commission President Ursula von der Leyen has scheduled a key meeting in Brussels next Tuesday. Top pharma leaders from across Europe will attend to discuss how best to respond if tariffs are brought back into the spotlight.
“We consider the pharmaceutical sector vital to Europe’s future,” said a Commission representative. “We will act to protect it.”
The official also noted how deeply tied the U.S. and EU pharma industries are. Medicines often rely on cross-border production, with ingredients made in one region and finished drugs prepared in another.
Roots of the Problem: Tax Reforms and Outsourcing
Much of today’s trade imbalance stems from decisions made years ago. A recent Senate report found that U.S. drugmakers moved profits overseas to avoid taxes. This happened after the 2017 tax reforms introduced under President Donald Trump.
Big names like Merck, Pfizer, AbbVie, and Johnson & Johnson used these new rules to shift income to lower-tax countries like Ireland. While this reduced their U.S. tax bills, it also led to a heavier reliance on offshore production.
“It’s ironic. The very policy meant to bring profits home pushed companies to go abroad,” said Araujo. “Now the U.S. wants to penalize that same overseas production.”
This setup has left both economies highly dependent on each other. Any disruption in trade—like new tariffs—could take years to undo. Drug production isn’t easy to move. It requires long-term investments, strict safety rules, and trained workers.
Wider Concerns for Global Pharma Supply Chains
The U.S. isn’t the only country worried about supply chains. COVID-19 showed how fragile global drug production can be. Since then, many governments have worked to bring some production back home. But doing so is slow and costly.
Some experts say the recent U.S. tariff talk is part of a broader push to reduce dependence on foreign goods. But this approach risks causing shortages, raising drug prices, and disrupting patient care.
“Pharmaceutical supply chains are not like furniture or clothing,” said Dr. Elena Fischer, a trade analyst based in Berlin. “They are tightly regulated, very complex, and not easily replaced.”
She warned that any move to upset these networks could hurt both U.S. and EU citizens alike.
Looking Ahead: What’s Next for Transatlantic Trade?
While the immediate threat has been avoided, tensions remain high. Many in the EU believe the issue will resurface later in the year, possibly as U.S. elections near.
There is also concern that other sectors—like semiconductors—could face a similar situation. The EU plans to review its own trade policy and could take steps to protect key industries if the U.S. acts again.
For now, industry leaders on both sides are hoping for dialogue over dispute.
“This is a moment to work together, not fight each other,” said Gering. “The health of millions depends on it.”