From Tariff-Free to Targeted: How the EU–US Trade Deal Puts Pharma in the Crosshairs

The July 2025 EU–US trade agreement brought relief to many industries by averting a 30% U.S. duty on European goods. But for pharmaceuticals, the deal marked the end of a long-standing safe harbor. A new ceiling of 15% tariffs on EU exports, including branded medicines, has upended decades of tariff-free transatlantic trade and thrust the sector into uncharted territory.

While officials in Washington and Brussels framed the agreement as a diplomatic breakthrough, for pharma it represents a structural shift. A once-protected industry now faces billions in added costs, squeezed margins, and heightened uncertainty for patients and payers alike.

A Sudden Cost Shock for Pharma

Industry analysts estimate that applying a 15% tariff to branded drugs could add $13–19 billion annually in new costs. This is more than a financial hit—it alters the economics of drug development and market access.

For companies manufacturing in the EU and launching into the U.S., tariffs will erode gross-to-net margins, weaken payer negotiating leverage, and risk slower uptake as cost-effectiveness models shift. Late-stage assets with EU-based supply chains are particularly exposed.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) warned that the tariff is “a blunt instrument” that will “disrupt supply chains, impact investment in R&D, and ultimately harm patient access on both sides of the Atlantic.”

Disruption Across the Value Chain

The impact reaches far beyond finished products. Tariffs ripple across the entire pharmaceutical ecosystem, from raw materials to distribution:

• Manufacturing costs will rise for EU-based plants supplying the U.S. market
• Supply chains face logistical and pricing pressures, undermining just-in-time delivery models
• Market launches may be delayed or abandoned in therapeutic areas where margins are already thin

This creates a dual challenge: higher operating costs and more complex global launch decisions.

R&D Under Pressure: A Hidden Tax on Innovation

The tariff shock comes as R&D budgets are already under intense scrutiny. Redirecting resources to cover tariff-driven costs risks slowing innovation pipelines. Investors are taking notice too, pricing in lower near-term returns on innovative therapies.

The result is a hidden tax on innovation, one that could reduce the number of novel treatments reaching patients over the next decade.

Strategic Shifts Already Underway

Pharma companies are not waiting for the impact to materialize. Strategic responses are moving quickly:

• Biogen has announced a $2 billion expansion in North Carolina to reduce tariff exposure
• Johnson & Johnson, AstraZeneca, and Eli Lilly together have committed over $130 billion to expand U.S. production capacity

The calculus is clear: localize manufacturing, even at significant capital cost, to bypass tariffs and de-risk supply chains.

Policy Volatility: The Bigger Risk

Although the current deal caps tariffs at 15%, U.S. officials have hinted rates could climb to 35% if EU investment commitments fall short. That leaves pharma caught in the middle of geopolitical brinkmanship, complicating long-term planning.

At the same time, the Trump administration is pressing for higher ex-U.S. prices to offset domestic price controls, further tightening the screws on global pricing strategies.

In this environment, pharma companies must prepare for political risk to be a permanent fixture of strategic planning.

Navigating the New Reality

Companies that succeed in this new landscape will act on multiple fronts:

1. Localize Manufacturing: Accelerate U.S.-based capacity to secure tariff-free market access
2. Strengthen Supply Chains: Build resilience for critical inputs, APIs, and components
3. Reassess Launch Strategies: Prioritize assets and geographies based on revised gross-to-net projections
4. Engage in Policy Advocacy: Push for carve-outs, clearer definitions, and long-term regulatory stability

The End of Tariff Immunity for Pharma

The EU–US trade deal marks a seismic break with the past. For the first time in decades, medicines are fully exposed to the shifting winds of trade policy and geopolitics.

For pharma executives, the challenge is not only absorbing near-term cost shocks but embedding geopolitical volatility into operating models. Supply chains, manufacturing footprints, and even R&D investment priorities will be reshaped by trade and political risk.

For patients, the stakes are profound. Without coordination between policymakers and industry, access to life-saving medicines could become another casualty of geopolitical competition.

Bottom Line

The age of tariff-free certainty is over. Pharma leaders now face a world where trade policy is as critical to success as clinical trial design or regulatory approval. Building resilience—financial, operational, and political—is no longer optional. It is the new foundation of global pharmaceutical strategy.