Trump announces 100% tariff on drugs, 50% on kitchen cabinets: Major blow for global importers
Trump ramps up trade war with tariffs on drugs, trucks and cabinets
Washington: US President Donald Trump on Thursday announced sweeping tariffs on pharmaceuticals, heavy trucks, home renovation materials and furniture, signalling a sharp escalation of his global trade war.
100% tariff on pharmaceuticals
Starting October 1, President Trump announced a 100% tariff on branded or patented pharmaceutical products, unless the company is building a manufacturing plant in the US. The measure is aimed at encouraging domestic production of medicines while penalising foreign suppliers.
25% tariff on heavy trucks
Trump also imposed a 25% tariff on heavy trucks imported from abroad to protect US manufacturers such as Peterbilt, Kenworth, Freightliner, and Mack Trucks. Foreign competitors include Sweden’s Volvo and Germany’s Daimler (Freightliner and Western Star). Shares in these companies fell sharply in after-hours European trading.
The president justified the truck tariffs primarily as a national security measure, citing a Section 232 probe conducted earlier this year to assess the impact of imported trucks on US security. Section 232 allows the president to restrict imports deemed a national security threat.
30% tariff on furniture
The new tariffs also target the furniture sector, with a 30% import tax on upholstered furniture. Imported products, mainly from Asia, accounted for 42% of upholstered furniture sold in the US in 2022, according to the United States International Trade Commission. Shares in retailers such as Wayfair and Williams Sonoma fell following the announcement.
50% tariff on home renovation products
Trump further announced a 50% tariff on kitchen cabinets, bathroom vanities, and related home renovation products.
Imports make up a substantial portion of these markets, particularly from Asia. The tariff is intended to encourage domestic production while protecting US manufacturers.
Economic impact and inflation concerns
The tariff surge has raised concerns over inflation in the US economy, the world’s largest. Trump argues that tariffs will revive domestic manufacturing and reduce the trade deficit, but critics warn that higher import taxes could slow economic growth and increase costs for consumers.
In 2024, the US imported nearly $233 billion worth of pharmaceutical products. A 100% tariff could significantly increase medicine costs, impacting Medicare, Medicaid, and general healthcare expenses.
Trump’s broader protectionist strategy
This latest move continues Trump’s aggressive use of tariffs and emergency powers, including 10% baseline tariffs on all countries, with higher rates for nations with trade surpluses. He has previously targeted Canada, Mexico, and China, citing concerns over fentanyl trafficking and illegal immigration.
Trump maintains that tariffs will force foreign companies to invest in US factories, despite evidence that prior import taxes have not led to significant factory construction or job growth. Since April, manufacturers have cut 42,000 jobs, while builders shed 8,000 jobs.
Trump’s stance on inflation
Trump has repeatedly dismissed inflation concerns, calling the economy’s current performance “unbelievable success”, even though the consumer price index rose 2.9% over the past 12 months, up from 2.3% in April.
How Trump’s new tariff on drugs could impact the global market
1. Global pharmaceutical companies hit
Foreign drugmakers exporting to the US, such as those in Europe and Asia, could face a doubling of costs for branded and patented medicines.
Companies may see their profit margins shrink, especially if they cannot pass the extra costs to US consumers.
2. Supply chain disruption
US distributors and pharmacies will have to source alternatives or absorb higher costs.
Manufacturers may delay shipments, shift production, or restructure global supply chains to minimise tariffs.
3. Impact on US drug prices
Higher import costs could push medicine prices up for US consumers.
Medicare, Medicaid, and private insurers may face increased expenses, potentially affecting healthcare affordability.
4. Investment and production shifts
Tariffs are meant to incentivise drugmakers to build manufacturing plants in the US.
Some companies may start domestic production, but it will take years to scale, causing short-term supply constraints.
5. Global market ripple effects
Stock prices of pharmaceutical companies with significant US exposure are likely to fall.
Investors may become wary of countries heavily reliant on US imports.
Trade tensions may spill over into other sectors, impacting markets beyond pharmaceuticals.
6. Potential retaliation
Countries affected by the tariffs may impose their own tariffs on US goods, escalating trade tensions and impacting global trade flows.
With inputs from AFP, Bloomberg
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