Trump Administration Announces Tariffs on Imported Patented Medication and Pharmaceutical Ingredients under Section 232 of the Trade Expansion Act of 1962

On April 2, 2026, exactly one year after the “Liberation Day” tariffs, President Donald Trump issued a Proclamation, “Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States,” (the “Proclamation”) imposing sweeping tariffs on imported patented medications and active pharmaceutical ingredients (“APIs”). This Proclamation, issued pursuant to Section 232 of the Trade Expansion Act of 1962,¹ establishes a 100% ad valorem duty on products of companies that have not secured “Most-Favored-Nation” (“MFN”) pricing agreements, while providing tiered lower rates for companies committed to onshoring production to the United States and countries that have negotiated trade deals with the Trump Administration.

The new tariffs will take effect on after 12:01 a.m. EDT on July 31, 2026 for companies that have not committed to onshore production of pharmaceuticals and pharmaceutical ingredients, and September 29, 2026 for other companies.

Background

Under Section 232, the President may impose import restrictions on certain imports that threaten to impair national security after an investigation and affirmative determination and confidential report by the Secretary of Commerce. The new duties resulted from an investigation initiated by the Secretary of Commerce on April 1, 2025 to determine the effects on the national security of imports of pharmaceuticals and pharmaceutical ingredients.

The Proclamation highlights a critical vulnerability: as of 2025, approximately 53% of patented pharmaceutical products distributed in the United States were produced abroad, and 85% of patented APIs were sourced from foreign manufacturers. The Proclamation asserts that this “import reliance” compromises the domestic industrial base and limits the nation’s ability to respond to public health emergencies or wartime requirements.

The new duties follow a year of intense negotiations between the White House and the pharmaceutical industry centered on the “TrumpRx” platform, a direct-to-patient marketplace designed to align US drug prices with international benchmarks.

Key Provisions

The Proclamation establishes a complex, multi-tiered tariff structure based on a company’s compliance with domestic production goals and pricing agreements:

• 100% Ad Valorem Duty: A 100% tariff will apply to patented pharmaceuticals and associated ingredients (as listed in Annex I) for companies that have not entered into approved onshoring or pricing agreements.
• The 20% “Onshoring” Rate: Companies with a Secretary of Commerce-approved plan to transition production to the United States qualify for a reduced 20% rate. This rate will increase to 100% on April 2, 2030, effectively creating a four-year window for domestic relocation.
• Agreement-Specific Rates: The Proclamation provides lower rates for strategic partners to implement pharmaceutical-related commitments in existing trade deals: 15% for the European Union, Japan, South Korea, Switzerland, and Liechtenstein. Imports from the United Kingdom will be subject to a 10% rate, with a pathway to 0% contingent on a future bilateral pharmaceutical pricing agreement. On December 1, 2025, the United States and United Kingdom announced an “Agreement in Principle on Pharmaceutical Pricing,” although negotiations on a final deal have not been completed.
• Orphan Drug Exemption: In a significant carve-out, the ad valorem rate is set at 0% for all drugs where every approved indication is designated under the Orphan Drug Act, as long as the Secretary of Commerce, in consultation with the United States Trade Representative and the Secretary of Health and Human Services (HHS), determines that (1) they are products of a jurisdiction that has a current or forthcoming trade and security framework agreement, or (2) they meet an urgent US health need.  
• Generic Exemption: For now, generic pharmaceuticals and their associated ingredients are exempted from the new tariffs. However, the Proclamation directs the Secretary of Commerce to re-evaluate this exemption within one year of the Proclamation.
• MFN and Onshoring Exemption: The Proclamation also exempts imports of patented pharmaceuticals and associated pharmaceutical ingredients produced by companies that have fully executed agreements or are negotiating agreements with the Secretaries of Commerce and Health and Human Services regarding MFN pricing and onshoring of production and R&D of patented pharmaceuticals and pharmaceutical ingredients.
• Relationship to existing duties: The Proclamation describes the relationship between these new tariffs and any existing tariffs on these products. It also specifies that if a product is subject to more than one rate of duty under the Proclamation, then the lowest applicable rate will apply.
• Annexes: The Proclamation includes four Annexes: Annex I lists the applicable HTS codes for imported patented pharmaceuticals and associated pharmaceutical ingredients. Annex II lists companies with existing agreements. Annex III lists companies who will face 100% duties beginning on July 31, 2026. Annex IV is a list of exempted HTS codes.

The Proclamation also directs the following:

• Negotiations: The Proclamation directs the Secretaries of Commerce and HHS to pursue negotiations of agreements or continue any current negotiations of agreements with any parties they deem appropriate, to address the national security threat from imported pharmaceuticals and APIs. They must update the President on progress within 90 days of the Proclamation.
• Onshoring Criteria: The Proclamation directs the Secretaries of Commerce and HHS to establish criteria for onshoring plans, to be published in the Federal Register. The Secretary of Commerce will be responsible for approving, monitoring, and enforcing the onshoring plans, including requiring companies with qualifying onshoring plans to submit periodic reports to the Secretary regarding progress towards fulfilling onshoring milestones. The Secretary of Commerce may require external audits of such report and, if there is a finding that a company engaged in fraud or deliberately misled the US government, may impost the tariffs under the Proclamation both prospectively and retroactively on imports from relevant companies, and other tariffs and penalties allowed under the law.

Implications for the Pharmaceutical Sector

This action represents considerable shift in the US trade framework applicable to pharmaceuticals, moving from duty-free imports to a high-tariff model focused on onshoring production.

1. Supply Chain Decoupling: Companies currently reliant on global manufacturing hubs—particularly for high-margin, patented biologics—face a deliberative choice: absorb a 100% cost increase on imports into the United States, or commit to the capital-intensive process of building domestic capacity.
2. Trade and Tax Consequences: These duties are ad valorem, meaning they are calculated as a percentage of the value of the goods. This will significantly increase the “landed cost” of products, affecting transfer pricing strategies and customs valuation.
3. The “TrumpRx” Pressure: The Proclamation is a clear mechanism to pressure manufacturers to join the TrumpRx initiative. Manufacturers that have resisted joining the platform now face the highest tier of tariff, while participating firms have secured three-year exemptions or access to lower rates.
4. Regulatory Scrutiny: Manufacturers should expect increased oversight of “onshoring plans.” The Administration has indicated that these plans must be substantive and verifiable to qualify for the 20% rate.

Conclusion

The use of Section 232 for imports of pharmaceuticals and API marks a turning point in the Trump Administration’s efforts to prioritize domestic manufacturing and lower drug costs through trade leverage. Mayer Brown is prepared to assist clients in navigating these new tariff schedules, filing for exemptions, and representing your interests before HHS, Commerce, and the White House.

¹ 19 U.S.C. §1862.