The tariff landscape in context

The current US tariff regime affecting life sciences operates at three levels.

First, a baseline tariff of approximately 10% applies to most imported goods. Many pharmaceutical products and Active Pharmaceutical Ingredients (APIs) have so far been exempt, while most categories of medical devices remain exposed.

Second, sector- and origin-specific tariffs apply to a range of healthcare products. Medical devices, diagnostics, and laboratory equipment are commonly subject to tariffs in the 10–25% range, with higher effective rates for Chinese-origin components and selected reciprocal measures affecting imports from Canada and Mexico.

Third, and most strategically significant, are proposed tariffs of up to 100% on imported branded pharmaceuticals. These are targeted measures intended to encourage high-value pharmaceutical manufacturing to relocate to the United States, with exemptions often linked to commitments to build or expand domestic production capacity.

The distinction matters: baseline tariffs increase costs, while targeted tariffs are designed to change behaviour.

Pharmaceuticals, APIs, and devices

Branded pharmaceuticals sit at the centre of the current policy agenda. The threat of punitive tariffs signals a clear objective: repatriating economically and strategically important manufacturing capacity.

By contrast, generic medicines and products from certain free trade agreement (FTA) partners, including selected EU member states and Japan, have generally faced lower tariff exposure, typically capped in the 10–15% range. APIs and intermediates used in generic production are, at present, largely excluded from the baseline tariff, although this position may evolve.

A recent bilateral understanding between the United States and the United Kingdom provides for the exemption of many UK-origin pharmaceutical products from certain US tariff measures. However, this does not necessarily extend to all product categories, notably some medical devices, and remains subject to ongoing interpretation and implementation.

Medical device manufacturers face a different challenge. Most device categories have not benefited from broad exemptions and now operate in a tariff environment that materially raises the cost of serving the US market. For firms with globally distributed supply chains, tariffs have become a persistent operational cost rather than a short-term disruption.

Manufacturing, pricing, and investment decisions

US policy is explicitly designed to encourage reshoring. Tariff relief and exemptions are increasingly tied to commitments to manufacture within the United States, particularly for branded medicines and strategically important devices.

Many large life sciences companies have responded by announcing or accelerating US manufacturing investments. However, these decisions are complex. Higher labour and operating costs, workforce constraints, and long investment lead times complicate relocation decisions, particularly given uncertainty over how long current policies will remain in place.

At the same time, trade measures are unfolding alongside renewed pressure on drug pricing. Proposals to benchmark US prices in public programmes against lower-priced reference countries, combined with demands for higher rebates, limit companies’ ability to pass tariff-related cost increases through to customers.

How companies are adapting

Life sciences companies are responding through a combination of defensive and opportunistic strategies.

Many are pursuing selective reshoring, prioritising high-value or high-exposure products where US manufacturing enables tariff relief or commercial advantage, while accepting that higher operating costs limit how far this can be taken.

At the same time, firms are restructuring supply chains, diversifying away from China and broader Asian sourcing, increasing reliance on Europe, the UK, and lower-tariff partners, and reducing concentration risk through multiple suppliers. Some are actively engaging in “tariff engineering” by changing final assembly locations, modifying product configurations, or routing products through FTA partners to reduce effective duty rates.

Trade compliance and optimisation has become a priority investment area, with greater use of bonded and foreign trade zones, duty drawback mechanisms (particularly for re-exports and clinical trial materials), and more sophisticated internal trade and tax capabilities.

Commercially, companies are renegotiating pricing and contracting structures to share tariff burdens with customers or distributors. Those with substantial US manufacturing footprints are increasingly marketing themselves as “tariff-resilient” suppliers and, in some cases, securing co-investment or participating in public-private partnerships to expand domestic API and device capacity.

Policy volatility and strategic risk

A key consideration is policy durability. Life sciences investments are long-term, while trade and pricing policies can shift materially between administrations. This uncertainty complicates capital allocation decisions and increases the value of flexibility.

At the same time, policy volatility is encouraging some companies and governments to deepen engagement with alternative markets perceived as offering greater regulatory and trade stability. While the US remains central, this dynamic is influencing how global risk is balanced.

Conclusion

US policy towards life sciences is increasingly explicit in its objectives: securing domestic supply, reducing foreign dependence, and exerting downward pressure on healthcare costs. These goals are reshaping the operating environment for global manufacturers.

Companies that treat policy as a strategic variable, aligning manufacturing, supply chains, and commercial models while preserving flexibility, will be best positioned to compete in an increasingly complex global market.