President Donald Trump announced Thursday that he would impose tariffs of up to 100 percent on some brand-name drugs and revise tariffs on products that contain iron and aluminum, the administration’s first move to expand tariffs since the Supreme Court addressed its trade agenda in February.
Thedrug tax orderit has a series of exemptions, including for generic drugs and for companies that have already committed to building manufacturing plants in the US by the end of Trump’s term. Countries that have struck trade deals with the administration will also receive lower rates, significantly reducing how many drugs will be affected by the triple tax.
America toochange the way of assessing the duty of steel, copper and aluminumby placing the levy on the full value of the metals paid by US customers rather than the amount it cost to produce them in a foreign country – a method that has confused importers as they try to calculate their obligations.
“We’ve made it easy,” said a senior administration official, who spoke on condition of anonymity on a call to reporters. “It made it easier to import to America.”
But the official also said the move would eliminate the “discount” companies receive as a result of “arbitrarily undercutting” their emissions and then charging American consumers more.
The announcements come on the one-year anniversary of what the president deemed “Deliverance Day,” the date he imposed heavy tariffs on America’s trading partners that disrupted the global economy and were ultimately ruled unconstitutional by the Supreme Court.
They point to the approach the White House is taking as a result of the decision, turning to industry-specific tariffs.as well as behavioral studies of businessinstead of the economic emergency law that was widely used (and often impulsively) last year, but which many judges ruled was unconstitutional. The moves also underscore that the president is not backing down from his tax policies, even as voters have increasingly expressed concerns about their affordability.
The drug tariffs are the result of a Commerce Department investigation launched last year into the national security implications of manufacturing drugs abroad. Trump threatened last Julyimpose a high tax of up to 200 percent on medicinescountries that are encouraging countries as well as drug companies to make deals with the Trump administration to reduce their costs.
As a result, drugs from the European Union, Japan, South Korea and Switzerland, which will face a 15 percent tax, an administration official confirmed Thursday, while imports from the United Kingdom will face a 10 percent tax.
Major drugmakers including Pfizer, Merck, Bristol Myers Squibb and Astra Zeneca who reached their own accord with the White House will not face any import tariffs. Under the secret agreement, drug companies broadly agreed to provide most of their drugs to Medicaid at prices known as “most-favored-nation” prices — which are calculated based on prices paid in other wealthy countries.
Drugmakers also agreed to launch new drugs in the United States at those price levels in the future — a lever the Trump administration believes will be critical in controlling costs over time. And they offered to build new facilities in the United States
The administration official said Thursday that companies that have not yet reached such an agreement with the Commerce Department could still do so and reduce their tax rates to 20 percent.
In recent months, the Trump administration has pushed lawmakers on Capitol Hill to codify deals with drug companies into law, but it’s unclear how strong the idea is among Republicans who have historically opposed price controls.
“We have allowed other countries to manufacture the drugs, and so we have seen to these other countries that manufacture the drugs,” the administration official said Thursday. “We need to ensure our drug supply is protected, safe and domestic.”
The administration has made similar arguments about steel and other industrial metals, which have been undercut in recent decades by competition from cheaper products. Last spring, the administration extended a 25 percent tariff on steel and aluminum to all countries — which it doubled last summer. In late July, Trump imposed a 50 percent tariff on copper imports.
Administration last Augustexpanded rapidlywhich products are covered by the steel and aluminum tariffs, catching importers by surprise and angering key trading partners. The net was so large that items such as a metal ring in a container of yarn resulted in tariffs, according to Eugene Laney, president of the American Exporters and Importers Association.
The European Union made cutting steel and aluminum tariffs a key factor in its vote last month to approve lower tariffs on US manufactured goods – part of a deal Trump brokered with European Commission President Ursula von der Leyen last summer.
The United States will also now exempt products that contain less than 15 percent by weight of foreign steel, aluminum or copper from additional tariffs. Products that contain more than 15 percent of metals will be taxed at 25 percent on the full value of the product, instead of setting the tax on the percentage of the product made up of foreign metals.
The changes to the steel and aluminum tariffs will be welcomed by trade watchdogs, who have pushed for months for tariff reforms to ensure importers do not arbitrarily cut prices. The senior administration official said foreign companies were “fooling the system” and were trying to close the loopholes.
“We did not receive the tax revenue we expected, because the world reduced the cost of their claims of steel coming to America,” a senior administration official said. “We’re just removing the artificial nature. And basically, it didn’t change the price of the output, it just put more money in the pockets of the exporters.”
An administration official said 25 percent should not be an economic disparity, but the Committee on a Responsible Federal Budget, a think tank that focuses on government fiscal policy, has estimated that such a structure would increase tax costs, potentially allowing the administration to collect up to $70 billion in additional revenue.
