Investing.com -- The Trump administration is weighing the introduction of tariffs on European pharmaceutical imports, a move that analysts at Bernstein say could carry manageable risks for the sector in the short term but may reshape investment patterns over the longer term.
U.S. press reports citing unnamed officials have indicated that President Donald Trump has signaled his intention to announce tariffs on pharmaceutical products “over the next two weeks.”
Although the so-called "Liberation Day" package did not initially include pharmaceuticals, the timing of new tariffs aligns with earlier expectations that action could begin in mid-May, following the Section 232 investigation into the national security implications of drug supply chains.
European pharmaceutical firms have a significant footprint in the U.S., generating between 40% and 60% of their total revenue in the American market.
Many operate manufacturing and research sites on U.S. soil, although not all drugs sold domestically are produced there.
According to Bernstein, Ireland and Switzerland, both low-tax jurisdictions, account for about one-third of total U.S. pharmaceutical imports from Europe, raising the possibility that tariffs could target drugs manufactured in those countries.
Bernstein analysts estimate that if a 20% tariff were applied to the cost of goods sold for U.S. sales, the impact on earnings would range from low- to high-single digits for major European drugmakers, assuming a 50% natural hedge.
This model is based on Sanofi (NASDAQ:SNY), which currently manufactures half of its U.S. sales domestically. The new estimate marks a reduction from earlier forecasts, which had assumed tariffs might be levied on total U.S. sales rather than production costs.
Among the companies covered, Novo Nordisk (NYSE:NVO) and Novartis (SIX:NOVN) are considered the least exposed to tariff risks, despite Novo’s narrow therapeutic portfolio.
GlaxoSmithKline (NYSE:GSK) and Belgium-based UCB are the most exposed, with UCB particularly vulnerable due to its lack of U.S. manufacturing operations.
Company officials across the sector suggest that passing increased costs on to American consumers would be difficult, limiting the ability to offset potential losses through price hikes.
While the short-term financial impact appears contained, longer-term strategic shifts are already underway.
Several firms have announced new U.S. investments in anticipation of changing trade dynamics.
AstraZeneca (NASDAQ:AZN) disclosed $3.5 billion in new U.S. spending during its third-quarter results last November.
Novartis, whose CEO said in April that all key products sold in the U.S. would eventually be produced locally, has committed $23 billion to American operations over the next five years.
Roche plans to invest $50 billion over the same period in research and manufacturing, including a new U.S.-based production facility.
Sanofi’s chief financial officer has also signaled that additional U.S. investments may be announced soon, as part of a broader strategic plan.
While the full scope of the proposed tariffs remains unclear, Bernstein analysts note that the threat alone may be enough to prompt European firms to accelerate plans to expand their American operations.
Over time, the build-out of new U.S. plants, which typically takes three to five years, could also lead to higher domestic drug prices, potentially affecting American pharmaceutical companies that rely heavily on offshore production.