European biopharma faces uncertain future as Trump eyes tari...

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14-05-2025 15:11

European biopharma faces uncertain future as Trump eyes tariffs

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European biopharma faces uncertain future as Trump eyes tariffs

Challenging times may be ahead for Europe’s biopharmaceutical sector as the administration of US President Donald Trump signals the possibility of imposing tariffs on imported European pharmaceutical products. Washington has now turned its focus to this critical industry.

According to analysts at Bernstein, such a move could introduce manageable short-term risks, but over the long term, it could reshape the sector’s investment landscape.

Reports suggest that Trump may announce tariffs on pharmaceutical goods within the next two weeks. While pharma products were originally excluded from the so-called Liberation Day tariff package, that exemption could change at any moment, leaving the industry on edge.

Currently, European pharmaceutical firms maintain a strong footprint in the US, generating between 40% and 60% of total revenue from the American market. Some companies operate manufacturing and R&D facilities in the US, though not all drugs are produced or sold locally.

Bernstein’s currency strategists estimate that if a 20% tariff is applied to the cost of goods sold to the US, the profit impact could vary widely across major European drugmakers. This updated scenario is less severe than earlier projections, which assumed tariffs would be applied to total US sales revenue rather than production costs.

Sanofi, for example, currently conducts about 50% of its business in the US, making it moderately exposed. At the low-risk end, Novo Nordisk and Novartis are seen as better positioned, while GlaxoSmithKline and Belgium’s UCB appear most vulnerable, particularly the latter due to its lack of US-based manufacturing operations.

Industry executives warn that it may be difficult to pass increased costs on to American consumers, making it unlikely that lost margins could be recovered through price hikes. Still, companies are hopeful for a favorable outcome.

Some firms are already responding with proactive US investments, anticipating a shift in trade policy. Among them is AstraZeneca, which recently announced $3.5 billion in new spending on US operations. Novartis has pledged to invest $23 billion over the next five years to strengthen its American footprint.

Sanofi’s CFO has also hinted that additional investment in the US is under consideration. However, experts caution that companies are navigating uncertainty, as the scale and structure of potential tariffs remain unclear.

As Bernstein analysts put it, even the threat alone may be enough to push European firms to rethink their strategies concerning the US.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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