Since taking office, President Trump has prioritized tariffs as a key element of his trade policy, aiming to protect domestic industries, address trade imbalances and enhance U.S. negotiating power. As his approach shifts from country-specific tariffs to broader industry targets, he has signaled plans to impose 25% tariffs on automobiles and similar duties on key sectors as early as April 2, creating potential economic uncertainty for industries like pharmaceuticals. These tariffs are designed to support reshoring with the aim of creating jobs, strengthening domestic industries and reducing reliance on foreign supply chains. As the administration states: “The goal is to ensure that American workers and companies are on a level playing field, and to bring critical industries back to the United States enhancing national security and economic stability.” An example of this strategy in action is Eli Lilly’s recent decision to expand its U.S. manufacturing footprint, investing in new facilities to produce key medications domestically. However, while such efforts aim to boost U.S. industry, these policies could also have significant implications for the health and life sciences sector, potentially driving up costs, disrupting supply chains and altering pharmaceutical trade dynamics between the United States, Europe and China. The question remains: what impact will this have on the availability, affordability and innovation of medicines in both the United States and Europe?

The U.S. reliance on global pharmaceutical supply chains

The U.S. administration’s push to reshore manufacturing has raised questions about potential impacts on the health and life sciences industries, which rely on global supply chains. In 2023, the United States became the world’s largest pharmaceutical importer, bringing in $170 billion worth of products. This included sourcing 80% of active pharmaceutical ingredients (APIs), primarily from China and India, as well as from the European Union (EU). In 2024, pharmaceuticals were the top U.S. import from the EU, including $127 billion worth of semaglutide, a key ingredient in widely used weight loss medications. The United States also led globally in medical instrument imports, bringing in $37.7 billion worth in 2023, reinforcing its position as the world’s largest importer in this category. Proposed tariffs on these essential imports could have significant implications for the U.S. healthcare system, potentially affecting costs, access and the broader supply chain. As a result, businesses across industries should assess how potential shifts in trade policy may impact their own supply chains and plan accordingly to mitigate risks and maintain stability.

The proposed tariffs are likely to raise domestic costs, forcing companies to either absorb import costs or pass them on to payers and consumers, potentially affecting the affordability of essential medications and healthcare services. This could place additional financial pressure on patients and providers, exacerbating access challenges.

Tariffs could also disrupt clinical research by driving up costs for investigational drugs and medical equipment, prompting companies to shift trials to more cost-effective regions or alternative supply sources. This could lead to delays in drug development, slower innovation and setbacks in addressing unmet medical needs. Additionally, relocating trials to regions with differing regulatory standards may raise concerns about treatment quality and safety, potentially eroding patient trust in new therapies. To navigate these challenges, global operations must assess the impact on supply chains, research processes and market strategies while ensuring compliance across multiple regions.

The medtech industry, heavily reliant on international materials and assembly, faces similar risks. Industry groups like AdvaMed warn that tariffs could disrupt supply chains, drive up manufacturing costs, and slow R&D investment, delaying the development of critical technologies. Higher production costs could also be passed on to payers and patients, worsening affordability and creating potential shortages of essential products.

Ultimately, companies across all sectors may need to reduce staff or adjust operations to offset rising costs, potentially weakening global competitiveness. Industry leaders must proactively evaluate these risks and develop strategies to sustain innovation, manage supply chains and maintain operational efficiency.

While the BIOSECURE Act encourages a shift away from reliance on China, reshoring U.S. pharmaceutical production presents significant challenges due to limited domestic manufacturing capacity and the industry’s ongoing dependence on global supply chains. However, Eli Lilly’s substantial investment in expanding U.S. manufacturing capabilities signals that other pharmaceutical companies may follow suit, potentially fostering a broader trend toward domestic production if supported by favorable policies and infrastructure. Such a shift could offer opportunities for economic growth, including job creation and increased investment in U.S.-based manufacturing. Still, the full impact of these changes remains uncertain, especially as businesses across sectors must carefully evaluate the implications of this potential shift on supply chains, costs and long-term innovation. These evaluations should be done through comprehensive risk assessments, considering factors such as market stability, geopolitical influences, cost-effectiveness and the availability of skilled labor, to ensure strategic decisions align with both short-term and long-term objectives.

The EU’s struggle for competitiveness and strategic autonomy

On the other side of the Atlantic, Europe is pursuing its own competitiveness and strategic autonomy agenda as it grapples with the economic fallout from the pandemic and geopolitical instability. Pharmaceuticals were designated as a strategic sector for EU economic growth in the hailed 2024 Mario Draghi report on the future of European competitiveness and key initiatives such as the Critical Medicines Act reflect efforts to strengthen the European pharmaceutical sector and its global standing.

Sweeping U.S. tariffs on the sector threaten to derail these ambitions, with Member States such as Belgium, Germany, Denmark and Ireland more vulnerable than others. In the first 10 months of 2024, Belgium exported over $73 billion of pharma products of which 25% went to the United States, and the pharma industry accounts for 15% of total Belgian exports. In Ireland, pharmaceuticals accounted for 55% of total exports in 2022, with 35% destined for the United States, making the sector one of the largest contributors to national GDP. Increased tariffs could force European manufacturers to absorb higher costs or cut margins and even question future investment decisions on the continent. While the EU prepares a potential response, the timing of this presents a major challenge for Europe’s pharmaceutical industry, already facing regulatory uncertainty under the EU’s General Pharmaceutical Legislation (GPL) revision. Proposed cuts to regulatory data protection (RDP), alongside tariff threats, further risk undermining Europe’s competitiveness and contradicting its life sciences ambitions. At a time of geopolitical instability, weakening RDP could make innovation models unsustainable, driving investment and R&D elsewhere. With GPL negotiations ongoing, there is still a window for industry to reframe the conversation highlighting how geopolitical shifts are further threatening its competitiveness and how Europe should be and how Europe should be pushing for policies that both strengthen Europe’s innovation ecosystem while reinforcing its commitment to strategic autonomy.

The transatlantic toll and considerations for sector response

The proposed tariffs on EU pharmaceuticals present significant challenges for the pharmaceutical industry, with far-reaching implications on both sides of the Atlantic. Effective communication will be crucial to mitigate risks, protect interests and maintain strong stakeholder relationships. As pharmaceutical companies navigate this evolving policy landscape, here are key recommendations for effective communications and government affairs engagement in this dynamic environment:

Proactively manage expectations on both costs and supply chain disruptions: Companies should transparently communicate the potential impacts of rising import costs, particularly in the United States, which could lead to higher medicine prices. Clearly communicate the factors driving these changes and how they might affect patients, payers and healthcare providers. Similarly, companies facing supply chain challenges should provide timely updates on delays, shortages, and potential risks while emphasizing efforts to minimize disruptions and maintain access to essential medicines, reinforcing the company’s dedication to affordability. This could include plans to diversify partnerships or adjusting strategies to minimize disruptions and continue serving the market effectively. A proactive and transparent communication strategy mitigates uncertainty, and fosters trust by showcasing accountability and a commitment to long-term resilience.

Engage key stakeholders with targeted and nuanced messaging: For both U.S. and European companies, it is essential to communicate directly with key stakeholders, including policymakers, to ensure clarity and consistency in messaging. Establish a clear, data-driven narrative about the impact of tariffs on the industry, focusing on the challenges and potential consequences for patients, payers and healthcare providers. By aligning to the political landscape and tailoring messages for specific audiences, alongside utilizing diverse communication channels, companies can ensure their concerns are heard and their position is clearly understood. A stakeholder audit can help to assess how tariffs impact different groups, their current beliefs, and which messages will resonate. Direct engagement, trade associations and public communications each carry different reputational risks and opportunities. A well-balanced approach ensures concerns are addressed while maintaining credibility and trust across diverse audiences.

Mitigate risk through the integration of external communications functions: To effectively mitigate risks, government affairs should be integrated into broader external communications strategy. A cohesive, cross-functional approach ensures that policy engagement aligns with the company’s public messaging, leveraging insights from corporate affairs, public relations, and legal teams. By unifying these efforts, companies can clearly communicate potential risks and impacts to external stakeholders, such as regulators, investors, customers, and the media. This integration allows for consistent, transparent messaging across all external channels, grounded in credible data, and reinforces the company’s position on key issues, helping to manage public perception and minimize reputational risks.

Embed government affairs insights into business strategy: Pharmaceutical companies should ensure government affairs teams are a core business function, and not just a regulatory or communications tool. Government Affairs teams provide critical intelligence on legislative developments, policy trends and economic shifts that directly impact market access, pricing, and supply chains. By embedding these insights into commercial strategy and risk planning, companies can anticipate disruptions, adapt business models, and stay ahead of regulatory challenges. Establishing early warning systems, including through tracking domestic and global legislative developments, trade barriers, and evolving public sentiment, allows the business to make informed decisions rather than reacting to crises. A proactive, government affairs-informed business strategy ensures resilience in an unpredictable policy environment and strengthens long-term growth.

By adopting a proactive, transparent and coordinated communications and government affairs strategy, companies can navigate the uncertainties of proposed tariffs, mitigate risks and maintain strong relationships with both internal and external stakeholders. These steps will help organizations remain agile, protect their interests and ensure long-term resilience in a rapidly changing global environment.