The US has imposed sweeping tariffs of up to 100% on imported branded pharmaceuticals under Proclamation 11020, citing national security risks from foreign supply chain dependence — but companies that agree to move production to American soil, or enter into pricing deals with the government, can secure significantly reduced or even zero-tariff treatment.
The Industry and Security Bureau of the US Department of Commerce has published a notice in the Federal Register concerning the Procedures to Apply for Company-Specific Onshoring Agreements to Obtain Tariff Adjustments for Pharmaceuticals and Pharmaceutical Ingredients Under Proclamation 11020.
This notice follows the previously issued Proclamation 11020 of 2 April 2026, which established a default 100% tariff on branded drugs imported into the US unless manufacturers agree to relocate production to the US or enter into pricing agreements with the government. The administration has, however, introduced reduced tariff rates for select trading partners: 15% for imports from the European Union, Japan, South Korea, Switzerland, and Liechtenstein, and 10% for products from the United Kingdom, in line with prior bilateral trade agreements.
The national security threat
An investigation found that the US is heavily reliant on foreign pharmaceutical imports, with most patented drugs and active pharmaceutical ingredients (APIs) produced overseas. This dependence raises concerns over supply chain vulnerabilities during geopolitical or economic disruptions and poses risks to access to essential medicines critical for public health and national security.
The tariff structure (Section 232 actions)
To address these threats, the proclamation implements a tiered tariff system under Section 232 of the Trade Expansion Act of 1962:
- Standard rate: A 100% ad valorem duty is imposed on imported patented pharmaceuticals and associated ingredients.
- Incentivised rate for onshoring: Companies with approved plans to onshore production qualify for a reduced 20% tariff rate. This rate is temporary and will increase to 100% on 2 April 2030.
- Zero Tariff for comprehensive agreements: Companies that enter into both Most-Favoured-Nation (MFN) pricing agreements and onshoring/R&D agreements with the U.S. government will face no tariffs until 20 January 2029.
Strategic exemptions and allied trade
Generic drugs and biosimilars remain exempt from the tariffs, while certain critical medical products—including orphan drugs, nuclear medicines, gene therapies, and medical countermeasures—qualify for a zero tariff rate under specific conditions. Reduced tariff rates also apply to key allies, with 15% for the European Union, Japan, South Korea, Switzerland, and Liechtenstein, and 10% for the United Kingdom, with the possibility of further reductions.
The new duties will begin on 31 July 2026 for specific listed companies and 29 September 2026 for all others.
