Executive summary

United States (US) President Trump issued a proclamation on 2 April 2026 entitled "Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States" (the Proclamation), having concluded that US reliance on imported patented pharmaceuticals and related ingredients poses a threat to national security.

The Proclamation asserts that imports of patented pharmaceuticals, associated active pharmaceutical ingredients (APIs) and key starting materials (KSMs) threaten US national security and imposes a 100% ad valorem tariff on products listed in Annex I, with targeted carveouts and reduced-rate pathways.

Background

The Proclamation follows a US Department of Commerce investigation launched in April 2025 under Section 232 of the Trade Expansion Act of 1962 into the effects of the importation of pharmaceuticals and pharmaceutical ingredients on national security. (See EY Global Tax Alert, US launches investigation into pharmaceuticals and semiconductors, dated 15 April 2026.)

The Department of Commerce (Commerce) report cites US Food and Drug Administration data indicating that, as of 2025, roughly 53% of patented drugs distributed domestically are manufactured outside the United States and only approximately 15% of patented APIs by volume are produced domestically for the US market. The Proclamation cites the essential role of patented medicines for defense and public health, foreign government interventions that undermine US competitiveness and fragile supply chains. Accordingly, Commerce recommended a package combining negotiations, significant tariffs and preferential treatment for companies committing to onshore production.

Tariff framework

The Proclamation establishes a baseline 100% ad valorem duty on imports of patented pharmaceuticals and associated pharmaceutical ingredients identified in Annex I, unless a specified exception applies. Companies with onshoring plans approved by the Commerce Secretary (the Secretary) qualify for a 20% rate, which escalates to 100% four years after issuance of the Proclamation. The Secretary may also extend the 20% rate to companies that Commerce determines are likely to obtain approval for qualifying onshoring plans in the near term.

Separately, companies that have fully executed or are actively negotiating most-favored nation (MFN) pricing agreements with the US Department of Health and Human Services, combined with onshoring commitments, qualify for a 0% rate through 20 January 2029. Company-specific agreements listed in Annex II have been ratified, and the Secretary has been delegated authority to enter into and enforce additional agreements. This authority includes monitoring compliance with milestones, requiring periodic, and potentially audited, reports, and increasing rates prospectively or retroactively in cases of fraud or deliberate misrepresentation, if commitments are not met.

Partner-specific terms and category carve-outs

The Proclamation implements pharmaceutical-related commitments with key trading partners by establishing differentiated tariff treatment. Products from the European Union (EU), Japan, the Republic of Korea, Switzerland and Liechtenstein are subject to a 15% rate, unless a lower rate applies under another agreement. Products of the United Kingdom are subject to a 10% rate, which may be reduced to 0% under a future bilateral agreement on pharmaceutical pricing; any such reduction will be announced through notice in the Federal Register.

A 0% rate also applies to certain categories of medicines and ingredients, including drugs for which all approved indications are designated as "orphan" under the Orphan Drug Act; nuclear medicines; plasma-derived therapies; fertility treatments; cell and gene therapies; antibody-drug conjugates; medical countermeasures addressing chemical, biological, radiological and nuclear threats; other specialty products designated by the Secretary; and animal-health pharmaceuticals. Eligibility for this treatment is contingent on a determination by the Secretary, in consultation with the US Trade Representative and the Department of Health and Human Services, that the products originate in jurisdictions with current or forthcoming trade and security framework agreements, or that they address an urgent US health need. Pharmaceutical products and ingredients listed in Annex IV remain subject to a 0% Section 232 rate.

The Proclamation does not impose tariffs on generic pharmaceuticals, including biosimilars, or their associated ingredients, including purchases for the Strategic API Reserve. The Department of Commerce will report within one year on whether further action with respect to generics is warranted.

Administration and effective dates

The tariffs apply to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern Time on 29 September 2026 (with earlier effective dates for companies listed in Annex III), and remain in effect unless reduced, modified or terminated. If Column 1 duties apply, the sum of Column 1 and the Section 232 tariff will equal the applicable rate under the Proclamation; if Column 1 exceeds the applicable proclamation rate, only Column 1 applies. If more than one rate under the Proclamation could apply, the lowest governs. Commerce, in consultation with the US International Trade Commission and US Customs and Border Protection (CBP), will publish any necessary Harmonized Tariff Schedule of the United States (HTSUS) modifications and administrative measures; CBP may take appropriate steps to administer the tariffs and may request information from importers. Drawback is available for duties imposed under the Proclamation. Imports of US-origin pharmaceutical products are not subject to the tariffs. For foreign-trade zones, covered non-domestic-status goods admitted on or after the effective date must be admitted in privileged foreign status and will be dutiable upon entry for consumption at the applicable ad valorem rates.

Actions to consider

Actions for businesses to consider, depending on their specific situations, include:

• Assess exposure across patented products and associated APIs/KSMs subject to the 100% baseline and identify opportunities to qualify for reduced rates via onshoring plans, MFN pricing agreements, partner caps or category-based 0% carveouts.
• Consider the onshoring pathway (20% increasing to 100% after four years) and the MFN pricing as well as onshoring pathway (0% through 20 January 2029), recognizing that agreements will be monitored, audited as needed, and enforced.
• Model partner-specific outcomes for products of the EU, Japan, Korea, Switzerland and Liechtenstein (15% cap) and the United Kingdom (10%, potentially declining to 0% under a future deal), alongside any specialty carveouts.
• Prepare for customs implementation including HTSUS updates, company-specific and jurisdiction-specific rate application, Foreign Trade Zone privileged foreign status for covered goods, drawback planning and CBP information requests tied to eligibility and compliance.
• Partner with government relations colleagues and consider advocacy as appropriate.