President Trump announced this week a phased plan to impose tariffs on imported generic drugs into the US as a means to encourage US-based production of generics, and a previously announced executive action for tariffs on patented drugs is coming due. 

Generics: latest focus for US tariffs
The US tariff situation took another turn this week (July 21, 2026) with President Donald Trump announcing a plan to impose tariffs over a phased two-year period on imported generic drugs for those companies that have not committed to build manufacturing facilities in the United States. Effective August 1, 2026, all generic drugs brought into the US will continue to have no tariffs (0%) for a two-year period after which the tariff on generic drugs will be raised to 100% for a one-year period (August 2028-August 2029) and would be 200% thereafter.  

The proposed plan is part of a larger policy goal to increase domestic manufacturing in the US. “This is done in order to reshore generic pharmaceutical production into America, with a penalty to those companies that decide not to build plant and equipment within the stated period of time given to them,” said President Trump in a social media post of July 21, 2026.

On a volume basis, generic drugs account for approximately 90% of prescriptions dispensed in the US, but only approximately 13% of total drug spending on a value basis, according to information from the Association for Accessible Medicines, the US-based trade association representing generic drug and biosimilar companies and manufacturers.

The announcement did not contain further details as if such tariffs were to be imposed, would they apply to the finished drug product, active pharmaceutical ingredient (API), or both.

Branded/innovator/patented pharmaceuticals and tariffs
In his announcement, President Trump said that tariffs on branded, innovator, and patented pharmaceuticals will remain the same. Through a Proclamation issued in April (April 2, 2026), the President imposed pharmaceutical industry-specific tariffs under Section 232 of the Trade Expansion Act of 1962, as amended, which allows the President to impose import restrictions based on an investigation and affirmative determination by the US Department of Commerce that certain imports threaten to impair US national security.

Thes Section 232 pharmaceutical-industry-specific tariffs go into effect on July 31, 2026, for certain large pharmaceutical companies, and September 29, 2026, for all other companies with a 100% ad valorem duty rate on the import of patented pharmaceuticals and associated pharmaceutical ingredients (APIs and key starting materials) with certain exemptions and conditions for reduced rates. The Section 232 tariffs do not apply to generics and their associated ingredients, biosimilars, orphan drugs, and certain specialty products (plasma-derived therapeutics, nuclear medicines, cell and gene therapies, antibody drug conjugates, and fertility treatments), or ingredients for the Strategic API Reserve. In addition, the 100% duty rate can be reduced to 20% if companies have plans, approved by the US Department of Commerce Secretary, to onshore production to the US for those pharmaceuticals and pharmaceutical ingredients; however, that 20% increases to 100% in four years on April 2, 2030. In addition, pharmaceuticals from Japan, the European Union, South Korea, Switzerland, and Liechtenstein are subject to a 15% rate, instead of the general 100% rate, and the UK to a 10% rate, with the rate reducible to zero under a future US–UK bilateral trade agreement. Imports of US-origin pharmaceutical products are not subject to the tariffs.

Also, no tariffs on imports of patented pharmaceuticals and associated pharmaceutical ingredients are imposed on companies that reached agreements or are negotiating agreements for most-favored nation (MFN) drug pricing and onshoring of production and R&D of patented pharmaceuticals and pharmaceutical ingredients until January 20, 2029.

As of May (May 2026), 17 companies, representing the large pharmaceutical companies, had reached voluntary MFN pricing agreements with the US government. Under the voluntary MFN framework, manufacturers will offer all new drugs launched in the US at prices comparable to those in other high‑income countries. For existing drugs, the voluntary MFN framework requires manufacturers to make existing drugs available to state Medicaid programs (the US government healthcare program for low-income individuals) at MFN prices. Discounted prices offered in the direct-to-consumer channel, TrumpRx.gov, applies to prescription drugs commonly purchased outside of insurance. Moving forward, the Administration says it expects to reach similar agreements with most manufacturers of sole-source brand name drugs and biologics in the US. In parallel, the Administration is working with Congress to codify those voluntary agreements into law.

Reciprocal tariffs: no more
The imposition of the pharmaceutical industry-specific tariffs followed a decision by the US Supreme Court in February (February 2026) that struck down another set of tariffs, reciprocal tariffs or country-specific tariffs, which the President imposed under authority of the International Emergency Economic Powers Act (IEEPA). IEEPA provides the President broad authority to regulate a variety of economic transactions following a declaration of a national emergency. In 2025, President Trump issued a series of executive orders imposing tariffs on US imports under IEEPA and other statutory authority and negotiated country-specific deals with US trading partners. However, the US Supreme Court ruled in February that the President did not have the authority to impose tariff under IEEPA and that the power to tax and levy duties is constitutionally reserved for Congress. In rendering its decision, the Court affirmed a lower court decision that invalidated two sets of IEEPA tariffs: one set of tariffs on imports from Canada, Mexico, and China based on declared emergencies concerning illicit drugs, and another set of tariffs on most other US imports based on a declared emergency concerning the US trade deficit. Tariffs imposed under IEEPA are now eligible for refund.