The U.S. government has escalated trade tensions by announcing plans to impose a 25% tariff on Korean pharmaceuticals. This unexpected move has left the domestic pharmaceutical and biotech industry reeling, though many experts cautiously suggest that the actual impact may be limited by established local production bases and the potential for increased drug costs for American consumers. Nevertheless, concerns are mounting over growing uncertainty in the U.S. market.
On Monday, President Donald Trump declared that South Korea had failed to implement trade agreements, prompting a proposed increase in tariffs on various items, including pharmaceuticals, automobiles, and lumber, from 15% to 25%.
While caught off guard by Trump’s surprise announcement, domestic pharmaceutical and biotech companies assert they are already implementing response strategies.
Industry giants like Samsung Biologics and Celltrion believe their foresight in localization strategies will serve as an effective buffer against the tariffs. These companies have either acquired contract manufacturing organization (CMO) facilities in the U.S. or established export routes through CMO partnerships.
Samsung Biologics secured its first U.S. production base last December, acquiring a biopharmaceutical production facility from GlaxoSmithKline (GSK) in Rockville, Maryland, for 280 million USD.
Celltrion maintains it has structurally mitigated tariff risks by establishing a direct sales network and securing production facilities in the U.S. The company has already set up a production facility in Branchburg, New Jersey, providing a fundamental solution to tariff issues.
A representative of Celltrion emphasized that the company had structurally insulated itself from all risks, noting that its local facility was now fully operational and would be utilized as a core production base for products bound for the U.S. market.
The representative added that the company had developed customized response plans for various timelines to prepare for U.S. tariff uncertainties, explaining that during the transition period until local production is fully ramped up, it would rely on a two-year supply already in the U.S. market to ensure uninterrupted sales without tariff impacts.
Industry experts warn that high tariffs on Korean pharmaceuticals could also burden the U.S. pharmaceutical industry and consumers. Many domestic contract development and manufacturing organizations (CDMOs) count U.S.-based global pharmaceutical companies among their key clients, suggesting potential repercussions for the American market.
If high tariffs are imposed on Korean pharmaceuticals, the cost burden would likely shift to American pharmaceutical companies, potentially leading to higher prices for U.S. consumers. Given the Trump administration’s consistent pursuit of drug price-reduction policies, analysts believe that enforcing pharmaceutical tariffs could politically backfire by increasing healthcare costs for American citizens.
An industry insider noted that, unlike regular consumer goods, pharmaceuticals are essential items with low price elasticity and limited substitutability, adding that in a market where price competitiveness is crucial, imposing excessive tariffs could negatively impact the U.S. healthcare system, forcing the United States to tread carefully.
The Korea Bio Association pointed out that the recent U.S. announcement lacks procedural justification for immediate tariff imposition. They indicate that the criteria for applying Section 232 of the Trade Expansion Act, which allows for import restrictions on national security grounds, have not yet been met.
A representative from the Korea Bio Association said that in both countries’ announcements last year, pharmaceuticals were not included among the items subject to tariff reductions from 25% to 15%, adding that pharmaceuticals have remained duty-free since the Korea–U.S. Free Trade Agreement.
The representative further said that because Section 232 tariffs have not been announced and there have been no U.S. investigation results on the impact of pharmaceuticals and their imports on national security, it appeared unlikely that a 25% tariff would be applied to pharmaceuticals immediately.
Meanwhile, the pharmaceutical and biotech industry has speculated on several possible reasons behind Donald Trump’s decision to target Korean pharmaceuticals with tariffs, including their use as part of a broader strategy involving automobiles and other goods, the difficulty of imposing tariffs on sectors such as semiconductors and shipbuilding with significant domestic impact, efforts to curb bio-sector cooperation between China and South Korea, and the need to address internal political issues in the United States.