Tariff risk again…pharma closely watches exports to the US

The Trump administration has announced 'new 15% reciprocal tariff' following the court's invalidation of Trump's tariffs

Gov't "The export conditions for the US are secured largely"…may expect that the impact will be minimal

Last year's export↑ in the process of securing local inventory…this year's prospect based on a base effect

The US Supreme Court's ruling that reciprocal tariffs are unconstitutional, and President Trump's new 15% reciprocal tariff, come into effect at 2 PM on the 24th. The pharmaceutical and biotech industries are closely monitoring the situation as the risk of US tariffs may reignite.

Currently, many view the impact of the new 15% tariff as limited. Major pharmaceutical and biotech companies that export have already prepared countermeasures by securing sufficient local inventory and expanding local production through manufacturing facilities in the United States. Some observers also predict that export performance, which surged significantly last year during the process of securing local inventory, may decrease to typical levels this year due to a base effect.

New '15%' tariff takes effect…Prospects↑ for "Limited impact on Korean drug exports to the US"

According to pharmaceutical industry sources on the 24th, the new 15% tariff imposed by US President Donald Trump on imports from all countries worldwide takes effect today (the 24th).

Immediately following the US Supreme Court's ruling on the unconstitutionality of reciprocal tariffs on the 20th, President Trump announced that he had signed an executive order imposing a new 10% tariff. The following day, President Trump adjusted the tariff upward to 15%. According to the White House, the new tariff takes effect at 12:00 AM on the 24th, Eastern Time, which corresponds to 2 PM on the 24th, Korean Time.

The new 15% tariff is based on 'Section 122 of the Trade Act.' This clause focuses on responding to serious international balance of payment deficits or a decline in the value of the dollar. It allows for the imposition of emergency tariffs of up to 15% for 150 days, which can be extended with congressional approval.​

Regarding the Supreme Court's ruling and President Trump's 15% tariff, the pharmaceutical industry is keeping a close watch, keeping in mind the possibility that US export risks could reignite.

However, many view that the impact will be limited even if a 10% (or 15%) tariff is imposed. Indeed, during an emergency meeting immediately after President Trump's announcement, the Ministry of Trade, Industry and Energy explained, "While export uncertainty to the US has risen slightly, the export conditions for the US secured through the Korea-US tariff agreement will largely be maintained."

An official from the domestic pharmaceutical and biotech industry also stated, "As a result, a new 15% tariff replaces the 15% reciprocal tariff. The key is whether the Most Favored Nation (MFN) status for medicines will be maintained following the conclusion of Korea-US tariff negotiations; however, regardless of MFN status, we have prepared measures, such as securing inventory in the US and acquiring local production facilities. Even if new tariffs are applied, we expect the impact to be minimal."

Securing local stock + acquiring US manufacturing plants…Major pharmaceutical and biotech firms complete countermeasures

The domestic pharmaceutical and biotech industry secured sufficient local inventory last year as a short-term measure ahead of the Trump administration's tariff imposition. Using Celltrion as an example, the company has preemptively secured two years' worth of inventory for products exported to the US as of early this year.

In the mid- to long-term, measures have been put in place to minimize risk by acquiring local production facilities.

Celltrion will engage in local production through Eli Lilly’s biologic manufacturing plant in Branchburg, New Jersey, which it acquired last year. In September last year, Celltrion acquired the Branchburg plant, with a production capacity of 66,000 liters, for KRW 460 billion (approximately USD 330 million). The acquisition process was finalized last month, and the facility reportedly began full-scale operations this month.

Samsung Biologics plans to commence local production after finalizing the acquisition of a biologic manufacturing plant in Maryland, purchased in December last year, by next month. This plant has a production capacity of 60,000 liters, and the company is considering expanding to 40,000 liters.

Preemptive export↑ last year for inventory accumulation…Export sales may decrease this year due to base effect

Some in the pharmaceutical industry suggest that the export performance of Korean medicines to the US this year may appear to decrease on the surface compared to last year.

This prospect suggests that while major companies preemptively increased export volumes last year to secure local inventory, leading to a significant spike in export performance, this year will see a decrease due to the resulting base effect.

Sales performance of Korea's domestic medicines exported to the US (unit: USD 1 million; source: Korea Customs Service)

According to the Korea Customs Service, the value of Korean medicines exported to the US reached USD 1.76 billion last year, the highest on record. Exports to the US have increased significantly over the past four years. Drug exports to the US, which were USD 843.94 million in 2022, grew by 7% to USD 903.3 million in 2023, and increased by approximately 50% to USD 1.358 billion in 2024. Building on this, high growth of nearly 30% continued last year, driving record-breaking performance for Korean medicines.

However, this year is slightly different. In January of this year, the export value of Korean medicines to the US was USD 76.42 million, which is less than half of the USD 176.3 million recorded in January last year. This figure is also more than 25% lower than the USD 103.07 million recorded in January 2024.