Switzerland braces for 100% US medicine tariff

Trump announces 100% tariffs on medicines Keystone-SDA

United States President Donald Trump has announced new tariffs on medicines, lorries and furniture produced outside the US.

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From October 1, “we will apply a 100% tax on all branded and patented pharmaceutical products, unless a company BUILDS its pharmaceutical plant in America”, Trump wrote on his Truth Social platform.

+ How pharma became Switzerland’s Achelles heel in the US

Until now, the Swiss pharmaceutical sector had escaped the 39% tariffs imposed on Switzerland by the Trump administration. But the Swiss pharmaceutical industry knew it was under threat of tariffs. Donald Trump had given pharmaceutical groups until the end of September to lower the prices of imported medicines, and had threatened to impose massive taxes on the industry if they failed to do so.

Novartis wants to bring down US prices

The Swiss pharmaceutical group Novartis is trying to bring down the price of medicines in the United States. Novartis is working with the government and trying to “find constructive solutions”, the group’s CEO Vas Narasimhan said in an interview published in the Neue Zürcher Zeitung on Saturday. He called on countries outside the US to face up to their responsibilities by demanding a greater share for innovation. In Switzerland in particular, drug prices are far too low, he said.

The Federal Council and the pharmaceutical industry held talks on Monday to discuss the US customs policy. Economics Minister Guy Parmelin described the talks as “constructive”, but gave no specific details.

Asked about a possible increase in the price of medicines in Switzerland, Health Minister Elisabeth Baume-Schneider replied that this was not the issue, but rather “how we are working to enhance the value of the Swiss pharmaceutical industry in line with Parliament’s mandate and the current legal basis”.

Trump’s objectives

Tariffs on pharmaceutical products lead to higher prices. But according to Fredy Hasenmaile, chief economist at Raiffeisen, the US government is pursuing two objectives: in addition to lowering drug prices, it wants to repatriate production to the United States.

“These two approaches are contradictory,” Hasenmaile told AWP. According to the economist, customs measures are not an appropriate way of bringing production back to the US in the long term. Building new production sites takes years, is expensive and the approval process is long and complex.

Roche/Novartis investments

The two Swiss pharmaceutical giants Novartis and Roche had already announced in the spring that they would be investing in the US in order to protect themselves against possible customs barriers. Novartis announced that it was going to invest $23 billion in additional factories and research laboratories in the United States over the next five years.

Roche even wants to spend $50 billion on increasing its capacity over the same period.

The pharmaceutical industry is the engine of growth in Switzerland, generating almost 10% of gross domestic product and contributing around 40% of annual economic growth since 2020. It generates more than half of all exports.

While the definition of these medicines “remains unclear”, points out Michael Wan, an economist with the Japanese bank MUFG in Singapore, “we assume that this will not include generic medicines shipped from countries such as India, which could therefore be spared these announcements”.

+ Sandoz board chair ‘convinced that common sense will ultimately prevail’ on US pharma tariffs

Trucks and furniture

In a separate publication, the US President also announced tariffs of 25% on “all heavy trucks manufactured in other regions of the world”. According to him, this measure is intended to support American truck manufacturers such as “Peterbilt, Kenworth, Freightliner, Mack Trucks and others”.

Trump explained that these customs duties on heavy goods vehicles were motivated by “many reasons, but above all, for national security purposes!”

In the spring, the Trump administration had launched an investigation to determine whether foreign truck imports posed a threat to “national security”.

Among the foreign companies competing with these manufacturers on the US market are Sweden’s Volvo and Germany’s Daimler.

The shares of both companies fell sharply after the close of European stock markets on Thursday evening.

Trump also plans to impose customs duties on a number of items of furniture.

“We will apply a 50% tax on all kitchen furniture, bathroom sinks and related products”, from 1 October, and “a 30% tax on upholstered furniture”, he wrote.

According to the US International Trade Commission, by 2022 imports, mainly from Asia, accounted for 60% of all furniture sold, including 86% of all wooden furniture and 42% of all upholstered furniture.

The shares of retailers Wayfair and Williams Sonoma, which depend on these imported products, fell at the close following this announcement.

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Fears of inflation

This tariff offensive has rekindled fears of inflation in the US, the world’s largest economy.

Donald Trump has made it his mission to revive the manufacturing industry through protectionist policies, which mark a complete reversal of US policy aimed until now at maintaining an open economy.

His administration has imposed a basic 10% tariff on all countries, with much higher rates for a number of countries whose exports to the US exceed their imports.

In particular, the President has imposed surtaxes on the country’s major trading partners such as Canada, Mexico, the European Union and China, with whom talks are still ongoing.

Translated from French with DeepL/mga

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