Trump gives Big Pharma 2 years to reshore generic drugs — or face 100% tariffs. Here's who pays if they don't

This is part of a previous tariff that would have applied only to branded pharmaceuticals from companies that haven’t invested in the U.S. or entered into agreements to lower their U.S. drug prices.

The original tariff only gives companies 120 to 180 days to dodge up to 100% tariffs — but it wouldn’t have impacted generic drugs at all.

“President Trump’s announcement provides a two-year runway for generic drugmakers to reshore production back into the United States,” said White House Spokesman Kush Desai in an email to Moneywise. Desai says that the previous tariff program, along with other deals with global drugmakers, “is proof that this Administration has a track record of success to get critical manufacturing back into the United States.”

In an email to Moneywise, a White House official says that Americans who currently rely on generic drugs from overseas won’t be forced to pay for markups caused by the tariff.

But how will companies actually respond? Who’s currently making the generic drugs that Americans buy, and are they likely to move their operations to the U.S. to avoid the tariffs?

Generic drugs are overwhelmingly made overseas — that can be a problem

Generic drugs are a huge part of the American healthcare system, thanks to how cheap they are (and how expensive branded drugs can get). The FDA’s Office of Generic Drugs says that more than 90% of prescriptions filled in the United States are generic.

In order to get that cheap, many generic drugs and their active pharmaceutical ingredients are manufactured overseas. According to a Washington University study, for 83 of the top 100 generic drugs in the US, there is no U.S. source for the Active Pharmaceutical Ingredients (APIs). For another 11, there’s only one U.S. source for APIs.

And according to the Coalition for a Prosperous America, almost 58% of U.S. pharmaceutical imports come from either China or India.

This can be a problem for a few reasons. First of all, it can create drug shortages when supply routes shut down. For example, India frequently relies on the Strait of Hormuz to transport its generic drug exports to the United States.

“The American people were left in a lurch during the early days of COVID due to widely-reported shortages of imported critical drugs and other medical equipment,” said a White House official in an email to Moneywise. “Americans are not safe when we rely on foreign countries for lifesaving drugs.”

Another problem is a potential lack of ethical and regulatory standards at factories outside the U.S. For example, the leading producer of drugs for Medicaid, Aurobindo, has been linked to both forced labor and multiple safety violations. And according to Exiger, India is the leading country for counterfeit drugs.

How likely is it that drug producers will reshore?

We already know that Americans tend to pay the cost of increased tariffs. A report from the KIEL Institut found that 96% of tariff costs are passed down to U.S. buyers.

But if generic drugmakers move their production factories to the U.S., they won’t have to pay those tariffs. Even if they did, would that solve the problems currently facing Americans who use generic drugs?

Some experts say likely not.