Trump's new EU tariff threats and your wallet: How higher drug prices could spike health care costs for Americans

The countries named have been conducting a joint military exercise in Greenland (2) in an apparent response to repeated threats to Greenlandic sovereignty.

Leaders from the affected countries responded the following day, writing in a joint statement (3): “Tariff threats undermine transatlantic relations and risk a dangerous downward spiral.”

The same statement said that the eight countries “stand in full solidarity with the Kingdom of Denmark and the people of Greenland” and reiterated the intention to “stand united and coordinated in our response,” suggesting the threatened tariffs won’t end the stalemate.

Who ultimately pays tariffs?

The tariff back-and-forth had a coda, with the release of a study (4) that found, in contrast to assertions from the Trump administration, almost every cent of a tariff is paid by the American importer, their customers and, ultimately, the American consumer, meaning that tariffs “function as a consumption tax on Americans.”

The Kiel Institute for the World Economy study, based on 25 million transactions totaling $4 trillion, found that only about 4% of the burden of tariffs is shouldered by firms outside the U.S. Instead, the German think tank found a near-complete (96%) pass-through of the cost of tariffs to U.S. consumers (4). “The $200 billion surge in customs revenue represents $200 billion extracted from American businesses and households,” wrote the study's authors.

This interpretation aligns with the Tax Foundation’s take, which is that the weight of historical evidence as well as recent studies, “show that tariffs are taxes that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, resulting in lower income, reduced employment and lower economic output” (5).

Modeling from the Washington think tank finds that tariffs imposed by the current Trump administration amount to an average tax increase of $1,100 per U.S. household in 2025, rising to $1,500 in 2026.

Spotlight on drug prices

The new crop of mooted tariffs stand to have an impact on drug prices, as currently American pharmaceutical companies get much of their product from Europe. In terms of value, pharmaceuticals make up the largest European Union export to the U.S. In 2024, the EU sold America $113.32 billion in pharma products, according to data from Trading Economics (6). And EU imports make up 60% of all pharma imports to the U.S., according to a report by Fast Company (7).

Even the more moderate deal agreed to last summer between the EU and the U.S. was forecast to cost the pharmaceutical industry up to $19 billion as medicines, which had historically been exempt from duties, became subject to an across-the-board 15% tariff.