Prescription for Power:
How a 100% Tariff Could Rewrite the Rules of Global Pharma

September 29, 2025

On a quiet Thursday morning in late September, as most of Wall Street was still sipping its first coffee, a single sentence dropped into the global pharmaceutical market like a thunderclap: the United States would impose a 100% tariff on imported branded and patented pharmaceuticals beginning October 1, 2025, unless the manufacturer was actively building a U.S. production facility. Within hours, shares of major Asian drugmakers tumbled. Trade ministers in Tokyo and Brussels were on the phone to Washington. And in-house counsel across the life-sciences industry began drafting memos on supply-chain exposure and litigation risk.

This was no ordinary tariff announcement. It was a frontal assault on a trillion-dollar global industry that sits at the crossroads of health, technology, and national security. It signaled a fundamental shift in how the U.S. might use trade tools—not simply to protect domestic industries, but to force structural change in where and how life-saving medicines are made. And it posed a provocative legal question: How far does presidential power extend when trade, health, and industrial policy collide?

A Turning Point in Pharmaceutical Trade Policy

The contours of the policy are deceptively simple. Beginning in October 2025, all imported branded or patented pharmaceuticals entering the United States will be subject to a 100% ad valorem tariff—effectively doubling their landed cost—unless the manufacturer is “building or actively constructing” a manufacturing facility on U.S. soil. Generic drugs appear, for now, to be excluded.

That exemption is the policy’s beating heart. It converts the tariff from a blunt instrument into a powerful industrial policy lever: build here or pay double. It is designed to compel global pharmaceutical giants—many of which have long relied on manufacturing hubs in Europe, India, or East Asia—to relocate production to U.S. shores. It is also a clear signal to voters that bringing drug manufacturing home is now a core policy goal.

The market reaction was swift. Companies with robust U.S. manufacturing footprints saw their share prices hold steady. Those with heavy reliance on foreign production, particularly in Asia, saw steep declines. European and Japanese governments quickly noted that existing trade agreements cap pharmaceutical tariffs at 15%, signaling possible legal challenges. Yet amid the political noise, one fact stands out: this is the most aggressive U.S. trade policy aimed at the pharmaceutical sector in modern history.

Presidential Authority and Its Limits

The constitutional question at the center of this controversy is as old as American trade policy itself: how much tariff-setting power has Congress delegated to the president—and how much can he lawfully use?

Under Article I, Section 8 of the Constitution, Congress holds the power to “lay and collect duties” and “regulate commerce with foreign nations.” Yet over the past century, Congress has repeatedly delegated portions of that authority to the executive branch, particularly where foreign affairs and national security are implicated. The result is a complex statutory framework that presidents have used—and tested—in ways the framers likely never envisioned.

Three statutes are most relevant to the new pharmaceutical tariff:

1. Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) authorizes the president to impose tariffs in response to “unreasonable” or “discriminatory” foreign trade practices. It was the foundation of many tariffs imposed during the 2018–2020 trade conflicts with China.

2. Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) permits the president to adjust imports that threaten to impair national security. The Supreme Court upheld broad discretion under § 232 in Federal Energy Administration v. Algonquin SNG, Inc. (426 U.S. 548 (1976)), and more recently, courts rejected a nondelegation challenge in American Institute for International Steel v. United States (806 F. App’x 982 (Fed. Cir. 2020)).

3. The International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701–1708, grants sweeping authority to regulate foreign economic transactions during declared national emergencies. While its use for tariffs is contested, the executive has relied on it to justify far-reaching trade restrictions.

These statutes, read together, provide the legal scaffolding for the tariff — but not without controversy. The “major questions doctrine,” articulated most recently in West Virginia v. EPA (597 U.S. 697 (2022)), requires Congress to speak clearly when delegating authority over matters of vast “economic and political significance.” A 100% tariff on pharmaceuticals — a sector representing hundreds of billions in annual trade — may qualify. Critics will argue that Congress never clearly authorized the executive to weaponize tariffs as an industrial-policy tool aimed at relocating global supply chains.

The nondelegation doctrine could also re-emerge. Though rarely successful, litigants have argued that overly broad delegations of trade authority violate the separation of powers. While courts have historically upheld such delegations — as in Algonquin SNG and American Institute for International Steel—the current Supreme Court has shown a renewed interest in policing the boundaries of legislative delegation.

Even if the tariff survives constitutional scrutiny, statutory challenges loom. In United States v. Yoshida International, Inc. (526 F.2d 560 (C.C.P.A. 1975)), the court emphasized that presidential tariff actions must remain within the bounds of congressional intent. Similarly, in V.O.S. Selections, Inc. v. Trump (CIT 2024), the Court of International Trade enjoined tariffs imposed under IEEPA, holding that the statute did not authorize them absent a clear link to a declared emergency. That case, now on appeal, could directly shape how courts view the pharmaceutical tariff.

Procedural Constraints and APA Challenges

Beyond substantive authority, the tariff is vulnerable to procedural attack. The Administrative Procedure Act (APA), 5 U.S.C. §§ 701–706, requires agencies to follow specific procedures and provide reasoned explanations for their actions. Courts regularly strike down agency decisions that are “arbitrary, capricious, [or] an abuse of discretion” (§ 706(2)(A)).

Although presidential proclamations are generally not subject to the APA, implementing regulations from agencies like the Office of the U.S. Trade Representative (USTR) or Customs and Border Protection (CBP) may be. Affected parties could challenge such rules on grounds that the government failed to conduct adequate economic impact analyses, did not provide sufficient notice and comment, or failed to justify its exemption criteria. The Supreme Court’s decision in Motor Vehicle Manufacturers Association v. State Farm (463 U.S. 29 (1983)) underscores that agencies must engage in reasoned decision-making — a standard that could prove challenging for a policy as sweeping as this.

Treaty Obligations, WTO Law, and the Prospect of Retaliation

Domestic law is only part of the equation. The United States is bound by a web of trade treaties—including those under the World Trade Organization (WTO)—that constrain how tariffs may be imposed.

GATT Article II binds members to agreed tariff ceilings, while Article III prohibits discriminatory treatment of imported products. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires non-discriminatory protection of patent rights and limits the use of trade measures that undermine them. A 100% tariff on branded drugs could violate both the bound rate commitments and the national treatment principle if applied selectively.

Precedent exists. In United States – Section 301 Trade Act (WT/DS152), a WTO panel cautioned that unilateral trade measures, even under U.S. law, must conform to WTO obligations. If the pharmaceutical tariff exceeds agreed-upon ceilings or discriminates against foreign patent holders, it could trigger formal dispute settlement proceedings under Dispute Settlement Understanding (DSU) Articles 4–22. Exporting nations could then seek authorization for retaliatory tariffs, escalating the conflict beyond pharmaceuticals into other sectors.

There is also a risk that the tariff’s exemption for companies building U.S. facilities could be construed as a prohibited local content requirement. WTO jurisprudence has consistently held such requirements—even indirect ones—to violate core trade principles. That argument could resonate strongly if the tariff is seen as coercing investment rather than addressing unfair trade practices.

Intellectual Property, Innovation, and Industrial Strategy

Although framed as a trade measure, the tariff’s impact on intellectual property strategy could be profound. By targeting “branded or patented” pharmaceuticals, the policy strikes at the heart of companies’ most valuable IP assets—the very patents that underpin drug exclusivity and revenue.

This raises strategic considerations across several dimensions:

• Patent Filing and Portfolio Strategy: Companies may accelerate U.S. filings to anchor more of their patent estate domestically, potentially shifting the geography of prosecution and litigation.

• Licensing and Collaboration Models: Foreign companies could mitigate tariff exposure by licensing technology to U.S.-based manufacturers or forming joint ventures that qualify for the exemption.

• R&D Footprint and Commercialization: If tariff exposure becomes a recurring risk, companies may shift clinical development, regulatory interactions, and commercialization activities closer to U.S. soil to align the entire innovation lifecycle with domestic production.

These shifts may, in turn, alter the landscape of IP enforcement. As more high-value manufacturing and commercialization occurs domestically, disputes over process patents, trade secrets, and manufacturing know-how may increasingly fall within U.S. jurisdiction—reshaping forum strategy and litigation dynamics.

Contract Law, Commercial Risk, and Supply Chain Disruption

The ripple effects extend beyond trade law and IP. Many long-term supply, distribution, and procurement contracts in the pharmaceutical sector are priced based on existing tariff regimes. A sudden doubling of import duties could make performance economically untenable, triggering a wave of contract disputes.

Some parties may invoke force majeure clauses, arguing that the tariff is an unforeseeable government action excusing non-performance. Others may seek to renegotiate terms or litigate over price-adjustment and risk-allocation provisions. Classic doctrines of commercial impracticability under U.C.C. § 2-615 or the Restatement (Second) of Contracts § 261 could also come into play.

The tariff could also implicate constitutional protections for contracts. In Allied Structural Steel Co. v. Spannaus (438 U.S. 234 (1978)), the Supreme Court struck down a state law that retroactively altered contractual obligations, reaffirming the importance of the Contracts Clause. Although federal action is not subject to that clause, similar concerns about retroactivity and due process could arise if the tariff disrupts vested contractual rights.

Finally, the exemption’s ambiguity—what qualifies as “building” a facility? does acquisition count?—creates compliance uncertainty that could itself become a litigation flashpoint. Until regulatory guidance is issued, companies face significant interpretive risk.

Strategic Roadmap: How Companies Can Prepare

For companies operating in or adjacent to the pharmaceutical supply chain, the announcement is not merely a political story—it is a call to action. A proactive, multidisciplinary strategy can mitigate risk and position businesses to thrive in a transformed trade landscape.

1. Conduct a Comprehensive Legal and Risk Audit

Map import exposure across product lines, jurisdictions, and supply chains. Determine whether existing or planned U.S. investments may satisfy exemption criteria. Review the potential applicability of IEEPA, § 301, and § 232 to your business and assess possible litigation strategies under the APA, the major questions doctrine, or WTO rules.

2. Reevaluate Manufacturing and Investment Strategy

Assess the feasibility of accelerating or expanding U.S. manufacturing capacity. Even partial onshoring could provide leverage in tariff negotiations or exemption eligibility. Maintain detailed documentation of construction plans, permitting, and capital expenditures — this will be critical if exemption eligibility becomes contested.

3. Review and Renegotiate Contracts

Audit supply and distribution agreements for tariff-allocation clauses, force majeure provisions, and price-adjustment mechanisms. Consider renegotiating contracts to share tariff risks or clarify which party bears responsibility for increased costs.

4. Engage in Advocacy and Policy Dialogue

Engage with USTR, CBP, and congressional offices to advocate for clear regulatory definitions, phased implementation, or targeted carve-outs. Industry coalitions can amplify influence and shape how “building a facility” is interpreted.

5. Prepare for Litigation and Dispute Resolution

Anticipate potential legal challenges — both in U.S. courts and at the WTO. Consider joining industry groups, filing amicus briefs, or intervening in key cases. Parallel strategies might include pursuing remedies under bilateral agreements or supporting challenges brought by foreign governments.

6. Plan for Communications and Reputational Risk

Communicate proactively with customers, insurers, and regulators about potential impacts on pricing and supply. Transparent messaging can mitigate reputational harm and build goodwill during periods of disruption.

Trade as Industrial Policy

The pharmaceutical tariff does not exist in isolation. It is part of a broader evolution in U.S. trade strategy — one in which tariffs are no longer merely defensive tools but proactive instruments of industrial policy. Similar approaches are already visible in semiconductors, electric vehicles, and clean energy. What makes this policy distinct is its focus on a sector where public health, national security, and technological innovation converge.

By tying market access to domestic manufacturing, the tariff blurs traditional boundaries between trade, health, and innovation policy. It raises fundamental questions about how far the executive can go in using trade power to reshape global supply chains—and whether courts, Congress, or the WTO will draw new limits.

Navigating the New Terrain

The announced 100% tariff on imported branded pharmaceuticals is more than a headline. It is a crucible for testing the limits of presidential trade authority, a potential flashpoint in international economic relations, and a catalyst for structural change in the life-sciences industry.

Whether the policy survives court scrutiny or trade disputes remains uncertain. But even if modified or delayed, the underlying shift it represents—toward conditioning market access on domestic production—is likely to endure. For companies across the pharmaceutical ecosystem, the imperative is clear: prepare now. Audit supply chains, reassess manufacturing footprints, revisit contracts, and develop litigation and advocacy strategies.

In the emerging era of trade-driven health policy, success will depend not only on scientific breakthroughs and patent portfolios but also on legal agility and strategic foresight. Those who adapt early—aligning their legal strategies with shifting political, economic, and doctrinal realities—will be best positioned to thrive in a transformed global landscape.