The news: Generic drugs imported into the US will face a 100% tariff beginning in August 2028, rising to 200% a year later, President Trump announced on Truth Social. The move marks a sharp policy reversal after the administration previously said they would be exempt from levies. The administration plans to impose the tariffs under Section 232 of the Trade Expansion Act of 1962, which allows import restrictions on national security grounds, a White House official told Politico.

Why it matters: Trump's goal is to bring more drug production back to the US, but generic manufacturers have less operational flexibility to respond to tariff threats than branded drugmakers. While tariff threats prompted many brand-name companies to negotiate lower prices on some patented drugs in exchange for tariff relief, generic manufacturers operate on thinner margins. Because generics cost 80% to 85% less than brand-name drugs, per the FDA, manufacturers have little financial cushion to absorb tariffs or quickly shift production to the US.

Trump's two-year delay is intended to give drugmakers time to shift pharmaceutical production back to the US. The generics industry is deeply dependent on overseas manufacturing: While 90% of drugs sold in the US are generics, according to the FDA, 69% of generic drug products are manufactured abroad. Meanwhile, 92% of facilities producing generic active pharmaceutical ingredients (APIs) for the US market are located overseas, primarily in India, China, and Italy, per research published last year in the National Library of Medicine.

Implications for pharma companies: Top generic manufacturers including Teva Pharmaceuticals and Sandoz have previously warned that Trump’s tariffs could make the US market uneconomical for low-margin medicines, prompting them to withdraw certain products. Passing tariffs would also raise costs for patients, insurers, and government programs like Medicare and Medicaid, undermining Trump's separate goal of lowering prescription drug prices and spending.

The proposal is unlikely to ever materialize as announced. Shifting generic drug manufacturing to the US within two years would be a gargantuan, if not impossible, undertaking, making it more likely that manufacturers wait out the policy ambiguity than commit billions to new US production. And as the administration moves further into its term, uncertainty has only grown over whether the policy will take effect before Trump leaves office or endure under the next administration.

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