Impact of U.S. Tariff on Asian Pharmaceutical Stocks

Shares of pharmaceutical companies across Asia experienced a significant decline on Friday following the announcement by U.S. President Donald Trump regarding 100% tariffs on imports of branded drugs starting from October 1, unless their producers had already begun constructing manufacturing plants in the United States. This move sent shockwaves through the market, especially for companies with substantial exposure to the U.S. market.

Japan’s Sumitomo Pharma saw its stock drop by 4.3%, while Australia’s CSL fell to a six-year low. Lorraine Tan, director of equity research for Asia at Morningstar, suggested that the final tariff rate might be lower given the ongoing negotiation patterns. However, she noted that the near-term uncertainty could continue to affect share prices negatively.

Analysts believe that the impact on Asian drugmakers may be limited, as many of them focus on generic drugs rather than branded ones. Ken Peng, head of Asia investment strategy at Citi Wealth, pointed out that the tariffs specifically target branded drugs and do not affect the generic drugs supplied by countries like China and India. He added that the recent growth in Chinese healthcare has been driven by selling intellectual property to U.S. and European pharmaceutical companies. The primary exporters of branded, finished products to the U.S. are Europe, Switzerland, and possibly Japan.

The European Union has a trade deal with the U.S., which includes a 15% tariff on goods such as pharmaceuticals. Meanwhile, Japan has an agreement that ensures its tariff rates will not exceed those of other countries, including the EU. These agreements provide some level of stability for Japanese pharmaceutical companies, even amid the new U.S. tariffs.

U.S. Investment Rush

Approximately 60% of U.S. pharma imports in 2024 came from the European Union, according to U.N. Comtrade data. Switzerland, which is not an EU member, was the second-largest exporter, accounting for 9% of imports. In response to the potential tariffs, many global drugmakers have announced multi-billion dollar investment plans in the U.S. this year to mitigate the impact of these proposed tariffs.

Companies such as AstraZeneca, Roche, Eli Lilly & Co, Johnson & Johnson, Novartis, and Sanofi have all made significant commitments to expand their operations in the U.S. A source from a Taiwan-based pharmaceutical company that produces branded drugs mentioned that it could take at least five years to build and certify a new U.S. plant, without considering potential supply chain or labor shortages.

“At least it’s a global tariff and not country specific, so that levels the playing field to some extent… Ultimately the biggest losers could be people who need medicine,” the source said.

Asian Shares Decline

In Japan, Otsuka Holdings dropped by 3.5%, and Daiichi Sankyo lost 1.6%. However, Takeda Pharmaceutical managed to gain 0.2%, and Shionogi rose by 1.3%. Takeda’s CEO, Christophe Weber, stated in July that the U.S. is the company’s largest manufacturing presence globally. Japan exported $2.5 billion worth of pharmaceutical products to the U.S. in 2024, according to U.N. Comtrade data.

Hong Kong’s Hang Seng Biotech Index fell by about 1.4%. Citi Wealth’s Peng remarked, “The market is calling (Trump’s) bluff.” He added, “We see some Asian pharma names down pretty significantly today, but if people really believe that large swathes of branded pharma will be tariffed at 100%, it wouldn’t be a 3% correction.”

India’s pharmaceutical stock index declined by 2.6%, with all 20 members of the index experiencing losses. Despite the industry’s focus on generic drugs, which are excluded from the tariffs, heavyweights like Sun Pharmaceutical Industries saw a 3.4% drop.

In Australia, Health Minister Mark Butler expressed concerns over the new “unfair, unjustified tariffs” after two decades of free trade. The country’s healthcare companies exported approximately A$2.1 billion ($1.37 billion) in medicines and pharmaceuticals to the U.S. last year. CSL, Australia’s largest biotechnology company, fell by 2% in the afternoon after initially dropping as much as 5% in early trade.

CSL stated that it does not expect any material impact from the tariffs, citing its “very significant manufacturing footprint” in the U.S.

The post Asian Drugmakers’ Stocks Plunge Amid Trump’s Tariff Threats appeared first on FondTimes.