Editor's note: An earlier version of this article mistakenly reported that pharmaceutical products are included in the reciprocal tariffs. However, a fact sheet from the White House says that pharmaceuticals are excluded.

Pharma and biotech companies are breathing a sigh of relief after the reciprocal tariffs announced by President Donald Trump Wednesday afternoon exclude pharmaceuticals. 

A White House fact sheet mentions that pharmaceuticals are exempt. However, the president had recently mentioned his desire to include tariffs on them. 

Speaking at an event in the White House Rose Garden, Trump expressed concern that many drugs are produced outside the U.S. and supply issues could crop up in the event of wars. 

In his comments, Trump noted that several large drugmakers -- Johnson & Johnson (JNJ), Eli Lilly (LLY), and Merck (MRK) -- have recently made announcements of making manufacturing investments in the U.S.

Most active pharmaceutical ingredients (APIs) produced overseas are used in the manufacture of generic drugs, which account for 9 out of 10 prescriptions filled in the U.S.

That means generic drugmakers, such as Viatris (NASDAQ:VTRS) and Teva Pharmaceutical Industries (NYSE:TEVA), could see significant impact if foreign-made pharmaceuticals are eventually subject to tariffs.

India, China, and the European Union produce the vast majority of APIs and also manufacture a significant amount of finished products.

If tariffs are eventually extended to pharmaceuticals, the country tariffs are as follows: India (26%); China (34%); and European Union (20%).

Trump noted that the reciprocal tariffs on the trio are much less than the tariffs they impose on American goods: India (52%); China (67%); and European Union (39%).

According to the U.S. Pharmacopeia, as of 2021, India manufactured nearly half -- 48% -- of the APIs made into drugs consumed in the U.S. Europe made 22%, and China, 13%. Just 10% of APIs in 2021 were manufactured in the U.S.

A 2022 evaluation of the top 100 Medicare Part D drugs based on spend from PharmacyChecker Research found that 32 were finished in the U.S. and another 67 were finished in countries including European Union countries, Canada, Japan, Singapore, Switzerland, and the United Kingdom.

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