Policy and Legal

The NAM advised the Department of Commerce on the integral nature of pharmaceutical and semiconductor manufacturers to the U.S. economy, explaining the potential negative impacts of tariffs on these sectors.

Pharmaceuticals: “Most medicines consumed in the U.S. are made in the U.S., and the industry invests more than $100 billion annually to develop new medicines for American patients and patients worldwide,” wrote NAM Vice President of International Policy Andrea Durkin to the Department of Commerce.

• “For manufacturers in the U.S. to sustain our nation’s global advantage in the discovery, development, production and delivery of pharmaceuticals, it is essential to safeguard a stable and reliable pharmaceutical supply chain network. Immediate and broad-based tariffs on imports of pharmaceutical inputs and finished products, many of which are sourced from allies and through related party transactions, undermine that very supply chain network,” she added.

Hurting innovation: “Pharmaceutical companies make up the largest share of [U.S. R&D] investment, accounting for 36.1% of all manufacturing R&D, spending $146.1 billion in 2023,” wrote Durkin. And companies’ ability to invest in R&D is tied directly to their revenue.

• “[F]or every 10% reduction in expected U.S. revenues, pharmaceutical innovation—such as clinical trial starts or new drug approvals—is expected to ultimately fall by 2.5% to 15%,” according to an analysis by the USC Schaeffer Center.

A better way: Instead of imposing counterproductive and damaging tariffs, the administration should adopt a comprehensive manufacturing strategy to support pharmaceutical innovation, wrote Durkin.

• This strategy includes making the 2017 tax reforms permanent, seeking to remedy the workforce skills gap, expediting permitting reform to enable domestic biopharmaceutical companies to expand their operations, fully equipping the Food and Drug Administration with the staff and resources it needs to operate swiftly and effectively, reforming pharmacy benefit managers (underregulated middlemen that drive up the costs of medications) and combatting the counterfeiting of pharmaceuticals.

Semiconductors: “The NAM believes it is vital for global economic leadership and for U.S. national security to promote a world-class semiconductor industry in America,” Durkin wrote to the Commerce Department in a separate communication, noting that chips are used throughout the manufacturing industry, in everything from medical devices, aircraft and spacecraft, data centers, automotive parts and vehicles, industrial automation and much more.

• “Semiconductor manufacturing capacity is expanding rapidly in China, supported by industrial targeting practices such as those set out in Made in China 2025, as well as trade-distorting industrial subsidies by the Chinese Communist Party. Tariffs have neither deterred China’s production advancements nor addressed the underlying unfair advantages conferred by the Chinese Communist Party.”

A better way: Instead of imposing tariffs, the Trump administration should pursue “policies that enable and facilitate domestic investments, unlock opportunities for economies of scale through full participation in global markets and leverage the collective advantages of America’s international allies to help make semiconductor supply chains more resilient,” Durkin wrote.

• “First, the Trump administration should support ongoing efforts by manufacturers to expand manufacturing production in the U.S. and attract, not deter, new investments. … Tariffs on imports that are used to build and operate semiconductor manufacturing facilities should be avoided or rebated.”
• “Second, the Trump administration should seek to maximize market opportunities for U.S. semiconductor exports, thereby strengthening the commercial position of U.S.-produced semiconductors worldwide. This can be accomplished by negotiating zero tariffs in new trade deals, preserving use of duty drawback and more strategic use of Export-Import Bank financing.”
• “Third, to strengthen the long-term resilience of the industry, the U.S. must partner with international allies to secure favorable trade and investment terms and leverage the collective advantages of global supply networks.”

The last word: “The Trump administration should pursue a comprehensive manufacturing strategy to support and sustain innovation and job creation in America, and to ensure the continued preeminence of our world-leading semiconductor and pharmaceutical sectors,” said NAM Managing Vice President of Policy Charles Crain.