Are new tariffs coming? Trump administration launches investigation into imported drugs and semiconductors

The Zhitong Finance App learned that the Trump administration has initiated a national security investigation into imported pharmaceuticals and semiconductors in accordance with section 232 of the Trade Expansion Act, which may further expand the full-scale trade war initiated by Trump. According to two notices issued by the US Department of Commerce, it will begin investigating the impact of imports of “semiconductors and semiconductor manufacturing equipment” and “pharmaceuticals and pharmaceutical ingredients, including finished pharmaceutical products” on US national security. The survey will examine current and projected demand for pharmaceuticals and semiconductor products, the ability of domestic production to meet demand, and the possibility of export restrictions.

According to reports, the “232 investigation” means that the US Department of Commerce has opened a case investigation into whether the import of specific products poses a threat to US national security in accordance with the authorization stipulated in section 232 of the 1962 Trade Expansion Act. The investigation allowed the US president to restrict imports of products deemed a threat to national security. According to the law, the Secretary of Commerce is required to submit the investigation results within 270 days, but US President Trump and other officials have indicated that these efforts may end sooner. Trump said on Monday that he anticipates imposing tariffs on imported drugs “in the near future.” Meanwhile, US Secretary of Commerce Lutnick said that semiconductor tariffs may be introduced in a month or two.

When the Trump administration launched the “232 investigation” on imported pharmaceuticals and semiconductors, pharmaceutical stocks worthy of investors' attention include: MSD (MRK.US), Johnson & Johnson (JNJ.US), Lilly (LLY.US), Novartis Pharmaceuticals (NVS.US), Novartis (NVS.US), AstraZeneca (AZN.US), etc.; semiconductor stocks worthy of investors' attention include: TSM.US (TSM.US), Samsung Electronics, etc.

Notably, Trump said earlier this month that he would levy tariffs on imported drugs. Trump said that the US does not produce its own medicines or other health-improving products, and the US often pays many times more for drugs than countries that produce pharmaceuticals. Trump believes that once tariffs are imposed on drugs, pharmaceutical companies will open factories in the US because the US is the “biggest market.”

However, some experts say Trump's plan to levy tariffs on imported drugs may have a broad impact on pharmaceutical companies and American patients. Mariana Socal, professor of health policy at Johns Hopkins Bloomberg School of Public Health, said: “Currently, many people can't afford prescription drugs.”

Some Wall Street analysts worry that it will be difficult to move drug production back to the US because of the high costs and may take years. BMO Capital Markets analyst Evan Seigerman previously stated in a report: “The global supply chain is complex, and the pharmaceutical industry's supply chain is particularly complex.” He pointed out that tariffs “may be very difficult” to get production back to the US because these companies already have mature business operations in the US. He also said it is expected that most large pharmaceutical companies may set a goal of “waiting until the end of Trump's presidency before considering making more permanent production decisions.”

TD Cowen analyst Steve Scala pointed out that pharmaceutical companies such as Eli Lilly, Bristol-Myers Squibb (BMY.US), and ABBV.US (ABBV.US) may be better able to withstand potential tariff shocks than other companies because they have more major production plants in the US than internationally, and Novartis Pharmaceuticals and Roche “seem to face greater risks” because they have fewer factories in the US.

According to reports, some pharmaceutical giants have shown an accelerated trend in infrastructure expansion in the US. Eli Lilly announced plans to invest more than 23 billion US dollars in facilities. MSD's new 1 billion US dollar plant in North Carolina has just been put into operation, Novo Nordisk is expanding its formulation filling capacity by 4.1 billion US dollars in the same region, and Johnson & Johnson is also investing 2 billion US dollars to build a biopharmaceutical factory.

Furthermore, some analysts point out that imposing new tariffs on imported semiconductors may increase the cost of US companies to produce smartphones and other devices, weaken their profits, or force them to raise prices for American consumers. For Apple (AAPL.US) in particular, the tech giant lost more than $770 billion in market capitalization in just a few days after Trump's trade war began.