Tensions Rise Between EU and US Over Pharmaceutical Trade

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Tensions between the European Union and the United States have reached a critical point, with the pharmaceutical industry caught in the middle of an increasingly adversarial trade climate. In early 2025, the Trump administration floated a series of new tariffs targeting European goods, beginning with a 25% levy on car imports. Behind closed doors, however, medicines are reportedly next in line.

For the EU, the implications go far beyond trade balances. Pharmaceuticals represent not only a strategic export, valued at €90 billion in shipments to the U.S. in 2023, but also a cornerstone of healthcare systems and national economies. As policymakers debate the future of data exclusivity and orphan drug protections, a dual threat emerges: political retaliation from Washington and structural reform within Brussels.

Tariff exposure and the scramble to ship early

As talk of tariffs escalated in early 2025, EU drugmakers responded with urgency. Ireland, Germany, and Belgium recorded a surge in outbound shipments to the United States in the first quarter. Companies moved quickly to front-load inventories before any new levies could be enacted. Ireland’s exports alone rose by 18% month over month, driven in large part by high-value cancer drugs and biologics.

The threat is not theoretical. A recent Lancet Oncology article warned that a trade war could increase the cost of oncology medicines, delay treatment availability, and disrupt the cross-border supply of chemotherapy agents that are often produced in European facilities.

Pharmaceutical firms now face regulatory ambiguity and political risk. Some are investigating alternative manufacturing locations, including friendlier jurisdictions in Eastern Europe and North America. Others are urging the European Commission to press for exemptions for essential medicines.

Meanwhile, guidance from EU regulators remains limited. The European Medicines Agency has yet to publish a clear position on how tariffs might affect licensing and approvals, leaving manufacturers to make strategic decisions in a policy vacuum.

For Ireland and several smaller EU economies, the pharmaceutical trade is not just about commerce. It is a structural pillar of employment, foreign direct investment, and export revenue. The stakes are high, and for now, the industry’s short-term response is focused on speed and inventory resilience.

Ireland’s economic dependency on pharma exports

Ireland’s economy is deeply entwined with pharmaceutical exports. In 2023, nearly 40% of all Irish goods exports were related to pharmaceuticals, with the United States representing the single largest destination. That level of exposure places Ireland in a vulnerable position amid current trade tensions.

A recent report from the Department of Finance estimates that a full-scale trade war targeting medicines could cost Ireland up to €18 billion over five years. The country faces potential job losses in production hubs and research centers, as well as a broader erosion of confidence from multinational investors.

Some of the world’s largest pharmaceutical companies, including Pfizer and Johnson & Johnson, maintain extensive manufacturing facilities in Ireland. Although no large-scale relocations have been announced, industry insiders suggest that future investments may be delayed or redirected if the trade outlook worsens.

Ireland is now examining contingency plans. These include diversification of export markets, domestic incentives for biotech scale-ups, and stronger trade relationships with Asia-Pacific partners. At the EU level, however, any decision to shield pharmaceuticals from retaliatory tariffs would require consensus — and Ireland’s economic interests must be balanced against broader strategic goals.

Patent law reform and its ripple effects

Alongside trade uncertainty, pharmaceutical companies must contend with sweeping changes to intellectual property law. The EU pharmaceutical package, proposed in April 2023, is the most comprehensive reform of the bloc’s drug legislation in over two decades.

At the heart of the package is a proposal to reduce data exclusivity from eight to six years. Additional exclusivity would be granted only under specific conditions, such as launching in all 27 member states or addressing unmet medical needs.

Similarly, the market exclusivity period for orphan drugs would be revised, targeting therapies for rare diseases. Industry stakeholders argue that this change could deter investment in specialized R&D, while policymakers counter that it will improve access and affordability.

The proposed framework has drawn scrutiny from American firms and U.S. trade officials. There is concern that modified IP protections could violate international standards and trigger disputes through the World Trade Organization. As the U.S. evaluates whether these reforms constitute unfair barriers to trade, European negotiators are preparing for legal and diplomatic challenges.

Fragmented drug pricing reforms in the EU5

Even within the EU, national governments are implementing their own pricing controls. Germany has introduced stricter cost-effectiveness evaluations. France has linked pricing to a broader group of international comparators. Italy and Spain have expanded performance-based agreements and price-volume thresholds. The UK, continues to influence regional trends through its capped revenue schemes for branded drugs.

This fragmented environment complicates commercial planning. Companies must now tailor launch strategies to the unique dynamics of each market, undermining the consistency once afforded by EU-wide pricing frameworks.

From the U.S. perspective, these measures appear to limit market access and reduce pricing transparency. That perception increases the likelihood of trade conflict, particularly if American firms see these mechanisms as implicit forms of protectionism.

Internally, EU fragmentation challenges Brussels’ broader vision of a unified pharmaceutical market. As each member state asserts its own pricing authority, the bloc’s ability to negotiate with external partners on a collective basis becomes weaker.

Shifting supply chains and transatlantic R&D strategies

The pandemic exposed the fragility of global supply chains, and geopolitical tensions have only intensified the urgency to localize production. European drugmakers are investing in diversified supply routes and regional manufacturing hubs to reduce dependency on politically unstable regions.

This reconfiguration includes moving active pharmaceutical ingredient production closer to home and investing in digital tracking tools to monitor disruptions. But it also comes with tradeoffs: increased production costs, regulatory complexity, and delays in product launches.

Investment in research and development is following a similar pattern. The U.S. continues to attract a larger share of pharma R&D due to its strong IP protections, streamlined regulatory systems, and large commercial market. The EU, despite its scientific excellence, risks falling behind if it cannot compete on policy and infrastructure.

Antimicrobial resistance is one of the few pharmaceutical issues where public health urgency transcends commercial interest. The EU has taken a leadership role by proposing new market entry incentives for antibiotic developers and tying regulatory benefits to equitable distribution.

In contrast, the U.S. has opted for more market-oriented models, focusing on reimbursement structures rather than exclusivity extensions. This divergence has become a sticking point in broader trade discussions.

Critics argue that fragmented strategies weaken the global response to AMR. Without alignment on incentives, funding, and access protocols, both regions risk underdelivering on a growing threat. As drug-resistant infections increase, so does the importance of building a coordinated transatlantic framework. Europe’s pharmaceutical sector faces a defining period. Rising trade barriers, domestic reforms, and shifting global investment flows have created a volatile environment.

Sources:

• Euronews
• The Lancet