United States President Donald Trump has flagged a significant shift in American pharmaceutical policy, announcing plans to introduce a “major tariff on pharmaceuticals” during a speech to Republican lawmakers. The policy, he said, aims to force multinational pharmaceutical companies to relocate their manufacturing operations to the United States—a move that could have global implications, particularly for close allies like Australia.
The announcement, made at the National Republican Congressional Committee dinner on Wednesday, did not specify the scale or timing of the proposed tariffs. However, it adds a new layer of complexity to ongoing trade discussions and follows a series of controversial economic measures that have already sent global markets into turmoil.
Targeting Foreign Price Caps
Trump took direct aim at subsidised drug pricing schemes common in countries like Australia. Referencing the Australian Pharmaceutical Benefits Scheme (PBS), the US President criticised nations that cap drug prices through government regulation.
“These other countries are smart,” Trump said. “They say you can’t charge more than $88 otherwise you can’t sell your product and the drug companies listen to them.”
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“But we’re going to do something that we have to do. We’re going to put tariff on our pharmaceuticals and once we do that, they’re going to come rushing back into our country because we’re the big market.”
He added, “The advantage we have over everybody is that we’re the big market. So we’re going to be announcing very shortly a major tariff on pharmaceuticals.”
Although Australia was not mentioned by name, Trump’s comments follow hours after remarks from his trade representative, Jamieson Greer, who openly criticised Australia during a US Senate hearing.
Trade Representative Greer: “Run Up the Score on Australia”
Greer stunned members of the US Senate when he suggested that the US should “run up the score” with Australia as part of efforts to reduce a $1.2 trillion trade deficit. While the US maintains an overall global trade deficit, it actually enjoys a trade surplus with Australia.
“We’re addressing the $1.2tn [trade] deficit – the largest in human history – that President Biden left us with. We should be running up the score in Australia,” Greer told the Senate.
His comments prompted a swift backlash from Democrat Senator Mark Warner of Virginia, who accused the Trump administration of using economic bullying tactics even on close allies.
“The idea that we are going to whack a friend and foe alike, particularly friends at this level, is insulting to the Australians, undermines our national security and, frankly, makes us not a good partner going forward,” Warner said, visibly frustrated.
Albanese and Dutton Close Ranks Over PBS
Back in Australia, the political response to the proposed tariffs was swift and bipartisan. Prime Minister Anthony Albanese reiterated that the PBS was “not up for negotiation,” a stance echoed by Opposition Leader Peter Dutton, who labelled it “sacrosanct” in trade talks.
Albanese dismissed Greer’s comments as “inappropriate” and counterproductive to the longstanding friendship between the two nations.
“It is certainly not an appropriate action and it certainly isn’t reciprocal that Australia has received a 10% tariff,” the Prime Minister said. “Whilst we acknowledge that every other country has a worse arrangement than Australia, or certainly no one has a better arrangement than Australia.”
Dutton was equally dismissive. “The PBS is one of the great institutions of Australian life. It’s protected, it’s not negotiable, and we will defend it in any trade negotiation, no matter who is on the other side of the table.”
What’s at Stake for Australia’s Pharma Industry
Australia exports approximately $2 billion worth of pharmaceuticals to the United States annually, with the bulk consisting of vaccines and blood products. Any new tariffs could significantly increase the cost of these exports, making them less competitive in the American market.
Experts from Monash University, writing in The Conversation, noted that while tariffs may not directly impact the PBS pricing structure within Australia, there could be downstream effects. For example, if Australian pharmaceutical companies see diminished demand in the US, they may shift operations offshore to reduce costs.
“It’s hard to see how tariffs would influence the PBS unless these issues are caught up in some larger trade or political deal,” the researchers wrote. “But if the US puts tariffs on drugs Australia exports to the US, that could have an effect. It would make Australian drugs more expensive, potentially driving down demand.”
A Risk to Diplomatic Ties
The diplomatic fallout could also be severe. Trade tensions between the US and China have already impacted the Australian economy. Adding pharmaceutical tariffs into the mix—particularly if they are seen as targeting allies—may damage the trust that underpins the US-Australia alliance.
While the US has often used trade as a tool for economic leverage, commentators warn that targeting allies like Australia at a time of increasing global instability sends the wrong message.
“What we are seeing here is economic nationalism taken to an extreme,” said Dr. Justine Spencer, a trade policy expert at the Australian National University. “It’s one thing to confront China or Russia on trade issues, but it’s quite another to suggest that Australia, a long-time military and economic partner, should be treated like a rival.”
Domestic Pressure Mounts on Trump Administration
The latest announcement is just one of several policies introduced by the Trump administration under the “Liberation Day” economic agenda—a protectionist package that includes steep tariffs on a range of goods, from electronics to agricultural imports.
Markets have reacted sharply to the new tariffs, with the ASX 200 losing $100 billion in value in a single day earlier this week—its largest one-day fall in nearly five years.
Australian Treasurer Jim Chalmers said the government was working with industry leaders to assess the economic impact of the proposed pharmaceutical tariffs and any retaliatory measures.
“We’re reviewing the implications for both our trade portfolio and for consumers who might be impacted by changes to drug pricing if supply chains are disrupted,” Chalmers said. “We’ll continue to advocate for fair and rules-based trade.”
What Comes Next?
Trump’s comments, while not yet translated into official policy, have already sent ripples through both political and economic arenas. The lack of clarity over the details of the proposed pharmaceutical tariffs adds to global uncertainty, with companies, investors, and governments left guessing about what comes next.
As the 2025 federal election approaches in both Australia and the United States, the issue is likely to remain in the spotlight. The PBS, a foundational element of Australian healthcare, is now entangled in a broader geopolitical struggle that shows no signs of abating.
Both major parties in Australia have declared the PBS untouchable, but with global economic pressures mounting and diplomatic ties being tested, the coming months will determine whether political declarations can withstand the weight of international trade strategy.
For now, Australians and the global pharmaceutical industry will watch closely, hoping that reason prevails over rhetoric.
