Tariff War in Life Sciences Industry

The escalating trade tensions between the United States (US) and the European Union (EU)⁽¹⁾ have lead to a tariff war in life sciences. It introduces new challenges for companies whose products have typically not been subject to customs duty on cross-border movements.

“Data-Driven Strategies for Builders & Doers in Life Sciences: Episode 9”

Historically, pharmaceutical and medtech products moved freely across borders without customs duties. The ongoing tariff war in life sciences is disrupting supply chains. Companies are forced to rethink trade strategies to mitigate rising costs and compliance risks.

The new tariffs⁽²⁾⁽³⁾ and the scrutiny by customs authorities necessitate a thorough understanding to ensure compliance and mitigate risks.

We have set out below a summary of key takeaways on the tariff landscape impacts on life sciences trade between the US and EU.

The U.S. imposed 25% tariffs on European pharmaceuticals.⁽³⁾
The EU retaliated with 25% duties on U.S. pharmaceutical exports.⁽²⁾
APIs, raw materials and consumables from China and India also face U.S. tariffs, raising costs at multiple points in the supply chain.

Increased Customs Scrutiny on Pharmaceutical Shipments

Over 90% of the active pharmaceutical ingredients (APIs) used in U.S. manufactured medicines originate from Asia (India and China) and Europe⁽⁴⁾. The imposition of tariffs significantly increases the cost of importing APIs to U.S.A, driving up total produciton expenses and ultimately leading to higher costs for patients.

The chart provides an overview of the API DMF filings by year and country from 2000 to 2023, showing significant shifts since the year 2000 to 2024. The source is USP.org

In addition, tariff wars trigger stricter customs enforcement and pharmaceutical and medical devices shipments are now under higher scrutiny, with customs officials closely examining:

HTS Code Accuracy – Incorrect classification results in penalties and shipment delays.
Complete Documentation – Any missing details flag shipments for manual review.
Origin Declarations – Goods manufactured in the U.S. cannot bypass EU tariffs through third-party importers.
Exemption Claims – Improper tariff exemption claims can lead to legal risks.

With closer collaboration between customs and regulatory bodies, any of these deviations can trigger a product recall for all affected lots. This intensifies pressure on supply chain and quality teams, especially since manufacturing and quality issues account for over 50% of recalls⁽⁵⁾.

To navigate these risks, life science companies must refine their trade compliance strategies. This is where modern Enterprise Resource Planning (ERP) systems play a game-changing role.

Impact on Shipments of Investigational Medicinal Products

The Tariffs war has placed Investigational Medicinal Products (IMPs) at risk of higher costs and stricter customs enforcement.

Many companies shipping IMPs to Europe declare a nil value to customs, assuming that since the products are not for commercial sale, they hold no dutiable value. However, customs authorities increasingly challenge this practice, requiring a fair market value or production cost declaration to prevent misclassification and potential fraud⁽⁶⁾.

With the escalation of U.S.-EU tariffs, the risk of incorrect declarations intensifies. An IMP with a U.S. country of origin, will be subject to 25% EU tariffs, significantly increasing clinical trial costs.

Clinical trials management is decentralized in the EU. This means that customs, duties and taxes by each EU member state adding further complexity and risks.

This can lead to budget overruns, trial delays, and difficulties in securing funding for future studies, creating an additional burden on biotech firms already navigating stringent regulatory and supply chain complexities.

Risks of Delegating Import Responsibilities to EU Representatives

Some companies might consider appointing EU-based representatives to act as the importer of record, aiming to mitigate the impact of tariffs. However, this approach carries significant risks:

Country of Origin Determination: Regardless of the importer’s location, customs authorities assess tariffs based on the product’s country of origin. If the IMP is manufactured in the U.S., it remains subject to EU tariffs upon entry.
Legal and Compliance Risks: Misrepresentation of the importer’s role or the product’s origin can lead to allegations of customs fraud, resulting in severe penalties and reputational damage.

Strategic Recommendations

To navigate this complex environment, an ERP system with trade compliance and tariff management modules is a must-have to support companies:

Automate HTS Classification – Ensures the correct HS codes for all raw materials and finished products.
Track Tariffs in Real Time – Updates duty rates instantly as trade policies change. If a raw material is imported duty-free, its preferential status can be maintained under certain conditions.
Generate Customs Documentation – Reduces errors in commercial invoices, bills of lading, and certificates of origin.
Optimize Supplier Decisions – Helps businesses source materials from duty-free zones or low-tariff countries.
Predict Cost Impacts – Provides tariff simulation models for better financial planning.
Support Duty Drawbacks – If an IMP pack is exported, companies may claim refunds on previously paid U.S. import duties.

The Life Science Industry trusts SAP
Infographic highlighting the key financial focus areas shaping life sciences in 2025.

If an API sourced from Europe and syringes from China are imported into the U.S. for processing, ERP systems can track them separately to qualify for re-export duty exemptions.

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Turn Tariff Risks into Supply Chain Efficiency

To protect against rising tariffs and customs risks, companies should:

Comprehensive Supply Chain Evaluation: Assess the entire supply chain to identify stages where tariffs apply and explore possibilities to restructure operations to minimize tariff liabilities.
Accurate Documentation: Maintain meticulous records and ensure all shipping documents accurately reflect the product’s origin, classification, and value to facilitate smoother customs clearance.
Engage Trade Compliance Experts: Consult with professionals specializing in international trade compliance to stay abreast of evolving regulations and implement best practices.
Explore Duty Mitigation Programs: Investigate programs such as Foreign Trade Zones (FTZs) or bonded warehouses that may offer relief or deferral of tariffs under certain conditions.

Tariffs should not just be seen as an extra cost but as an opportunity to optimize manufacturing processes, improve supply chain efficiency, and reduce compliance risks.

Companies that invest in ERP-driven customs management will gain a competitive edge in the evolving global trade environment.