tariff

US president has said that he will use tariffs to bring down costly pharmaceutical drugs, but the impact remains uncertain.

United States President Donald Trump has signed an executive order that could slap long-threatened tariffs of up to 100 percent on some patented drugs if pharmaceutical companies don’t reach deals with his administration in the coming months.

Under Thursday’s executive order, companies that have signed a “most favoured nation” pricing deal and are actively building facilities in the US will have a zero-percent tariff.

For those that don’t have a pricing deal but are building such projects in the US, a 20 percent tariff will apply, but it will increase to 100 percent in four years.

A senior administration official told reporters on a press call that companies still have months to negotiate before the 100 percent tariffs kick in. Bigger companies will have 120 days, and 180 days are offered for everyone else.

The official, speaking on condition of anonymity to preview the executive order before it was issued, did not identify any companies or drugs that were in jeopardy of getting hit with the increased tariffs.

But the source noted the administration had already reached 17 pricing deals with major drugmakers, 13 of which have signed.

In Thursday’s executive order, Trump wrote that he deemed the tariffs necessary “to address the threatened impairment of the national security posed by imports of pharmaceuticals and pharmaceutical ingredients”.

The order arrived on the first anniversary of Trump’s so-called Liberation Day, when the president unveiled sweeping new import taxes on nearly every country in the world, sending the stock market reeling. Those “Liberation Day” tariffs were among the duties the Supreme Court overturned in February.

Critics, pharmaceutical leaders and medical groups warned of the consequences the new tariffs could bring.

Stephen J Ubl, the CEO of the pharmaceutical company trade group PhRMA, said taxes “on cutting-edge medicines will increase costs and could jeopardize billions in US investments”.

He pointed to America’s already large footprint in biopharmaceutical manufacturing and noted medicines sourced from other countries “overwhelmingly come from reliable US allies”.

Trump has launched a barrage of new import taxes on US trading partners since the start of his second term and repeatedly pledged sky-high levies on foreign-made drugs.

But the administration has also used the threat of new levies to strike deals with major companies — like Pfizer, Eli Lilly and Bristol Myers Squibb — over the last year, with promises of lower prices for new drugs.

Beyond company-specific rates, a handful of countries have reached trade frameworks with the US to further cap tariffs on drugs sent to the US.

The European Union, Japan, Korea and Switzerland will see a 15 percent US tariff on patented pharmaceuticals, matching previously agreed rates for most goods.

Meanwhile, the United Kingdom will get 10 percent, which Thursday’s order noted would “then reduce to zero” under future trade agreements.

The UK previously said it secured a zero-percent tariff rate for all British medicines exported to the US for at least three years.

BRUSSELS — The European Parliament voted Thursday to approve a trade deal between Washington and Brussels but with amendments added to protect European interests should the United States fail to hold up its end of the bargain.

The deal was negotiated last July in Turnberry, Scotland, by President Trump and European Commission President Ursula von der Leyen. It set a 15% tariff on most goods in an effort to stave off far higher import duties on both sides that might have sent shock waves through economies around the globe.

New language now says that the deal can be suspended if Washington “undermined the objectives of the deal, discriminated against EU economic operators, threatened member states’ territorial integrity, foreign and defence policies, or engaged in economic coercion.”

That clause was forged because of the tensions over Greenland, said Bernd Lange, a German lawmaker and head of the EU’s parliamentary trade committee.

Trump drew widespread condemnation across the 27-nation bloc by threatening to take control of Greenland, a semiautonomous territory of Denmark. He has backed away from the threat, at least for now.

“If this would happen again, then immediately the tariffs would be installed,” he said at a news conference after lawmakers voted. He said the protective modifications were “weatherproofing” the Turnberry deal.

The deal will now be further negotiated by EU trade representatives Maroš Šefčovič and his U.S. counterpart Jamieson Greer, who are meeting Friday on the sidelines of the World Trade Organization meeting in Yaoundé, Cameroon.

“We need the EU-U.S. deal in force on both sides — delivering real certainty for EU businesses and showing that genuine partnership gets results,” Šefčovič said after the vote in Brussels.

There were formally two votes to introduce clauses to the deal. One passed 417-154 and the other 437-144 with dozens of abstentions each.

The U.S. Ambassador to the EU Andrew Pudzer said the vote would provide “stability and predictability” for U.S. and EU businesses and drive economic growth. “We encourage all parties to think to the future and the importance of unleashing opportunities for businesses on both sides of the Atlantic,” he said.

Malte Lohan, CEO of American Chamber of Commerce to the European Union, said the vote is “the right signal for businesses that have been stuck in limbo over the past year” and “a necessary step towards a more predictable transatlantic marketplace.”

Croatian lawmaker Željana Zovko said that despite the trade spat between Brussels and Washington, trade across the Atlantic had grown over the past year. “This resilience proves the trans-Atlantic trade works, and if it works, we should strengthen it, not hold it back.”

McNeil writes for the Associated Press.

WASHINGTON — The Trump administration is stepping up its ambitious effort to replace about $1.6 trillion in lost tariff revenue that was eliminated by the Supreme Court’s decision to strike down a range of the president’s import taxes.

Recovering that lost revenue, which the White House was counting on to help offset the steep, multitrillion-dollar cost of its tax cuts, is possible but will be challenging, experts say. The administration has to use different legal provisions to impose new import taxes, and those provisions require longer, complex processes that U.S. companies can use to seek exemptions. It could be months or more before it is clear how much revenue the replacement tariffs will yield.

“I wouldn’t bet against this administration being able to get back on paper the same effective tariff rate they had before,” said Elena Patel, co-director of the Urban-Brookings Tax Policy Center. But the new approach will “make it easier for people to contest the tariffs, which is going to put a big asterisk on the revenue until all that is settled.”

On Wednesday, U.S. Trade Representative Jamieson Greer said the administration will investigate 16 economies — including the European Union — over whether their governments are subsidizing excessive factory capacity in a way that disadvantages U.S. manufacturing. The investigation will also cover China, South Korea and Japan, Greer said.

In addition, he said, there would be a second investigation of dozens of countries to see whether their failure to ban goods made by forced labor amounts to an unfair trade practice that harms the United States. That investigation will also cover the EU and China, as well as Mexico, Canada, Australia and Brazil.

Both investigations are being conducted under Section 301 of the 1974 Trade Act, which requires the administration to consult with the targeted countries, as well as hold public hearings and allow affected U.S. industries to comment. A hearing as part of the factory capacity investigation will be held May 5, while a hearing on the forced labor investigation will occur April 28.

It’s a far cry from the emergency law that President Trump relied on in his first year in office, which allowed him to immediately impose tariffs on any country, at nearly any level, simply by issuing an executive order.

Moments after the Supreme Court’s ruling, Trump imposed a 10% tariff on all imports under a separate legal authority, but that duty can only last for 150 days. The president has said he would raise it to 15%, the maximum allowed, but has yet to do so. Some two dozen states have already challenged the new taxes. The administration is aiming to complete its Section 301 investigations before the 10% duties expire.

The effort underscores the importance that the Trump White House has placed on tariffs as a revenue-raiser at a time when the federal government is facing huge annual budget deficits for decades into the future. Previous administrations, by contrast, used tariffs more sparingly to narrowly protect specific industries.

Erica York, vice president of federal tax policy at the Tax Foundation, noted that the first investigation covers roughly 70% of imports, while the second would cover nearly all of them.

“That breadth suggests the goal isn’t to address the issues at hand, but instead to re-create a sweeping tariff tool,” she said.

Trump portrays tariffs as a way to force foreign countries to essentially help pay the cost of U.S. government services, even though all recent economic studies find that American companies and consumers are paying the duties, including analyses by the Federal Reserve Bank of New York and economists at Harvard University. In his State of the Union address last month, Trump even touted his tariffs as a potential replacement for the income tax, which would return the United States’ tax regime to the late 19th century.

Trump also wants tariffs to help pay for the tax cuts he extended in key legislation last year. The tax cut legislation is expected, according to the most recent estimates by the nonpartisan Congressional Budget Office, to add $4.7 trillion to the national debt over a decade, while all Trump’s import taxes, including ones not struck down by the court, were projected to offset about $3 trillion — or two-thirds of that cost.

The high court’s ruling Feb. 20 that he could no longer impose emergency tariffs eliminated about $1.6 trillion in expected revenue over the next decade, according to the CBO.

Some of Trump’s import taxes remain place, including previous tariffs on China and Canada that were imposed after earlier 301 investigations. The administration has also imposed tariffs on some specific products, including steel, lumber and cars. Those, combined with the 10% tariff for part of this year, should yield about $668 billion over the next decade, the Tax Foundation estimates.

“It’s going to take a really big patchwork of these other investigations to make up for the [lost] tariffs,” York said.

The administration’s efforts are also unusual because they reflect an overreliance on tariffs to bring in more government revenue. Trump has also said the import taxes are intended to return manufacturing to the United States — manufacturing jobs, however, are down since he returned to office — and he has used the tariffs to leverage trade deals.

“What makes this really different,” said Kent Smetters, executive director of the Penn Wharton Budget Model, “it is really the first time tariffs have been mainly used as a revenue raiser.”

Patel, meanwhile, argues that raising revenue can be done more reliably and straightforwardly by Congress. Laws like Section 301 are traditionally intended to be used to address specific trade policy concerns in particular countries.

“It’s not supposed to be there to raise revenue,” she said. “If we want to raise revenue through tariffs, then Congress should impose a broad based tariff.”

Rugaber writes for the Associated Press.