The Donald J. Trump administration is imposing the toughest trade barriers in generations, levying new duties of at least 10% on every major trading partner. But the duties exempt many chemicals and most pharmaceuticals, semiconductors, and energy products.
Here's the key paragraphs:
The White House has excluded many products from the tariffs, including an expansive number of major chemicals. These products include polymers such as polyethylene, polypropylene, polyethylene terephthalate; petrochemicals like phenols and ethylene; and other large-volume chemicals such as titanium dioxide. The list also has exclusions for pharmaceutical products, semiconductors, and energy products. Some products on the exemption list may be subject to later tariffs.
Chemical industry groups are weighing in on the measures carefully. The American Chemistry Council (ACC) says it is studying them to see how they affect the US industry. “ACC wants to work consistently with the Administration on a pro-growth trade agenda that decreases America’s supply chain vulnerabilities while negotiating new measures that benefit domestic production and jobs,” the group says in a statement.
The Society of Chemical Manufacturers and Affiliates (SOCMA) calls for a “strategic, sector-informed approach” in a statement. “Many SOCMA members are now confronting significantly higher costs for the raw materials they rely on—inputs often unavailable at scale within the US,” the trade group says.
In a note to clients, Laurence Alexander, a stock analyst with the investment firm Jefferies, says the most important impact of the new tariffs will be their effect on demand for chemicals from all sources. The global chemical industry overall will face a roughly 0.8% headwind, he says, while demand for chemicals serving durable goods and clothing markets could see as much as a 6% impact.
I think this bears a lot of watching and close reading. It sounds like there will be pharma tariffs as well. I can't imagine this does anything good for industrial chemist hiring this year but we will see. I thought this comment from Lilly's CEO was grimly ironic:
Lilly has been one of the industry leaders in building up its U.S. production capabilities. Since 2020, the Indianapolis drugmaker has earmarked $50 billion to construct and upgrade new plants in the U.S. But Lilly also depends largely on foreign manufacturing, most notably in business-friendly Ireland, where it employs more than 3,000 and is constructing a new $800 million facility.
“We can’t breach those agreements, so we have to eat the cost of the tariffs and make trade-offs within our own companies,” Ricks told BBC. “Typically, that will be in reduction of staff or research and development, and I predict R&D will come first. That’s a disappointing outcome.”
If Lilly with all of this Mounjaro revenue is planning on cutting R&D back, what will the other pharma firms do?
