China could emerge a winner as US turns pharmaceuticals into political bargaining chip

US President Donald Trump on April 9 said pharmaceuticals, exempt from previous import duties, would "very soon" be slapped with major tariffs. Some analysts have speculated that specific tariffs could be as high as 25 percent, matching those already selectively placed on autos, steel and aluminum.

For China – already the victim of Trump's most punitive tariffs – it isn't clear if drug tariffs would be in addition to the 145 percent tariffs already imposed on the nation. Either way, they signal that Washington wants to compel pharmaceutical companies to shift supply chains away from China and return to American soil.

Drug tariffs mark a potential turning point in the delicate and deeply interwoven relationship between the world's two largest economies. More importantly, they raise fundamental questions about the future of medical innovation, access and security.

Historically, pharmaceutical products have been largely exempt from tariff regimes, even during the height of the US-China trade conflicts in 2018-19. Both sides back then understood the public health risks of turning medicines into political bargaining chips.

But Trump's strident rhetoric about "America First" and the global tariff war it has triggered suggest those days of mutual restraint may be over.

At stake is a supply chain that is as sprawling as it is indispensable. China is the world's largest producer and exporter of "active pharmaceutical ingredients," the chemical compounds that make drugs effective. It is also a growing force in the export of generic drugs, medical devices and diagnostics.

In 2024, China exported US$19.05 billion worth of pharmaceutical goods to the US, while importing US$15.06 billion in return, according to China Chamber of Commerce for Import and Export of Medicines and Health Products.

It's a trade surplus, yes, but one where America still dominated the high-end, high-margin categories like biotech drugs, immunotherapies and precision diagnostics.

Breakdown in symbiosis?

This commercial symbiosis has made medicine a rare area of functional interdependence between the two countries. That may be about to change.

The numbers are striking. Roughly 80 percent of all active pharmaceutical ingredients used in the United States are imported. China and India dominate this market, but India itself depends on China for about 70 percent of its supply, according to the Active Pharmaceutical Ingredient Innovation Center.

For some drugs, American reliance on China is near total. The Washington Post reported that over 90 percent of the US supply of ibuprofen and ACTH (a hormone used in treating infantile spasms) originates in China, along with more than 70 percent of acetaminophen and over 40 percent of penicillin and heparin.

This over-reliance has consequences. When the COVID-19 choked supply chains in 2020, US hospitals found themselves scrambling to source basic drugs. Earlier this year, shortages of amoxicillin and ADHD medications again drew public outrage, with many experts pointing to over-centralization of manufacturing in a few overseas hubs.

Trump's tariff policy looks aimed at reversing this trend. But the US pharmaceutical industry cannot simply flip a switch and rebuild domestic production overnight. Most analysts agree it would take at least a decade and billions of dollars in investment to reestablish production capacity for vital drug components stateside. Environmental regulations, labor costs and scales of efficiency all work in favor of offshore suppliers.

A double-edged sword

In the short term, tariffs may create more problems than they solve. For American drugmakers, the immediate result will be higher input costs. Those costs will either eat into profit margins or be passed on to consumers, exacerbating an already contentious debate over high drug prices in the US.

Even China's exporters may feel the pain – at least initially. For many domestic drug firms, the US remains their most lucrative foreign market. Reduced orders could dent revenues and stall expansion plans, particularly for mid-sized players without diversified international footprints.

But China's pharmaceutical industry is not standing still.

The silver lining for China

If tariffs become a long-term fixture, they may trigger the very changes in China's domestic industry that policymakers in Beijing have long sought but struggled to accelerate.

For decades, Chinese pharma exports have centered on active pharmaceutical ingredients and low-margin generics. Meanwhile, high-end medical devices, biologics and advanced diagnostics remain dominated by multinational giants.

Now, trade pressure may provide the impetus for Chinese firms to move up the value chain. Already, Chinese medical device makers are gaining ground in fields like imaging, endoscopy and surgical robotics. Domestic brands are emerging to challenge foreign incumbents in areas like heart pacemakers and suturing tools. Tariffs, by increasing the cost of imports, could help level the playing field.

The same applies to biotech. China still relies heavily on imported biologics, such as vaccines, immunotherapies and blood products. But this is also a sector where the government has channeled heavy investment and policy support. If access to US drugs narrows, the domestic market will grow more receptive to local substitutes, accelerating clinical trials and regulatory green lights.

Moreover, many Chinese pharmaceutical companies are already preparing for a post-America era. They are expanding into markets along China's Belt and Road trade initiative, forming partnerships in Southeast Asia and pursuing EU and World Health Organization pre-qualification to access global procurement channels.

Some are integrating vertically – moving from production of active pharmaceutical ingredients into branded formulations to capture more value.

What China should do next?

To seize this moment, China's pharmaceutical sector needs more than just industrial policy; it needs systemic reform.

First, research and development must become a national priority. While China produces more chemistry PhDs than any country, it still lags in original drug discovery and translational medicine. Incentivizing long-term innovation over short-term manufacturing will be key.

Second, regulatory harmonization is crucial. Companies seeking to "go global" must meet overseas standards – not just in products, but in compliance culture. Aligning domestic protocols with international benchmarks will streamline approvals and boost confidence abroad.

Third, data and digital transformation must be accelerated. Artificial intelligence-assisted drug discovery, real-world evidence and tele-health integration are reshaping global pharma. China has the talent and infrastructure to lead in these areas, but it must ensure that privacy and access frameworks are globally credible.

A narrow path forward

The global pharmaceutical industry is entering a more politicized, protectionist phase. The US move to weaponize drugs in its tariff policy is both a warning and a test – for China, for global trade and for patients everywhere who rely on health-saving medications.

For China's pharmaceutical sector, the challenge is real. So is the opportunity. Near-term turbulence may sting, but the long-term outlook is one of forced maturity, strategic independence and global repositioning.

As for the United States, it may soon discover that economic nationalism comes at a high price – rising consumer costs, reduced supply security and a strained public health system.

In the end, trade barriers may not deliver medical sovereignty, but they could inadvertently spark the next leap in China's pharma evolution.

(The author is an adjunct research fellow at the Research Center for Global Public Opinion of China, Shanghai International Studies University, and founding partner of 3am Consulting, a consultancy specializing in global communications. He has no conflict of interests to declare.)