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The impact of US tariffs on China's pharmaceutical industry particularly on active pharmaceutical ingredients (APIs) has significant ripple effects on global supply chains, especially for countries like India, which is heavily dependent on Chinese API imports, said Dr Li Jin, founder and chairman, Pharmacodia Global Database, China.
With US imposing a 145% tariff on Chinese goods, these shockwaves are short-term pains for Chinese pharmaceutical companies. In the long-term, it will be the irreplaceability of China's supply chain, he added.
US President Donald Trump's tariff policy has exposed the hollowing out of the US pharmaceutical industry, but it has provided a strategic window for the globalization of Chinese pharmaceutical companies, Dr Jin told Pharmabiz in an email.
Tariffs currently impact China's pharmaceutical sector. It increases import costs of chemical reagents, biological reagents, and instruments. Its effect on in & out-licensing molecules is minimal, as it comes under the technical contract category. Tariffs may also increase costs for CROs (contract research organisations) due to their reliance on imported instruments and reagents, which could lead to a potential decrease in order volumes, he noted.
In the short-term, export costs have increased sharply, and low value-added products are under pressure. US is the largest market for China's pharmaceutical exports, valued at $19.047 billion in 2024, accounting for 17.6% of the total. The tariff for China's pharmaceutical products faces a 34%-240% tax rate. US relies on China for 80% of its antibiotics. Therefore, export of amoxicillin and penicillin will bear the brunt, pointed out Dr Jin.
As the US tariff imposition news flashed, capital markets panicked, and stock prices suffered a short-term setback. The biomedical sector of Hong Kong stocks fell by nearly 15% in a single day, and the market value of WuXi AppTec, BriGene, Junshi Biosciences, Zai Labs and other companies evaporated significantly. Now the stock market is worried that the tariff policy will weaken the profitability of Chinese pharmaceutical companies exporting as they rely on the US market, he said.
From a long-term perspective, we see the irreplaceability of China's supply chain in the US. This is because 90% of the world's APIs is sourced from China. For India 80%-90% of the key starting materials (KSMs) are from China. Even if tariffs push up costs, the US will find it difficult not to dependent on China, he said.
Now China is upgrading technology and moving from a raw material supplier to an innovation exporter. Tariffs have instead become a catalyst for an industry reshuffle, eliminating low-end production capacity and promoting technological upgrades. For instance, BeiGene's PD-1 inhibitor is approved for marketing in the US and WuXi Biologics has adopted a license-out model to avoid tariff impact, he said.
“We see strategic opportunities in this crisis. Policies like expansion of China's medical insurance category C catalogue and the acceleration innovative drugs approval will boost the domestic market and hedge overseas risks,” said Dr Jin.
The trend of multinational pharmaceutical companies to localize production in China like for instance Johnson & Johnson and Eli Lilly is increasing. This makes China’s supply chain deeply integrated into the global innovation network. Advances in AI drug research and development, biomanufacturing may enable China to seize the opportunity in the biotechnology race, he said.
Short-term disruptions may be unavoidable, but the global pharmaceutical industry is on the cusp of structural change, said Dr Jin.
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