August 22, 2025 9:49AM # From Tariff Shock to Mild Sting: How the EU Deal Could Affect Drug Prices for Patients By [Jeffrey A. Singer](https://www.cato.org/people/jeffrey-singer) --- SHARE Listen to this article Generated with [ ElevenLabs](https://elevenlabs.io/) AI technology. Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech) AudioNative Player... ![prescription](/sites/cato.org/files/styles/pubs_2x/public/2025-08/prescription%20drugs%20.jpg?itok=8iZd6uo6) The US and the European Union [released](https://www.whitehouse.gov/briefings-statements/2025/08/joint-statement-on-a-united-states-european-union-framework-on-an-agreement-on-reciprocal-fair-and-balanced-trade/) details of their trade “framework agreement” yesterday. If the deal goes through, American patients can expect to pay more for pharmaceuticals. But it could have been much worse, as I [wrote](https://www.cato.org/blog/making-medicine-cost-more-wont-make-america-healthy-again) in April. At that time, President Trump threatened a [250 percent](https://ca.finance.yahoo.com/news/trump-backs-down-250-eu-135408846.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAABE0zcwvO87c3vk6-T2RMXsJwWhUA6E0zAGBzpOUhmZYd82PK6PhlVLKo76rBvhVb1at1iRuv9eiYGoJOtxMfxBbu-PGnlMux8Ck-Zwod2goBALm8XNTYxvxoIVfCDBPLd8aZzTnpvYZDSdXfldBNr_u5u21O8p6o8qF3NTsvPW2) tariff on all imports from the EU. About [40 percent](https://www.bls.gov/ppi/methodology-reports/the-pharmaceutical-industry-an-overview-of-cpi-ppi-and-ipp-methodology.pdf) of the finished pharmaceutical products that Americans consume are imported from the EU. About [47 percent](https://advisory.avalerehealth.com/insights/majority-of-api-in-us-consumed-medicines-is-produced-in-the-us-2020) of the active pharmaceutical ingredients (APIs) that US pharmaceutical manufacturers use are imported from foreign countries. The EU is America’s largest source of imported APIs, making up [26 percent](https://www.contractpharma.com/exclusives/api-supply-for-us-market/). Pharmacies dispense approximately [91 percent](https://www.fda.gov/drugs/generic-drugs/office-generic-drugs-2022-annual-report) of all prescriptions in the US as generics. About [90 percent](https://prosperousamerica.org/study-finds-over-90-of-all-generic-drugs-dependent-on-imports/) of generic drugs rely on imported APIs. Before the president’s April 2 “Liberation Day” tariff announcement, most APIs and finished pharmaceuticals imported from Europe were [tariff-free](https://www.conference-board.org/research/CED-Newsletters-Alerts/forthcoming-tariffs-on-pharmaceuticals#:~:text=Key%20Insights,took%E2%80%9D%20the%20US%20pharmaceutical%20industry.). This was due to the World Trade Organization’s [Agreement on Trade in Pharmaceutical Products](https://www.wto.org/english/tratop_e/pharma_ag_e/pharma_agreement_e.htm). If Trump had stuck with his initial tariff threat of 250 percent on all imports from the EU, it would have significantly increased the prices that patients pay for medicines, either directly or indirectly (through higher insurance premiums as third-party payers cover many of them). Under the framework agreement, American consumers will face a 15 percent tariff on all goods imported from the EU, including finished pharmaceutical products. However, the tariff on finished generic drugs and APIs will [stay](https://www.fiercepharma.com/manufacturing/trump-locks-15-tariff-rate-europe-confirming-separate-most-favored-nation-duty#:~:text=UPDATED:%20Trump%20locks%20in%2015,the%20European%20Commission%20this%20week.) at zero. Therefore, if the arrangements under the framework stay the same—and if the courts don’t declare Trump’s unilateral tariff edict [unconstitutional](https://www.cato.org/blog/i-shot-tariff-i-swear-it-was-self-defense)—the effect on pharmaceutical prices won’t be as severe as it could have been. While patients won’t face the extreme price increases a 250 percent tariff would cause, some drug prices could still climb under the new framework. ##### Related Tags [Health Care](https://www.cato.org/health-care) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).