By Helena Smolak and Katherine Hamilton

Pharmaceutical stocks sank lower Wednesday after President Trump doubled down on his promise to slap tariffs on a long-exempt industry, causing market turmoil globally.

The Dow Jones U.S. Pharmaceuticals Index slipped 3.7% to 768.75 Wednesday morning, at one point hitting a 52-week low of 766.61. AbbVie shares fell 5.9% to $165.34, while Eli Lilly, Merck and Pfizer all declined about 3%.

In European morning trade, the Stoxx Europe 600 Health Care index--which is heavily dominated by Europe's six largest pharma companies--dropped 3.1% Wednesday, also touching a year low earlier in the session.

Switzerland's Roche and Novartis, the U.K.'s AstraZeneca, Denmark's Novo Nordisk and France's Sanofi were all down more than 5% in morning trade. Japan's Daiichi Sankyo and Takeda Pharmaceutical retreated 6% and 4.7%, respectively, while Australia's CSL shed 5%.

The pharma sector had been spared last week from Trump's sweeping tariff plan, which kicked in Wednesday, and drug companies have been exempt from trade taxes for decades. But Trump has previously pledged to impose duties on the industry, and his remarks at a Tuesday dinner with House Republicans suggested levies could come soon.

"We're going to tariff our pharmaceuticals and once we do that they're going to come rushing back into our country because we're the big market," Trump said, without providing further details. "So we're going to be announcing very shortly a major tariff on pharmaceuticals."

Drug companies have taken advantage of their tariff exemption by concentrating manufacturing in countries where the corporate-tax rate is low, such as Ireland and Switzerland. By importing the products for free to the U.S., where the bulk of their revenue comes from, they save extra on taxes.

Quickly moving operations to the U.S. could be challenging for companies due to stringent regulations and site-construction timelines that usually span more than four years, Bernstein analyst Courtney Breen said. Breen estimates tariffs would add about $46 billion in import costs alone for the industry.

Trump has long criticized the lack of pharmaceutical production in the U.S. His administration said it might launch an investigation into the sector under Section 232 of the Trade Expansion Act of 1962, which allows the president to levy tariffs on products deemed essential for national security. That is the provision Trump has used on recent tariffs targeting the automotive and steel sectors.

Drugmakers have said they're still unclear about whether Trump will impose tariffs on finished products or on active pharmaceutical ingredients. There's also still a question of whether the duties will come all at once or in phases.

Write to Helena Smolak at helena.smolak@wsj.com and Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

April 09, 2025 11:03 ET (15:03 GMT)

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