Some of the country's largest drugmakers could be impacted by President Trump's tariffs, announced on Wednesday from the Rose Garden.
That includes a 10% baseline tariff, but not the 20% reciprocal tariff for the European Union, which includes Ireland. The tariffs go into effect Thursday.
In a note to clients earlier Wednesday, TD Cowen analysts said the companies with the most exposure to tariffs on Ireland were Merck and AbbVie (ABBV).
But in the executive order, signed by Trump Wednesday, pharmaceuticals were excluded.
"The following goods as set forth in Annex II to this order, consistent with law, shall not be subject to the ad valorem rates of duty under this order: ... other products enumerated in Annex II to this order, including copper, pharmaceuticals," the order said.
Jefferies analyst Michael Yee said that for now, that gives the pharma and biotech sectors some breathing room.
"The President has mentioned (potential) for tariffs on pharmaceuticals/API which could come 'at some point...'. We will (continue) to watch the situation unfold but for now see minimal impact to biopharma," Yee wrote to clients Wednesday.
Still, TD analysts noted that AbbVie, Bristol Myers Squibb (BMY), and Eli Lilly "appear relatively well-positioned with more major U.S. plants than outside the United States, and most API sites in the U.S.," the analysts said.
API, or active pharmaceutical ingredients, are the base compounds used to develop drugs. They are often created in bulk, and of the Big Pharma companies TD spoke with, many rely on the key sources supplied from outside the US — mostly in Europe.
"After Ireland (22 sites), the countries with the most FDA registered drug manufacturing sites are France (20), Germany (14), Italy (13) and Singapore (12)," according to TD Cowen, adding that 82% of the non-US plants are in the EU.
In anticipation of a tariff impact, some companies have committed to growing their US manufacturing presence, including Eli Lilly (LLY), Johnson & Johnson (JNJ), and Merck (MRK). Others are likely going to begin tech transfers to US sites that will take roughly 12 to 18 months.
Eli Lilly notably announced $27 billion to build out four new sites in the US. Trump said Johnson & Johnson committed to $55 billion to build more US plants, and Merck committed to spending about $8 billion by 2028.
"The pharmaceutical companies are going to come roaring back. If they don't, they're going to have a very big tax to pay," Trump said Wednesday.