Health x Tariffs (Part 2): Biopharma Updates, Fentanyl Truths & Perspectives from Beijing
Amidst the temporary US-China trade "truce", where do things stand now for the global biopharma/med-tech sector?
🔬Welcome back to a second round of health x tariff coverage, here at CHP’s Real Diagnosis series.
When I wrote Part 1 at the start of April, we were still in the fog of threats and lobbying. Trump had just invoked tariffs on China, including threats on pharmaceuticals, and China had retaliated. Biopharma stocks slid dramatically, and no one knew how far things would go.
Today in Part 2, I cover the latest, most important updates since the market panics, walk-backs, and Geneva negotiations.
The dreaded topic of tariffs has already been widely (and wearily) covered by media outlets and market commentators everywhere. These days, it seems to be all that we reluctantly read online and complain about offline.
Indeed, on the ground in China during my travels in Beijing and Shanghai these weeks, nearly every colleague and friend that I have spoken with — from Western embassies to chambers of commerce, policy analysts to journalists — all have told me, with mournful expressions and semi-glazed eyes, that they are “absolutely sick” of analysing it.
And yet, despite the wall-to-wall coverage, there’s a lack of targeted insight into what all of this means for health.
That’s where China Health Pulse comes in. In this timely tariff update, I highlight what has changed, what has stalled and what is still uncertain — all while focusing on the real implications for biopharma, investors, patients and providers.
From Sweeping Threats to a “Sort-of” Truce
Since my last post, US-China tariffs have escalated aggressively through April to now reach an uneasy truce in mid-May. By 11th April, total US tariff burden on Chinese goods had reached 125%, and a day later, a 20% “fentanyl surcharge” was imposed on specific categories, pushing the maximum tariff rate on selected goods to 145%. In full retaliation, Chinese tariffs on US goods reached a peak of 125% by 12th April.
China formally filed for WTO consultations over US healthcare-related tariffs, citing violations of the 1994 WTO Pharma Agreement. I had discussed last time how this longstanding precedent had provided protective scaffolding to morally keep life-saving drugs affordable across borders, eliminating over 7,000 pharmaceutical products and derivatives from tariffs and duties.
The markets reacted quickly. $6 trillion was wiped out on Wall Street within 2 days. US biopharma stocks fell by up to 9%, and pharmaceutical lobbies rushed to seek exemptions. Executives warned of disruptions to API flows, clinical trials, and diagnostic imports: not just the finished drugs, but the containers they come in, the intermediates that go into them and even the diagnostic tests used to prescribe them. Companies began to nervously plan for contingencies, COVID-style: warehousing, dual sourcing, Southeast Asia pivots… US industry groups submitted over 500 healthcare-specific exemption requests, and analysts began tracking supply chain exposure across both countries.
Then came the surprising about-turn (a nice economic analysis of this by Robin J Brooks here, Brookings Institution Senior Fellow). Trump posted on Truth Social on 22nd April: “Tariffs are a tool, not a punishment. We won’t hurt American innovation.” The White House revised tariff lists. While several high-priority health inputs (reagents, diagnostic plastics, imaging components) remained, others including branded drugs and patented biologics, were spared.
US and Chinese trade officials began talks on 10th May in Geneva, overseen by WTO legal counsel. After two days of intense negotiations, a 90-day de-escalation agreement was announced on 12th May, to reduce tariffs and establish a bilateral mechanism for ongoing trade discussions. Trump tweeted ”GREAT PROGRESS MADE!!!”, in response to: US tariffs to drop from 145% to 40–70%, and China tariffs from 125% to 10%. However, most high-priority health products face partial exemptions, not full protection, and over 2,000 exemption requests remain under review, with hundreds from the health sector. The public comment period closes in late June, with policy finalisation expected by mid-July.
An uneasy truce continues for now, but biopharma and medtech companies remain exposed. The most recent Section 301 tariff revision still includes key health-related categories:
Active pharmaceutical ingredients (APIs), including precursors to antibiotics, statins and antivirals
Diagnostic components such as reagents, PCR consumables and sterile lab plastics
Selected medtech inputs, including parts for imaging, robotics and invasive devices
Some critical areas remain exempt: notably, finished branded pharmaceuticals, most consumer-facing digital health tools and patented biologics. However, the concern extends beyond the finished drug, raw materials or even any side-products. Tariffs also affect inputs further up the supply chain, including containers, intermediates and diagnostic materials used in prescribing and administration. These exposures have the potential to impact cost and availability across therapeutic and diagnostic pathways.
There are significant risks for both sides.
Foreign Industry: Strategic Shifts Under Pressure
Foreign biopharma multinationals are choosing to execute a "US for US" strategy: bracing for fragmentation by localising domestic production, and shifting manufacturing out of China in order to sidestep levies and tariff-proof their supply chains. These substantial moves signal that they expect geopolitical volatility to persist long term, even if current tariffs ease:
AbbVie will invest $10 billion in the US over the next decade, adding four new manufacturing sites to its US network to prepare for potential scenarios. CEO Rob Michael said “in terms of potential mitigation in the near term, we could take inventory management actions or secure alternate sources of API.”
Amgen is investing $900 million to expand its central Ohio manufacturing facility, adding 350 new jobs and increasing total US manufacturing investment to over $5 billion.
Eli Lilly has announced $50 billion to build four new US manufacturing sites, three of which will focus on active pharmaceutical ingredients (API), reshoring critical capabilities of small molecule chemical synthesis and further strengthening Lilly's supply chain.
Gilead is investing an additional $32 billion in US manufacturing and R&D through 2030 and create more than 3,000 direct and indirect jobs by 2028.
Merck is shifting manufacturing for its blockbuster drug Keytruda to a new $1 billion biologics factory in Delaware, reaffirming commitment to a strong US footprint. CEO Robert M Davis said “the Wilmington site represents our continued commitment to growing our investments in US manufacturing and has the potential to create thousands of high-paying American jobs while ensuring that we can produce and distribute products close to patients right here in the US”.
Moderna CFO Jamey Mock said “it’s an uncertain environment, but nobody has lost faith”. They are expanding efforts to rein in costs, cutting from $5.9 billion down to $5.4-5.7 billion for 2026, and then further down to $4.7-5 billion in 2027, aiming to break even in 2028.
Novartis has committed $23 billion over five years for seven US facilities and a $1.1 billion R&D hub in San Diego. CEO Vas Narasimhan said “Our goal is to have 100% of our products produced in the US for the US… we believe this is manageable.”
Pfizer has already anticipated a $150 million financial impact in 2025 from the current slate of tariffs. CEO Albert Bourla expressed “cautious optimism” that potential Section 232 findings would focus on imports from countries considered actual national security risks, rather than allies, based on conversations with the White House, and is considering transferring overseas production to domestic sites.
GSK views its 2022 decoupling with its consumer health business Haleon, as “very intentional, deliberate choices to reset”, making it regionally resilient in its supply chains and mitigated for risk through double sourcing, in the face of biopharma tariffs. CEO Emma Walmsley said “we're watching it very carefully … we are well-prepared.”
AstraZeneca is planning to move some production from Europe to US plants.
Alongside their domestic manufacturing expansion efforts, foreign MNCs are actively reassessing their China strategies. For many companies, continued presence in the Chinese market is a critical non-negotiable: typically, it’s the second or third largest globally by revenue.
Several are choosing to split operations geographically, accepting the higher costs and complexity involved. Eli Lilly has announced a $212 million upgrade to its manufacturing site in Suzhou. AstraZeneca is investing $2.5 billion to build its sixth global R&D centre in Beijing.
China’s Industry: Relative Calm, Strategic Positioning
Unlike global firms, Chinese biopharma players remain relatively insulated — at least for now. Approximately 70% of drugs in China are developed and manufactured domestically. This “closed-loop” system helps shield the sector from US tariffs and foreign supply chain disruptions, reinforced by state policies that prioritise local innovation and self-sufficiency.
A small but growing number of Chinese companies are pursuing outbound drug approvals and distribution, which brings greater exposure to tariff risks and regulatory complexity. This includes Beione (formerly BeiGene’s China operations), which has secured US approvals for drugs like Brukinsa and Tevimbra. Still, most Chinese biopharma firms continue to concentrate on the vast domestic market. The majority of their international collaborations are structured around in-licensing foreign products for local manufacture and distribution — arrangements that remain largely unaffected by tariffs for now.
Even so, the balance remains delicate. Chinese biopharma companies with global ambitions are accustomed to separating market volatility from day-to-day operations. The latest tariff tensions are just one more chapter in a long series of disruptions that have not slowed their pursuit of overseas regulatory approvals or clinical partnerships.
In recent Q1 earnings calls, WuXi AppTec, Zai Lab and Hengrui Biopharma, among others, have all projected continued confidence, reporting steady revenue growth to global investors. Their messaging strikes a tone of measured resilience, highlighting strong domestic manufacturing capabilities, diversified global operations and therefore limited direct exposure to US trade measures. For instance, Beone reported a 49% year-on-year revenue increase in Q1 to reach $1.32 billion, and WuXi Apptec reported a 21% increase to $1.32 billion, even as tariffs escalated.
Impact on Patients and Providers
In past trade disputes, healthcare was usually spared. As I had said in Part 1, the 1994 WTO Pharma Agreement had reflected a shared principle: life-saving goods shouldn’t be bargaining chips, and patients shouldn’t bear the cost of geopolitics.
This time, it’s different. Healthcare has been explicitly included in tariff proposals, raising alarm across the industry. But patients and providers don’t need to panic yet, either in the US or China.
Whether implemented fully or only in part, the current tariff schedule would phase in gradually. Supply chains are unlikely to feel direct disruption for at least 12 to 24 months. Major hospitals aren’t importing APIs, reagents or diagnostic plastics themselves. Instead, the impact will be felt first by their upstream suppliers. And when it comes to potential out-of-pocket costs for patients, other policy forces, from reimbursement regimes to price negotiations, are still the dominant forces affecting drug affordability.
In China, the most significant factor remains the National Reimbursement Drug List (NRDL - more to come in a future post). Both foreign and domestic drugs on the NRDL are reimbursed under China’s public health insurance, with prices negotiated between manufacturers and government through volume-based procurement to maintain affordability for China’s insured population, in order to promote China’s advancements towards Universal Health Coverage. If and when tariffs raise the import costs of foreign drugs on the NDRL list, the financial burden will have to be absorbed by pharmaceutical companies, impacting their profit margins rather than patient costs. But for non-NRDL drugs, where patients pay out-of-pocket, it’s true that tariffs could indeed push prices higher, especially in the private market or for imported specialty products.
In the US, the more immediate drug pricing concern isn’t tariffs, either. Biopharma companies have already been busy worrying about the 2022, Biden-initiated Inflation Reduction Act (IRA). Unlike other developed countries like Canada and the UK, where governments negotiate fair prices and restrict annual price hikes, US drugmakers have long enjoyed near-total pricing power, protected by long patent windows (12-14 years) and a fragmented regulatory system. It’s no wonder that the US pays far more per patient than almost anywhere else.
The IRA aims to change this, allowing US Medicare to negotiate prices for a small set of high-cost, top-selling drugs in order to make them more affordable for patients. These drugs have already made big pharma billions of dollars, and they have been fighting back in courts to protect future revenue, and so far, they have been losing. The IRA also aims to limit annual out-of-pocket costs for seniors to $2,000, and to penalise companies for price increases above inflation.
It’s true that tariffs may add a layer of pressure in certain instances. For Medicare-covered seniors, the IRA’s price caps will shield them from most increases. But for younger Americans, or for drugs not yet included in IRA-negotiated lists, tariff-driven price increases may still be passed through to patients.
Interestingly enough, the IRAs have been coming up as a frequent topic during my on-the-ground conversations in China these past weeks. Several Chinese gov officials and academics have gleefully pointed out to me (in off-the-record conversations) that this US mechanism for drug affordability, is in fact a “reverse-NRDL” that directly follows China’s footsteps. They believe that US is now copying China’s approach to drug price control and public purchasing: and see this as one of many signs that China is now switching positions to lead the West, including in technically complex regulatory and reimbursement frameworks where it had traditionally always followed. They see this symbolic shift as evidence that China is now setting global norms and standards, cementing its position as a world leader. I’m fascinated by these perspectives, and keen to review them more closely, in a future post.
And What about Fentanyl?
One of the most politically charged moves in the recent tariff package was the White House’s decision to impose a 20% penalty on “fentanyl-related imports” from China. This thorny issue has once again become a focal point in US–China tensions, with both sides trading accusations that leave little room for nuance.
The US administration is blaming China for the continued flow of precursor chemicals, allegedly used by Latin American cartels to produce illicit fentanyl. Trump recently declared: “We’re doing what Biden never did. China is the root of this poison — and they’re going to pay.”
China has hit back. Its Ministry of Foreign Affairs called the measure “a politicised distraction from America’s internal public health crisis,” warning that “tariffing your way out of addiction will not work.” Their message is clear: the fentanyl crisis was made in America, not China.
This isn’t the first time fentanyl has featured in bilateral relations. In 2019, China banned all fentanyl analogues following negotiations with the U.S. That move was seen as a rare example of effective collaboration. But today, the tone is far more confrontational.
A 2023 Brookings Institution report provides context often missing from the current US narrative. It identified China as a principal (though indirect) source of fentanyl precursors, but emphasised that “while supply-side measures, even with limited effectiveness, can save lives, domestic prevention, treatment, harm reduction, and law enforcement remain fundamental.”
In truth, the crisis is driven less by international supply chains than by US domestic failures. Precursor chemicals are globally traded, and it is demand, not just supply, that fuels the fentanyl market. That demand is deeply rooted in the US health system.
In 2022, the US recorded 22.2 fentanyl deaths per 100,000 people. To compare, England and Wales had just 0.1 per 100,000 — a rate 222 times lower. The UK’s stricter prescribing rules, centralized NHS infrastructure, and robust harm reduction policies have contained the spread. Canada, despite facing its own opioid challenges, also maintains a significantly lower per capita mortality rate, attributed to broader access to addiction treatment and public health support.
In contrast, the US has failed to control the upstream forces driving demand. Its fragmented, underfunded healthcare system, legacy of unchecked opioid overprescription, and minimal investment in harm reduction have created the perfect storm. For decades, the US pharmaceutical industry, enabled by aggressive marketing and inadequate regulations, have flooded American communities with over-prescriptions of high-dose opioids at a scale that no other countries have seen. Treatment remains inaccessible to many, and efforts to build coordinated, evidence-based drug policy have lagged far behind.
Addressing this crisis requires deep structural reform: expanding access to care, regulating pharmaceutical marketing with foresight, and treating addiction not as crime, but as chronic illness. Without that, tariffs on fentanyl precursors will do little, and risk becoming just another political barb in trade dramas that have little to do with patient lives.
Beyond Drug Tariffs: Health Data and R&D Delays
The potential decoupling impacts between US and China go far beyond tariffs on physical goods – whether biopharma and medtech, fentanyl or otherwise. The wider context and even higher stakes are the free flow of health and genomic data. Restrictions from both governments are beginning to reshape how, where, and with whom global R&D happens. This has severe implications on cross-border collaboration in biotech and drug development.
US side:
Recently, the US Department of Justice’s Executive Order in April, restricted transfers of "bulk sensitive personal data," including large-scale datasets on health, genomics and biometrics. It was designed to prevent adversarial access to data categories now seen as national security assets, especially in the context of AI training and surveillance. The policy targets countries of concern, including China. While framed as a general data protection measure, it has specific implications for CROs, diagnostics firms, and life sciences companies working across borders. Many are now reassessing where they store, process, and transfer research data.
In parallel, the brewing BIOSECURE Act (still under congressional review) proposes banning US federal agencies from contracting with named firms like WuXi AppTec and BGI, which are viewed as national security risks. If passed, it would effectively firewall US biomedical procurement from any Chinese-linked entity, with ripple effects likely across the entire biopharma ecosystem.
China side:
Meanwhile, China has been expanding its own comprehensive data control regime, increasingly tightening cross-border research involving health and life sciences. This began with the 2017 Cybersecurity Law, but has since been layered with the 2021 Data Security Law and Personal Information Protection Law, which is China’s own GDPR-style framework. These require government approvals and security assessments for any transfer of personal or health data abroad, including for multinational clinical trials.
From 2023 onward, new sector-specific rules have further raised the bar. The Cross-Border Genetic Data Transfer Guidelines require formal approvals for any export of genomic data (even those anonymised). The Health and Medical Data Security Guidelines now classify patient records, bio-specimens and clinical trial data as strategic resources. Hospitals, trial sponsors and data processors must comply with national oversight protocols, including periodic reviews and disclosures.
Data once seen as a shared scientific asset is now increasingly viewed as a strategic commodity, with profound implications for multinational R&D, trial coordination and AI-driven drug discovery. The uncertainties are already impacting companies, particularly those traversing both US and China markets.
What Next?
For industry: decision-making should not be accelerated simply by panic, but now is definitely the time to start cooly thinking about the long term. Decoupling is becoming operational reality, and while the 90-day pause may buy time, strategic groundwork for reconfiguring manufacturing, data infrastructure and clinical trial geographies needs to begin now (if it hasn’t already). It will be important to build optionality across regulatory zones without assuming continued interoperability between them.
For investors: Sentiment and signal are diverging, so aim to look beneath the volatilities to prevent from being pulled by hype. Indiscriminate pricing may obscure real pockets of value. Chinese biopharma stocks have already been battered by delisting fears, tightening capital and persistent geopolitical risk, but those serving “closed loop” China’s markets may be better insulated from the cross-border pricing impacts of tariffs — unlike US and EU-facing peers.
For patients: while little may change tomorrow, tariffs on APIs, reagents and device components could slowly erode the long-term affordability of generics, diagnostics and tech-enabled care. Most health systems around the world are already under strain, and patients living in middle-income settings or outside of public insurance coverage (in both US and China) would be the ones to be impacted first.
As “health x tariffs” continues as an evolving conversation, I will keep tracking how the landscape shifts over the next 90 days, updating this post as needed with new developments in order to provide you with sector-specific focus.
Last week in Beijing, I attended an EU–China conference marking 50 years of bilateral relations, as well as a closed-door briefing with my former team at the British Embassy on the recent, 7th UK–China Ministerial Health Dialogue (the 6th was held in 2021). In both settings, tariffs were notably absent from public discussion. In side conversations, however, several EU and UK colleagues voiced quiet relief that their governments had remained outside the crosshairs of Washington’s latest trade measures. It reflects a growing undercurrent: non-US Western actors are increasingly seeking to define and separate their own commercial and diplomatic lanes with China.
I’m now in Shanghai, catching up with investors and industry leaders to get a closer read on how they’re responding to everything on the ground here in China. Later this week, I’ll be at the JP Morgan China Summit, where I’ll be watching closely for the gap between what’s broadcasted onstage, versus what’s shared in confidence in the coffee breaks in between.
I’ll be back in London on 25th May, where I look forward to speaking at the London Business School’s 2025 China Business Forum, on the “Global Healthcare: Innovation & Access” Panel. Hope to see some of you there.
As always, thanks for reading, and if you’re seeing relevant shifts from your vantage point, I’d love to hear from you.
🔬This was Part 2 of health x tariff coverage in CHP’s Real Diagnosis series. Read Part 1 here:
Comprehensive analysis Ruby. Of course, it’s hard to estimate exactly the proportion of headline numbers announced by various Big Pharma companies will come to fruition but the need to manufacture in the market served feels like a genuine trend.