How Trump’s tariffs could upend pharma’s overseas tax strategy

Subscribe to enjoy similar stories. Pfizer in 2019 sold $20 billion of drugs in the U.S. Its federal tax bill? Zero.

That revelation was part of a Senate Finance Committee investigation done by Democratic staff, released in March, that examined how U.S. pharmaceutical giants exploit a loophole created by the 2017 Trump tax overhaul to shift profits offshore. The strategy has been great for Big Pharma’s bottom line—and for countries such as Ireland, too.

But as President Trump’s trade war picks up steam, that model could start to unravel. Trump has already singled out pharma companies and countries like Ireland that reap the benefits of tax-avoidance moves. Despite its small size, Ireland ran an $87 billion trade surplus with the U.S.

last year—larger than any country except China, Mexico and Vietnam. “Ireland was very smart," Trump said last month. “They took our pharmaceutical companies away." Trump is due to unveil sweeping tariffs Wednesday, though details remain unclear.

Big pharmaceutical companies are lobbying for exemptions, arguing that tariffs would hurt patients and undermine investment in research and development. A PwC analysis estimates annual tariffs on pharmaceuticals and medical devices could soar from $500 million to $63 billion. If country tariffs are followed by sector-based ones that include pharmaceuticals, they could work as a double tariff of sorts.

Unlike countries such as China, Ireland didn’t rack up its trade imbalance by becoming a low-cost manufacturing hub. Instead, it did so by offering an advantageous tax regime that has attracted U.S. companies—particularly in tech and pharma—seeking to reduce their tax bills by shifting intellectual property, or IP, overseas.