US tariffs on drugs and the end of WTO

Trump's plan to levy duties on pharma violates WTO rules, but there is no recourse as the trade regulator is dysfunctional

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US PRESIDENT Donald Trump's shock decision to impose tariffs on pharmaceuticals from April has put the spotlight on one of the most worrisome problems in international commerce—the absence of a global trade regulator. The World Trade Organization (WTO) has been dying a slow death over the past decade, and even its most trenchant critics have been troubled by the deliberate attempt of the US, which, ironically, championed its formation, to shackle the apex trade regulatory body. With Trump in his second term resorting to more impulsive, aggressive tariffs and violating one of the basic tenets of WTO, there is no recourse for trading partners except retaliation, as the 166-member organisation has no means to challenge the arbitrary US measures. For the Indian industry, one of the leading suppliers of generics to the US market, there are tough challenges ahead.

The confusion and alarm in Big Pharma are palpable. Some firms are forming tariff taskforces while others are engaged in complex analyses on the likely impact of the 25 per cent tariffs Trump has said he will impose in early April. There is no clarity yet, because the US president has at one time spoken of a 10-25 per cent tariff hike while at others of the higher figure. For the Europeans, the major worry is about the consequences of tariffs on medical equipment, while for many others it is on the active pharmaceutical ingredient (API), which is the active component of a drug product. This will affect the entire supply chain in the production of medicines.