Impact of proposed tariffs on the life sciences industry
US tariff threats are disrupting life sciences operations. Explore how companies are adapting
Life sciences companies are deeply dependent on global supply chains for critical inputs—from medical equipment and clinical trial materials to active pharmaceutical ingredients (APIs). But that global model faces growing pressure. New tariffs—originally announced by the Trump administration in April 2025 and now going into effect following rounds of negotiations—threaten to disrupt supply continuity, raise manufacturing costs, and reshape industry dynamics.1
The pressure has only intensified in recent months. A 15 percent tariff on EU imports2 and a 25 percent tariff on goods from India, announced in late July,3 could have a disproportionate impact on life sciences—particularly if pharmaceutical products, including generics, are not excluded in ongoing trade negotiations.
With these baseline tariffs now moving from proposal to implementation, companies must urgently prepare. KPMG LLP surveyed C-suite executives in May 2025 across sectors—including life sciences—to assess the impact of tariff volatility and the strategies companies are adopting in response.4
Financial impacts and operational adjustments
The survey revealed that tariffs have had minimal financial impact thus far on life sciences companies. Thirty-seven percent of life sciences executives surveyed reported no relative change in their gross margins, and only 5 percent reported experiencing a decrease in gross margins of between 6 percent to 10 percent. This latter result is notably lower than the 22 percent across all industries reporting a gross-margin decline.
37 percent of life sciences executives surveyed reported no relative change in their gross margins, and only 5 percent reported experiencing a decrease in gross margins of between 6 percent to 10 percent.
Rajesh Misra
Principal, Advisory C&O Commercial, KPMG US
Contract manufacturing emerged as the most affected foreign operation, with 20 percent of life sciences respondents reporting impacts due to current or potential tariffs. At the same time, customer demand within the sector remained relatively constant, with 55 percent of sector respondents reporting no change—far exceeding the reported stability in other sectors such as consumer goods (17 percent) and energy, natural resources, and chemicals (8 percent).
Foreign sales have taken a minor hit, with 55 percent of life sciences respondents reporting a 0 percent to 5 percent decrease due to tariffs, and 19 percent noting no decrease at all. Compared to survey respondents overall, a smaller portion in life sciences execs (16 percent) said their companies have increased investments to capitalize on growth opportunities amid tariff uncertainties.
Investment and strategic responses
As for other investment strategies, 34 percent of life sciences executives surveyed reported that their companies have postponed investments by 7 to 12 months, aligning closely with the overall average of 41 percent. Key areas most affected by tariffs include supply chain infrastructure improvements (cited by 56 percent of respondents) and the expansion or upgrade of manufacturing facilities (54 percent). Investments in new technology, R&D, or product development were seen as being affected by tariffs by 41 percent of life sciences companies. These results suggest that tariffs would be a critical impediment to wider innovation and growth.
Mitigation strategies
For life sciences companies, mitigating the effects of tariffs entails strategic repositioning and manufacturing shifts. Respondents reported they are exploring supply chain relocation to foreign sources with lower tariffs (22 percent) and strategically shifting manufacturing back to the United States (14 percent). These strategies align with those reported by respondents from other industries.
In another mitigation tactic, 65 percent of life sciences respondents said they have transferred 1 percent to 50 percent of tariff costs to their customers, mirroring the overall trend (73 percent of companies surveyed have done so).
To fortify agility and planning in tariff responses, 60 percent of life sciences respondents said their companies are enhancing data analytics to improve tariff forecasting and planning, and 53 percent said they were conducting scenario analysis.
In a noteworthy divergence from other sectors, 15 percent of life sciences respondents estimated that it would take over three years to relocate manufacturing to the United States—three times the share of companies overall that projecting such an extended timeline.
Finally, to navigate tariff-related risks, life sciences respondents said their companies have integrated tariff exposure analysis into third-party processes (56 percent) and assessed high-risk third-party relationships (48 percent)—the two most commonly cited strategies overall.
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In the face of evolving tariff pressures, the life sciences industry is responding with measured resilience and strategic flexibility. By rethinking supply chains, sourcing models, and operational priorities, the sector is positioning itself not only to weather disruption, but also to emerge stronger.
Footnotes
2 US and EU avert trade war with 15% tariff deal | Reuters
3 Trump’s 25% Tariff Move Raises Uncertainty for Indian Pharma, Threatens Higher U.S. Healthcare Costs
4 The survey of 300 C-suite executives (including 52 from life sciences) was conducted online from May 22, 2025, to June 11, 2025.
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