Manufacturing Gaps in the U.S. Pharmaceutical Industry Exposed by Tariff Wars

The pharmaceutical supply chain is a globally interdependent network—one that has long relied on international trade to maintain affordability, innovation, and access. However, the intensification of tariff wars—particularly between the United States and countries like China, India, and Canada—is exposing critical vulnerabilities in this system. Nowhere is this more evident than in the United States, where an overreliance on offshore manufacturing has revealed deep-rooted gaps in domestic pharmaceutical production capabilities. This white paper explores the origins of these vulnerabilities, the impacts of recent trade conflicts on the pharmaceutical industry, and the urgent need for strategic investment in domestic manufacturing infrastructure. It argues that the current tariff-driven shocks should serve not as a passing political issue, but as a national wake-up call to redesign a more resilient and secure pharmaceutical supply chain within the U.S.

Offshoring for Efficiency

For decades, the pharmaceutical industry has pursued cost efficiency by offshoring various stages of drug manufacturing. From sourcing active pharmaceutical ingredients (APIs) to producing final dose formulations and packaging, countries like China, India, and Canada have become indispensable nodes in the supply network. Several drivers contributed to this trend:

• Cost reduction: Labor and regulatory compliance are significantly cheaper in many offshore regions.
• Laxer environmental constraints: Developing countries often allow manufacturing practices that would face higher scrutiny under U.S. regulations.
• Government incentives: Some foreign governments subsidize pharmaceutical production to attract multinational manufacturers.

By the early 2020s, nearly 80% of APIs used in U.S.-marketed drugs were manufactured abroad, with China and India being dominant players. This heavy reliance on external partners left the U.S. vulnerable to any geopolitical, logistical, or regulatory disturbances beyond its borders.

The Emergence of Tariff Wars 

Tariff wars—particularly those initiated during the U.S.-China trade conflict and escalated under the guise of economic nationalism—have altered the dynamics of global supply chains. Pharmaceuticals and medical devices have increasingly become entangled in this tit-for-tat tariff escalation. Key moments:

• 2018–2019 U.S.-China Trade War: The U.S. imposed tariffs on hundreds of Chinese imports, including certain APIs, excipients, and medical devices. In response, China threatened supply restrictions on strategic goods, including pharmaceuticals.
• 2020–2022 COVID-19 Supply Shock: Export restrictions, nationalism, and logistical bottlenecks intensified the pressure on offshore supply, especially from India and China.
• 2024–2025 Canada-U.S. Trade Disputes: Proposed 25% Canadian tariffs on pharmaceutical goods have added a new layer of uncertainty to North American supply relationships.

These tariff conflicts have not only raised costs but also delayed shipments, reduced sourcing options, and—most crucially—exposed how little domestic fallback capacity the U.S. has for essential medicines.

Core Manufacturing Gaps Exposed:

1. Lack of Domestic API Production: Perhaps the most alarming gap is in API production. The U.S. produces a small fraction of the APIs needed for its pharmaceutical products, with critical shortfalls in antibiotics, oncology drugs, and sterile injectables. Antibiotics like penicillin and cephalosporins are almost exclusively produced abroad, largely due to high costs and outdated infrastructure domestically. Sterile manufacturing capacity, particularly for injectable drugs, is severely limited in the U.S. and concentrated in a handful of facilities vulnerable to quality disruptions. Tariffs on Chinese chemical precursors or Canadian finished goods risk strangling supply of even the most essential drugs like insulin, morphine, or epinephrine.
2. Overreliance on Foreign Contract Manufacturers: Many U.S. drug sponsors rely on contract manufacturing organizations (CMOs) based abroad for formulation, packaging, and serialization services. Tariff-related delays or cost increases in these services can upend launch timelines or compliance with FDA serialization mandates. Small- and mid-sized biotechs are especially exposed, lacking the capital to shift quickly to domestic providers (if they exist at all).
3. Limited Biologic and Vaccine Infrastructure: While mRNA vaccine development demonstrated the U.S.’s research prowess, the manufacturing infrastructure for biologics and vaccines remains globally distributed and fragile. Key components—such as lipids, enzymes, and cell culture reagents—are manufactured offshore and subject to both tariff and export control risks. Furthermore, the scale-up of biologics requires specialized bioreactors, which are in short supply domestically. In a tariff-inflated scenario, delays in accessing these components could paralyze high-priority therapeutic development.
4. Gaps in Generic Drug Manufacturing: Generic drugs account for 90% of prescriptions filled in the U.S. but are disproportionately dependent on imports. India alone supplies over 40% of U.S. generics, often using Chinese APIs. Tariff shocks to India or Canada (where many U.S. generic brands are manufactured or packaged) may not only increase costs, but also prompt drug shortages in essential areas like cardiovascular health, mental health, and antibiotics.
5. Inadequate Cold Chain and Logistics Redundancy: Specialty drugs and investigational therapies increasingly depend on robust cold-chain systems. Tariffs on temperature-controlled packaging, tracking systems, or transport services from cross-border vendors can compromise cold-chain integrity. Without domestic redundancy in specialized packaging or monitoring technology, even a minor trade disruption can lead to product spoilage or regulatory noncompliance.

Ripple Effects of Tariffs on Healthcare and Innovation 

Tariff-induced supply instability impacts not just manufacturers but also health systems, research institutions, and patients:

• Hospitals and Pharmacies: Greater reliance on just-in-time inventory makes these providers especially vulnerable to supply chain shocks. Tariffs that raise prices on essential medicines create budget pressure and increase the likelihood of therapeutic substitutions or stockouts.
• Clinical Trials: Many investigational therapies or companion diagnostics are manufactured or packaged in tariff-affected regions. Small-scale biotech sponsors may not be able to absorb increased costs or revalidate new suppliers quickly, delaying or halting studies.
• Patients: Access to life-saving medications may be disrupted, especially for chronic or rare conditions where alternatives are limited. Vulnerable populations—such as seniors or those with complex medication regimens—bear the brunt of shortages and price hikes.

Systemic Barriers to Domestic Reinvestments

Despite growing recognition of these gaps, several challenges continue to hinder domestic reinvestment:

• High upfront capital costs for building GMP-compliant manufacturing facilities.
• Slow regulatory pathways for facility approvals and product transfers within the U.S.
• Workforce shortages, particularly in chemical engineering, sterile processing, and advanced biologics.
• Price competition from international producers who are not subject to the same regulatory rigor or environmental constraints.

Moreover, the unpredictability of tariff policy makes long-term planning and ROI forecasting difficult for investors.

Policy Solutions and Strategic Opportunities  

The U.S. government and private sector must align to rebuild manufacturing capacity as a matter of national security. Several strategies can help:

• • Tax Incentives and Grants: Expand programs like BARDA and the CHIPS Act-style industrial policies to pharmaceutical manufacturing. Also, provide tax credits for domestic API production and sterile manufacturing facility expansion.

• Public-Private Partnerships

• • Enable NIH, DoD, and VA to collaborate with industry on long-term purchasing guarantees to de-risk new domestic facilities.
  • Support nonprofit or mission-aligned manufacturing hubs like Civica Rx.
• Regulatory Streamlining: Create fast-track approval pathways for manufacturers relocating production to the U.S and completely harmonize FDA and international quality standards to allow smoother transfer of operations.
• Supply Chain Mapping and Transparency: Mandate disclosure of source-country data for critical medicines and APIs to improve national visibility. Additionally, use AI and predictive analytics to anticipate vulnerabilities before they result in shortages.
• Workforce Development: Invest in STEM and biomanufacturing programs at community colleges and universities to create a pipeline of talent. Upskill existing workers for roles in sterile processing, quality assurance, and regulatory compliance.

A Strategic Inflection Point

Tariff wars have revealed what many insiders already knew: the U.S. pharmaceutical supply chain is brittle, underinvested, and deeply dependent on geopolitical rivals for essential ingredients and products. Rather than reacting with piecemeal exemptions or temporary workarounds, this is a rare opportunity for the U.S. to reimagine its pharmaceutical manufacturing base as a critical national asset. Building a resilient, domestic pharmaceutical infrastructure will require coordination across government, industry, and academia—but the payoff is clear: greater security, lower vulnerability to global shocks, and a healthcare system better equipped to serve its people.

If the U.S. chooses not to act now, it risks continued exposure to the whims of foreign policy and a loss of control over its most fundamental health needs. In contrast, embracing this moment for reinvestment and reform could define the next generation of American pharmaceutical leadership.

At Syner-G Biopharma Group, we recognize these systemic gaps as both critical risks and transformative opportunities. Through our comprehensive CMC consulting services, expertise in domestic CDMO vendor selection and qualification, and solutions spanning biomanufacturing strategy and delivery infrastructure, we help pharmaceutical innovators build resilient, U.S.-centered supply chains. Whether supporting early-stage development or commercial scale-up, Syner-G serves as a trusted strategic partner, empowering organizations to mitigate geopolitical vulnerabilities and fortify domestic pharmaceutical manufacturing as a national priority. Schedule a complimentary consultation with one of our experts today.