In a dramatic escalation of the U.S. trade agenda, President Trump announced on September 25, 2025, that the U.S. will impose steep new import tariffs, effective October 1, 2025. The measures include:
- A 100% tariff on branded (patented) pharmaceutical products, unless the company is actively building a U.S. manufacturing facility.
- A 25% tariff on heavy-duty trucks built abroad.
- A 50% tariff on kitchen cabinets and bathroom vanities, and a 30% tariff on upholstered furniture.
The administration frames these actions as critical to protecting American manufacturers and safeguarding national security.
But in practice, these tariffs raise urgent legal, commercial, and risk-management questions for companies across multiple sectors.
Strategic Implications & Key Risks
Legal Authority & Trade Law Exposure
- The Trump administration appears to rely on Section 232 of the Trade Expansion Act of 1962 (national security) to justify these tariffs, particularly on trucks and pharmaceuticals.
- Some of Trump’s prior tariffs — imposed under alternative authority (e.g., under the International Emergency Economic Powers Act or on steel/aluminum) — are now under judicial review and heading to the Supreme Court.
- The White House has not yet clarified whether these new levies will stack with existing tariffs or replace them.
- Trade deals with the EU, Japan, and the U.K. contain clauses limiting tariffs on pharmaceuticals to 15%. The EU has pointed to this ceiling as a protection against higher rates for European exporters.
Companies should closely monitor Commerce Department notices, the Federal Register, and potential rulemaking. Litigation planning should begin now, particularly for sectors exposed to Section 232 authority.
Commercial and Supply Chain Disruption
- The tariff on pharmaceuticals may dramatically raise input and finished drug costs, especially for those reliant on branded APIs or finished doses from abroad.
- Because the announced 100% rate is conditioned on whether a foreign company has “broken ground” or is “under construction” on a U.S. plant, timing and definitions of “building” will be fiercely contested.
- For heavy trucks, a 25% tariff could meaningfully reshape cost structures and reduce competition from foreign OEMs in the U.S. market.
- The furniture/cabinet tariffs hit core construction, remodeling, and home-goods sectors — where imports are substantial and cost pass-through is likely.
- Indirect impacts: higher freight costs, bottlenecks in cross-border parts flows or subassemblies, and higher inflation pressure on B2B and consumer goods overall.
Inflation & Monetary Policy Risk
- These tariffs arrive at a delicate moment: inflation is already elevated, and the Federal Reserve has warned that goods-price inflation is feeding broader price pressures.
- Any further cost push could constrain consumer demand and force the Fed to delay easing — or even tighten further.
Political & International Fallout
- Key U.S. trading partners, including the EU, Japan, and Canada, are likely to object and may retaliate or challenge the tariffs through WTO or other trade mechanisms.
- Some subsidies or exemptions may be extended to companies that invest in U.S. facilities, raising the specter of “tariff forbearance” and regulatory arbitrage.
What Companies Should Do Right Now
- Identify exposure
Map which supply chains, product lines, or service offerings rely on imported branded drugs, heavy trucks, furniture or cabinetry.
- Track compliance and definitions
Closely monitor forthcoming rulemakings and guidance on how “branded” pharmaceutical products will be defined, and what qualifies as “breaking ground” or “under construction.”
Confirm whether existing U.S. plant operations will be exempt or grandfathered.
- Scenario analysis
Run cost modeling with and without the tariffs. Estimate potential pass-through to customers, margin compression, or supply chain redesign costs.
- Strategic hedging and procurement shifts
Explore alternative sources, advance orders, forward contracts, or local sourcing. Consider accelerating U.S. investment projects to secure exemption eligibility.
- Legal defense preparation
Engage trade counsel to prepare for challenges under U.S. administrative law or international dispute mechanisms. Companies with significant exposure should consider participating in public comment processes.
- Engage with government and trade bodies
Industry associations, trade groups, and bilateral lobbying may influence final tariff structure, phase-ins, or carveouts. Coalitions often matter.
These tariffs represent one of the boldest expansions in U.S. trade leverage to date. Their market, legal, and operational consequences will be far-reaching.
Please reach out to AGG Global Trade & Sanctions chair Allison Raley for tailored exposure analyses or for guidance preparing stakeholder communications around this development.
Author:
Allison Raley
Email: allison.raley@agg.com