CDMOs Risk Being Last in Onshoring Queue as Pharma Tariffs Bite

Section 232 of the Trade Expansion Act of 1962 lets a president restrict imports that threaten national security. After a U.S. Department of Commerce (DOC) investigation into pharma supply chains, an April 2 proclamation set a default 100% duty on patented drugs and their ingredients, including active pharmaceutical ingredients (APIs) and key starting materials. It took effect on July 31 for 17 large companies named in the proclamation and applies to the rest of the industry from today. It replaces the “Liberation Day” tariffs the Supreme Court struck down in February.

The 100% tariff does fluctuate wildly depending on trade deals (products from the EU, Japan, South Korea, and Switzerland pay 15%, while UK imports pay nothing), and having a DOC-approved onshoring plan cuts the rate to 20% and pairing it with a most-favored-nation (MFN) pricing agreement cuts it to zero.

Generics and biosimilars are excluded, and on September 23, the DOC described specialty products including orphan drugs, nuclear medicines, cell and gene therapies, and antibody-drug conjugates (ADCs) as qualifying for a zero rate.

The introduction of these protectionist measures should be a boon for U.S.-based CDMOs, after the Pharma & Biopharma Outsourcing Association (PBOA) successfully lobbied the DOC to confirm tech transfer to such a facility counts toward a company’s onshoring plan.

The president of the industry group, Gil Roth, however, told BPI East in Boston last week that ensuring that CDMO capacity is available is another matter, as data centers and big pharma have the upper hand on the contract sector when securing equipment, construction crews, and skilled labor.

Now that tariffs apply, it is the smaller drugmakers that need that capacity. The 17 companies that struck onshoring and pricing deals with the White House can build their own, Roth said, but “the next 1,700 companies after them cannot afford to build their own operations and own facilities.”

Since the start of Trump’s second administration, big pharma has pledged more than $370 billion in U.S. investment. According to PharmaSource, CDMOs disclosed nearly $18.5 billion of U.S. capex in 2025, but that fell to $3.9 billion worldwide in the first half of 2026, with U.S. spend a fraction of that.

Tariffs also inflate the bill for CDMOs expanding in the U.S., because much of the equipment for new plants is imported. Before trade agreements capped rates, a planned $100 million U.S. capex could become $150 million depending on the day the equipment arrived on site, Roth said. German bioprocess equipment and consumables supplier Sartorius has since set aside €26 million ($29.5 million) to compensate customers for tariff surcharges they paid on products after receiving refunds on the duties the Supreme Court struck down.

But Roth’s bigger fear is big pharma poaching trained operators from CDMOs, telling delegates: “If [Eli] Lilly or one of these other companies really, really needs people, they can pay a lot more than CDMOs can.”

Foreign-owned CDMOs building a U.S. presence to avoid tariffs – Samsung Biologics acquired its first U.S. production site in December 2025, for example – face a further hurdle in moving staff. The White House extended its $100,000 H-1B fee on September 18, though a court order blocks collection. Furthermore, Roth said the September 2025 ICE raid on Hyundai’s Georgia battery plant has made some overseas employers wary.

Roth expects some of pharma’s announced plants to end up as CDMO sites, since drugmakers have a history of cancelling facilities after trial failures or market shifts. ROIS, the CDMO arm of Spain’s Rovi, has already acquired Bristol Myers Squibb’s injectables site in Phoenix, Arizona, and Samsung’s Rockville plant came from GSK.

“We’ve seen it happen before, and I would not be surprised to see that happen again.”

Dan Stanton is a journalist with 15 years’ experience covering bioprocessing and biomanufacturing. He currently works as an editorial specialist at Sartorius.