Shares of Eli Lilly (LLY) are down in early trading on Aug. 5 after U.S. President Donald Trump doubled down on his threat to impose tariffs on the pharmaceutical industry.
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Speaking to CNBC, Trump said that tariffs on pharmaceuticals imported into America could eventually reach up to 250%, the highest duty he has threatened to impose on an industry. The president said he will initially impose a “small tariff” on imported medications, but within a year and a half that rate could jump as high as 250%.
Trump has repeatedly threatened to impose tariffs on pharmaceutical imports but has stopped short of doing so yet. Analysts say that the president’s tariff strategy is erratic and there’s no guarantee he will eventually set pharmaceutical tariffs as high as 250%. Still, the threat of such steep import duties has pharma stocks, including LLY, sliding lower.
Shifting Manufacturing
The tariffs are Trump’s way of getting drug companies to move more of their operations to the U.S. at a time when domestic drug manufacturing has declined. Eli Lilly has been quick to comply, announcing plans to invest at least $27 billion to build four new manufacturing sites across America.
So far, the investments announced by Eli Lilly and other pharma companies haven’t been enough to appease President Trump. “We want pharmaceuticals made in our country,” said Trump when speaking to CNBC by telephone. Last week, Trump sent letters to 17 drug makers calling on them to commit to lowering U.S. drug prices by Sept. 29 of this year.
Any new import duties would deal a blow to the pharmaceutical industry, which has warned that the tariffs could drive up costs further for American patients.
Is LLY Stock a Buy?
The stock of Eli Lilly has a consensus Strong Buy rating among 19 Wall Street analysts. That rating is based on 17 Buy and two Hold recommendations issued in the last 12 months. The average LLY price target of $1,028.80 implies 34.89% upside from current levels.
