Donald Trump’s shock tariff hike could dampen investment in Australia’s $2.6 billion pharma industry

US President Donald Trump’s fresh tariff hike on branded pharmaceuticals could dampen investment and research in Australia’s $2.6 billion export industry.

On Friday, Mr Trump said the US would place a 100 per cent tariff on branded or patented pharmaceutical product imports from October 1 unless a pharmaceutical company was building a manufacturing plant in the US.

There are fears Australian biotech CSL - one of the country’s largest companies - and several other local industry players could be hurt by the move, which comes after Mr Trump slapped a 50 per cent tariff on Australian steel and aluminium imports to the US in June.

Lowy Institute fellow Jenny Gordon said “a bigger risk is more long-term in that it’s the decline in investment in biotech and the mRNA vaccines, the downplaying of vaccines, which will reduce demand”.

“Those are some of the things that will have a longer-term impact on some of the products that Australian firms sell,” Dr Gordon said.

“It reduces supply of the latest technology and to the extent to which our researchers are working with (US) researchers, they won’t be developing the same kinds of things coming down the pipeline.”

Pharmaceuticals were “one of the areas where we’ve found a niche where we’re excellent and we’ve built an export market”, she said.

Stephen Duckett, a professor in the School of Population and Global Health at the University of Melbourne, said the US move represented “President Trump ripping up the Australia-US free trade agreement”.

“The tariffs will affect companies like CSL where they buy plasma in the US and process it in Australia and sell it back into the United States,” Professor Duckett said.

CSL said in a statement on Friday it was confident of a tariff exemption given Mr Trump’s comments about companies building manufacturing facilities in the US.

CSL shares rallied in Friday trade to finish down $3.76, or 1.90 per cent lower, at $194.23 after the Melbourne-based company initially shed billions in market value on news of the tariff hike.

It could have been worse.

Back in July, Mr Trump flagged a possible 200 per cent tariff on pharmaceuticals - one of Australia’s largest exports to the US.

Health Minister Mark Butler on Friday said the government was still working to understand the implications for local exporters.

“We’ve been making the case, since it first became clear that the US was going to take some action in this area, about the benefits of continued free trade in pharmaceuticals between our countries,” he told reporters in Adelaide.

Australia’s health and life sciences industry, including pharmaceuticals, is worth about $5.6 billion annually and is one of the nation’s largest export sectors, employing about 260,000 people.

Some $2.6 billion worth of pharmaceuticals are exported from Australia annually, according to the Federal Government.