European pharma secured a U.S. tariff win. Investors remain wary

European pharmaceutical firms gained some much-desired clarity on Thursday, with news that U.S. tariffs will be capped at up to 15% — but a muted market reaction appeared to reflect skepticism among investors on whether the rate is set in stone. Fresh details on the European Union’s trade agreement with the White House revealed that the 15% duties will not stack on top of other EU-wide tariffs, a key concern for the industry. They also showed that the U.S.’s “Most Favored Nation” drug pricing policy — which seeks to reduce American drug prices by linking them to the lower rates paid by other countries — will only apply to generic pharmaceuticals. After the EU’s framework U.S. trade deal was announced at the end of July, setting a 15% tariff on most of the bloc’s imports stateside, President Donald Trump threatened tariffs on pharmaceuticals imported into the U.S. of up to 250% . A lack of specifics on what this could mean for Europe had left the sector mired in uncertainty . European Commissioner Maroš Šefčovič reiterated in a Thursday statement that the 15% all-inclusive tariff cap would benefit a “wide range of sectors,” including pharmaceuticals, cars, semiconductors and lumber. But following the EU’s update, released at midday in London, the Europe Stoxx 600 healthcare index continued to trade around 0.35% lower. Among the companies most-impacted, shares of Ozempic-maker Novo Nordisk ticked just 1.4% higher, Switzerland’s Roche dipped 0.65%, while Danish vaccine-maker Bavarian Nordic nudged up 0.4%. Traders meanwhile remained focused on Thursday’s earnings report from Novonesis, which drove shares down by around 7%. The EU is the biggest external source of pharmaceutical and medical products for the United States, with exports totaling around 120 billion euros ($139.7 billion) in 2024. Seeking a favorable deal, a string of European firms — including Anglo-Swedish AstraZeneca — have already been pledging to move production and up their investments in the country. ‘People still aren’t sure’ Emily Field, head of European pharmaceuticals equity research at Barclays, said the lack of an initial relief rally could be because investors “still don’t know what to believe.” “When the European trade deal was struck and pharmaceuticals were included, our initial interpretation was that there was a 15% cap, but it wasn’t completely clear,” she told CNBC. “Then on earnings calls, many companies said they needed to wait for the outcome of Section 232.” The Section 232 investigation by the White House is an ongoing probe into the impact of various imports on U.S. national security, including pharmaceuticals, with an unclear end date. Trump also sent an ultimatum to companies demanding that they lower U.S. drugs prices. “My read of today’s update confirms what we originally thought, that 232 is irrelevant as it relates to Europe and the outcome for its pharmaceuticals doesn’t matter,” Field continued. “But we’ve been there before, and then Trump’s 250% tariff threat on “Squawk Box” worried people again. So I’m wondering if stocks aren’t moving because people still aren’t sure, there could be another clarification, and they are just still not ready to call anything final until we see this 232 outcome.” “In theory it looks like a win [for pharma] given there was this bigger tariff worry out there, but we also still don’t have full details on the Most-Favored Nation element either. Markets might start to move depending on how the details are reported and if interpretations start to change.” ‘Big win’ Michael Field, chief equity strategist at Morningstar, said that the trade deal details were overall positive news for Europe, even if wider markets also remained downbeat. The Stoxx 600 index was 0.25% lower at 2:40 p.m. in London. “This agreement is a big win for Europe and pharma firms producing in the region. Additionally, Trump is exempting generic pharma products and precursors, which could also be a boost for the ailing European chemicals industry,” he said in emailed comments. It is also positive for autos, he said. The sector is set to get a 15% tariff rate, though with the newly-announced condition that the EU must remove its own duties on seafood and agricultural products first. “Stocks haven’t responded as expected to greater clarity from this trade deal. This could be due to the level of market noise we are seeing. There is a lot happening in markets, but this news is a positive and should gradually get priced in once the market’s attention shifts,” Field said. “The big take-away from this is that the U.S. seems to becoming more pragmatic in its approach to tariffs. Specifically, it’s exempting numerous goods that it cannot produce at home. The natural extension of this could be further nuance in…