US President Donald Trump has implemented a 90-day pause on “reciprocal” tariffs, allowing pharmaceutical stocks to recover after initial declines. This change eliminates the need for a pharma exemption as bilateral tariffs are delayed.
Following Trump’s announcement, the NASDAQ Composite surged by 10%, while the Dow Jones Industrial Average increased by 7%. Initially, Trump had indicated a potential removal of the tariff exemption for pharmaceuticals, causing concern for companies like Johnson & Johnson, Merck, and Amgen.
Impact Of The 90 Day Tariff Pause
The 90-day timeframe may lead to altered planning around future tariffs, with some speculating that higher tariffs might not materialise. JNJ, however, remains lower than its session highs, trading around $148.00 after dropping to $141.50.
Trump had previously announced tariffs for several countries, yet the pharmaceutical sector was initially exempt. The looming possibility of tariffs post-pause in July raises concerns about foreign production affected by new rates.
Additionally, Trump raised Chinese tariffs from 104% to 125% in response to China’s own customs adjustments. Bernstein analyst Courtney Breen estimates that the paused rates could result in an additional $46 billion in import costs for the pharmaceutical industry.
This development indicates a temporary reprieve for pharmaceutical exporters operating under the weight of political friction. The US president’s 90-day freeze on reciprocal tariffs shifts some of the near-term pressure away from key US-listed pharmaceutical firms, helping investors recalibrate expectations after a rocky start to the week. During this short window, market participants are being handed what amounts to a breathing space—albeit one that doesn’t resolve any longer-term threats.
The pause has brought immediate relief. Share prices, which had responded skittishly to hints of tightening measures, bounced back sharply after the announcement. The NASDAQ Composite’s 10% surge, alongside a 7% gain on the Dow, suggests that investors had priced in a more adverse scenario. Markets staged an outsized relief rally, underscoring how nervous they had become over policy ambiguity.
Market Reactions And Future Speculations
The marked recovery in shares of firms like Johnson & Johnson and Merck, despite not regaining full intraday highs, shows a return of confidence—though cautious. For instance, the price action in JNJ—rebounding from a sharp low near $141.50 but hesitating around $148—signals lingering uncertainty that fades only slightly in the face of temporary policy changes.
What this moment offers is an inflection point in strategy. We are now working within a tight 90-day schedule—a period during which assumptions on long-term cost structures need to remain flexible. Tariffs may not be implemented immediately, but the implied threat of a July reversal continues to shape cost expectations among institutional players.
The sharp revision to Chinese import taxes—from 104% to 125%—adds complexity, since these abrupt measures could distort sourcing costs for US-based pharmaceutical giants reliant on Chinese manufacturing components. Here, it’s critical to identify supply chains that are most exposed, then assess how quickly these firms can pivot sourcing strategies without disrupting production timelines.
Breen’s calculation, that the deferred tariff levels could translate to an added $46 billion in expenses across the sector, shouldn’t be viewed in isolation. Import costs rarely rise evenly—some companies are insulated by longer-term contracts, others have already begun diversifying suppliers, which gradually reduces exposure. Still, the figure gives a sense of what’s in play should the pause end without compromise.
It also forces a reassessment of leverage around global procurement. Should July arrive without progress, those firms with high reliance on overseas active pharmaceutical ingredients will feel the cost stress sooner. Market makers and options desks should be mapping tail-risk scenarios where fresh duties do go into effect, likely producing volatility spikes in options implied vol across healthcare indices.
Thus, the positioning over the next few weeks needs to acknowledge the temporary nature of relief. If you’re holding exposure to pharma-related instruments tied to US indices, price stability in the short term does not allay the uncertainty that July now embodies.
Spreads may widen if speculative participants rotate out ahead of new trade rhetoric. Hedging strategies could shift—skew favouring downside put protection might get more demand as we tick past the halfway point of the suspension period. At the same time, volume around long gamma trades may thin quickly if the current bounce proves to be the short-lived kind.
This window should also serve as a chance to evaluate beta correlations. We’ve seen pharma diverge from broader market signals during previous tariff cycles, and that pattern may hold again. Switching funding sources or rolling into contracts with extended duration on risk-managed books could create some breathing room for dealers positioning themselves around July’s uncertainty.
All told, the unexpected upside has returned some calm to what had become an erratic space. But the weight of Breen’s import cost projection remains, and we would not be surprised if positioning starts shifting again soon—perhaps as early as next week—as participants transition focus from relief to adjustment.
