Are importers front-running pharma tariffs? Pharmaceutical products imported to the US in January and February reached $37 billion, compared to $31 billion during the same period last year.
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Major indexes gave up early gains yesterday after the European Union's trade negotiator cited little progress or clarity in talks with the US. The S&P 500 finished down 0.2%, while the Nasdaq 100 eked out a 0.2% gain and the Russell 2000 ended up 0.1%.
Most S&P 500 sector ETFs finished in the red, with tech, communication services, and financials delivering the best returns on the day.
Pharmaceutical products are normally excluded from tariffs due to a World Trade Organization agreement that the US signed in 1994. That said, the Commerce Department filed a notice to the Federal Register on Monday saying it was investigating tariffs on pharmaceuticals.
Generic drugs, which are predominantly made in India and China, account for 90% of prescriptions in the US. Those aren't the drugs in question here — though the companies that make them operate on slim margins and have said their only option in the event of tariffs would be to raise prices.
No, we're talking about those big, name-brand drugs. For those, they're coming in from Germany (worth $17.1 billion in 2024) and most of all Ireland ($50.3 billion last year), which dwarf the competition in no small part because the drugs they import aren't the cheap generics, but the expensive, flagship medications.
Even setting the Irish connection aside, the US imported $37 billion worth of drugs in the first two months of this year, well above the roughly $30 billion imported in those two months in both 2023 and 2024.
With the White House now studying tariffs on pharmaceuticals, it sure looks like the big drugmakers had a very busy January and February getting as many medications into American ports as possible.
THE TAKEAWAY
A blip? Perhaps. But that is what you'd expect if, say, major pharmaceutical manufacturers were worried about a grim prognosis of margin-pinching tariffs coming down the pipeline.
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We've got a few weeks until most of the members of the Magnificent 7 report quarterly earnings — Google comes first on April 24, while Nvidia makes us all wait until the end of May — but analysts on the Street are already starting to lower their expectations for how the tech titans will perform. Yesterday, Wedbush Securities cut its estimates and price for Amazon, the second such action in as many days, as part of a broad analysis of the internet sector.
Other Mag 7 market titans — which, because of their massive market weights, have in recent years driven an outsized share of gains for major indexes like the S&P 500 — are also seeing slippage in earnings expectations, as analysts either price in an economic slowdown due to tariffs or reverse engineer their earnings calls to correspond to the recent stock market slump.
If we look at Wall Street's best guess of what the full-year earnings per share for these companies will be in 12 months, a pattern emerges, as these charts show.
As of now, estimates for Microsoft and Nvidia haven't yet cracked, but Microsoft's surprise cancellation of another data center isn't a good omen. And while semiconductors have been exempt from tariffs so far, an analyst warns "this is not over" for the chip giant.
It doesn't help that foreign investors arefleeing US stocks at a record pace, according to a Bank of America survey that also said the Magnificent 7 are no longer deemed the "most crowded trade" for the first time in over two years, ceding the title to (checks survey) gold.
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The offering is made available through StartEngine Crowdfunding, Inc. No broker-dealer or intermediary was involved in offering.
Past performance is no guarantee of future results. Investing in private company securities is not suitable for all investors. This investment is highly speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment. There is no guarantee that a market will develop for such securities.
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