Can Eli Lilly Stock Withstand the Threat of President Trump's New Sweeping Tariffs?

Are made in other countries

President Trump wants that to change (something worth watching)

Instead of a carrot-and-stick apach, the president plans to rely solely on a stick -- tariffs

However, Trump recently threatened to levy steep tariffs on all pharmaceutical imports to the United States (something worth watching), in light of current trends

As you might expect, the pharmaceutical industry doesn't the idea, given current economic conditions

But can a top pharma stock such as Eli Lilly (LLY -3 (which is quite significant), given the current landscape

Image source: Getty Images

What the re reveals is president's threatened pharmaceutical tariffs First of all, firm details Trump's pharmaceutical tariffs have not been released yet, considering recent developments

Moreover, However, the president said that tariffs on pharmaceutical imports will come "very soon, amid market uncertainty. " We do know, though, that Trump wants steep tariff levels

He said during a Cabinet meeting earlier this month, "They're going to be tariffs at [a] very high rate, 200%. " Commerce Secretary Howard Lutnick vided further clarification in an interview with CNBC

Additionally, He said that the details on pharmaceutical tariffs will be announced at the end of July, in light of current trends

Once that investigation is, Trump will establish his tariff policies

Moreover, Trump doesn't plan for pharmaceutical tariffs to take effect immediately, though (something worth watching)

He said, "We'll give them [drugmakers] a certain period of time to get their act together. " He suggested that pharmaceutical companies would have " a year, year and a half" to move manufacturing to the U

However, Meanwhile, To avoid the tariffs

Ricks stated, "We support the U, amid market uncertainty

Government's goals to increase domestic investment, given the current landscape

However, Meanwhile, However, we don't believe tariffs are the right mechanism. " He suggested tax incentives as a better way to mote U, given current economic conditions

Moreover, Manufacturing of prescription drugs

But Ricks acknowledged the possibility that pharmaceutical tariffs could be imposed

He predicted that they "would have a negative effect on Lilly and for our industry. " Wall Street agrees with that view (an important development)

Analysts at Barclays wrote to investors, "A 200% tariff would inflate duction costs, compress fit margins, and risk supply chain disruptions, leading to drug shortages and higher prices for U. " UBS analysts agreed, stating that tariffs could significantly hurt drugmakers' margins on ducts manufactured outside the U

Nevertheless, Lilly has three options in light of the steep pharmaceutical tariffs Trump has threatened, in today's financial world

The option the president hopes drugmakers take is to relocate manufacturing to the Unites States

Lilly is already planning to build up its U (which is quite significant)

Operations so that it can supply all ducts sold in the U

Moreover, Manufacturing facilities (which is quite significant)

However, it's doubtful that the company will complete this effort within the 12 to 18 months Trump mentioned

UBS said in a note to investors that four to five years is more reasonable for relocating manufacturing operations, in this volatile climate

On the other hand, The second option for Lilly is to pass higher prices along to customers

Lilly's third option is to absorb the higher costs

Evaluating the threat Let's return to our original question: Can Eli Lilly withstand the threat of Trump's new sweeping tariffs, given the current landscape

I think the answer is "yes," albeit with a major caveat

What the re reveals is devil is in the details

Meanwhile, Lilly's ability to navigate high tariffs depends on exactly what the Trump administration plans to do, given the current landscape

Additionally, Ricks said in Lilly's Q1 earnings call that tariffs would "have a transient effect for Lilly, but bably not a long-term one. " I suspect he's right

However, The company already manufactures many of the ducts it sells in the U

Furthermore, Inside the country

Those ducts wouldn't be affected, in this volatile climate

In contrast, As Ricks mentioned, Lilly is already boosting U

Nevertheless, Duction, which will also help

Finally, don't discount legal challenges to the president's tariffs (an important development)

An argument could be made that pharmaceutical ducts made in Ireland, the primary overseas source for Lilly, don't present a national security threat to the U. , since Ireland is a staunch ally (fascinating analysis)

Granted, Lilly could face a bumpy ride for a while, in today's financial world

But I don't think the threat of tariffs undermines the long-term investment thesis for this top pharma stock, in this volatile climate

Furthermore, Keith Speights has no position in any of the stocks mentioned

The Motley Fool recommends Barclays Plc

This analysis suggests that Motley Fool has a disclosure policy.