Could tariffs help reshore US drug manufacturing?

Summary

Marketplace Morning Report: Could Tariffs Help Reshore US Drug Manufacturing?

Release Date: July 21, 2025

In this episode of Marketplace Morning Report, host David Brancaccio delves into a range of pressing economic and business topics, culminating in an in-depth discussion on the potential impact of tariffs on reshoring U.S. drug manufacturing. Below is a comprehensive summary of the key points, insights, and conclusions drawn from the episode.

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1. Chevron's Acquisition of Hess Corporation

[01:00] David Brancaccio opens the episode with significant news from the energy sector: Chevron's acquisition of Hess Corporation, a notable player in fossil fuels. This move marks Chevron's strategic expansion into vital oil fields located off the coast of Guyana.

Henry Epp provides context on the significance of this acquisition:

"Oil off the coast of Guyana was first discovered in 2015, and it's the kind of resource oil companies just don't come across that often anymore." [01:27]

David Goldwyn, President of Goldwyn Global Strategies, explains the strategic advantage of these oil reserves:

"It's a large basin, and once you stick that straw in it, even if it's sort of a mile down, you can continue to drain it at a pretty steady rate for probably 20 years... which is a lot cheaper than getting crude from one of the last big discoveries like fracked shale oil in the Permian Basin." [01:27]

Matt Smith, an analyst with Kepler, highlights the quality of the crude oil:

"It's a medium to light crude oil... very attractive, especially in Europe, which has been trying to cut down imports of similar types of crude from Russia since the invasion of Ukraine." [02:10]

The acquisition not only consolidates Chevron's position in a lucrative oil region but also has broader implications for global energy markets, particularly in the context of Europe's search for alternative energy sources post-Russia-Ukraine conflict.

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2. Changes in the S&P 500 Index

Transitioning from the energy sector, Brancaccio addresses the implications of Chevron's acquisition on the S&P 500 index.

• Hess Oil's Integration into Chevron: With Hess being absorbed by Chevron, Hess will no longer be a separate entity within the S&P 500. This creates an open slot in the index.

• Block’s Inclusion: The vacant position will be filled by Block, formerly known as Square, a leading mobile payments company. This transition reflects the dynamic nature of the S&P 500, continuously evolving with market leaders.

"Starting on Wednesday, S&P and Nasdaq futures are both up 3.10%." [02:42]

This shift underscores the growing influence of fintech companies in the broader economic landscape and signals investor confidence in digital payment platforms.

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3. Departure of Erica Williams from the Public Company Accounting Oversight Board (PCAOB)

[03:28] Brancaccio shifts focus to regulatory oversight, highlighting the resignation of Erica Williams from the PCAOB.

Nancy Marshall Genser provides an overview of PCAOB's role:

"This board was created by Congress in 2002 to oversee accounting firms that audit public companies... The idea is to protect investors so they can have faith in the financial statements of the companies they're putting their money into." [03:55]

The circumstances surrounding Williams' departure are notable:

"SEC Chair Paul Atkins asked Williams to resign. Atkins is in favor of deregulation... the board says under her leadership it finalized seven projects covering 24 rules and standards, more than under any other chair." [03:59]

Implications of Her Departure:

• Potential Shift in Oversight: Williams was recognized for strengthening regulatory standards. Her exit, prompted by a pro-deregulation SEC chair, could signal a weakening of oversight mechanisms.

• Future Risks: Williams expressed concerns about resource constraints potentially leading to increased fraud risks, especially in economic downturns.

"She said there will be a higher risk of fraud if we head into an economic downturn." [04:30]

This development raises questions about the future robustness of financial oversight and investor protection mechanisms within the U.S. market.

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4. Could Tariffs Help Reshore US Drug Manufacturing?

[06:37] The episode culminates in an extensive discussion on the feasibility and implications of imposing tariffs to bring drug manufacturing back to the United States.

Savannah Peters introduces the topic by addressing the current landscape of U.S. drug manufacturing:

"President Trump wants to bring more drug manufacturing to the United States and has talked of tariffs on imported medicine." [06:37]

Key Insights from Experts:

• Marta Voshinska (Brookings Institution):

  "Where your prescription medications are made depends mostly on whether they're patent protected." [06:47]

  She further elaborates that:

  "Pricey name brand medications make up only about 10% of those dispensed to Americans. The remaining 90%... are low-cost generics." [07:03]

  Voshinska emphasizes that the majority of these generics are produced overseas, primarily in India and China.

• Aaron Kesselheim (Harvard Medical School):

  "Reliance on imports is risky when there are issues that disrupt the international trade supply chain. That puts a strain on the US drug supply." [07:20]

  He highlights the challenges of reshoring:

  "Building up US Capacity is expensive... Drug companies would need to build factories, hire and train workers, secure approvals from an FDA crippled by budget cuts." [07:20]

• Aaron Fox (University of Utah):

  "Tariffs could drive some companies away altogether... patients may not get the most preferred product, experience adverse effects, or face treatment delays." [07:37]

  Fox warns that tariffs might lead to higher prices for generics, which are currently available at low costs.

Marta Voshinska responds with a conditional stance:

"Tariffs might be necessary to shore up domestic supply chains... if used strategically and as part of broader interventions." [08:58]

She underscores the importance of accompanying tariffs with investments to support domestic pharmaceutical manufacturing.

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Conclusion

The episode of Marketplace Morning Report provides a multifaceted analysis of current economic shifts, from major M&A activities in the energy sector to potential regulatory changes affecting financial oversight. The primary focus on U.S. drug manufacturing reveals the complex interplay between policy tools like tariffs and the realities of global supply chains. Experts present a cautious view, suggesting that while tariffs could incentivize reshoring, significant challenges and unintended consequences must be meticulously managed to ensure that such measures benefit both the industry and consumers.

For listeners seeking to understand the nuances of these economic strategies and their broader impacts, this episode offers valuable insights and expert perspectives.

Transcript

[Marketplace Host]

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[David Brancaccio]

It's like mixing oil and oil Chevron will buy Hess Corporation, both of fossil fuels fame. I'm David Brancaccio in Los Angeles. Chevron mixing in Hess comes after a long dispute with ExxonMobil over Hess partial ownership of oil operations off Guyana. Marketplace's Henry Epp has more on why oil giants have such interest in oil fields and that stretch of water east of Venezuela.

[David Goldwyn]

Oil off the coast of Guyana was first discovered in 2015, and it's the kind of resource oil companies just don't come across that often anymore. David Goldwyn, president of Goldwyn Global Strategies, says, it's a large basin, and once you stick that straw in it, even if it's, you know, sort of a mile down, you can continue to drain it at a pretty steady rate for probably 20 years, which is a lot cheaper than getting crude from One of the last big discoveries fracked shale oil in the Permian Basin in the US So so shale, you have to essentially constantly be drilling and fracking new wells because they have a very large initial production rate and then it plateaus. Oil production in the Permian appears to be approaching a plateau, Goldwyn says. Production near Guyana, meanwhile, is still ramping up. But oil companies aren't just interested in the amount of oil there, but also the type. Matt Smith, an analyst with Kepler, says it's a medium to light crude oil. It's a barrel which you can pull from it when you refine it. Gasoline and diesel, a decent amount of both of those. So it's a very attractive barrel. Especially, smith says, in Europe, which has been trying to cut down imports of similar types of crude from Russia ever since that country invaded Ukraine. I'm Henry A.P. for Marketplace.

[David Brancaccio]

Also there's that club of 500 companies of great interest to stock investors, the S&P 500 because Hess Oil becomes part of Chevron. Now Hess Hess disappears, opening up a spot in the index that'll be filled by the mobile payments company formerly known as Square. That firm is now called Block, which becomes part of the S&P 500. Starting on Wednesday, S and P and Nasdaq futures are both up 3, 10%. Now do you have a stake in the oversight of companies listed on the stock exchange? If so, know that the boss of what to us may be an obscure regulatory agency is stepping down. Erica Williams is is leaving the Public Company Accounting Oversight Board. Marketplace's Nancy Marshall Genser joins us now. Nancy, what exactly do they do?

[Nancy Marshall Genser]

Well, this board was created by Congress in 2002 to oversee accounting firms that audit public companies. The board was established in response to accounting scandals at WorldCom and Enron and it establishes standards for these accounting firms. It checks their audits. It can hit them with fines. The idea is to protect investors so they can have faith in the financial statements of the companies they're putting their money into.

[David Brancaccio]

May I ask, was it Erica Williams own choice to leave?

[Nancy Marshall Genser]

Well, the securities and Exchange Commission oversees this board, David, and Reuters is reporting that SEC Chair Paul Atkins asked Williams to resign. Atkins is in favor of deregulation. Williams was a very active regulator. The board says under her leadership it finalized seven projects covering 24 rules and standards and it says that's more than under any other chair.

[David Brancaccio]

What does William's departure say about the future of accounting oversight for big companies?

[Nancy Marshall Genser]

Well, in a quote on the board's website, she says it's critical that board staff, quote, continue to be empowered. She told the Wall Street Journal she's afraid the board won't get the resources it needs to, quote, deliver for investors. And she said there will be a higher risk of fraud if we head into an economic downturn.

[David Brancaccio]

Nancy on the PCAOB beat today. And financial markets in Tokyo are closed today for a hol day called Marine Day to give thanks to the oceans. We'll see where indexes move tomorrow. After Japan's ruling coalition suffered a big election defeat in Parliament, the opposition is talking of a no confidence vote even as Prime Minister Shigeru Ishiba says he plans to stay key. Japanese stocks listed in New York are steady in pre market trading now. Toyota, Mitsubishi included.

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[Marketplace Host]

This Marketplace podcast is supported by Mercury. Mercury is the FinTech More than 200,000 businesses use to protect their money and power their financial workflows. Learn [e-mail] President Trump wants to bring.

[David Brancaccio]

More drug manufacturing to the United States and has talked of tariffs on imported medicine. Marketplace's Savannah Peters has more now on why so much medicine production is in foreign lands.

[Marta Voshinska]

Where your prescription medications are made depends mostly on whether they're patent protected, says healthcare economist Marta Voshinska with the Brookings Institution.

[Marketplace Host]

When it comes to branded drugs, it really is either the US Or Europe.

[Marta Voshinska]

But pricey name brand medications make up only about 10% of those dispensed to Americans. The remaining 90%, Wozynska says, are low cost generics.

[Marketplace Host]

Think about your blood pressure medication, your statins, your antibiotics.

[Marta Voshinska]

Those drugs and their active ingredients are made mostly in India and China. So the vast majority of medications that Americans rely on to stay healthy and treat illnesses come from overseas. Aaron Kesselheim, a professor at Harvard Medical School, says that reliance on imports is risky when there are issues that disrupt the international trade supply chain. That puts a strain on the US Drug supply. But building up US Capacity is expensive. Drug companies would need to build factories, hire and train workers, secure approvals from an FDA crippled by doge cuts. And Kesselheim can't see companies making those investments without more certainty. Threats of the tariffs seem to be very transient and fickle. The math is especially tricky for low cost generic drug makers, which operate on thin margins, says Aaron Fox, who studies drug shortages at the University of Utah. Rather than draw companies into the US Market, she says, tariffs could drive some away altogether. I think what that means for patients is they may not get a product that is the most preferred to treat their illness. They might experience more adverse effects. They might have treatment delays. Americans could also see higher prices for generic drugs they're used to getting for cheap. Marta Vosinska with the Brookings Institution says that might be necessary to shore up domestic supply chains and that tariffs can be an effective tool to that end.

[David Goldwyn]

If they're used strategically, and they're part of a broader set of interventions.

[Marta Voshinska]

She'll be watching what other investments the administration makes in buffering the US Drug supply. I'm Savannah Peters for Marketplace.

[David Brancaccio]

And in Los Angeles, I'm David Brancaccio. Marketplace Morning report from apm, American Public Media. Yeah, federal funding for public media was just eliminated. And without federal funds, local public radio, state across the country will struggle to acquire and broadcast Marketplace. That has a big impact on our bottom line. So we're turning to you at this critical time. Individual donations are so important right now. Give to your local station. And if you can, please donate directly to Marketplace. Go to marketplace.org donate and thank you.