US-based multinational Johnson & Johnson (J&J) has announced that it will be investing $55bn in new US manufacturing facilities over the next four years. This move comes as a response to the pressure from the Trump administration to reshore all kinds of industry, including pharmaceuticals, and avoid the potential of 25% tariffs on importing such products. While such a move exemplifies what the administration will have been hoping to encourage through the tariff approach, examples such as J&J highlight that it will not be cheap or a quick fix, with other potential challenges emerging as a consequence of other, sometimes unrelated aspects of the Trump agenda.
J&J’s plans are based on the building of four new plants, including one in Wilson, North Carolina, a city with 21% unemployment at present. Clearly, there is a socioeconomic upside to such reshoring if strategic opportunities for job creation are factored in. The key influence, however, for businesses such as J&J, and other pharmaceutical giants such as Pfizer will be the “big stick” that tariffs represent to their bottom line. A recent analysis by PwC estimated that total tariffs levied on the pharmaceutical, life sciences, and medical devices industries could rise under Trump’s policies from $0.5bn a year to almost $63bn – a powerful incentive. Undoubtedly, similar calculations are taking place across the full range of FMCG industries active across America’s borders that are in the tariff crosshairs.
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J&J’s announcement also noted significant investment would also be taking place in creating extensive R&D infrastructure “aimed at developing lifesaving and life-changing treatments in areas such as oncology, neuroscience, immunology, cardiovascular disease, and robotic surgery”. This suggests a wider effort beyond pure production reshoring. However, FMCG industries dependent on scientific innovation and skill sets face another challenge – signs of a growing “brain drain”. The Trump administration’s agenda, exemplified by the activities of Elon Musk’s DOGE, has hit scientific functions within the public sector particularly heavily, at organisations such as the CDC, NIH, and others. Furthermore, grants to academic institutions to fund scientific research projects have been placed on hold or cancelled, forcing out researchers from a range of fields.
This is a double-edged sword for FMCG businesses such as those in the cosmetics and consumer health fields; while the public sector cuts potentially fuel a job market with highly qualified researchers and technicians that may countenance a move to the private sector, many of those skilled workers may also be looking at academic or industrial alternatives outside of the US. This possibility is already being taken advantage of by international universities, with various Canadian and European institutions starting to reach out and build programs aimed at encouraging doctoral and post-doctoral researchers to leave the US. Thus, while production facilities may, over several years, help to establish a more complete domestic US capability to meet demand in a tariff/government-intervention-free form, R&D capabilities may become more international based on the availability of talent.
J&J’s example is likely to be replicated across FMCG industries as US businesses seek to balance their globalised supply chains with a domestic US capability that offers some protection against the protectionist impulses of the current administration. Such domestic production, however, does also increase the likelihood of price increases for the US consumer based on US costs, salaries, etc. This creates another inflationary pressure point on consumers’ spending priorities. Overall, whether tariffs are levied, or more expensive domestic products populate the shelves, US consumers are likely to be paying more one way or the other.
