What do Trump's tariffs and US-UK trade negotiations mean for the NHS?

With Donald Trump’s unpredictable announcements causing the British government to rush for a deal, tariffs and trade negotiations hang over the NHS as an issue once again. The new American administration is threatening to add direct taxes on imported medicines, sworn off by most developed countries for 30 years, to a well-established list of fears around privatisation and the NHS being forced to pay more.

From the point of view of health care in the UK and the patients that need it, some of those concerns are very real, though usually not immediate. Others are likely overblown.

Tariffs on medicines

The last three years have seen a deeply troubling spate of medicines shortages, which are at previously unseen levels on every available indicator. Staff in most community pharmacies spend over an hour a day searching for stock for medicines in shortage. Patients are left in anxiety and even danger as they struggle to find the products they need. Tariffs carry some risk of adding to this situation, but only indirectly and partially.

At the time of writing, the level of new tariffs is set at a 10% blanket rate for most countries and most sectors, and 145% for China. Pharmaceuticals are not included, but Mr Trump has suggested they soon will be, with a sector-specific tariff he has occasionally threatened to be as high as 25%.

For the UK, this poses possible risks, and even possible benefits. The existing tariffs will hit chemicals and tools moving into the US, potentially disrupting supplies that the NHS and UK pharmacists purchase across the Atlantic.

If tariffs were actually applied to medicines, it would be more difficult for US pharmacies and benefit management firms to compete with the UK in purchasing medicines from India, China or the EU, potentially to the NHS’s advantage. On the other hand, it would be a very difficult situation for the UK’s pharmaceutical industry. A quarter of UK pharmaceutical exports by value today go to the US – a proportion that has risen slightly since Brexit and the end of Covid-19.

Relocating medicines manufacturing to the US to avoid the tariffs might be a real risk, bringing more disruption and potentially increasing the apparent impact of Brexit in shifting the UK out of medicine supply chains. Probably the greatest risk would be a hit to the stability of medicine supply chains. Interviews we undertook for our work funded by the Health Foundation suggest that the heightened shortages of the past three years seem to be largely a repercussion of general disruption from Covid-19 and the war in Ukraine.

That implies that the end of the pharmaceutical industry which provides most of our medicines as generic products in bulk has become fairly fragile in general, due to low profit margins and concentration. A squeeze on US prices risks causing some production lines to fall quiet, which is a worrying prospect for patients in the UK.

On the table?

A more longstanding concern has been that a trade deal with the US might drive up NHS medicines prices directly, by forcing the health service to water down value-for-money standards or by increasing the length of patents so that companies can charge more. This was a US priority in successive trade negotiations during the previous decade, including with South Korea and Australia, with little to partial success.

During his first term, Mr Trump pursued this agenda strongly and not very subtly, with his health secretary promising to “use the full weight of the US government's trading power to try to get them to pay more”.

There were no major successes and it is unclear to what extent this remains a priority. Mr Trump has more recently emphasised cutting US drug prices, and most of the measures to achieve this such as national negotiation would be obstructed by deals which try to tie other countries into paying more. However, a degree of continued wariness is probably justified.

Double privatisation

Another common concern has been that a US trade deal could somehow threaten the UK's model of a tax-funded NHS free at the point of use, and force us to pay for private coverage as American citizens have to – or at least that it could lead to more US firms being present within a still tax-funded NHS. The idea that a trade deal could effectively ban a major existing public service is not plausible. If it ever was suggested, it is difficult to see what could compensate any British government for the catastrophic unpopularity of such a move.

Even for the NHS contracting out services to US firms, it is difficult to see what exactly could change. The English health service already has a high level of openness to private firms. Until 2023, the US firm Centene was the largest private GP supplier in the country: it sold up because it was struggling to turn a profit, not because it was legally barred. At the opposite end of the spectrum, Scotland, Wales and Northern Ireland generally do not run their health services on the basis of competitive contracting at all: there is no market to access.

In a very ambitious trade deal, it is possible that procurement commitments could challenge the new softer-touch requirements on how thoroughly the English NHS goes out to market for services. It is difficult to imagine anything this advanced being cobbled together in the circumstances, but even if it was, the UK government has signed up with specific exemptions for the NHS before and would be well advised to do the same.

An eye for AI

The rapid emergence of powerful artificial intelligence, including for many uses in health care, makes this a new and important issue for international negotiations. 

We have chronicled how the UK has kept a more fragmented and in some ways lighter-touch system of regulation compared to the EU’s new AI Act, which regulates AI systems across the board. This means, among other things, that regulation for uses of AI systems which are not specifically intended to diagnose and treat patients is quite unclear – including the use of ChatGPT and other large language models for medical advice, and of artificial intelligence for administering hospitals and their patients.

However, the UK government plans to raise artificial intelligence as a promising area of cooperation with the US where its rules are “not over-regulating”. The new US administration has cancelled controls on the most advanced systems. It is unclear how an agreement would relate to the more overarching AI Safety Bill previously expected from the UK government, but staying close to the US model would imply less regulation for many less formal uses of AI in and around the NHS.

The bottom line

There are possible perils for the NHS in a new UK agreement with the US, or in its absence.

Having no deal means the prospect of medicines tariffs. Signing one brings the possibility of constraints on medicine pricing, though this ought to be easy to rule out, or on artificial intelligence regulation. Global disruption to medicines supply as US tariffs disrupt trade around the world is a serious worry. However, it would only be adding to a problem we already face, and urgently need to tackle.

Probably the most important problem for health in the UK will be the impact on every other sector, what this means for tax revenues, and what perceptions of global economic stability and domestic financial stability mean for the government’s debt payments. The government believed that worse OBR forecasts in March required spending cuts to keep them in line with their fiscal commitments, and chose a £5 billion cut in welfare spending. The Spring Statement also saw a £7 billion cut to overseas aid to increase defence spending.

Any further deterioration in tax revenue, interest rates or security will require billions more to be sliced from somewhere, unless the government is willing to bend or break its key tax and borrowing commitments. Only this week, lowered growth forecasts from the IMF and UK government deficit figures seemed to suggest that the picture is indeed still getting darker. That is truly a cause for concern at a time when the NHS is repeatedly bursting through its budget; the public want much more from it; unhappy pharmaceutical firms are demanding to retain more income; and local authorities face an even tougher year as social care costs escalate.