The massive 9.1% global production surge in 2025 was a deliberate stockpiling effort to preempt tariff disruptions. The expected 2026 contraction is a natural and healthy rebalancing as companies work through this excess inventory, not a sign of industry weakness.
While US tariff policies aim to bring pharmaceutical production back onshore, the immediate beneficiaries are likely to be contract manufacturers. Building new proprietary facilities is a slow and expensive process, so companies will lean on agile contract partners to quickly diversify their supply chains in the interim.
The push for supply chain diversification and reduced reliance on China is not a new phenomenon. The COVID-19 pandemic first exposed the critical risks of single-source dependency. Recent tariff threats are not the origin of this strategic realignment but rather a powerful accelerant, forcing companies to act on plans already in motion.
While US and European pharmaceutical production is set to contract in 2026 after a tariff-driven surge, China's is projected to accelerate. This divergence is driven by China's massive, growing domestic market, making its pharma sector resilient to US trade policies aimed at curbing reliance on it.