Denmark’s Economy Thrives Amidst Drug Exports — Trump’s Tariff Threat Won’t Hinder Growth
Vials move along a conveyor at the Novo Nordisk A/S production facilities in Hillerod, Denmark, on Monday, June 12, 2023. The success of Novo’s bestsellers Ozempic and Wegovy, drugs that assist individuals in achieving significant weight loss, has sparked a surge in the pharmaceutical sector, with approximately 40 companies developing products that will heighten competition.
Denmark’s economic growth, attributed to an “exceptional surge” in pharmaceutical exports, is projected to moderate this year, although the anticipated U.S. tariffs on the pharma industry are not expected to significantly impact the situation, according to the International Monetary Fund (IMF).
The IMF’s latest report on Denmark forecasts that the economy, which grew by 3.7% in 2024, will see a decrease to 2.9% this year and 1.8% by 2026. These declines are expected amidst a slowdown in export growth, including pharmaceutical goods. Nevertheless, the IMF indicated that Denmark will be shielded from potential U.S. tariffs on pharmaceutical imports, given that most Danish drug products are not produced domestically or do not cross its borders.
Danish drug manufacturers are becoming increasingly dependent on a “merchanting and processing” system, where the majority of the value of the medicines is linked to the intellectual property entrenched within them. This involves drug companies hiring manufacturers in other countries to produce and ship their products.
The IMF noted, “The U.S. is a key trading partner; however, exports produced in Denmark that pass through customs make up only 3 percent of total exports, limiting the direct impact of U.S. tariffs on the Danish economy.” It added that while the direct impacts of such tariffs are expected to be minimal, rising trade tensions and policy uncertainties pose risks to the economic outlook.
Looking beyond 2026, medium-term growth is anticipated to be around 1.5%, reflecting a maturing pharmaceutical sector and a declining working-age population. Last fall, IMF economists noted that Denmark’s growth had been primarily driven by an “exceptional surge” in its pharma industry, which stood in contrast to a relatively subdued overall economy.
The fund highlighted Danish pharmaceutical giant Novo Nordisk’s significant increase in foreign demand for its diabetes and weight loss medications, Wegovy and Ozempic, as a key growth driver. This demand led to the company’s sales as a percentage of Denmark’s GDP increasing from 1% in the early 1990s to 8.3% in 2023.
A more pressing challenge for the broader European pharmaceutical sector is the threat posed by U.S. President Donald Trump’s potential tariffs on drug imports. Although pharmaceuticals were initially exempt from Trump’s tariffs announced in April, there are indications that he may target the global industry, threatening separate levies on pharmaceuticals exported to the U.S. and seeking lower U.S. drug prices.
On Monday, Trump signed an executive order aimed at directing drugmakers to reduce their prices to match significantly lower prices paid in other countries. While he did not specify which nations would be targeted, he mentioned that certain developed countries might require additional assistance.
“Basically, what we’re doing is equalizing,” Trump stated during a press event. “We will pay the lowest price there is in the world. We will get whoever is paying the lowest price, and that’s the price that we’re going to get.”
Although White House officials did not disclose the specific medications affected by the order, they noted its impact would extend to both the commercial market and Medicare and Medicaid. In 2022, drug prices in the U.S. (both brand-name and generics) were nearly three times higher than those in 33 OECD comparison countries, according to data from the U.S. Department of Health & Human Services released in 2024.
The potential of tariffs on pharmaceutical imports has been described as a “sword of Damocles” hanging over Europe’s pharma sector, with CEOs warning about the possibility of major companies relocating to the U.S. to avoid such levies. The European Federation of Pharmaceutical Industries and Associations (EFPIA), representing key European pharmaceutical firms, expressed concerns to European Commission President Ursula von der Leyen in April. They noted that without swift and substantial policy changes, pharmaceutical research, development, and manufacturing could increasingly shift towards the U.S.
The EFPIA stated that a survey of its members revealed that around 100 billion euros ($112 billion) worth of capital and research and development investments were at risk. “The U.S. now leads Europe on every investor metric from availability of capital, intellectual property rights, speed of approval to rewards for innovation,” it added. “In light of the uncertainty created by the threat of tariffs, there is little incentive to invest in the EU and considerable motivation to move to the U.S.”
