Pharma Protectionism in Progress
Chart of the Week:
TSMC Earnings Hit Record Highs; Chairman Emphasizes “Insatiable AI Demand”
TSMC announced its 1Q26 results, with revenue reaching NT$1.134 trillion, exceeding market expectations of NT$1.127 trillion. Net income stood at NT$572.48 billion, also beating the consensus of NT$543.32 billion. Driven by high-margin AI revenue, the gross margin reached a new record of over 66%, with a net profit margin of 50.5%. 1Q EPS simultaneously hit an all-time high of NT$22.08.
Market Recap 1:
US-Iran Negotiations Progress Smoothly; Risk Appetite Surges as Industry Styles Shift
Despite the impending expiration of the two-week ceasefire agreement between the U.S. and Iran and the lack of a scheduled second round of talks, Trump stated that Iran is interested in reaching a deal and that negotiations are progressing smoothly. This week, markets reflected optimism over the increased probability of peace talks. Global risk sentiment improved significantly, with capital flowing back into risk assets. All four major U.S. indices closed in the green, led by the Philadelphia Semiconductor Index (SOX) with a weekly gain of 7.4%. European markets, which were less impacted by the US-Iran conflict previously, showed relatively weaker gains this week. In contrast, Asia and emerging markets benefited significantly from the improved risk appetite. The Nikkei 225 performed strongly with a 4.2% weekly gain, making it one of the top performers among major markets outside the U.S.
Market Recap 2:
HY Bonds Gain on Risk-On Sentiment; Weaker Dollar Lifts Emerging Debt and Crypto
Despite energy prices recording their largest gains since 2005, March inflation and core inflation data came in lower than expected. The U.S. March CPI rose 3.3% YoY, below the market expectation of 3.4% but a significant jump from 2.4% in February; core CPI rose 2.6% YoY, lower than the 2.7% forecast. Inflation data is expected to be impacted by high oil price spillovers, thereby limiting the room for rate cuts before year-end. KGI Invest believes the inflation risk is a one-off impact and the Fed will maintain its current monetary policy path. If oil prices retreat, the Fed may not resume rate cuts until the first half of 2027; Treasury yields remained stable.
What’s Trending:
Trump’s First Term vs. Current Term: Investment Opportunities Amid US-Iran Tensions
Across both terms, Trump targeted Iran in his second year in office, with the core objective of preventing Iran from acquiring nuclear weapons. His first term relied primarily on economic sanctions paired with limited military actions. In contrast, the current term has shifted toward large-scale military operations, including the elimination of Iran’s supreme leader and senior officials. During the first term, conflicts persisted until the 2020 pandemic, though their market and economic impact eventually diminished, with inflation receding from peaks before the midterm elections.
In Focus 1:
Global Pharma Giants Reach Accords with Trump to Avert 100% Tariff Crisis
In April 2026, Trump signed an executive order under Section 232 to impose a 100% tariff on imported patented drugs and key active ingredients. The policy utilizes a tiered tax structure aimed at lowering domestic drug prices and forcing supply chains back to the U.S. For individual companies, drugmakers can secure a 0% tariff until 2029 by agreeing to Most-Favored-Nation (MFN) pricing and signing reshoring agreements. Those committing to relocate production bases to the U.S. can receive an initial 20% preferential rate until 2030. At the national level, specific import exemptions have been established: 10% for the UK, and 15% for the EU, Switzerland, Japan, South Korea, and Liechtenstein. Currently, most major pharmaceutical exporters to the U.S. (by value)—with the exceptions of India and China—have reached preferential rate agreements with the Trump administration.
In Focus 2:
U.S. Drug Manufacturing Surges Under Trump; Markets Pivot Back to Biopharma
During his first term, Trump actively promoted the reshoring of pharmaceutical manufacturing to fulfill his “America First” agenda. Amidst the COVID-19 pandemic, an executive order required federal agencies to prioritize the procurement of essential medicines and key active ingredients produced domestically. His second term has intensified these efforts through Section 232, leading to a marked increase in branded drugs manufactured in the U.S. in both periods. In 2025, production volume grew by approximately 4.8% YoY; as of March 31, 2026, the number of U.S.-made branded drugs has surpassed 2,600 units, representing a 3.4% growth compared to year-end.
