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Investing.com -- Deutsche Bank (ETR:DBKGn) has lifted its outlook on the European pharmaceuticals sector, upgrading it to “overweight” from “underweight” after tariff relief measures were announced in a joint statement by the European Union and the White House, in a note dated Friday.
The brokerage said the new trade framework reduces uncertainty for drugmakers, which had been under pressure from the possibility of higher duties on exports to the United States.
The U.S. committed to capping tariffs on European pharmaceuticals at 15 percent and to applying only the Most Favored Nation tariff rate to generic medicines and their ingredients starting September 1.
The agreement also stated that tariffs imposed under Section 232 on pharmaceuticals would not exceed 15%.
Deutsche Bank analysts said the development is significant for the sector, which is the largest exporter from the EU to the U.S. and had underperformed the STOXX 600 by 14 percent so far this year.
They flagged that tariff clarity serves as a “buy trigger” and pointed to several other positives for the sector, including valuations trading at a 13% discount to their 10-year average and expectations of 7% earnings growth in 2025, compared with no growth forecast for the broader STOXX 600 index.
The brokerage also observed that consensus earnings forecasts for health care have already been cut by 7% this year, which Deutsche Bank said more than accounts for tariff risks.
While the bank noted that tariffs on Swiss pharmaceutical companies remain unresolved, it described the EU-U.S. announcement as a positive sign for further agreements.