Canada's $7 billion drug exports face risk as Trump signals steep tariffs and pricing reform crackdown
A proposed 200 percent tariff on pharmaceutical imports by US President Donald Trump has raised alarms across Canada’s pharmaceutical industry, which exported approximately $7bn in drug products to the US last year, according to The Globe and Mail.
Trump announced on Tuesday that drug tariffs could reach “a very, very high rate, like 200 per cent,” giving companies one to one-and-a-half years to shift production to the US.
Although he has not issued an executive order yet, the threat adds new uncertainty to Canada’s role in supplying medications to its largest trading partner.
As per a March research report cited by Global News, US$3bn in American pharmaceuticals depend on Canadian manufacturing.
A 25 percent tariff would add US$750m in costs.
Liam MacDonald, policy expert at the Canadian Chamber of Commerce, warned this move “is going to hurt Americans much more than it would hurt Canadians,” pointing to higher drug prices, medication shortages, and increased insurance costs for American patients.
However, MacDonald also said there would be economic effects on Canadian companies, especially those exporting generics.
“We do export quite a lot of pharmaceuticals to the United States, primarily generics,” he said, adding that the countries have long collaborated in this sector.
Jim Keon, president of the Canadian Generic Pharmaceutical Association, told CTV News that although Canada is not the main target of Trump’s proposed tariffs, the country could “get caught in the crossfire” as the US attempts to reduce its reliance on China and India.
Keon said Canadian exports make up less than five percent of all generic drugs sold in the US but warned that without access to that market, some firms might find it impractical to continue manufacturing certain medicines for domestic use.
Keon expressed hope that the economic and security deal currently under negotiation between Canada and the US would preserve tariff-free pharmaceutical trade.
Global News reported that the target date for this new agreement is July 21.
Canadian government officials have not received a formal executive order on the pharmaceutical tariffs, according to Industry Minister Mélanie Joly.
She said in Global News that while her office is following the developments “very closely,” the negotiations remain confidential. “We will not negotiate in public,” she stated.
Beyond tariffs, the US pharmaceutical landscape is also shifting under a new executive order signed by Trump in May.
As reported by The Globe and Mail, the order directs Health Secretary Robert F. Kennedy Jr. to communicate “most-favoured-nation” price targets within 30 days to drug manufacturers, aligning US prices with those of comparable countries.
The US currently has the highest drug prices globally, with average list prices more than three times higher than in Canada.
The Pharmaceutical Research and Manufacturers of America (PhRMA) has strongly opposed the policy.
In a statement cited by The Globe and Mail, PhRMA president Stephen Ubl said, “We must reject foreign price control models that ration care and suppress innovation.”
A PhRMA spokesperson did not confirm whether any price targets had been communicated to date.
Innovative Medicines Canada, which represents drugmakers in the country, said the US move should “invite reflection” on domestic policies.
“The United States has signalled a growing expectation that other countries contribute more meaningfully to the costs of pharmaceutical innovation,” said Erin Polka, senior director of communications, in a statement to The Globe and Mail.
The proposed tariffs come amid data that show only 12 percent of the active ingredients in pharmaceuticals consumed in the US are made domestically, according to a recent analysis by US Pharmacopeia.
Imports come largely from India (32 percent), the European Union (20 percent), and China (8 percent), while Canadian contributions remain relatively small.
Cheryl Reicin, international chair of life sciences at Mintz LLP, told The Globe and Mail that pharmaceutical clients are currently in wait-and-see mode.
“There are more questions than answers now,” she said, noting that the specifics on what needs to be manufactured in the US to avoid tariffs remain unclear.
She added, “I have whiplash from all the daily tariff changes.”
