Trump Imposes Trade Tariffs on Canada, Mexico, and China
What implications will these have on the pharma supply chain?
President Trump signed three executive orders over the weekend, ordering tariffs on three key US trade partners, including Canada, Mexico, and China. These taxes on imports, Trump says, stem from the threat posed by illegal aliens and drugs, including fentanyl, as he declared it a national emergency under International Emergency Economic Powers Act (IEEPA). The tariffs will take officially effect on Tuesday, Feb. 4.
Until the crisis is alleviated, a 25% tariff will be implemented on imports from Canada and Mexico, while China will be paying a 10% tax on goods. However, there are certain caveats included within these. For example, for Canadian energy resources that include natural gas and oil, those will receive a 10% tariff, as opposed to the 25% mentioned above. Trump has also been hinting at tariffs on steel and imported computers chips.
“The challenges at our southern border are foremost in the public consciousness, but our northern border is not exempt from these issues,” stated Trump’s tariff order against Canada.1 “Criminal networks are implicated in human trafficking and smuggling operations, enabling unvetted illegal migration across our northern border. There is also a growing presence of Mexican cartels operating fentanyl and nitazene synthesis labs in Canada.”
In response, Canada has already stated that would enact a 25% on $30 billion worth of products imported from the US, including appliances, motorcycles, apparel, coffee, beer, wine, and spirits to name a few.2
Although implications on the pharma supply chain—and the industry itself—are yet to be defined, Trump has been quoted as saying that he plans on imposing tariffs on pharmaceuticals at some point.3 There is potential for these tariffs to intensify the drug shortages in the country, which would cause an increase in drug prices, while negatively impacting generics manufacturers. The US relies heavily on drugs being sourced from China, and with it being considered the world’s largest producer of active pharmaceutical ingredients (APIs),4 the nation also owned 44% of API production volume worldwide as of 2023.5
The Healthcare Distribution Alliance (HDA), an organization representing the industry’s pharma distributors, recently issued a statement6 urging the Trump Administration to reconsider imposing tariffs on industries that play a role in medication production, noting that “Tariffs on pharmaceuticals would strain the pharmaceutical supply chain and could adversely affect American patients, whether through increased medical product costs or manufacturers leaving the market. Accordingly, we ask the administration to consider establishing exemptions for pharmaceutical products and long implementation timelines to maintain the safe and efficient delivery of approximately 10 million medicines and healthcare products every day.
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress. Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs.”
References
1. Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border. The White House. February 1, 2025. Accessed February 3, 2025. https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border/
2. Canada announces $155B tariff package in response to unjustified U.S. tariffs. Department of Finance Canada. February 1, 2025. Accessed February 3, 2025. https://www.canada.ca/en/department-finance/news/2025/02/canada-announces-155b-tariff-package-in-response-to-unjustified-us-tariffs.html
3. Watson K. Trump says he'll impose tariffs on oil and gas imports next month, and eventually on pharmaceuticals. CBS News. January 31, 2025. Accessed February 3, 2025. https://www.cbsnews.com/news/trump-to-impose-tariffs-on-oil-and-gas-imports-next-month-pharmaceuticals/
4. Section 3: Growing US Reliance on China’s Biotech and Pharmaceutical Products. US-China Economic and Security Review Commission. Accessed February 3, 2025. https://www.uscc.gov/sites/default/files/2019-11/Chapter%203%20Section%203%20-%20Growing%20U.S.%20Reliance%20on%20China%E2%80%99s%20Biotech%20and%20Pharmaceutical%20Products.pdf
5. Mikulic, M. Distribution of active pharmaceutical ingredient (API) production volume worldwide as of 2023, by region. Statista. October 10, 2024. Accessed February 3, 2025. https://www.statista.com/statistics/1498065/api-production-volume-by-region/
6. HDA Statement on Proposed Tariffs of Pharmaceutical Products. HDA. February 2, 2025. Accessed February 3, 2025. https://www.hda.org/newsroom/2025/hda-statement-on-proposed-tariffs-of-pharmaceutical-products/
