Regulatory Updates – Impacts of Global Tariffs on Pharmaceuticals

Recent tariff measures affecting pharmaceutical products and ingredients have introduced new compliance and cost considerations for manufacturers, distributors, and importers operating in Canada and abroad.

Overview of Recent Developments

At the beginning of April, the Trump administration (the “Administration”) introduced a two-fold tariff strategy affecting pharmaceuticals. Reciprocal tariffs were implemented under the International Emergency Economic Powers Act, imposing global reciprocal tariffs on nearly all imports into the U.S. Certain classes of products are exempt, including those covered by statutory exclusions, those identified in Annex II of Executive Order 14257, and select goods – such as pharmaceutical products – subject to pending investigations under Section 232 of the Trade Expansion Act.

Section 232 of the Trade Expansion Act introduces sector-specific tariffs, with official rates to be determined following the United States Department of Commerce’s investigation into the impact of imports on U.S. national security. In a related development, the Administration introduced a 100% tariff on branded drugs from any company not currently operating or actively building operations in the U.S. as of October 1, 2025. At the time of writing, this tariff is on hold pending ongoing discussions with pharmaceutical manufacturers.

In addition to broad-scale tariffs, the Administration has introduced several measures affecting pharmaceutical pricing and trade. In May, an executive order was issued to align U.S. drug prices with the lowest prices offered in other developed nations, leading to agreements with major pharmaceutical companies to implement Most-Favoured-Nation (MFN) pricing for certain drugs.

In September, the Administration introduced a framework intended to implement existing and future trade deals. The “Potential Tariff Adjustments for Aligned Partners” Annex was introduced, enumerating a list of products, including generic pharmaceuticals and their ingredients, for which President Trump may be willing to apply only the MFN pricing upon the conclusion of any future reciprocal trade and security deal.

Risks to Pharmaceutical Manufacturers

Tariffs introduce a range of compliance and regulatory considerations, including trade requirements such as country-of-origin rules and harmonized tariff schedule classifications (HTS), pricing regulations, and adherence to good manufacturing practices. Changes in supply chains, corporate structure, or any transactions and sales undertaken by a company to comply with tariffs, can create additional compliance obligations.

Emerging Practices

Amid a rapidly shifting and uncertain tariff landscape, companies have adopted a range of practices to remain compliant. Large pharmaceutical companies are investing billions of dollars to reshore or onshore manufacturing to the U.S., reducing exposure to tariff-related risks.

Supply chain diversification is another common strategy. Manufacturers are strategically adjusting their supply chains to mitigate the impact of tariffs and maintain agility in a changing regulatory environment. This includes incorporating tariff scenarios into procurement decisions and rerouting supply chains as needed.

Companies are also implementing “no regret” actions – measures that have minimal operational impact while tariffs remain in flux.

These actions include:

• adjusting product pricing to pass additional costs to consumers;
• applying first-sale-for-export rules;
• reviewing contracts for force majeure clauses or other provisions affected by tariffs; and
• developing internal compliance mechanisms to ensure accurate HTS classifications and country-of-origin determinations. 

For further information on the impacts of global tariffs on the pharmaceutical industry, please contact any member of our Intellectual Property Litigation Group.

The author would like to thank Chloe Bechard, Articling Student-At-Law, for her assistance in writing this Update.