Impact of the U.S. 2025 tariff policy on Canadian pharmaceutical exports to the U.S

• The U.S. government changed the tariff on Canadian pharmaceutical exports from 25% to 35% in August 2025. • The quantitative impact of this tariff on Canadian pharmaceutical exports is unknown. • Domestic pharmaceutical exports to the U.S. will decrease by US$2 billion. • Re-exporting activities through Canada will cease. • Pharmaceutical industry needs support from industrial and pharmaceutical policy. A bilateral tariff on Canadian exports to the U.S. imposed in March 2025 may have profound and lasting effects, not only on U.S. market supply but also on the Canadian pharmaceutical manufacturing industry. The tariff rate on pharmaceutical products was 25% at the time of initiation and was raised to 35% in August 2025. This study quantitatively predicts the impact of the U.S. tariff policy on pharmaceutical exports and proposes the appropriate Canadian policy response. We first use time-series prediction to identify the natural trend of Canadian pharmaceutical exports, then apply estimated elasticities (the percentage change in import demand when price increases by 1%) from the literature to forecast changes in export values. Monte Carlo simulations are subsequently conducted to determine the range for the prediction. We also discuss the potential impact of tariffs on the re-export of pharmaceutical products from Canada to the U.S. Depending on the elasticity estimate we utilize, the annual decrease in Canadian pharmaceutical exports can range from US$0.72 billion to US$3.35 billion, with an average reduction of approximately US$2 billion. Medicines consisting of mixed or unmixed products for therapeutic or prophylactic uses are the products most significantly affected. Canadian domestic exports will decline by a significant proportion, and Canada will likely cease to re-export drugs to the U.S. once the tariff policy is in effect. The U.S. market may suffer from a supply shortage. Meanwhile, Canadian pharmaceutical manufacturers will be adversely affected due to reduced U.S. demand.