On September 1, 2025, President Donald Trump took a bold new step in his ongoing trade war, announcing plans to impose significant tariffs on imported pharmaceuticals—a sector that, until now, had mostly escaped his tariff blitz. The move, which follows years of mostly duty-free treatment for foreign-made medicines, sent shockwaves through the pharmaceutical industry and set off a cascade of economic, legal, and political consequences on both sides of the border.
For decades, Americans have benefited from relatively inexpensive imported medicines, with drugmakers moving much of their manufacturing overseas to take advantage of lower costs in places like China, India, Ireland, and Switzerland. This offshoring, while keeping drug prices lower, created a massive U.S. trade deficit in medicinal and pharmaceutical products—nearly $150 billion just last year, according to the Associated Press.
But that era may be ending. As part of a newly detailed trade deal between U.S. and European leaders, a 15% tariff on some European pharmaceuticals is already on the table. President Trump, however, is threatening to go much further, proposing duties of up to 200% on drugs made outside the United States. "Shock and awe" is how Maytee Pereira of PwC described the potential impact, noting, "This is an industry that's going from zero (tariffs) to the potentiality of 200%."
Trump has repeatedly promised Americans he would lower prescription drug costs. Yet, as Diederik Stadig, a healthcare economist with ING, pointed out, "A tariff would hurt consumers most of all, as they would feel the inflationary effect ... directly when paying for prescriptions at the pharmacy and indirectly through higher insurance premiums." Stadig warned that lower-income households and the elderly would be hit hardest by rising prices.
Despite the tough talk, Trump has indicated he might delay implementing the tariffs for a year or more, giving companies time to stockpile medicines and shift manufacturing stateside—a process some have already begun. According to a July 29 note by Leerink Partners analyst David Risinger, most drugmakers have already increased imports and may have six to eighteen months of inventory on hand. Jefferies analyst David Windley added that tariffs delayed until late 2026 might not be felt until 2027 or 2028 due to these stockpiles.
Still, even a more modest 25% tariff could gradually raise U.S. drug prices by 10% to 14% as reserves dwindle, Stadig estimates. The consequences could be particularly dire for generic drugs, which make up 92% of U.S. retail and mail-order pharmacy prescriptions. These companies operate on razor-thin margins and may simply exit the U.S. market rather than absorb the new costs. As Brookings Institution health policy analyst Marta Wosiska observed, "Those are not very resilient markets. If there's a shock, it's hard for them to recover." She added that tariffs alone are unlikely to persuade generic manufacturers to build U.S. factories—they'd likely need government financing to make the math work.
Trump’s rationale for these sweeping tariffs isn’t just economic. The COVID-19 pandemic laid bare the risks of relying on foreign suppliers for critical medical goods, especially when geopolitical rivals like China are involved. In April, the administration launched an investigation under Section 232 of the Trade Expansion Act of 1962, examining how drug imports affect national security. Trump has argued that bringing pharmaceutical manufacturing back to American soil is essential for both security and economic resilience. He’s even pressured drugmakers to offer "most-favored nation" pricing in the U.S.
Some major pharmaceutical companies have already responded. Swiss giant Roche announced a $50 billion investment to expand its U.S. operations, and Johnson & Johnson plans to spend $55 billion domestically over the next four years. CEO Joaquin Duato recently stated the company aims to supply all U.S. market drugs from American sites. But as Wosiska cautioned, "Building a pharmaceutical factory in the United States from scratch is expensive and can take several years." And even then, if tariffs apply to imported ingredients, U.S. plants may not be immune.
According to Jacob Jensen of the American Action Forum, "97% of antibiotics, 92% of antivirals and 83% of the most popular generic drugs contain at least one active ingredient that is manufactured abroad." As Pereira bluntly put it, "The only way to truly protect yourself from the tariffs would be to build the supply chain end to end in the United States." That’s a tall order, and one that could drive up costs even further.
Meanwhile, the legal battle over Trump’s tariff authority is heating up. On August 29, a divided U.S. appeals court ruled that most of Trump’s tariffs are illegal, but allowed them to remain in place through October 14 while the administration appeals to the Supreme Court. The tariffs in question include those aimed at halting imports of fentanyl, a synthetic opioid linked to about 70,000 U.S. deaths annually—a crisis that Treasury Secretary Scott Bessent cited as a legitimate reason to declare a national emergency. "If this is not a national emergency, what is?" Bessent told Reuters, defending the use of the 1977 International Emergency Economic Powers Act (IEEPA) as the legal basis for the tariffs.
Bessent expressed confidence that the Supreme Court would uphold Trump’s authority under IEEPA, but said the administration has a backup plan: Section 338 of the Smoot-Hawley Tariff Act of 1930, which allows for temporary tariffs of up to 50% against countries that discriminate against U.S. commerce. The administration’s legal brief, expected to be filed by September 3, will argue that ballooning trade deficits and the fentanyl epidemic amount to an "emergency" justifying extraordinary action.
The ripple effects of Trump’s trade policies are being felt far beyond the pharmaceutical industry. In Canada, for example, tourism companies are reporting a jump in domestic bookings as travelers steer clear of the United States due to trade tensions and border concerns. Karma Campervans saw a 42% increase in rental nights and a 37% rise in Canadian travelers compared to last year. Couples like Amabel D’Souza and James Raworth opted for "babymoons" in Nova Scotia and Prince Edward Island, citing anxiety over border detentions and a weak Canadian dollar. Similarly, Avishek Ganta and Nuria Ruiz, who moved from San Francisco to Toronto, chose to vacation in Newfoundland and Labrador rather than risk crossing back into the U.S.
Statistics Canada reported a 29% year-over-year plunge in Canadian return trips from the U.S. in June, just months after Trump’s return to office. Airlines such as Porter and WestJet have adjusted by boosting domestic flight capacity and seeing notable increases in bookings, while some tourism operators say they’re struggling with fewer American visitors and higher costs for tariff-affected goods.
As the legal, economic, and political battles over tariffs rage on, one thing is clear: the landscape of North American trade and travel is shifting rapidly, with consequences rippling from pharmacy counters to vacation destinations. The coming months will reveal whether Trump’s hardline approach delivers the promised benefits—or leaves consumers, businesses, and governments scrambling to adapt.