Canada and the United States have historically maintained collaborative and complementary relationships that have benefited both nations. However, today we stand at a critical juncture where healthcare-focused industries demand special consideration in trade disputes. Life Sciences Ontario’s stance is clear- pharmaceuticals, medical devices, and other life sciences technologies should be exempted from tariff structures and retaliatory measures, as the impacts extend beyond livelihoods to the lives of Canadians.
The current unpredictable tariff environment creates daily uncertainty and anxiety across the life sciences sector. Rather than viewing this as merely a challenge, we must recognize it as an opportunity to address long-standing issues and strengthen Canada’s economic sovereignty in this essential sector.
COVID-19 demonstrated that a robust domestic life sciences ecosystem is not just a priority but a necessity for both economic security and national resilience. The pandemic revealed critical vulnerabilities in our supply chains and highlighted the strategic importance of life sciences innovation.
The unique nature of life sciences—where economic impact extends beyond direct manufacturing to clinical trials, research ecosystems, and healthcare delivery—necessitates a distinct approach.
Ontario and Canada have made remarkable strides in developing life sciences strategies. These achievements should not be undermined by broad trade barriers that fail to recognize the sector’s unique contributions and challenges. We must double down on science and innovation, especially as research and diversity initiatives face challenges in the United States. This presents a significant opportunity for Ontario and Canada to position themselves as global leaders in life sciences innovation.
Now is the time to implement a comprehensive industrial strategy that addresses regulatory agility, capital access, talent attraction, supply chain diversification, domestic procurement and interprovincial trade barriers. Many Canadian innovations are manufactured domestically but sold elsewhere due to domestic market barriers—a paradox we can no longer afford to ignore.
LSO members are diverse and include many drug and medical device industry stakeholders, and LSO has been actively engaged in collaborative efforts to prepare for and respond to the U.S. tariff threat. We are well positioned to communicate the challenges our sector is facing and advocate for effective policy responses. Life Sciences Ontario’s message is clear: our sector requires special consideration in trade negotiations because the consequences of disruption extend far beyond economic metrics to patient outcomes and national security.
- On March 4, 2025, the U.S. imposed 10% tariffs on Canadian energy imports and 25% tariffs on all other Canadian imports.
- In response, Canada enacted reciprocal 25% tariffs on $30 billion worth of U.S. imports.
- A second round of Canadian countermeasures on an additional $125 billion of U.S. goods is under consideration.
- The Canadian government is seeking stakeholder feedback until April 2, 2025.
Key Trade Agreements Between the U.S. and Canada:
- 1989: U.S.-Canada Free Trade Agreement (CUSFTA)
- 1994: North American Free Trade Agreement (NAFTA)
- 2020: United States-Mexico-Canada Agreement (USMCA)
These agreements have historically shaped North American trade, but the current tariff disputes threaten the stability of this long-standing partnership.
The challenges and Potential Impact on Life Sciences are multi-fold:
- Highly integrated pharmaceutical supply chains are at risk.
- Potential disruptions in active pharmaceutical ingredient (API) sourcing could lead to drug shortages.
- Increased production costs threaten market competitiveness.
- Delays in product launches and clinical trials due to economic uncertainty.
40% of Canada’s medical technology imports come from the U.S1
74% of Canadian medical technology exports go to the U.S1
16% of drugs sold in Canada are imported from the U.S2
Approximately 77% of Canada’s pesticide imports originate from the U.S3
Canada ranks last among G7 countries in the speed of regulatory approvals for new medicines and access to innovative treatments4. This regulatory bottleneck is evident across the healthcare innovation spectrum, with fewer than 20% of new medicines launched globally available through Canadian public drug plans5 and Health Canada’s intricate approval system causing significant delays for innovative drugs, particularly for life-threatening conditions like cancer6. The situation extends beyond pharmaceuticals, affecting multiple sectors—Canadian agritech startups face financial and regulatory compliance barriers7, with approximately one-quarter of proposed plant breeding research projects abandoned due to perceived regulatory burdens8, while MedTech innovators must navigate complex approval pathways during supply shortages9,10, further complicated by recent expansions of Health Canada’s authority that potentially increase compliance burdens for manufacturers11.
Canada’s health technology companies continue to struggle with outdated regulations that fail to keep pace with rapid innovations in AI, digital health solutions, and medical device development12,13. A 2023 study highlighted the urgent need for regulatory frameworks that balance patient safety with innovation, calling for open data access, sustained government funding, and alignment with international standards13.
Many startups also struggle with the rigorous safety and efficacy requirements to meet compliance14. The regulatory disadvantage is quantifiable—between 2012 and 2019, median drug approvals in the U.S. occurred 289 days earlier than in Canada, while European approvals came 154 days earlier15, hindering timely access to treatments and undermining Canada’s global competitiveness in life sciences innovation.
A robust interprovincial trade framework opens markets for Canadian life sciences companies to market their products, increase their revenues, and relieve some of the pressure caused by tariffs. For instance, the agriculture and agri-food sector has faced obstacles such as varying trucking regulations and inconsistent meat inspection protocols between provinces. These discrepancies have led to increased operational costs and inefficiencies, with estimates suggesting that such barriers cost the industry approximately CA$1.7 billion annually16.
Despite initiatives such as the Canadian Free Trade Agreement (CFTA), numerous exemptions and sector-specific regulations persist, continuing to hinder interprovincial commerce. Studies suggest that eliminating interprovincial trade barriers could increase Canada’s GDP by approximately 4% to 8%, underscoring the need for stronger national integration17.
Canada has historically struggled to retain top talent in life sciences, with many researchers, entrepreneurs, and companies migrating to the U.S. due to better access to capital, regulatory efficiency, and commercialization opportunities18. The current trade and policy landscape presents a strategic opportunity to reverse this trend and strengthen the domestic ecosystem.
Recent developments highlight a growing interest in Canadian institutions from U.S.-based professionals. Notably, three prominent Yale University professors have joined the University of Toronto, citing concerns over academic freedom and the U.S. political climate19. According to Canadian Medical Association, as of 2019, there has been approximately 13% increase in U.S.-trained physicians relocating to Canada since 2014. However, barriers to licensing and integration remain a challenge for foreign-trained professionals20.
For the life sciences sector, talent repatriation and retention are crucial. Ontario has significant innovation from life sciences companies initially developed through decades of government investment in academic research. However, the commercialization path for local research breakthroughs often leads Ontario startups to relocate to the U.S. With fewer homegrown companies scaling up, job opportunities for local scientists and entrepreneurs diminish, despite extensive training in Ontario’s publicly funded postsecondary institutions18.
A report from BDC underscores that a lack of early-stage capital is stalling company growth, pushing promising life sciences innovators out of the province21. To counteract this trend, targeted commercialization incentives and policy reforms are urgently needed. Federal and provincial governments must work with industry stakeholders to develop funding mechanisms, streamline regulatory processes, and foster an environment that encourages investment in Canadian-based R&D and manufacturing.
LSO’s Efforts to Respond to Tariff Threats: A Call for Strategic Action
LSO believes the imposition of Canadian tariffs on life sciences products could have unintended consequences and should be avoided at all costs. Our members are concerned that tariffs could lead to supply chain disruptions, drug shortages, decreased access to new innovations via clinical trials, and increased overall health system costs.
Ontario’s life sciences sector is a key driver of innovation and growth in Canada and stands to be significantly impacted by trade tariffs. Restrictions on cross-border movement will increase costs, limit accessibility in healthcare systems in both countries, and delay the delivery of critical therapies. It’s vital for all sectors to collaborate in addressing these challenges.
A 25% import tariff on pharmaceuticals and medical devices would inflate production costs, potentially forcing price adjustments or supply reallocations that prioritize other markets, reducing availability in Canada. The highly integrated pharmaceutical supply chain relies on free movement across borders. Companies are working to mitigate challenges by diversifying suppliers, but short-term solutions are not always feasible due to contractual obligations and regulatory approvals.
The imposition of tariffs could also lead to rising healthcare costs and reduced investment in Canada’s research and innovation ecosystem, particularly affecting smaller firms and startups. Stability and predictability in trade relations are essential for both Canada and the U.S.
- Collecting Input from Members (Ongoing) – LSO has initiated an e-blast and a dedicated newsletter segment to gather feedback from stakeholders on the impact of tariffs.
- Ontario Business and Trade Leadership Coalition (OBTLC) – LSO’s President and CEO Jason Field, is a member of the coalition which unites leaders from key trade-dependent sectors to champion business-driven solutions, advocate for effective policies, and position Ontario as a global trade leader.
- Life Sciences Tariff Task Force – LSO is partnering with the Ontario Centre for Innovation, MedTech Canada, Medical Innovation Xchange, Innovative Medicines Canada, Borden Ladner Gervais LLP, and KPMG Canada to assess the sector-wide impact of tariffs and develop solutions.
- Ontario Pre-Budget Submission – LSO has formally submitted recommendations to the Ontario government outlining the risks of tariffs and proposing mitigation strategies.
- Federal Pre-Budget Submission – LSO has provided a submission to the federal government emphasizing the urgent need for policy measures to safeguard the life sciences sector.
- Joint Advocacy Letter – LSO co-signed a letter with industry leaders, including Innovative Medicines Canada, BIOTECanada, BIOQuébec, Life Sciences BC, MaRS Discovery District, Medtech Canada, the Neighbourhood Pharmacy Association of Canada, and Research Canada, urging the government to exclude essential healthcare products from retaliatory measures.
- Submission on Countermeasures – LSO provided feedback on the Notice of Intent to Impose Countermeasures in Response to U.S. Tariffs on Canadian Goods, advocating for policies that minimize harm to the life sciences sector.
Read Jason Field’s Op-ed in The Hill Times
This section will be updated as new information becomes available
How LSO Can Support Its Members!
We encourage life sciences companies to work closely with LSO in advocating for strategic solutions. Your input is vital in ensuring the sector’s resilience amid these challenges.
The resources will be updated with newer sources as more information becomes available: