Tariffs imposed by President Trump on Tuesday affect the medical device space unevenly. Companies with a domestic manufacturing footprint and sales concentration should be relatively insulated from the impact of tariffs, while those companies with footprints and sales in Canada, China, or Mexico may face supply shortages and elevated cost of goods.
China and Mexico are two of the largest medical equipment manufacturers in the world. They represent roughly 40% of total medical equipment goods imported to the U.S. from January through September 2024, according to Morgan Stanley data.
Two ETFs that are in the space, IHI and XHE have had different reactions to the tariff and industry news:
The health care industry relies heavily on imported medical supplies and equipment. For instance, as of May 2, 2024, the U.S. had imported $14.9 billion in medical equipment, with a substantial portion originating from China. The American Hospital Association (AHA) analyzed potential economic impacts last year as the administration of President Joe Biden was considering increased tariffs on various Chinese-made medical products, including syringes, medical masks, respirators, and gloves. Various tariffs were set to rise from 25% to 50%, with most increases taking effect at staggered times starting last summer.
Those heightened tariffs were expected to escalate the prices of high-volume medical supplies, such as personal protective equipment (PPE) and syringes, thereby exacerbating the financial challenges that hospitals and health care providers already face. The same concerns have been repeating across the industry since the president’s Feb. 1, 2025, announcement.
A survey by Black Book Market Research had results showing more than 80% anticipate a surge in costs for hospitals and health systems by at least 15% in the next six months due to increased import expenses. Approximately 70% predict that drug costs will rise by at least 10%, assuming the higher tariffs are implemented.
Beneficiaries of this dynamic will be those companies that can take advantage of competitive disruptions.
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