The capricious tariff policies of the Trump administration are keeping the manufacturing sector on edge. Previously, we have extensively covered how the automotive industry and its supply chains in Mexico and Canada would respond if the tariff threats materialize. Among these, the potential impact on "industrial tourism" (i.e., the multiple cross-border transports of parts or components before final assembly into a vehicle) is particularly thorny – would taxes be levied each time goods cross the border? If so, car prices could skyrocket. Although the medical device industry has not received the same level of attention, several financial experts and business analysts point out that it is equally vulnerable to the broad impact of tariffs.

The启示of the pandemic for the medical technology supply chain

First, it must be acknowledged that the medical technology industry unexpectedly gained a lifeline from the COVID-19 pandemic. At the time, the sudden demand for personal protective equipment (PPE) exposed a serious lack of domestic production capacity in the United States (mainly relying on imports from China), which then sparked a wave of "reshoring" and "nearshoring." Medical device manufacturers, especially their suppliers, began to reconsider the relocation of some operations back to their home countries. Although the demand for PPE decreased in the later stages of the pandemic, with some temporarily converted facilities returning to their original businesses or closing down, the industry learned a profound lesson: the supply chain cannot be overly concentrated. Derron Stark, a partner at EY, told sister publication MD+DI: "Since 2020, many medical technology companies have enhanced their supply chain resilience by adding regional production bases, including within the United States, to mitigate the impact of tariffs."

Annual cost may soar from $500 million to $63 billion

The report "US Tariff Industry Analysis" released by the professional services firm PwC points out that if tariff measures are fully implemented, the annual tariff costs for the pharmaceutical, life sciences, and medical device industries could surge from $500 million to nearly $63 billion. This forecast does not take into account the countermeasures of trading partners and changes in corporate behavior in response to policy adjustments. In addition, if a 25% tariff is imposed on the pharmaceutical industry, tariff revenue could increase by approximately $76 billion.

The report further points out that due to the high dependence on overseas raw materials and manufacturing, the industry may face direct impacts such as a decline in profit margins, an increase in drug prices for American consumers, and supply chain disruptions. "Although the industry has long benefited from low tax rates or even tax-free policies, the Trump administration, in order to promote domestic production, is very likely to significantly increase tariffs."

PwC points out that the way forward for U.S. multinational enterprises lies in modeling the impact of these trade policies on their business operations and supply chains. Specifically, companies should consider adjusting their operational strategies, including a comprehensive restructuring of the supply chain system, adopting alternative material sourcing strategies, re-planning manufacturing and intellectual property (IP) layouts, and exploring alternative logistics solutions.

SMEs in distress

The CEO of management consulting firm Streamliners, Andreas Haag, told Medtech Dive that small and medium-sized enterprises are in a particularly difficult situation due to their lack of supply chain and pricing flexibility compared to large companies. "The current policy outlook is uncertain—will tariffs be long-lasting, or are they just being used as a negotiating tool?"

This uncertainty itself is another shock to businesses—as is well known, business activities depend on predictability. Are tariffs a negotiating tactic of President Trump, or are they an "end in themselves" as some analysts believe? Trump has always firmly believed that tariffs are a necessary prerequisite for "making America great again." In this context, corporate planning is caught in a dilemma. John Babitt, EY's Global Health Technology Leader, frankly stated in an MD+DI article: "In the face of uncertainty and continuous change, companies are forced to shift their short-term strategies into medium-term plans, and even urgently activate strategies that were not previously considered. All of this is inherently unpredictable."

EY's Stark points out that even in the face of challenges, the healthcare industry is still capable of attracting patients who need the corresponding products. ButThe core issue is: Who bears the cost? The company, the patient, or shared by both?

This article is compiled by Specialized Plastics Vision, please indicate the source when reprinting. Original source: plastics today.