Recent trade policies announced by President Donald Trump have created significant uncertainty in the medical device industry, which relies heavily on international manufacturing and supply chains. The administration’s shifting stance on tariffs has particularly impacted the sector, with a 25% tariff initially ordered on Canada and Mexico before being delayed for one month, while a 10% tariff on Chinese imports has already taken effect. Additional tariffs on European Union goods have been threatened, along with plans for reciprocal tariffs on nations that levy duties on U.S. goods.
Supply chain experts indicate these measures could prove expensive for medical technology companies, especially given the unclear duration of these policies. Many U.S. medical device manufacturers depend on foreign sources for raw materials and components, even when final assembly occurs domestically.
Harvard Business School Professor Willy Shih emphasizes that the interconnected nature of global supply chains cannot be quickly dismantled, noting that business leaders require certainty for long-term planning. The medical device industry’s main lobbying organization, Advamed, has requested exemptions for medical devices and supplies, warning that the tariffs could reduce research investment, trigger job losses, increase healthcare costs, and potentially create shortages of essential medical technologies.
The American Hospital Association has joined in seeking exemptions, expressing concern that disrupting imports of basic medical supplies from China could impact surgical procedures and patient care. Medical device companies with global manufacturing operations are carefully monitoring these developments.
According to Boston University Metropolitan College Professor Canan Gunes Corlu, while returning manufacturing to U.S. soil may appear beneficial, the process is complex and requires substantial capital investment. Companies face challenges in maintaining quality standards, cost efficiency, and profit margins when relocating production.
Many suppliers were already diversifying their manufacturing bases to countries like Vietnam, Thailand, Malaysia, and Mexico before the additional Chinese tariff, notes Shih. However, China remains crucial for electronics manufacturing, producing essential components for medical devices such as display screens and glucose meter assemblies.
Mexico has emerged as an alternative manufacturing hub, with new shipping routes established between eastern China and western Mexico. However, higher U.S. labor costs present a significant obstacle to domestic production, requiring manufacturers to focus on high-margin products or invest heavily in automation.
BDO consultant Ashley Hetrick points out that while U.S. manufacturers have increased capacity for medical consumables since COVID-19, much of this expansion occurred in Canada and Mexico. The potential for retaliatory tariffs could make it harder for U.S.-made products to compete internationally, possibly pushing buyers toward European alternatives.
Companies are exploring ways to maximize their domestic manufacturing capabilities through additional production lines and extended operating hours. However, they face competition from other industries also seeking to expand U.S. operations, including semiconductor, automotive, and aerospace sectors.
The situation raises concerns about potential impacts on innovation, as companies might reduce research and development spending to offset increased costs. Medical device manufacturers also face pressure from healthcare providers to limit price increases, creating a challenging business environment as they navigate these trade policy changes.
The industry continues to advocate for exemptions similar to those granted during the COVID-19 pandemic when Trump excluded 80 critical medical items from Chinese tariffs. As the situation evolves, manufacturers must balance the need to maintain efficient supply chains with potential requirements to restructure their global operations.