Trump tariffs and health care: Protecting the national interest or driving up prices?

© stockyme - stock.adobe.com

Tariffs on imported goods are crucial “for protecting the national interest,” but they also may push up the prices of medical supplies and drugs.

It appeared tariffs will be on hold for a month for items imported from Mexico as U.S. President Donald Trump, Mexican President Claudia Sheinbaum, and their top advisers negotiate a deal between the two nations, according to statements from the presidents’ social media accounts.

Tariffs on hold for Mexico

The move came as health care organizations warned of ramifications for the sector. The White House issued a statement that said added costs on imports are necessary to block “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl,” according to the White House.

Trump said the United States will impose the tariffs on goods imported from Canada, Mexico and China, under jurisdiction of the International Emergency Economic Powers Act (IEEPA). The amounts were to 25% for items coming from Canada and Mexico, 10% on imports from China, and 10% on energy resources from Canada.

“President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country,” said a statement from the White House.

“Tariffs are a powerful, proven source of leverage for protecting the national interest,” the White House statement said. “President Trump is using the tools at hand and taking decisive action that puts Americans’ safety and our national security first.”

As of late morning Feb. 3, it appeared the tariffs still were in effect for Canada and China. As for Mexico, that nation will commit 10,000 troops to the American border to stop the flow of fentanyl and illegal migrants into the United States, according to a statement published on X, formerly Twitter, citing the president’s posts from the Truth Social website.

On Feb. 3, the Healthcare Distribution Alliance (HDA), the Association for Accessible Medicines (AAM), and the U.S. Chamber of Commerce all issued statements about the potential effects. They generally agreed it’s good for the nation to strengthen American manufacturing and add jobs. But there’s a chance the added fees will cause prices to increase for generic drugs and items hospital staff use every day, which could hurt hospitals, according to the American Hospital Association (AHA).

Potential shortages?

HDA has almost 40 members who connect 1,200 health care manufacturers with approximately 330,000 providers. Strategic investments in domestic manufacturing can strengthen supply chain resilience, HDA said in its statement.

“However, we respectfully urge caution on instituting tariffs on sectors that will impact medical products,” the HDA statement said. Tariffs on pharmaceuticals would strain the pharmaceutical supply chain and could adversely affect American patients, whether through increased medical product costs or manufacturers leaving the market. Accordingly, we ask the administration to consider establishing exemptions for pharmaceutical products and long implementation timelines to maintain the safe and efficient delivery of approximately 10 million medicines and health care products every day.

"We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress,” the HDMA said. “Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs.”

Distributors operate on low profit margins of 0.3%. Passing on costs to payers and patients, including those in Medicare and Medicaid, could result in shortages of medications, according to HDA.

Generic drugs dry up?

The generic drug market operates with a thin profit margin – and sometimes nonexistent profit margin, according to AAM.

Americans benefit from low-cost generic medicines, but tariffs could hurt the makers of those drugs, said a statement from AAM President and CEO John Murphy III.

“Generic manufacturers simply can’t absorb new costs. Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater,” Murphy’s statement said. “The overall value of all generic sales in the U.S. has gone down by $6.4 billion in five years despite growth in volume and new generic launches. Tariffs would make this much worse.

“Americans pay less for generics than almost anywhere in the world but are facing growing challenges of drug shortages,” Murphy’s statement said. “The previous Trump Administration opted not to impose tariffs on generic and biosimilar manufactures. AAM and its members urge the Administration to follow their past practice and work with our industry on constructive policies and regulatory reforms that will bolster the resiliency and vibrancy of this critical healthcare market to the benefit of the American economy, lower overall healthcare costs, and keeping America’s patients healthy.”

At the hospital

It was unclear exactly what effect the tariffs could have on hospital budgets, although they likely would not help.

Medical supplies comprise approximately 10.5% of the average hospital’s budget. That totaled $146.9 billion in 2023, up from $6.6 billion the year before, according to an AHA fact sheet on the effects of tariffs. AHA published the fact sheet in July 2024 in response to a proposal by the Biden administration to raise tariffs on a number of Chinese-made items. That plan included tariffs for syringes, medical masks, respirators and gloves made in China, set to take effect last year.

There were tariff exclusions for 77 medical products exempted since the COVID-19 pandemic, according to AHA. Those were set to expire in May 2024, but the administration announced most were granted an extension through May 31, 2025.

“AHA supports efforts to incentivize domestic manufacturing of essential medical supplies to improve the resiliency of the health care supply chain,” the AHA fact sheet said. “However, higher prices for high-volume medical supplies, such as personal protective equipment and syringes, are likely to exacerbate and prolong the financial headwinds that hospitals already face today.”

Right focus, wrong tactic

Along with hospitals, prices will go up for everyday families if the tariffs take hold, said a statement from U.S. Chamber of Commerce Senior Vice President and Head of International John Murphy.

"The president is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs under IEEPA is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains,” Murphy said. “The Chamber will consult with our members, including main street businesses across the country impacted by this move, to determine next steps to prevent economic harm to Americans. We will continue to work with Congress and the administration on solutions to address the fentanyl and border crisis."