Trump tariffs on imports and effects on health care, explained

© zimmytws - stock.adobe.com

The imposition of tariffs on imported medical goods has significant implications for the health care sector, affecting everything from the cost and availability of medications to the financial stability of health care institutions.

What’s happening

President Donald J. Trump
_{© Courtesy of the Library of Congress Prints and Photographs Division}

As of March 3, leaders of the health care sector and across other industries were awaiting action from the White House on potential tariffs imposed on goods imported from Canada, Mexico and China. By mid-afternoon, President Donald J. Trump confirmed his Feb. 1 announcement to implement of a 25% additional tariff on imports from Canada and Mexico and an additional 10% tariff on Chinese goods entering the United States. Energy resources form Canada were to have a lower 10% tariff, according to the president’s announcement. The tariffs were to go into effect on March 4 and the president said there was “no room” for delay, according to the Associated Press.

The added costs to imported goods are meant to address an emergency situation. The president claimed the authority under the International Emergency Economic Powers Act (IEEPA) to stem the flow of illegal immigrants and drugs, including the deadly drug fentanyl that has contributed to the death rate of the U.S. opioid epidemic. China, Canada and Mexico have not been accountable to their promises of halting illegal immigration and the importation of deadly narcotics, according to the White House.

Effects on health care

The health care sector has been a major player in helping those affected by opioid addiction. Apart from the opioid crisis, imposition of tariffs on imported medical goods has significant implications for the U.S. health care system, affecting everything from the cost and availability of medications to the financial stability of health care institutions. Understanding these impacts is crucial for physicians, as they directly influence patient care and the operational dynamics of medical practices.

What leaders are saying

The American Hospital Association (AHA) has stated current and proposed tariffs could jeopardize the availability of medications and devices that patients use. AHA President and CEO Rick Pollack wrote to the president expressing concerns.

“We ask that you consider granting exceptions to the current and proposed tariffs for medical devices and pharmaceuticals made in Mexico, Canada and China that are essential to the provision of safe, effective care in America's hospitals, clinics, and other settings,” Pollack wrote in a letter to the president. “It is especially critical to have these exceptions for products already in shortage and for which production in the countries subject to increased tariffs supply a significant part of the U.S. market.”

AHA is not alone. Black Book Research conducted a survey of 160 health care professionals, including physicians, executives and pharmaceutical makers. That research firm reported “widespread apprehension about escalating costs for hospitals, physicians, payers, and patients.”

"Health care providers, payers, and patients will all experience the financial ramifications of these tariffs," Black Book founder Doug Brown said in a statement. "As medical supply costs escalate, hospitals and insurers will be forced to make difficult financial decisions, inevitably passing increased expenses down to patients through higher out-of-pocket costs."

The American Medical Manufacturers Association (AMMA) also cited statements from other industry leaders from earlier this year.

“Make no mistake, if there are widespread tariffs anywhere from the 10% to 25% range, I anticipate there will be corresponding price increases,” Jason Hollar, CEO of health care services and products company Cardinal Health, told analysts during the company’s earnings call earlier this year, as cited by AMMA.

By the numbers: medical supplies and equipment

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. AHA analyzed the economic effects 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.

The 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.

Medical devices locked out?

In February, AdvaMed, the Medtech Association, President and CEO Scott Whitaker outlined the risks tariffs pose on medical devices from China, Canada and Mexico.

“We have shared with the administration our concerns about the potential impact tariffs could have on the medical technology supply chain that American patients depend on for their care,” Whitaker said in a statement. “In light of that risk, an exemption was provided for most medical devices during President Trump’s first term with respect to the tariffs on China, and we are advocating for a similar approach this time.”

The medical device market is highly regulated, a factor that could lead to harsh financial effects if tariffs are imposed. The U.S. Food and Drug Administration decides what products can put on the market, and then Medicaid, Medicare, and the U.S Veterans Administration largely determines the reimbursement for procedures using medtech products.

“This means tariffs impact American companies similarly to an excise tax, which would lead to less R&D/innovation, layoffs, higher prices for the above-mentioned payors and patients, or all of the above,” Whitaker said. “Additionally, moving manufacturing from one facility to a different or new facility requires FDA approval, which makes it difficult in the short term to adjust production to the U.S.”

Impact on pharmaceutical products

The pharmaceutical sector is particularly vulnerable to the effects of tariffs, given its dependence on global supply chains for active pharmaceutical ingredients (APIs) and finished products. China, for example, is a major supplier of both raw pharmaceutical ingredients and finished medications to the U.S., especially for generic drugs, which constitute 90% of U.S. prescriptions. The imposition of tariffs could disrupt the availability of these essential medicines, leading to shortages and higher prices, according to Vox.

Generic drug manufacturers, operating on thin profit margins, may find it challenging to absorb the additional costs imposed by tariffs. This situation could result in reduced access to essential medications for patients, particularly those relying on affordable generic options. Moreover, the potential for engineered shortages, as opposed to accidental ones, raises concerns about the lack of contingency plans to mitigate these impacts, the Vox report said.

Strain on health care institutions

Hospitals and health care providers are already navigating a complex financial landscape, and the additional burden of increased costs due to tariffs could exacerbate existing challenges. AHA estimated medical supply expenses account for approximately 10.5% of the average hospital’s budget, totaling $146.9 billion in 2023 — a $6.6 billion increase over 2022. The anticipated rise in prices for essential supplies could strain hospital budgets further, potentially affecting staffing, patient services, and the ability to invest in new technologies.

Smaller healthcare facilities and clinics, which may lack the purchasing power to negotiate favorable terms with suppliers, could be disproportionately affected. These institutions might face difficulties in maintaining adequate inventories of necessary medical supplies, thereby impacting patient care delivery.

Potential benefits and strategic considerations

While the immediate effects of tariffs present challenges, some argue that these measures could incentivize domestic production of medical supplies and pharmaceuticals, thereby reducing dependence on foreign sources. AMMA Executive Director Eric Axel suggested that tariffs could help U.S. manufacturers become more competitive, which is key to protecting the U.S. healthcare supply chain.

“We basically go from one emergency to another. If we don’t have resilience, we leave ourselves exposed,” he said in the AMMA analysis.

However, transitioning production domestically is a complex and time-consuming process. Establishing new manufacturing facilities for medical equipment could take between 1.5 to two years under ideal conditions, while launching drug manufacturing facilities might require three to five years.

During this transition period, the health care system would need to navigate the challenges posed by tariffs while working towards greater self-sufficiency.

A boost for domestic drug production?

In anticipation of tariffs, pharmaceutical companies acknowledged they were exploring strategies to mitigate financial impacts. For instance, Pfizer's CEO, Albert Bourla, indicated that the company could leverage its existing U.S. manufacturing facilities to counter potential tariff effects.

reuters.com

Similarly, Eli Lilly announced plans to invest $27 billion in constructing four new U.S. manufacturing plants, aiming to reduce dependency on foreign imports and safeguard the supply of critical medications.

A new kind of normal?

The AMMA analysis noted: “Companies are coping with the uncertainty around Trump’s tariffs and trying to determine whether they’re temporary threats or a new kind of normal.”

“This administration, in the first iteration, made policy at 2am on Twitter. Things are constantly changing,” Kyle MacKinnon of group purchasing organization Premier said in that report. “We’re collectively trying to analyze and evaluate with the information we have right now, knowing it’s going to probably change, and we’re just going to have to keep flexible and pivot.”

Implications for physicians

Physicians should be cognizant of how tariffs on imported medical goods can indirectly affect their practice and patient care. Increased costs for medical supplies and medications may lead to budget constraints within healthcare facilities, potentially resulting in staffing shortages, reduced access to necessary equipment, and limitations on available treatments. Physicians might also encounter patients facing higher out-of-pocket costs for medications, which could affect adherence to treatment plans.

Staying informed about these economic factors enables physicians to advocate effectively for their patients and collaborate with healthcare administrators to develop strategies that mitigate the negative impacts of tariffs. This might include participating in policy discussions, supporting efforts to bolster domestic production of medical supplies, and working closely with patients to navigate changes in medication availability and costs.

Conclusion

The imposition of tariffs on imported medical goods presents a multifaceted challenge to the healthcare sector, influencing costs, supply chains, and patient access to essential services. While there is potential for long-term benefits through the promotion of domestic manufacturing, the immediate and short-term impacts necessitate careful consideration and proactive measures. Physicians, as frontline providers of care, play a crucial role in adapting to these changes and ensuring that patient care remains uncompromised during periods of economic adjustment.