President Donald Trump brought the world’s two biggest economies to the brink of a trade war Friday by announcing a 25 percent tariff on up to $50 billion in Chinese imports to take effect July 6. Here’s how it could affect the U.S. economy and consumers. (June 15) AP
It’s going to be more expensive to import pacemakers, ultrasound equipment and other medical gear from China, which means the cost of those services could tick up.
But it could have been worse. The medical device sector did not take as big a hit as anticipated from the Trump Administration’s 25 percent tariffs on $34 billion in Chinese goods that went into effect Friday, part of President Trump’s plan to equalize global trade polices. This means patients may be able to avoid higher doctor and hospital bills, at least for now.
After President Trump’s announcement about planned tariffs and the release this spring about the list of products to likely be affected, a group of 40 lawmakers in Congress pressed for a reduction in the tariffs on medical devices, as did industry trade group AdvaMed. In the end, the proposed amount of medical technology affected was lowered from nearly $3 billion to about $836 million.
Many products including defibrillators, hearing aids, artificial joints, artificial teeth and fillings “escaped” the tariffs, at least for now, and at this point the effect is likely “manageable,” said Brandon Henry, an analyst with RBC Capital Markets in a recent note to analysts. “While we believe this was positive for medtech, given the magnitude of future tariffs proposed by President Trump, medical devices may not escape the potential upcoming 10 percent tariffs.”
A tariff is essentially a tax on an imported good. Companies affected by tariffs can respond by absorbing the extra expense, increasing prices, moving production to other countries or some combination of the three.
Among the medical devices and diagnostic technology products facing the 25 percent tariff coming from China, which has one of the world’s largest medical device markets (the U.S. is No. 1; China is ranked between No. 2 and No. 4, depending on the source):
•Electrocardiographs and EKG parts
•Magnetic resonance imaging (MRI) equipment
•X-ray equipment and X-ray tubes
•Computed tomography (CT) equipment
•Anesthetic equipment and instruments
•Ophthalmology instruments and equipment
•Electrodiagnostic equipment (used for nerve testing) and parts
•Ultraviolet and infrared equipment
The medical tech industry says it will continue to seek to temper the impact of additional tariffs on medical technology.
“We sought to remove medtech from the (tariffs) Sec 301 action due to concerns about the adverse effects on our competitiveness, as well as the potential longer-term impact on patient access to medical technology,” said Ralph Ives, executive vice president, global strategy and analysis for AdvaMed, which represents medical device makers.
Overall, the U.S. imports about $6 billion in medical technology from China, while China imports about $4 billion in U.S. medical tech, Henry estimates.
So far, China has not imposed any tariffs on U.S. medical devices, but has proposed some. “If trade tensions escalate, medical devices imported into China from the U.S. may not be immune from future potential tariffs,” Henry said. “Also, China may take other actions to limit the expansion of U.S. companies into China.”