The Impact of Tariffs on Healthcare: Medical Devices and Pharma at Greatest Risk

Broad economic uncertainty and the Trump administration’s aggressive and fluctuating trade policies have led to outsized market moves, though most view the healthcare sector as better positioned than others. Healthcare’s reputation as a safe haven has, overall, helped its stocks hold up better this year than the broader market.

Healthcare is generally considered more insulated from macro and political impacts than other sectors because of its domestic focus and relatively predictable demand. For example, many healthcare products and services are considered essential and thus are better able to withstand an economic downturn.

Yet not even healthcare is immune to the effects of President Donald Trump’s tariffs. Among healthcare companies, tariffs are expected to hit makers of medical devices and pharmaceuticals the hardest.

Medical Devices

Experts have highlighted tariffs as the one overarching policy risk that could materially affect the medical devices space. This marks a departure from the first Trump administration, when medical devices and other life-saving supplies were exempt from tariffs.

Companies that manufacture medical devices in locations outside of the United States now face the most obvious risk in experts’ eyes as their goods are subject to tariffs. Mexico is a major manufacturing hub for medical devices, and companies with a heavy manufacturing presence there were initially considered at high risk due to tariff expectations. Yet proposed rules that would exempt USMCA-compliant companies from tariffs have lessened this risk factor.

Likewise, suppliers to medical device companies are also eligible for the USMCA-compliant tariff exemption, although analysts say it is not yet clear which suppliers are USMCA-compliant. Those suppliers that manufacture in Mexico but are not covered by the USMCA expose their medical device customers to the risk of higher input costs and potential supply chain disruptions.

Meanwhile, most medical device multinationals are considered relatively insulated from the impact of tariffs on Chinese imports. This is because these companies started building up a local manufacturing presence within China years ago in response to the launch of the protectionist “Made in China” policy. This trend was exacerbated during Trump’s first term as companies sought to reduce shipments from China to the United States to minimize potential tariff impacts. 

By contrast, companies that export U.S.-made products to China face significant headwinds because China’s retaliatory tariffs on U.S. goods make it more expensive for these companies to do business. One example is GE HealthCare, which is a major exporter of imaging equipment to China and was the worst-performing medical device stock immediately following the April 2 tariff announcement.

Pharmaceuticals

During Trump’s first term, pharmaceuticals were given an exemption from tariffs. Initially, the industry was optimistic that pharma would be afforded the same treatment this time around, and pharmaceuticals were excluded from the list of reciprocal tariffs the Trump administration announced on April 2. However, Trump has since promised “major” pharma tariffs in an effort to stimulate U.S. drug manufacturing.  

The unexpected inclusion of Europe in Trump’s tariff plans is considered especially disruptive to the pharmaceutical industry and threatens to dampen pharma R&D and manufacturing activity there. The administration is particularly focused on disincentivizing a tax planning strategy in Ireland that enables companies to take advantage of the country’s lower tax rate by booking operating profits for U.S.-sold products in their Irish subsidiaries. All told, the European Union could lose $100 billion in pharma investments due to potential targeted import taxes on certain medications, according to the European Federation of Pharmaceutical Industries and Associations.

As with medical devices, pharma companies are considered less exposed to China tariffs than other subsectors. However, they are not immune. While U.S. pharma’s manufacturing presence in China is relatively light, many of the active ingredients used to manufacture pharmaceuticals are made there.

Related Reading: 5 Pharma Industry Trends to Watch in 2025

How Will Medical Device and Pharma Firms Respond?

Onshoring medical device and pharma production would be a tall order. Experts see it taking years, not months, to do so — a long-term effort that could outlive the Trump administration. Experts note that construction timelines for medical device and pharmaceutical manufacturing facilities are particularly drawn out because they require FDA oversight.

Medical device and pharma companies have some recourse. One avenue some companies are using is stockpiling inventory to help mitigate near-term uncertainty. In fact, some firms started rushing shipments to the United States as early as late last year in anticipation of a tariff announcement. Another strategy is to pass on any tariff-related cost increases to customers, which would increase pressure on healthcare providers and the patients they serve. This strategy is considered by experts to be more viable than onshoring production.

Firms are also using legal avenues to weather the tariff storm. Many are stepping up their lobbying efforts in an attempt to get officials to exempt medical devices and healthcare products from tariffs. Industry trade associations like the Advanced Medical Technology Association have taken the lead on lobbying efforts.

Trump’s 90-day pause on most of the reciprocal tariffs implemented just days earlier offers some reprieve for healthcare companies. Yet the situation is still highly fluid and comes at a time when the industry is absorbing other shocks to the system such as the Trump administration’s cuts to FDA staff and National Institutes of Health research funds. 

Stay Ahead of Tariff Developments 

With the constant shifts in tariff policy, it’s critical to rely on a tool that delivers all the most relevant insights to you in real time, while filtering out extraneous noise. 

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