HIDA
By Elizabeth Hilla
Many healthcare industry leaders say the uncertainty caused by tariffs now rivals the disruptions experienced during the pandemic. While the news changes on a daily basis, there are a few underlying points likely to remain the same.
Medical manufacturers are boosting resilience by moving out of China. A key lesson from the pandemic was that the resilience of the medical supply chain requires sourcing products from a variety of domestic, nearshore and global sources. HIDA surveyed medical manufacturers in February 2025 and found that 88% of respondents had seen manufacturing move out of China. Medical manufacturing is moving to locations in Southeast Asia, nearshore locations like Mexico, and reshoring to the United States. That said, manufacturing locations are primarily driven by economic factors, such as access to raw materials and labor. China’s large working-age population of 773 million – more than twice that of the U.S., Mexico, Vietnam, Thailand, and Malaysia combined – means that China will be a major source of medical product manufacturing for the foreseeable future.
Tariffs are paid in the United States by American companies. Any tariff due is paid by the U.S. company that is the importer of record, not the exporting country. Products are manufactured in locations around the globe and shipped to the United States. At the port of entry, U.S. Customs determines if the product is subject to tariffs. Once the tariff is paid by the U.S. importer, the goods are cleared into the United States for distribution.
Tariffs are cumulative. A variety of tariffs are levied on medical products from a variety of legal authorities. Some are pre-existing tariffs on unfair trade practices, some are emergency tariffs levied to restrict the flow of fentanyl, and a third category consists of reciprocal and retaliatory tariffs levied by President Trump on April 2. The April tariffs were paused through early July and China tariffs were modified on May 12. These tariffs are cumulative – or “stackable.” Each tariff stacks on top of the other to create a large aggregate tariff. For example, medical products such as syringes, needles, and medical gloves imported from China are subject to three different tariffs, with cumulative rates at one point as high as 245%.
Narrow margins make tariffs difficult to absorb. Every stakeholder across the continuum of care faces financial challenges and shrinking margins. The median operating margins for health systems in the United States hover between 1% to 2%. For publicly-traded healthcare distributors, the figure is about 3%. The tariffs under consideration are many orders of magnitude larger than the margins on which we operate.
Distributors can help providers with tariffs. Distributors and GPOs are working to help their customers respond to tariffs, identifying alternative sources for products when they are available and working to mitigate costs through supply chain efficiencies.
Tariffs are HIDA’s top priority in government affairs. Our priorities are to promote resilience by ensuring product availability, and encourage tariff relief for critical medical products. HIDA continues to advocate on behalf of the medical supply chain with the Trump administration and Congress.