Workers in Tijuana, Mexico, sew each Medtronic Harmony heart valve by hand. Devices made outside the U.S. may be subject to new import taxes under President Donald Trump. [Photo courtesy of Medtronic]
In a statement, AdvaMed President and CEO Scott Whitaker said the medical device manufacturing association has shared concerns with the Trump Administration “about the potential impact tariffs could have on the medical technology supply chain that American patients depend on for their care.”
“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,” Whitaker said. “We will closely monitor for any effects the tariffs may have on this critical supply chain and share that information with the Administration.”
Trump put the Mexico and Canada tariffs on hold today, creating more uncertainly for device manufacturers and their customers and suppliers.
Whitaker’s comments are continued at the end of this post.
Most — if not all — U.S. medical device manufacturers have production facilities outside the U.S. and/or rely on foreign suppliers and contract manufacturers.
For example, Intuitive Surgical last month said Trump’s tariffs could hurt their business because they make instruments for their surgical robotics systems in Mexicali. In its newly published annual report, the company further detailed that risk.
“As we currently manufacture a significant majority of our instruments and accessories in Mexicali, Mexico, a 25% tariff on all imports from Mexico would increase the costs of our products manufactured in Mexico and adversely impact our gross profit,” the company said in its annual report. “Such tariffs and, if enacted, any further legislation or actions taken by the U.S. federal government that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by governments in Europe, Asia, and other countries, could adversely impact our ability to sell products and services in our OUS markets. Tariffs could increase the cost of our products and the components and raw materials that go into making them. These increased costs could adversely impact the gross margin that we earn on our products, which could make our products less competitive and reduce consumer demand. Countries may also adopt other protectionist measures that could limit our ability to offer our products and services. The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope, and nature of the tariffs.”
Trump also said he wants to tax all imports of semiconductors and chips, which are mostly manufactured abroad and increasingly used by medical device manufacturers.
Related: Medtronic CEO Geoff Martha talks Trump import taxes and supply chain
“Our industry is heavily regulated: FDA decides what products can be put on the market, and then Medicaid, Medicare, and the VA largely determine the reimbursement for procedures using medtech products,” Whitaker continued in his statement. “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. 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.”
“The increased costs posed by tariffs, and their functioning essentially as an excise tax in practice, could resurrect the climate of concern the medical device excise tax created for nearly a decade,” he said. “During the President’s first term with respect to the tariffs on China, a carve-out was provided for much of the medtech sector, given the risks to the U.S. hospital supply chain. We maintain that the potential supply chain disruption and its downstream effects on patients remain a risk, should tariffs be implemented. Shortages of critical medical technologies are a real concern in our initial modeling. Tariffs could hold back the innovation potential of the U.S. medtech industry. R&D spending would likely be the first and most direct casualty, threatening America’s medtech innovation leadership. And increased tariffs may even have the unintended consequence of boosting the competitiveness of medtech industries of other nations.”
“We hope that these critical facts resonate with the Administration, and we will continue to make our case on behalf of the patients our companies serve,” Whitaker concluded.
