March 3 update: Trump says the 25% tariffs on Canada and Mexico will begin March 4 as scheduled, while the tariff on China is doubling to 20%.
Tariffs implemented by the Trump administration will affect costs in the healthcare supply chain, and the impact would be expected to grow if the original plan for the tariffs is restored.
President Donald Trump on Feb. 1 signed tariffs of 25% on goods from Canada and Mexico and 10% for China, with the last of those adding to already existing tariffs. But the administration paused the start of the Canada and Mexico tariffs two days later, delaying them until March 4 to assess ongoing efforts of those countries to meet U.S. border-related demands.
The China tariffs are expected to affect healthcare operations, given the country’s role in producing medical supplies and active pharmaceutical ingredients (APIs) for generic and biosimilar drugs. There had been speculation that the tariff order would exempt healthcare items, but no such exclusion was forthcoming.
The tariffs thus are rekindling some of the same concerns that arose when the COVID-19 pandemic led sections of China to shut down for different stretches of a nearly three-year period.
“Scarcity is going to happen,” said Nio Queiro, chief strategy officer at Nashville General Hospital, as well as a leadership consultant and coach, “whether it happens because of long wait times in waiting to get supplies or it happens because there’s a limited number of supplies.”
Wait times for some deliveries began rising almost immediately this week because of a backlog stemming from apparent confusion over which types of shipments were subject to the tariff. A Feb. 7 modification to the tariff order was intended to alleviate the delays.
“Right now, it’s not impacting us because people have the supplies they need, but if this continues a week or two or even three, it’s going to start hitting,” Queiro said Feb. 6.
A consequential policy
In a letter to Trump, the American Hospital Association (AHA) cited China as a source of cancer and cardiovascular medications, immunosuppressives and antibiotics. The AHA said nearly 30% of APIs come from China, as do many single-use devices (e.g., blood pressure cuffs) and types of personal protective equipment for healthcare workers.
Healthcare purchasing organizations expect an impact from U.S. tariff policy in general. Before the new tariffs were signed, Vizient issued a report (registration required) projecting a 2.3% cost increase in non-pharmacy supplies over a year-long period beginning in July 2025. That would be tame compared with recent year-over-year increases in the category, such as a 6.9% jump from 2023 to 2024, per Strata Decision Technology’s latest hospital data, but it suggests prices will remain elevated.
One factor in Vizient’s forecast was the already existing tariffs on China, a policy initiated during Trump’s first administration and expanded by the Biden administration last September.
Med-surg supply costs were projected to rise by 2.3%, in part due to the September 2024 tariff, which affected products such as gloves, needles, syringes and some face masks, Vizient reported. Enteral syringes could pose a particular issue, given a tariff of 50% on the product beginning in 2026.
Even without the new tariffs, hospitals would be looking at a moderately inflationary environment for drugs as well. For example, Vizient predicted a 3.84% increase in pharmaceutical spending for the year-long period starting in July 2025.
Following the announcement of the new tariff, Premier Inc. noted that China’s retaliatory export controls include a rare-earth metal used in imaging as a contrast agent and to reduce radiation exposure. A direct impact on costs at lab and imaging facilities is anticipated.
Wariness among providers
Concern within the healthcare industry was evident in a Black Book Research survey leading up to the tariff announcement. The week-long survey included industry representatives from hospital finance and supply chain teams, payers, patient groups, health market customers, pharmaceutical and medical equipment manufacturers, and physician and ancillary practice administrators.
Among respondents, 82% predicted that hospital supply costs will rise by at least 15% over the next six months because of increased import expenses. Nearly 70% of respondents foresaw at least a 10% increase in drug costs.
Of 21 hospital finance leaders who participated in the survey, 90% said they would need to shift increased costs onto insurers and patients by raising prices.
“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,” Doug Brown, founder of Black Book Research, said in a written statement.
Meanwhile, 94% of healthcare administrators surveyed said they would need to reduce procurement volumes or delay equipment upgrades.
“My biggest concern is that we in healthcare live off our budgets,” Queiro said. “Our reimbursement hasn’t changed, so now the margins, which are razor thin as it is in healthcare, are going to be impacted again.”
Uncertainty reigns
In addition to the pandemic, the potential tariff impact also brings to mind the halt in the production of key saline products during the last quarter of 2024, after Hurricane Helene caused vast damage to a North Carolina plant owned by Baxter International, the leading manufacturer of the product.
“We saw practice models having to change,” said Imamu Tomlinson, MD, MBA, the CEO of Vituity, a physician-owned multispecialty practice that also provides staffing for hospital outpatient and emergency care. “A lot of people were using lactated ringer’s [IV fluid] and other solutions that maybe were effective in some cases but clearly suboptimal in others.”
Clinical staffing could be an area in which hospitals look to cut back in response to the tariffs, Tomlinson speculated: “There’s only one pool of money, so are they going to have to restrict resources in other areas? If you add to hospitals’ overhead costs, are there staffing adjustments that they make? Are there adjustments that they make that could negatively affect patient care?”
If the tariffs on imports from Canada and Mexico take effect, the severity of the situation would be expected to increase. Mexico is said to export more than 150 of roughly 350 pharmaceutical products and APIs that are categorized as critical by the International Trade Administration.
Going through with tariffs on the two North American countries “would really just put us in major crisis,” Queiro said. “We have to assume the worst, and if we do, we’re going to be prepared.”
Mitigatory steps
While noting he does not have direct knowledge of hospital decision-making processes, Tomlinson said ramping up supply diversification efforts is a viable step.
“If you have a single-vendor relationship with some of these medical equipment companies, in general you’re probably at risk,” he said.
When compounded by other financial constraints, the current shortages could spur a new level of emphasis on efficiency, Queiro said.
“We in healthcare are going to have to redefine how we provide care,” she said. “We had moved into a performance age [where] we knew that cost cutting was not the way to get us out of our financial situation. But now we have a situation that performance is great, but cost has come back to be our first line of sight [as to] how we do care.”
One advantage in the current scenario, she said, is that clinical teams seem more aligned with the emphasis on cost efficiency. That should pave the way for meaningful collaboration.
“They are greatly aware that is not a grab for reducing the amount of services that they provide,” Queiro said. “This is the reality of the situation in the country.”
Health system administrators should be “pulling in your clinical partners and coming up with protocols and handle it very similarly to how creative we were with the pandemic. We need to be creative with our financials, and the only way we’re going to survive this is by doing a collaboration with the clinical folks, and we’ve got to start immediately.”
