Will new US tariffs on China disrupt healthcare supply chains?

President Donald Trump has ordered a new 10% tariff on $200 billion in Chinese export products, representing slightly less than half of all Chinese-made goods purchased by US buyers. The tariffs took effect on September 24th and will rise to 25% on January 1st, absent a new trade agreement between China and the US. These new tariffs are an increase on top of any existing duty on the goods.

President Trump has signaled his desire for a trade war with China since 2016 when he unveiled his preferred tariff policy of 45% on all Chinese imports. In his announcement of the new tranche of tariffs on September 17th, his statement reiterated his willingness to tax all imports if China took retaliatory action, which China promptly did by announcing new duties on imports from the US.

Previous rounds of the president’s tariffs focused on industrial product categories such as raw materials, mechanical or electronic components. This latest round of tariffs impacts the consumables that healthcare organizations purchase in large quantities, such as natural and manmade textiles, paper and wood pulp products, plastic and rubber products, as well as narrower product categories like “badges” and “headwear”.

Healthcare supply chains have managed sudden cost increases before. For example, the Medical Device Tax (now under a moratorium and seemingly headed for eventual official repeal) was a 2.3% excise tax charged to manufacturers. Sudden price spikes – as high as 5,000% are often seen in pharmaceuticals as patent protections and corporate owners change. In our experience, though, IDN supply chains have not been asked to accommodate a country-specific, multi-category hike of 25%.

At ASP Global, we are preparing to respond to today’s fast-changing circumstances. We are currently assessing our portfolio’s exposure to the tariffs that became effective on September 24 and analyzing the potential impact of January 1, 2019, tariff increases.

ASP Global has identified high-quality manufacturers of health system supplies in over 15 countries, including in the United States. If your health system needs to diversify to new countries-of-origin for impacted products, we are ready to advise on manufacturing partners, timelines, and strategies to safeguard the quality of your products.

Contact William Fallon at william.fallon@aspglobal.com for advice on weathering this trade war.