Details on the tariffs

On Saturday, Trump ordered tariffs of 25% on imports from Canada — excluding energy imports — and Mexico, and 10% tariffs on goods from China. These tariffs are slated to take effect on Feb. 4.

Trump said the tariffs would remain in place until Canada, China, and Mexico stop the flow of fentanyl and undocumented immigrants into the United States.

The move prompted retaliatory tariffs from Canada, with Prime Minister Justin Trudeau saying Saturday that Canada would issue its own 25% tariff on $155 billion Canadian worth of goods from the U.S. That would include tariffs on $30 billion worth of goods as of Tuesday.

However, on Monday, the United States agreed to a 30-day pause on the tariffs. Trudeau said in a post on X that the pause would occur "while we work together," saying the Canadian government would name a fentanyl czar, list Mexican cartels as terrorist groups, and launch a "Canada-U.S. Joint Strike Force to combat organized crime, fentanyl, and money laundering."

China has said it will challenge the tariffs at the World Trade Organization and take unspecified "countermeasures" in response.

Meanwhile, Mexico threatened to also impose retaliatory tariffs on U.S. goods, but on Monday, Mexico and the U.S. reached an agreement to delay tariffs of Mexican goods into the U.S. for one month after Mexico agreed to increase security at the border. Mexican President Claudia Sheinbaum announced that Mexico would immediately reinforce its northern border with 10,000 members of its national guard to address drug trafficking from Mexico into the United States.

How tariffs could impact healthcare

Much of the healthcare industry relies on goods imported from Canada, China, and Mexico. For example, China is a large producer of pharmaceutical ingredients.

According to industry group AdvaMed, Mexico is the top source of medical devices used in the U.S., with around $15 billion of med-tech being imported annually from the country, more than any other single country. AdvaMed has asked the Trump administration to exempt essential medical products from tariffs, and noted the taxes could lead to higher prices, less innovation, and disruptions to supply chains.

"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," Whitaker added, referring to the smaller 2.3% levy the industry fought to have removed from the Affordable Care Act that was repealed in 2020.

AdvaMed noted that exemptions were provided for many medical devices in the tariffs imposed on China during Trump's first term, and said it's advocating for a similar approach.

"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," Whitaker said. "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."

Hospitals also rely on imports for several everyday supplies like gowns, gloves, and syringes, as well as for bigger items like CT scanners and X-ray equipment. According to research firm Capstone, supply expenses account for 13% of hospitals' total expenses.

Marta Wosińska, a senior fellow in economic studies at the Brookings Institution, said that tariffs could cause more shortages of generic drugs with thin profit margins if drugmakers aren't able to raise prices. Generic drug companies might not be able to raise their prices in response to the tariffs because of penalties for raising prices too quickly in some government programs, and because some drugmakers may have long-term contracts with group purchasing organizations, STAT reports.

"If you face inflation rebates, you are not able to pass on the tariffs onto buyers. If you also have low margins, you may not be able to absorb those tariffs," Wosińska said. "So what gives? You may exit the market and this in turn could result in shortages because drug markets don't easily rebound to shocks."

According to an estimate from The Budget Lab at Yale University, after shifts in the supply chain, the long term prices of pharmaceuticals in the United States will be 1.1% higher.

However, Wosińska noted that higher prices for pharmaceutical ingredients might not necessarily be a bad thing. Since the COVID-19 pandemic, the United States has been trying to reduce its reliance on China to protect the supply chain. A large amount of drug manufacturing has moved to China since it's less expensive there, so moving away from China would come at a cost.

"If we want a more resilient supply chain, we will have to pay for it," Wosińska said.