Medical Device Industry Braces for Tariffs on Chinese Goods

Posted July 11, 2018

The U.S. medical device industry is bracing for the effects of wide-ranging tariffs on Chinese goods announced by President Donald Trump’s administration, many of which went into effect last week. This first round of 25% tariffs covers 818 products imported from China, worth more than $34 billion, according to the Office of the U.S. Trade Representative (USTR). That list includes several products directly and indirectly related to the medical device industry, such as X-ray tubes, electromedical imaging components, and parts of certain medical and surgical sterilizers, among others.

More than 500 products have been removed from the initial list of taxed goods since it was published in April, according to the USTR, including defibrillators. A second set of 284 proposed products, valued at $16 billion, are undergoing further review.

The USTR is imposing the tariffs because it “has determined that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation … are unreasonable or discriminatory and burden or restrict U.S. commerce,” the administration wrote in its announcement.

During the public comment period for the tariffs, Patrick Hope, executive director of the Medical Imaging and Technology Alliance, wrote that while the organization supported efforts that would address “unfair Chinese economic practices,” the tariffs would not accomplish that goal because “the medical device industry across the board runs very balanced trade with China.”

Hope called on the Trump administration to establish a process that would exempt medical imaging products and components from the tariffs, which he said would harm American competitiveness, the economy, and potentially patients’ access to care.

“Many products are imported from a manufacturer in China to a manufacturing facility in the U.S., where they are substantially transformed and then re-exported—often to China. Taxing these products on both ends of one company’s supply chain could create a disincentive for companies to manufacture in the United States,” Hope wrote.

Overall, more than $5 billion of the proposed tariffs on Chinese goods could affect the medical device industry, especially when taking into consideration the components used to manufacture medical devices, according to Greg Crist, executive vice president of public affairs at medical device trade association AdvaMed.

“It’s … fair to say that manufacturers are disappointed because this action threatens to affect the health and well-being of American patients and those around the world,” Crist told Medical Design & Outsourcing after the tariffs were announced in April.

Since the tariffs were introduced, China has responded in kind, levying its own taxes on American goods, such as pork, aluminum, and steel. However, the Chinese tariffs do not appear to directly affect medical device manufacturers, according to Grace Palma, CEO of China Med Device.

Following China’s response, USTR announced additional 10% tariffs on Chinese goods, valued at $200 billion, on Wednesday. Those tariffs will undergo a two-month comment period before going into effect.