Navigating Tariff-Induced Supply Chain Challenges in Healthcare

I. Introduction

The U.S. healthcare system depends on a globally integrated supply chain not just for medical equipment and supplies, but for virtually every facet of operations, including pharmaceuticals, IT systems, laboratory instruments, construction materials, purchased services, and more. Historically, healthcare products received strategic exemptions from tariffs — but new policies highlight the potential for tariffs to negatively impact these products. The current administration has implemented, or plans to implement, tariffs on key trading partners. Further, executive orders indicate pharmaceutical tariffs may be implemented within the coming weeks or months. For hospitals and healthcare systems, this policy shift introduces real risks: increased costs, supply delays, and reduced access to lifesaving and life-sustaining products.

II. The Global Supply Chain of Healthcare Products

The U.S. imported $36.7 billion in medical equipment in 2024¹, with much of its healthcare infrastructure relying on global partnerships. Several countries play critical roles in the healthcare supply chain, and as of June 2025, varying levels of tariffs apply to their exports, according to the Reed Smith Tariff Tracker: 

• China: Supplied nearly $2.31 billion, primarily for face masks, gloves, and syringes in 2023¹, and remains the dominant source for active pharmaceutical ingredients (APIs) used in both U.S. and global drug production². The U.S. currently has a 20% tariff with China, with a 34% tariff set to start 8/12/25¹⁰.
• India: Provides around 40% of the U.S. generic drug supply, which accounts for 90% of prescriptions filled, while relying heavily on Chinese API imports³. A 27% tariff on Indian goods is expected to start 7/9/25¹⁰.
• Mexico: Exported $12 billion in medical equipment, including syringes, diagnostics, and surgical tools¹.
• Canada: A key supplier of prescription medications and raw materials, often offering lower-cost alternatives to U.S.-produced drugs. Canadian and Mexican goods that fall under USMCA rules (fully sourced from USMCA countries) are exempt from tariffs; otherwise, a 25% tariff applies to products from Canada and Mexico¹⁰.
• Other Key Suppliers: Germany, Ireland, and Japan also play important roles — exporting advanced surgical instruments, hosting major medical technology manufacturing hubs, and supplying high-tech diagnostic equipment, respectively¹.

This global network ensures innovation, availability, and affordability across the U.S. healthcare landscape — but also introduces potential vulnerabilities in times of geopolitical or logistical disruption.

III. Understanding the Complexity of the U.S. Healthcare Supply Chain & the Influence of Tariffs

Hospitals operate within one of the most intricate supply chains in any industry. Medical products often require highly specialized manufacturing processes and must meet strict FDA and international regulatory standards, which significantly limit sourcing flexibility.

Mark Pascaris, Senior Director and Analytic Lead for Nonprofit Healthcare at Fitch Ratings, cautioned that new tariffs could undermine the modest financial recovery many nonprofit hospitals have achieved in recent years. “This adds yet another headwind for not-for-profit hospitals, which are already navigating post-pandemic pressures, workforce shortages, and persistent inflation,” Pascaris said⁸.

Given that medical supplies and pharmaceuticals make up 20% or more of hospital operating expenses⁹, tariffs could affect a broad range of items. Tariffs on critical inputs like diagnostic reagents, telecom hardware, or steel and HVAC components could drive up costs, delay major projects, and disrupt operations. These impacts are far-reaching: a price hike in imported IT equipment may impact cybersecurity readiness, while construction material tariffs could stall facility upgrades or expansions. Even software platforms used in electronic health records may be built on globally sourced technologies, leaving hospitals exposed to cost increases and longer implementation timelines.

However, unlike many other sectors, shifting suppliers or relocating production is neither quick nor simple. It involves considerable time, cost, and logistical coordination — especially in a market where pharmaceuticals remain among the top U.S. import categories⁴. Even if some manufacturing is reshored to the U.S., Pascaris warned that hospitals may still face “permanently elevated costs and potentially fewer choices.”⁸

The COVID-19 pandemic underscored these healthcare supply chain challenges, exposing deep vulnerabilities in the global healthcare supply chain and leading to widespread shortages. More recently, the disruption of a single manufacturing plant in North Carolina — which impacted roughly 60% of the nation’s IV solution supply — demonstrated how localized events can have nationwide consequences.

For hospitals, these realities make clear the need for resilient, diversified, and well-managed supply chains to ensure continuity of care and protect against future shocks.

IV. Impact of Tariffs on Healthcare Contracts

Rising tariffs on imported medical goods are adding new financial strain for U.S. hospitals. Increased costs on essential supplies like gloves and syringes — many of which are sourced from China — are difficult to absorb, especially given long-term reimbursement contracts that prevent providers from adjusting prices. The costs of both pharmaceuticals and medical devices are also expected to be impacted by impending tariffs. In particular, complex and varied items such as surgical kits may be affected by the inability for providers to easily switch out kit items.

To manage these pressures, some manufacturers are shifting production to lower-tariff countries such as Malaysia. However, these changes take time and can introduce new sourcing complexities and delays⁵. Hospitals may experience a 6–12 month delay in feeling the effects of new tariffs due to fixed-price contracts with suppliers, which may shield them from immediate cost increases. However, as these contracts come up for renewal, hospitals are likely to face significant pricing hikes. In some cases, the magnitude of the increase may trigger force majeure clauses, allowing suppliers to renegotiate or exit contracts due to unforeseen economic hardship.

V. Sampling of Supplier Projected Tariff Financial Impacts & Strategic Responses

To better understand how suppliers in the market are adjusting to policy changes, the projected revenue between Q4 2024 and Q1 2025 as well as announced tariff mitigation strategies were compared for key healthcare suppliers.

The chart below illustrates how leading healthcare suppliers have revised their 2025 revenue projections in response to recent U.S. tariff changes. Each bar represents the estimated impact on a specific company, comparing revenue forecasts from Q4 2024 (prior to tariff implementation) with updated estimates from Q1 2025, after companies began adjusting to the new cost landscape.

Companies are also categorized by their tariff response strategy outlined in their Q1 2025 earnings calls: absorbing the added costs, passing them along to hospitals, adopting a mixed strategy, or having low exposure. The strategic decisions made by the suppliers are already influencing hospital budgets, contract terms, and supply chain planning—and will continue to do so heading into the second half of the year. Hospitals are particularly vulnerable based on their utilization of those suppliers who have announced they will pass increased costs onto the health systems.

The most significant projected revenue declines are seen among distributors and medical device manufacturers, reflecting increased import costs on surgical supplies, equipment components, and consumables. Pharmaceutical manufacturers tend to show smaller shifts, often due to more diversified sourcing or the fact that pharmaceutical tariffs have not been formally announced.

Suppliers expected to either fully or partially pass tariff-related costs to hospitals are among those with the steepest projected revenue declines. This suggests that companies pursuing downstream cost-shifting are still facing significant short-term financial pressure and indicates that price increases alone may not be enough to offset the broader impact of tariffs. In contrast, companies absorbing costs or reporting low exposure tend to show smaller revenue shifts, reflecting stronger internal cost controls or more resilient sourcing models that allow them to protect their customers.