On Friday, July 6, tariffs on $34 billion worth of products imported from China, including parts and machines used for x-rays, CT scans, and MRIs equipment, officially went into effect. Tariffs on another $16 billion worth of products are expected to begin soon.

Over the past two years, the United States has actively enacted several new tariffs, which are taxes on imports from other countries. Their main purpose is to protect domestic industry from foreign competition.

Trump-administration tariffs, especially those aimed at China and Mexico, are meant to drive a positive effect on the American economy and to retaliate for perceived economic affronts.

But for citizens, tariffs are driving up the price of everything from cars to jeans.

And for many American companies, the growing trade war is devastating. According to a July Wall Street Journal article, “The increased tariffs enacted by the U.S. on products coming from China raise the costs for many American companies and threaten their future profits.”

Effective July 6, 2018, tariffs ranging up to 25% on over 800 products came online, including many items in the medical imaging industry.

“The 25 percent tariffs are implemented as proposed, they would represent a tax increase on U.S. manufacturers and their industrial, commercial, and residential customers valued at about $2.25 billion,” said Kyle Pitsor, vice president of government affairs for National Electrical Manufacturers Association (NEMA.)

As Reina Imaging reported earlier this year, as the world’s largest manufacturer of medical devices, the U.S. industry faces a $5 billion hit from new tariffs, it is predicted by experts, out of a total $50 billion market effect for the first year. These tariffs are expected to increase manufacturing costs, making prices less competitive and significantly damaging global sales for U.S.-made medical devices.

Industry representatives of NEMA called on “the U.S. and Mexico to act quickly to reach an understanding that will prevent the imposition of U.S. tariffs on imports from Mexico.”

NEMA represents nearly 325 electrical equipment and medical imaging manufacturers accounting for 360,000 American jobs in more than 7,000 facilities across every state. These industries produce $106 billion in shipments and $36 billion in exports of electrical equipment and medical imaging technologies per year.

In June, Walmart Inc, Target Corp, and more than 600 other companies urged U.S. President Donald Trump in a letter to resolve the trade dispute with China, saying tariffs hurt American businesses and consumers.

According to the article, this letter is the latest of many sent to the Trump administration by Tariffs Hurt the Heartland, the national campaign against tariffs supported by more than 150 trade groups representing agriculture, manufacturing, retail, and tech industries.

Patrick Hope, executive director of the Medical Imaging & Technology Alliance (MITA) expressed concern that patient access and healthcare innovation are directly threatened by the new taxes. MITA is considered a leading organization and collective voice of medical imaging equipment, radiopharmaceutical manufacturers, innovators, and product developers.

To reiterate our earlier report, according to the Economic Census in 2012, (the most recent available; the 2017 census is underway) the sector employs about 356,000 people at approximately 5,800 companies, paid median salaries 15 percent higher than the average manufacturing job. More than 80 percent of U.S. medical device companies employ fewer than 50 employees, and many of the most innovative medtech startups produce little to no revenue for their first few years. Within a global market size of around $150 billion, U.S. makers capture about 40 percent. Exports of medical devices in key product categories identified by the Department of Commerce exceeded $44 billion in 2015.

The tariffs are expected to have little effect on China. A day after the U.S. announcement, China responded with its own set of tariffs on 545 U.S. products imported to China (with another 114 categories to be affected during a second phase) including basic chemicals and medical devices, such as MRI machines

As the new steel and aluminum tariffs increase costs for American companies, Asian medtech competitors will win a greater market share by manufacturing similar, but often lower quality, devices at a lower cost. Japan, China, and Korea are most likely to benefit.  Asian medtech competitors sell globally, so it is likely that U.S. international medtech sales will be hurt.

America’s medical device industry is already in a period of slowed growth from recent innovation being based more on data science than the invention of new products, a trend expected to continue.

As a family-owned manufacturer of high-quality medical devices, Reina will continue to monitor and report on this issue, so critical to the health of every patient.