The potential impact of tariffs on medical costs

February 26, 2025

People often visualize high priced imports like automobiles and high-volume exports like soybeans when they think of tariffs, but many medical products could be affected by announced or planned tariffs. Health care costs are already rising rapidly, and tariffs could worsen this trend. Further, tariffs could cause shortages in inexpensive generic drugs, where the substitute available would often be a much more expensive brand name drug.

Although tariffs are initially paid by the party importing foreign goods into the U.S., these costs are generally added to total purchase price, raising the cost of goods to the purchaser, whether this is a household buying a new dishwasher or a hospital purchasing a high-tech imaging machine.

The U.S. imports $15 billion annually in medical devices from Mexico, and also imports medical devices from Germany, Costa Rica, Ireland, and China. The U.S. imports $40 billion of active pharmaceutical ingredients (APIs) the European Union and countries including India and China. These are used to manufacture drugs. A special concern is that some manufacturers could cease production of cheap generic drugs if tariffs are placed on their components. When generic medications become unavailable, clinicians often must substitute more expensive brand name medications.

Medical supplies, including personal protective equipment and syringes, are mostly imported, and tariffs could increase supply costs, which represent about 13% of total hospital expenses.

Implications for employers:

● Tariffs could increase operating costs for health care delivery systems, further inflating prices.

● Medical goods could be exempted from tariffs if the Administration wished to avoid increasing medical costs.

● Employers should be aware that tariffs are one additional reason why medical costs could increase further in the coming months.

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Illustration by Dall-E