Navigating through the tariffs in medical device manufacturing
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If there’s one thing we can count on in medtech manufacturing, it’s change – and not always the kind we’d like. Fresh off the MD&M West conference in Anaheim, one of the biggest talking points in boardrooms and coffee line conversations was the looming impact of the Trump tariffs. As medical device companies and medtech manufacturers recalibrate their supply chain strategies, these tariffs have the potential to influence companies’ tactics across the board, regardless of size or market position.
The latest round of tariffs – whether reinstated, expanded, or newly implemented – could hit medical device manufacturers right where it hurts: the bottom line. With many raw materials and some key components sourced from China (and other tariff-imposed countries), many firms are now looking at increased costs they can’t easily pass on to customers. Medtech companies, already squeezed by regulatory pressures and reimbursement challenges, are now forced to reevaluate their supply chains in real time.
Some companies may be better positioned to weather the storm. Those with a stronger margin profile might be able to absorb some of the increased costs. Others might feel confident in passing those costs on to customers, particularly if their product is highly differentiated. Companies that view tariffs as a political negotiating tool and only a short-term challenge might opt for temporary workarounds rather than drastic strategic shifts.
In response to tariffs, companies are exploring various strategies to mitigate financial damage. Some are diversifying their supplier base, looking for alternate sources of raw materials and components in lower-tariff or tariff-free regions. Those companies that began adopting post-COVID strategies of manufacturing in the region for sales in the region have a head start. In other words, think globally and act locally for supply chain and manufacturing operations to support international sales efforts.
While other companies have spoken of focusing on operational efficiency, squeezing costs out of their existing production processes to offset rising material costs, many already employ continuous improvement programs, and the 2025 tariff may simply expedite these efforts.
Manufacturers with significant exposure to imported components may have no choice but to raise prices, but this comes with its own risks. Medtech customers – whether hospitals, clinics, or distributors – are already under financial pressure and may push back against higher costs. Finding the balance between maintaining margins and retaining customers will be a key challenge in the months ahead.
For some companies, the tariffs could make acquisition more appealing. Rather than absorbing additional costs, some firms may consider acquisitions that provide a new geographical footprint, allowing them to shift production to regions with lower tariff exposure. While mergers and acquisitions (M&A) have always been a tool for growth, the current environment may accelerate deals focused on supply chain realignment rather than purely technological synergies.
Regardless of strategy, possible tariffs are forcing medtech companies to reassess operations and cost structures. Those that can adapt – whether through supply chain adjustments, pricing strategies, or efficiency improvements – will be in a stronger position to navigate this challenge.
Uncertainty in global trade policy is nothing new, but its impact on medtech manufacturing is becoming increasingly difficult to ignore. Whether this is a short-term hurdle or a long-term shift, companies that stay proactive rather than reactive will be best positioned for success.
About the author: This column was written by guest author Daniel Sheppard, CM&AA. He has spent nearly two decades advising founder-owned medtech and finance companies in mergers and acquisitions, corporate finance, and strategic growth initiatives. He is currently a managing director at MedWorld Advisors and can be reached at Daniel@MedWorldAdvisors.com. Value = Strategic Fit + Timing® is a registered trademark of MedWorld Advisors.
To view this article on the Today’s Medical Developments Magazine website, click here.