How Trump's tariffs may affect the healthcare supply chain
Anticipate healthcare supply chain disruptions as Trump's tariffs potentially raise medical costs, cause shortages and shift procurement and clinical practices.
The Trump Administration's tariff plans could have a measurable impact on the healthcare industry, including healthcare supply chain disruptions and higher costs.
A tariff is a tax charged on goods imported from other countries. President Trump has vowed to impose tariffs on goods from China, Canada and Mexico in an effort to boost U.S. manufacturing, protect American jobs and stop the flow of fentanyl into the country.
On Feb. 4, 2025, President Trump followed through on his campaign promise, implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on goods from China. Although, Trump paused the tariffs on Canada and Mexico for 30 days. Together, the three countries account for over 40% of imports into the U.S.
How the tariffs will ultimately impact the U.S. economy remains to be seen, especially after China imposed retaliatory tariffs and Trump delayed some tariffs. However, leaders are preparing for a potentially significant disruption to the healthcare supply chain as a result of the tariffs.
Tariffs may lead to medical supply shortages
A recent Black Book Market Research survey of different healthcare industry executives showed widespread worry about escalating costs for hospitals, physicians, payers and patients as a result of the double-digit tariffs under Trump.
Most executives believe costs for hospitals and health systems will swell by at least 15% in the next six months due to higher import expenses. Specifically, 69% of the surveyed leaders predict at least a 10% growth in pharmaceutical costs as a result of the tariff on active pharmaceutical ingredients from China.
Additionally, 90% of healthcare supply chain leaders polled think there will be major disruptions in procurement processes and contract negotiations with suppliers because of increased costs and pricing volatility.
A lot of the concern around healthcare supply chain disruption comes from the fact that a lot of prescription drugs and drug components are made outside of the U.S., specifically in Canada and China, says Niobis Queiro, CEO of the Queiro Group, a healthcare consulting and coaching agency.
"Not only could we have the cost increase, which is again something that already is killing us financially, but we also have the delay in getting the drugs because [the Trump administration] has not even come up with how they are going to apply these tariffs," Queiro explained. "So right now, we are already set up to have an issue with our supplies because they are held up until they figure that out."
Downstream effects of Trump's tariffs
Imamu Tomlinson, M.D., MBA, CEO of the multispecialty practice Vituity, anticipates clinical care practices to be hit the hardest by Trump's tariffs.
"For us, it's going to make us pivot quickly from a clinical standard, so from a clinical practice standard to an appropriate alternative," Tomlinson explained. This happened recently with a saline shortage.
"When we didn't have normal saline volumes, for example, we had to adjust," he stated. "We were also judicious about use, using Lactated Ringer's or other solutions to offset the saline shortage. But, at the end of the day, the standard of care at the time was to use normal saline for certain things."
As clinical standards shift, healthcare providers may see a change in reimbursement and revenue cycle practices. After all, providers will need to code and bill for different clinical activities, which may deviate from the standard payers expect.
Niobis Queiro, CEO of the Queiro Group
Additionally, higher healthcare costs stemming from Trump's tariffs may work their way down to the consumer.
"We're going to have the issue that the cost is going to go up, and it's going to be sent to us, the hospitals and providers," Queiro said. "Then, we may have to increase our prices when we renegotiate with payers. The payers then go to the direct employers and increase the premiums. Then, employers raise the cost of insurance for their employees, and then we are really going to have a major divide in this country of who gets care."
Ninety percent of the 21 hospital finance executives surveyed by Black Book Market Research reported they will need to shift increased costs to payers and patients through higher service charges. About half of the payers surveyed (48%) also anticipated higher premiums within the next year directly because of higher supply chain costs.
Healthcare providers prepare for impact
It's difficult to discern the true impact of Trump's tariffs on healthcare costs, the supply chain and patient care since it is still a dynamic situation. However, healthcare providers are preparing for supply chain disruptions and, consequently, higher healthcare costs.
"The first thing we need to do is understand what programs are at risk, whether it be population health or the things that we are buying that we know that are coming from external places," Queiro said. "We have to sit down with our pharmaceutical teams and we have to have a multidisciplinary conversation to level-set our potential risks."
Clinicians also need to be part of the conversation, Queiro continued. Clinicians will be able to explain the intricacies involved with patient care and how swapping supplies will directly affect patients and care standards.
"They know the dependencies that we may not understand from the financial side," Queiro stated. "Sometimes we look at something and we look at it rolled up; they know how to unravel it. We need to sit together."
Healthcare providers also need to look at who their suppliers are and perhaps consider alternative vendors.
"If you're a hospital provider or even a physician group purchasing materials or medications, I think there's going to be a lot of vendor diversification," Tomlinson predicted. "If you have the lion's share of your masks coming from one place that may be a potential place that could get tariffs, maybe you pivot and diversify where you get masks from. And I think the same for medications."
Imamu Tomlinson, M.D., CEO of the multispecialty practice Vituity
Some organizations may start purchasing supplies in bulk, especially if they originate in Canada or Mexico. A similar shopping spree happened during the COVID-19 pandemic when there was talk about initial shortages. However, Tomlinson doesn't think it'll get that bad, although exceptional vendors may get some larger-than-normal orders from providers before tariffs kick in.
Overall, providers need to stay abreast of the economic policy changes right now. No one can say with certainty how Trump's tariffs will impact healthcare's supply chain and revenue, and to what extent. However, potential downstream effects on patient care and access cannot be ignored, and healthcare is the quickest industry to respond to policy changes.
Regardless, the healthcare industry has proven itself resilient amid change. The impact of new tariffs is unlikely to be the straw that breaks the healthcare camel's back, Tomlinson indicated.
"We have overcome so many things in healthcare," Queiro also said. "We are not going to fall apart. We are a force of people dedicated to the safety and well-being of this country. Even if we're in finance, we're part of that solution. And I really believe that whatever comes our way, there's nothing we can't do."
Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.
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