The US-China tariff war shows no signs of easing. Despite the tariffs being set out to target domestic companies, global medical technology (medtech) companies with operations and manufacturing facilities in US and China are among the hardest hit. The Economist Intelligence Unit (EIU) expects US-China tariffs to remain in place over at least the next few years, roughly corresponding with the first term of the US president, Donald Trump, which ends in 2020.

EIU Healthcare’s brief on ‘What the US China Trade War Means for MedTech’ takes a deeper look at what the tariffs mean for medtech companies, and what companies need to know as they seek out growth opportunities under the current outlook.

Medtech tariff timeline: Medtech under siege in 2018 

  • The first of the two tranches of US tariffs that have went into effect as early as July 6 2018, has affected around US$1bn of medtech products – roughly a fifth of the value of all medtech products the US imports from China.
  • China has retaliated by imposing tariffs on six medtech product categories almost immediately after the US announced its second tranche of tariffs.
  • While medtech products were mostly spared in the latest – and biggest round of US tariffs on US$200bn worth of Chinese imports so far, China has hit back with tariffs on some 33 medtech product categories ranging from low-value medical consumables such as syringes to high-value medical equipment such as computed tomography (CT) equipment.
Made in China 2025: What’s behind the tariffs 
  • The US tariffs target the ten sectors identified in Made in China 2025 plan, with medical devices being one of them.
  • So far, only one of the many high-end medical device types identified under Made in China 2025 – imaging equipment, has been targeted by US tariffs. Imaging equipment makes up roughly half of the value of medtech products that now face US tariffs.

What’s at stake for medical imaging   
  • With several imaging modalities targeted under US and China tariffs, global medtech companies with businesses in the imaging sector are particularly affected.
  • The Medical Imaging & Technology Alliance (MITA) estimates that US tariffs will cost imaging companies in the US about US$138m a year. With higher costs to bear, medical imaging industry representatives surveyed by MITA all say that they would have reduce investments in research and development, hurting the competitiveness of their products on global markets.

US-China medtech rivalry: Battle over high-end market segments   

While there are mid- and low-value medtech products (the categories that still make up a large share of China’s global medtech exports) affected by the tariffs, the space to watch in US-China medtech rivalry is the battle over high-end market segments.

  • Where are Chinese medtech companies emerging as stronger competitors – increasingly winning over a larger share of not just their domestic market but overseas markets, and in higher-value segments?
  • What fast-growing medtech market segments will Chinese competition likely be muscling in?
A global strategy in the face of medtech tariffs

To cushion the impact of the trade war, medtech companies will need to emphasise their links with other key markets crucial to their growth. Major medtech markets in Europe and Japan, as well as emerging markets in South-east Asia, Latin America and the Middle East all present growth opportunities that medtech companies need to seek out and capture.

Download EIU Healthcare’s report to find out:

  • Breakdown and analysis of medtech categories impacted by US and China trade tariffs
  • Drivers behind US-China medtech competition – what policies such as China 2025 and large, fast-growing medtech areas such as in-vitro diagnostics (IVD), high-value medical consumables could mean for competition?
  • How the emergence of Chinese medtech players is shifting the global medtech market landscape?
  • What do medtech companies need to do to cushion the impact of the trade war?
  • What do medtech companies need to know to augment their global strategy in the face of tariffs?
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