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Tariffs, Inflation, and Healthcare, oh My!


Medical Equipment in the middle of Tariffs

Federal tariff policy can have a major impact on inflation, the cost of medical care., and the availability of medical services. Tariffs are taxes imposed by the U.S. government on goods imported from other countries. These tariffs are paid by the importer and can affect the price of the goods (and the services they provide), often leading to higher costs for consumers and businesses. In the US, spending on medical supplies is substantial. The Federal government alone spent an estimated $8.2 billion in fiscal year 2021. A significant portion of medical supplies are imported - about 30% of the total US medical supplies. A tariff on all imported goods could have detrimental effects on the healthcare system. First, providers anticipating the imposition of a tariff might immediately begin stocking up medical supplies and storing them in warehouses. Such actions could put a strain on the medical supply chain. It also forces providers to spend precious dollars that could have been used more productively (e.g., capital expansion, increased wages, increase employment and services). Second, once the tariff get imposed, the additional tax (tariff) is paid by the provider then passed on to the consumer. All things equal, the imposition of a tariff on healthcare supplies will increase the cost of providing healthcare. This, in turn, increase the price consumers pay for healthcare. It may make it unaffordable for some American to get healthcare.


Among imported medical supplies, China plays a major role, accounting for approximately 28% of the total medical equipment imports. This reliance on Chinese imports has grown over the years, especially in the wake of the COVID-19 pandemic. In addition to the increased cost of Chinese equipment due to the imposed tariff, if China retaliates and starts a trade war, these precious medical supplies may not be available to help Americans. Providers will need to find alternative sources. Unlike many commodities, medical equipment is not easily substituted. Some medical equipment cannot be replaced without years of research and development by manufactures not affected by the trade war. Some argue that imposing tariffs will force importers to turn to domestic sources. In the case of medical equipment, this may not occur. Medical equipment is proprietary and specialized. The tariff may create a service void in the healthcare market.

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