The latest wave of tariffs on U.S. imports have pushed businesses—even ones that manufacture domestically—to reevaluate and overhaul the supply that they’ve spent decades streamlining. For many manufacturers, this means expanding or shifting their supplier networks to mitigate delays and shortages, all while ensuring production continues at unit economics that still fit existing business models. This, however, isn’t always feasible for MedTech companies, as they’re bound by strict FDA regulations and safety requirements that limit their ability to work with new suppliers. Working with a non-vetted or unapproved supplier can lead to compliance issues, lost revenue from recalled or unsellable products, as well as risks to patient health.
To complicate matters, certain components—such as mature-node electrodes and semiconductors used in ventilators, imaging systems, and portable diagnostics—can only be sourced from a few global suppliers. If those suppliers are subject to tariffs, manufacturers must choose between directly absorbing the added costs or passing them onto the medical facilities that depend on their products.
In response, industry groups like AdvaMed are calling for tariff exemptions for MedTech products, warning that increased costs could undermine patient care and drive up out-of-pocket healthcare expenses. But until a decision is made, MedTech companies must operate under the assumption that the tariffs, and their accompanying regulatory complexities, will remain in place.
As a result, they’re navigating these new challenges while working to strengthen their supply chain resilience. But they can’t simply shift suppliers or adjust sourcing strategies overnight. They need a thought-out approach. Here are three key considerations for MedTech manufacturers as they work to tariff-proof their supply chains.
- Manufacturers will be hit with unexpected costs—unless they gain full visibility into their entire supplier network.
A manufacturer’s ability to truly know the impact tariffs will have on its supply chain starts with gaining visibility into its entire supplier network. Those that only have visibility into their tier-one, or direct, suppliers are likely missing the full picture. That’s because these suppliers rely on other suppliers—a manufacturer’s second-, third-, or even fourth-tier suppliers —for critical subcomponents and raw materials. Without visibility into where these suppliers are located, manufacturers could be hit with unexpected costs due to tariffs.
For example, a U.S. MedTech company might source medical monitors domestically, without realizing that key components inside those monitors, such as semiconductors or control buttons, are sourced overseas. If tariffs are introduced on countries where these parts originate, and the company lacks the visibility into those deeper supplier relationships, they’ll be caught off guard with price increases from further upstream in their supply chain.
Some U.S. MedTech companies have turned towards onshoring operations to address this visibility gap. Abbott, Becton Dickinson and Thermo Fisher, for example, are now investing billions into onshoring their manufacturing to gain tighter control over quality assurance while reducing exposure to tariffs and other unexpected import costs.
But while large-scale onshoring may be feasible for industry giants with the time, labor and resources to invest at scale, other companies must find alternative solutions. One common approach is leveraging technology to keep track of every component, subcomponent and their country of origin—in addition to how various tariffs apply as they continue to change—to make more informed decisions on sourcing and planning. Plus, certain AI integrations can automate time-consuming tasks, such as classifying components by Harmonized Tariff Schedule (HTS) codes and filling out extensive customs documentation to qualify for tariff relief.
However, assessing risk into tiered supply chains without compromising IP poses an additional challenge. To avoid this, manufacturers need to clearly define their risks, communicate them effectively across all of their vendors and use technology where applicable to create actionable insights that lead to smarter, more effective decision-making. That way, manufacturers can surface risk across upstream vendors and trigger alerts that flag risk profiles.
- Fluctuations in manufacturing cost can start a chain reaction that can directly impact patients.
Unsurprisingly, tariff-driven cost increases are set to strain the healthcare industry, with experts predicting a 15% rise in hospital expenses over the next six months.
While manufacturers can absorb a portion of the added costs, they’ll certainly have to pass some of them onto their customers—hospitals and medical facilities—which will, in turn, need to charge higher expenses for patients. In the MedTech sector, where device costs are often covered by insurance, rising production expenses could prompt insurers to revisit reimbursement policies. However, adjustments take time, and this will likely leave manufacturers and patients to shoulder the financial burden in the interim.
To navigate these challenges, MedTech manufacturers should strengthen relationships with existing suppliers. A stronger line of communication can help companies better anticipate and respond to fluctuations in pricing, lead times and documentation requirements before they disrupt manufacturing.
At the same time, manufacturers should reevaluate their current cost structures and pricing models. With tariffs likely to drive up the costs of materials and components, budgeting based on previous norms no longer works. Companies need to update their budgets to account for known cost increases—a process that becomes far more precise with full visibility into their tiered supply chains, including data on country-of-origin, Harmonized Tariff Schedule (HTS) codes and total landed costs. In doing so, companies can minimize the financial and operational impact tied to trade policy changes, while also mitigating disruptions to the healthcare providers and patients who depend on their products.
- A robust digital record can make all the difference between a smooth pass-through or a delay at the border.
Running a global MedTech supply chain means managing a high volume of sensitive data under complex regulatory scrutiny. Misclassifying even a single part, whether accidental or not, can result in incorrect tariff assessments, denied claims and compliance violations that delay critical shipments at the border. Programs like duty drawbacks, de minimis exemptions and temporary import bonding can help manufacturers offset rising costs—but they demand accurate documentation. One missing point or incorrectly filed form can lead to penalties or prevent them from claiming tariff refunds.
To mitigate these risks, manufacturers need to maintain a digital record of every part’s movement across the supply chain. A centralized digital paper trail ensures faster access to the information needed for tariff claims and customs inspections. For companies managing parts that cross multiple borders, or go through multiple handlers, level of transparency is critical to minimize administrative burdens and to quickly provide the right information at the right time.
Manufacturers must also be able to adapt to new tariffs as they happen. Having systems that apply pricing changes in real time allows manufacturers to rethink their procurement strategies based on actionable information, and catch potential documentation errors and compliance violations before they happen rather than when they’re stopped at customs.
While tariffs may be out of a manufacturers’ hands, how they respond is still within their control. The MedTech companies that emerge the strongest from this moment won’t be the ones waiting for policy relief—they’ll be the ones that use technology to increase visibility into their supply chains, adapt to changing tariffs in real time and strengthen their relationships with their partners.
Phillip Gulley
Phillip Gulley is Co-founder and Chief Strategy Officer for Cofactr.
