A pause in the US-China trade war benefits the medtech sector

30 May 2018 (Last Updated November 22nd, 2018 11:23)

The tariff war between China and the US is set to scale, and has no clear end in sight. Tariff wars hinder not only jobs but also entire industries, all while slowing economic growth. If the trade war is not quelled, there will be a cascade of consequences for both nations.

A pause in the US-China trade war benefits the medtech sector
President Trump initially proposed approximately $50bn in tariffs against Chinese imports due to claims that China had been crippling the US economy. Image: The White House.

The tariff war between China and the US is set to scale, and has no clear end in sight. Tariff wars hinder not only jobs but also entire industries, all while slowing economic growth. If the trade war is not quelled, there will be a cascade of consequences for both nations.

President Trump initially proposed approximately $50bn in tariffs against Chinese imports due to claims that China had been crippling the US economy, as well as allegations from the Office of the United States Trade Representative (USTR) that China utilises its anti-monopoly law to procure IP from large US-based multinational companies. On 23 April, China announced proposed tariffs of its own on 128 products equalling sales of approximately $3bn. The tariff war heavily affects the aerospace, technology, and machinery industries.

The US tariffs are being imposed on a myriad of products, including steel and aluminium exports from China. Initially, the tariffs focused on commodities within certain industries; however, as the threats of a trade war scale up, there will be an increase in targeting specialised markets.  The medtech industry is unlikely to be lucky enough to avoid having tariffs imposed upon it, and a majority of major therapeutic areas will find their product lines being affected.

In April, the US Secretary of the Treasury Steven Mnuchin stated his intentions to travel to China in order to negotiate with officials in a preventative measure for a trade war. A full-out trade war is not financially viable for the US and China, as they are the two largest economies in the world. GlobalData expects to see major changes within the China and US medtech industries if the trade war is not reconsidered.

May 22 was the proposed date when US tariffs were to come into effect against China; however, Secretary Mnuchin released a statement days before the deadline that both parties had ‘reached a consensus’ that ‘they will not fight a trade war, and will stop increasing tariffs on each other.’ However, US Trade Representative, Robert Lighthizer, implied that imposing tariffs is still being considered, contradicting statements made to The Washington Post. The constant ebs and flows of this pseudo tariff war are already taking a toll on jobs and will negatively impact the medtech industry.

GlobalData expects that an increased strain will be felt within the medtech industry as numerous products in multiple therapeutic areas are affected by tariffs. A document released by the USTR outlines specific product categories that will be affected by tariffs, including multiple products involved in medtech import-export between China and the US.

There are specific product categories in the USTR list for tariffs that will affect the medtech industry as a whole. Specific product lines in each therapeutic area will be affected, such as immunological products for in vitro diagnostics. Other listed product lines are more ambiguous, as they are applicable to multiple therapeutic areas, such as diode lasers, which are used in dental, cosmetic, and general surgery indications. The number of products that fall under these categories will be immense and will have an effect on not only local manufacturers, but also on large multinational companies working primarily within the US and China.

The current pause in the trade war between the US and China is beneficial for both nations; however, the threat of all these proposed tariffs may still come into effect if negotiations break down.

For more insight and data, visit the GlobalData Report Store – Verdict Medical Devices is part of GlobalData Plc.