So What's the End Game with Tariffs?

Businesses thrive on stability, and predictability is needed for companies to make long-term investments. Unfortunately, the recent tariffs, particularly in the medical supply industry, stifle innovation and investment. As Milton Friedman wisely stated, "One of the great mistakes is to judge policies and programs by their intentions rather than their results." Tariffs may protect an overreliance on China, but too many, in too many tranches, with postponements and delays—as is happening now—make it impossible to make business decisions.

The Office of the U.S. Trade Representative (USTR) recently "finalized" tariff increases on face masks, gloves, and syringes. These hikes, starting as soon as September 27, 2024, and increasing through 2026, will burden an industry already under pressure from global health crises and supply chain disruptions.

The Tariff Impact:

• Facemasks: A 25% increase starting in 2024, increasing to 50% in 2026.
• Medical Gloves: A rise from 50% in 2025 to 100% by 2026.
• Syringes and Needles: An immediate spike to 100% in 2024.

With tariffs on syringes and medical gloves reaching 100%, the question becomes: What is the end game here? What is the long-term goal of these policies?

Moving Away from China—But How?

I am fully in favor of reducing reliance on China. We need to prioritize domestic production. However, these tariffs alone do not offer a clear pathway toward that goal. Instead, they create more uncertainty for businesses deciding whether to invest in local manufacturing. If companies can predict and see with certainty, they will likely invest in expanding U.S.-based production or re-shoring operations.

The problem is the need for a clear, long-term plan. Simply increasing tariffs does little to incentivize businesses to bring production home. Instead, it creates financial strain on industries, delays in supply chains, and, ultimately, higher healthcare costs.

Uncertainty Kills Investments & Increases Costs

In business, uncertainty is a dealbreaker. Whether in healthcare, manufacturing, or tech, no company can grow or invest when the future is murky. Tariffs, particularly how they have recently been rolled out in tranches, delays, shifting, and removal of products, create that murkiness. What should be a straightforward goal—reducing reliance on China and boosting U.S. manufacturing—becomes tangled in unpredictable cost hikes. This uncertainty leads companies like mine to pull back on long-term investments in production.

This uncertainty is particularly damaging in the medical supply industry. We're not just dealing with commodities; we're dealing with life-saving products. Masks, syringes, and gloves are essential tools for healthcare providers and patients. Increasing tariffs on these goods affect not just companies like Dealmed but hospitals, doctors, and, most importantly, patients.

When tariffs double, as they are set to do for syringes and gloves, it drives up the cost for healthcare providers already working on tight margins. These costs will be passed on to the healthcare institutions or patients.

What Is the End Game?

As a business leader, I'm left asking: What is the end game here? If the goal is to reduce dependence on China, where are the policies that encourage domestic manufacturing and investment? Where is the clear roadmap for businesses to follow?

Simply penalizing companies with higher costs isn't a solution; it's a roadblock.

The USTR does not have an expiration date for these tariffs but instead revisits them every few years to determine if they should be modified, extended, or removed.

So far, the USTR has yet to provide a clear timeline for when these tariffs will expire or whether they might be extended beyond 2026. However, future trade negotiations with China or changing economic conditions could change things.

Would you build a factory knowing that the only way you can survive is so long that there are tariffs, and those tariffs can be pulled at any moment?