Potential tariff impact on Johnson & Johnson could soften following the US-China trade pause, according to the company's CFO.
In the realm of medtech businesses, companies like Johnson & Johnson (J&J) and Boston Scientific are navigating the complexities of dual-source manufacturing footprints, allowing them to work with two separate supply chains [1]. This strategy is a response to the ongoing uncertainties posed by tariffs and trade policies.
At the Bernstein investor conference, J&J CFO Joseph Wolk provided an update on the impact of tariffs. While the company had previously predicted a $400 million tariff-related cost for 2025, primarily affecting its medtech business, Wolk suggested that the impact could be reduced to $200 million due to a temporary agreement [2]. However, it is important to note that the impact from the Trump administration's Section 232 investigations into the pharmaceutical and semiconductor industries is not included in this estimate [2].
Pharmaceuticals and active pharmaceutical ingredients (APIs) are currently exempt from the baseline 10% US tariffs introduced during the Trump administration; however, many upstream materials and components used in pharmaceutical production still face tariffs, causing supply chain disruptions and potential cost increases for the pharma sector [3]. The US government has threatened to impose "major" tariffs on pharmaceuticals in the near future, which would significantly disrupt global pharma trade and likely increase drug prices both in the US and abroad, especially impacting EU exports that heavily rely on the US market [3].
Boston Scientific is another major player likely affected by tariffs on upstream materials. The company plans to update its $200 million tariff impact forecast to reflect changes since it provided the outlook [1]. J&J, on the other hand, has already committed to investing heavily in domestic manufacturing capacity to mitigate tariff and trade risk, aligning with a broader trend where pharma and tech companies are pledging billions to boost domestic production in the US as a hedge against tariffs and supply chain uncertainty [4].
In the semiconductor industry, tariffs remain a more pressing issue. Technology and semiconductor sectors have higher exposure to imports from China, making them more vulnerable to tariff hikes from US-China trade tensions. Although recent tariff threats have focused less on China directly, tariffs on tech and semiconductor imports from China would still impose significant risks to these industries [5].
As the situation continues to evolve, companies like J&J and Boston Scientific are implementing cost cuts and production shifts to manage tariffs. For instance, J&J CEO Joaquin Duato expressed confidence in meeting the company's earnings-per-share guidance of about 5% to 7% growth from 2025 to 2030 [6]. Meanwhile, Illumina's DNA sequencers have been hit with a China import ban [7].
The US is preparing for the return of country-specific reciprocal tariffs in August, with tariffs between the US and Europe remaining in flux. The United States is considering 30% tariffs on imports from the European Union and 35% tariffs on imports from Canada [8]. The U.S. and China reached a temporary agreement to pause escalating tariff rates for 90 days, with the US pausing a 34% tariff on imports from China on May 12 [9]. However, China accused the US of undermining the May 12 agreement on May 26 [9].
AdvaMed continues to press the White House to exempt medical devices from tariffs, with the American Hospital Association joining the call for Trump to exempt devices from import tariffs [10]. As the tariff landscape continues to shift, companies like J&J and Boston Scientific will need to remain agile and proactive in their responses.
References: 1. EY's Lynlee Brown discusses strategies for medtech firms to mitigate tariffs 2. Johnson & Johnson CFO Joseph Wolk gives an update at the Bernstein investor conference 3. Pharmaceuticals and active pharmaceutical ingredients (APIs) are exempt from the baseline 10% US tariffs introduced during the Trump administration 4. Johnson & Johnson will invest heavily in domestic manufacturing capacity to mitigate tariff and trade risk 5. Semiconductors have higher exposure to China tariffs, making them more vulnerable to tariff hikes from US-China trade tensions 6. J&J CEO Joaquin Duato expresses confidence in meeting the company's earnings-per-share guidance of about 5% to 7% growth from 2025 to 2030 7. Illumina's DNA sequencers have been hit with a China import ban 8. The United States is considering 30% tariffs on imports from the European Union and 35% tariffs on imports from Canada 9. The U.S. and China reached a temporary agreement to pause escalating tariff rates for 90 days 10. The American Hospital Association has joined the call for Trump to exempt devices from import tariffs
- In the realm of medtech businesses, Boston Scientific, like Johnson & Johnson (J&J), is modifying its manufacturing strategies to work with two separate supply chains, in response to the complexities posed by tariffs and trade policies, similar to the strategy employed by J&J.
- Johnson & Johnson (J&J) CFO Joseph Wolk has updated on the impact of tariffs at the Bernstein investor conference, suggesting that the projected tariff-related cost for 2025 could be reduced from $400 million to $200 million due to a temporary agreement.
- The health sector, especially pharmaceuticals and active pharmaceutical ingredients (APIs), are currently exempt from the baseline 10% US tariffs, but many upstream materials and components used in their production still face tariffs, causing supply chain disruptions and potential cost increases.
- As a response to tariff and trade uncertainties, pharma and tech companies, including J&J, are pledging billions to boost domestic production in the US, reducing their dependence on foreign imports.
- In addition to medtech and pharmaceuticals, the semiconductor industry, with its high exposure to China imports, remains significantly impacted by tariff hikes from US-China trade tensions, and any further tariffs could impose significant risks on these industries.