An alarming unintended consequence of President Donald Trump’s misguided trade war with China has suddenly threatened to cripple the US fight against the COVID-19 pandemic. The administration’s tariffs on Chinese medical products may contribute to shortages and higher costs of vital equipment at a time of nationwide health crisis.
In the last two years, Trump’s policy has forced China to divert the sales of these products—including protective gear for doctors and nurses and high-tech equipment to monitor patients—from the United States to other markets, and now the US medical establishment faces looming trouble importing these necessities from other countries, which may be hoarding them to meet their own health crises.
To deal with this issue, the Trump administration quietly announced on March 10 and 12, 2020, that it would temporarily reduce some tariffs imposed on Chinese products to treat the coronavirus pandemic. But those actions, which effectively acknowledged that trade wars can endanger public health, covered only a handful of urgently needed products.
Trump’s tariffs had been slapped on nearly $5 billion of US imports of medical goods from China, about 26 percent of all medical goods imported from all countries. Now that there are potential supply shortages globally, the US health crisis demands that the administration comprehensively and permanently reverse these policies of self-harm.
This calamity was hardly unforeseen. In August 2018, the Trump administration’s US Trade Representative convened a hearing to ask the public whether it should impose tariffs on such products. Matt Rowan, president of the Health Industry Distributors Association (HIDA), warned against the impact that Trump’s tariffs would have on the American health sector.
“These products are essential to protecting healthcare providers and their patients every single day,” he said with shocking prescience. “The healthcare products on the proposed list are used widely throughout healthcare settings and are a critical component of our nation’s response to public health emergencies.”
His warnings, echoed by many others over the next year, went unheeded. Trump’s reversal earlier in March served as an implicit indictment of his administration’s own policy.
But a potential for crisis is not limited to the unnecessary costs and health equipment bottlenecks that Trump’s trade war with China has created. His continued mistreatment of many trading partners, imposition of tariffs and threats of tariffs on their exports, may make it difficult now to get new sources of supplies. Even allies are now lashing out and restricting the flow of medical equipment outside of their borders, including to the United States.
President Trump should immediately admit to the problem his policies have created. His administration should permanently and comprehensively suspend the trade war tariffs on critical medical products from China. And with its former allies, the administration should reverse its isolationist approach and reinvigorate the international cooperation that had formed the basis of US policy for over 70 years.
To avoid even worse tragedies to come, the world needs American leadership now more than ever.
MEDICAL PRODUCTS NEEDED TO FIGHT COVID-19
Among the many products that industry experts have identified as important for the fight against the COVID-19 pandemic, some of the most important include personal protective equipment, masks, sterile gloves, and goggles that doctors, nurses, and first responders wear to limit the spread of infectious disease. Also critical is disposable equipment such as hospital gowns, surgical drapes, as well as thermometers and breathing masks, which patients require during a hospital visit.
Finally, relatively high-tech medical equipment—including CT systems, ultrasound systems, patient monitors, and X-ray devices—is used to diagnose and treat patients suffering from the disease. Americans imported about $22 billion of such products from the world in 2019, before the outbreak of COVID-19.
Before Trump began the trade war in 2018, US tariffs on imports of most of these products were fairly low. For half of the products imported, the US tariff was even zero. A handful faced nuisance tariffs of less than 4.5 percent, and disposable and other medical headwear had tariffs of 6 to 8 percent (see appendix table at the end of the blog).
Overall, low US tariffs enabled American hospitals and patients to access a plentiful supply of these products at the highest quality and lowest price, including from China: Before the trade war, the United States imported $5 billion of these goods from China, or about 26 percent of US imports of such products at the time.
TRUMP’S TRADE WAR TARIFFS ON CHINA CONSIDERABLY CUT US IMPORTS OF SOME MEDICAL PRODUCTS FROM THERE
President Trump began his trade war with China in early 2018. Over the next two years, he raised US tariffs ranging from 15 to 25 percent on $360 billion, or two-thirds, worth of what Americans buy from China. These tariffs on China were imposed under Section 301 of the Trade Act of 1974.
The Trump administration’s tariffs hit hard many medical products now needed to treat COVID-19. Over time, Trump brought more of such products into the firing lines of his trade war, despite additional warnings to the administration of the potential consequences. As Linda O’Neill, also of HIDA, cautioned in her June 2019 testimony on Section 301 tariffs: “Tariffs on critical health care products put a risk to our nation’s public health preparedness.”
Trump’s tariffs resulted in a sharp decline in US imports from China of many of these critical products between 2017 and 2019 (figure 1). As the American economy grew, demand for health care services for America’s aging population continued to increase, and US demand for imports of these products from the rest of the world overall grew at over 20 percent. The disruption to trade with China was dramatic.
In the aggregate, US imports of Chinese medical products hit with 10 to 25 percent US tariffs beginning in 2018 fell by 16 percent, or nearly $200 million, between 2017 and 2019. At the same time, US imports of these products from the rest of the world increased by 23 percent. The differences were especially large in CT systems, patient monitors and pulse oximeters, and certain types of disposable medical headwear.
In September 2019, Trump hit even more medical products from China with 15 percent tariffs. US imports of these products from the rest of the world also grew 23 percent between 2017 and 2019, while US import growth from China fell to only 13 percent. The smaller negative effect on these products in 2019 is likely due to the US tariffs being at a lower rate (15 percent, not 25 percent) and only being in effect for four months.
Overall, Trump’s tariffs imposed hardship on American medical care purchasers and providers.
In many instances, Americans had no choice but to continue to buy from China, which meant paying an additional cost due to the tariff. Medical equipment cannot instantaneously sprout up at another plant in some other country. American patients demand the safety that comes through Food and Drug Administration (FDA) testing and certification. This process ensures manufacturing facilities do not roll out defective health care equipment.
As Lara Simmons of Medline Industries had explained to the administration in June 2019, “Finding alternative sources of supply for these products to minimize the cost impact of the duties is not a viable option in the near or medium term…. Starting production in the U.S. or any third country would be a time consuming and expensive process due to the FDA regulatory procedure that is required for these products.”
She alerted the administration to the timeline of the tariffs’ impact on US health care preparedness: “This process can take more than two years.” Even for American consumers who tried to switch to non-Chinese suppliers, doing so would come at a cost. Companies and hospitals would need to shift resources to their procurement divisions to search for new manufactures.
New products would need to be tested to ensure interoperability and that they met the same quality standards as the old ones that Trump’s tariffs were forcing them to abandon. These financial resources instead could have been spent on patient care or cutting costs.
Finally, America’s own manufacturers of hospital equipment also faced higher costs because of Trump’s tariffs on other products—specifically, the many parts and components. Trump’s 25 percent tariffs remain on over $100 billion of intermediate inputs from China.
Failing to heed the warnings, Trump’s tariffs have disrupted the American health care system’s access to medical products, just when they are needed the most in 2020.
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