Tariffs to help medical equipment makers grow

May 23rd, 2019

Chinese manufacturers of medical equipment are expected to benefit from China’s retaliatory tariffs on US goods amid the trade war between the world’s two largest economies, as a substitution drive is taking place, an industry analyst said on Tuesday, May 21.

China announced a tariff list affecting US-origin goods worth $60 billion on May 13. Items subject to tariffs range from blood pressure measuring instrument to B-ultrasonic diagnostic equipment.

China is the world’s second-largest market for medical equipment and drugs and a major source of revenue for American companies in the sector such as GE and Johnson & Johnson, the world’s leading players in medical equipment.

China imports mainly high-end medical equipment. For instance, customs data showed that in 2017, China imported $436 million worth of B-ultrasonic diagnostic equipment.

In the first quarter of the year, China’s imports of medical equipment and instruments grew by 10.8 percent year-on-year, while overall import growth was flat at just 0.3 percent.

Some industry analysts have argued that while some of the tariffs will be passed on to Chinese consumers by importers as some core technology and equipment can’t be replaced, some medical equipment that China can make may gain a boost in the market share.

With the tariffs raising product prices, foreign brands may lose competitiveness or be forced to invest more in localization, according to industry media reports.

In both scenarios, domestic medical equipment makers stand to benefit, and this development could aid efforts to breach foreign monopolies in entrenched sectors, the report said.

Li Tianquan, co-founder of domestic healthcare big data platform yaozh.com, noted that there are mixed results from the tariff wars among the drug and manufacturing sectors.

In some low-end segments, domestic brands already substitute for international brands with a price advantage. Quality of domestic products is the top concern for patients. If imported alternatives face an increase in price, domestic products stand a better chance, Li told the Global Times on May 21.

A major manufacturer of medical equipment, China exported medical equipment totaled $21.7 billion, up 5.84 percent year-on-year in 2017, according to a research paper by Caixin, citing customs data. Exports to the US were valued at $5.11 billion in the same year.

In the list of $300 billion worth of Chinese imports that would be hit with tariffs of up to 25 percent, proposed by the US, pharmaceuticals, certain pharmaceutical inputs and select medical goods were excluded.

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