Trump card

How to fight the good fight in the US President’s phony trade war

To misquote the great American journalist HL Mencken, ‘nobody ever went broke underestimating the vanity of Donald Trump’.

While global markets and world leaders continue to sweat and hand-wringing over the possibility of hefty tariffs being imposed on US imports, America’s president is, no doubt, sitting in his underpants, flicking through the TV channels and basking in all the crazy attention he is generating for himself.

While it’s just possible that he’s vainglorious enough to go through with his plan, the greater likelihood is that it’s a phony war, aimed at forcing those he likes least to back down at the last minute and offer a few non-trade-related kickbacks to make him look tough, at least in his own eyes.

The exact nature and scope of tariffs against the UK remain uncertain, but the potential consequences for our MedTech, biotech and life sciences companies are significant enough to warrant careful consideration and strategic planning.

The threat of increased costs is a primary concern. Tariffs on healthcare-related goods, including medical technology and equipment, will inevitably drive up prices.

For UK companies exporting to the US, this could make their products less competitive, potentially eroding market share. Even if the tariffs are not directly applied to UK goods initially, the overall disruption to global supply chains could have a ripple effect.

The UK’s pharmaceutical industry associations, notably the ABPI, have been understandably cautious in their public statements on the potential impact of US tariffs, reflecting the uncertainty and complexity of the situation.

However, the concerns raised by US-based organisations like the HDA and AdvaMed offer valuable insights into the potential challenges that UK companies may face. Increased costs, supply chain disruptions, reduced market access and a dampening effect on innovation are all real possibilities.

Many UK MedTech companies rely on components and materials sourced from around the world, including countries like China, India and EU member states. If these inputs become more expensive due to US tariffs, UK manufacturers will face pressure to absorb these costs, pass them on to consumers, or find alternative suppliers.

The latter option, while potentially mitigating the impact of tariffs, can be time-consuming, costly, and may compromise product quality if the new sources are not fully vetted.

That’s the bad news. The good news is that by taking a proactive approach and working collaboratively with the government, UK MedTech and biotech firms can mitigate the risks and capitalise on any opportunities that may arise.

The key to success will be agility, adaptability and a commitment to innovation in the face of uncertainty.

If Trump does implement significant tariffs, UK companies exporting to the US may need to establish production facilities there, potentially impacting profitability and requiring significant investment.

Companies should already be anticipating and planning for potential tariff changes, including exploring negotiation strategies and alternative supply chains, and rapid negotiation. Despite potential tariffs, the US will remain a crucial market for UK MedTech due to its high healthcare spending and openness to innovation.

The capriciousness of the current US president notwithstanding, UK companies should prioritise maintaining access to this market because it spends more on healthcare than any other territory and will continue to do so, no matter how much it reforms and changes.

Granted, tariffs will disproportionately affect companies selling commodity MedTech products with thin margins and so high-value-added products are better positioned to absorb tariff costs.

The anticipated decoupling of the healthcare industry globally, especially the US and China, could further complicate matters. Trump may seek to restrict Chinese medical technology from reaching its shores, even through third-party countries – including the UK.

This could involve stringent supply chain reviews and non-tariff barriers, placing additional burdens on UK companies that have integrated Chinese components or manufacturing processes into their operations.

Such restrictions would force these companies to re-evaluate their sourcing strategies and potentially invest in alternative production facilities, which can be a substantial undertaking.

In addition to the direct economic impacts, there are also potential security risks associated with the US tariff policies. Anti-NATO hacktivist groups may engage in disruptive attacks against health sector organisations in NATO countries, including the UK, in retaliation for the tariffs.

This could lead to data breaches, service disruptions and reputational damage, further exacerbating the challenges facing the MedTech industry.

Health sector organisations, especially those using AI/ML systems to bolster research and development, may also be at heightened risk of cyber espionage campaigns, as foreign governments and competitors seek to gain an advantage in the increasingly competitive global market.

Despite these challenges, there may also be opportunities for UK MedTech companies. If US tariffs make products from certain countries less competitive, UK companies may be able to gain market share in the US.

However, this would likely require them to be highly agile and responsive to changing market conditions. The pressure to diversify supply chains could also lead to new partnerships and collaborations between UK companies and suppliers in other parts of the world, potentially strengthening the UK’s position in the global MedTech industry in the long run.

The UK government has a crucial role to play and the Prime Minister is actively engaging in dialogue with the US administration to advocate for a more open and predictable trading relationship, and to seek exemptions for UK MedTech products from any tariffs that may be imposed. Peter Mandelson, the UK’s ambassador to the US and a former EU commissioner will play a crucial role in these talks.

The Government should also provide support to UK companies to help them diversify their markets, improve their supply chain resilience and invest in innovation. It should also ensure that appropriate cybersecurity measures are in place to protect the health sector from potential cyberattacks.

Perhaps the biggest consolation for UK companies, however, is Trump’s heroically small attention span. While this week it is tariffs that are powering the presidential synapses, next week it is likely to be something else.

Ivor Campbell is Chief Executive of Snedden Campbell