- Analysts identified several medical device manufacturers that could be affected by President Donald Trump's proposed 5% tariff on imports of all goods from Mexico.
- The tariff announced last week would go into effect June 10, with the rate rising progressively to as high as 25% by the beginning of October.
- Medtech companies with manufacturing facilities in Mexico are affected, while others may feel the pinch indirectly through the purchase of raw materials, components or finished products that are produced in Mexico, Needham analyst Mike Matson said in a research note.
As medtech companies are stuck navigating a tit-for-tat trade war between the U.S. and China, the Trump administration pitched a new wrinkle last week that could impact U.S-Mexico medical device trade.
The U.S imported approximately $15 billion worth of optical and medical instruments from Mexico in 2018, according to the Office of the U.S. Trade Representative. Analysts at RBC Capital Markets estimated in a note to investors that the Mexican market accounts for about 15% of all U.S. medtech imports and approximately 7% of U.S. medtech exports.
U.S. medical device makers with manufacturing facilities in Mexico include Align Technology, Conmed, Haemonetics, Intuitive Surgical, Masimo and Silk Road Medical, according to analysts at Jefferies.
Additional device makers with operations in Mexico are Hill-Rom Holdings, Invacare, Medtronic, Merit Medical Systems, Stryker and Teleflex, Matson said.
Trump's surprise announcement sent stock markets reeling on Friday, with the Dow Jones Industrial Average declining 1.4% and the S&P 500 down 1.3%. The president, in a statement, said the tariff is in response to continued large-scale illegal immigration from Mexico. Trump said the tariff would be removed if Mexico takes action to stem the migration.
A Mexican trade delegation was set to begin talks in Washington on Monday in hopes of heading off the punitive duties, according to media reports. Mexican President Andrés Manuel López Obrador on Saturday said he expected "good results" from the high-level talks, the Los Angeles Times reported.
U.S. Senate Finance Committee Chairman Chuck Grassley of Iowa issued a statement calling the action a misuse of presidential tariff authority and contrary to congressional intent. Following through on the tariff threat could jeopardize passage of the United States, Mexico Canada Agreement (USMCA), Grassley said.
However, acting White House Chief of Staff Mick Mulvaney said the issue of Mexican tariffs and the USMCA are not linked. Mexico, Canada and the United States last month agreed to end steel and aluminum tariffs, which had been a key impediment to ratification of the USMCA.
The U.S. Chamber of Commerce is considering legal action in response to the proposed 5% duty, CNBC reported.