In the recent past, medtech companies didn’t have to think too much about tariffs, but that is no longer true. Shifts in global tariff policies have complicated global supply chains and now threaten profit margins at medtech companies around the world.
Up to 10% to 40% of EBIT margin could be at risk for medtech players due to new tariffs, according to recent BCG analysis.
Tariffs will impact virtually all global medtech players, though the impact will vary widely across players, and even across product lines for the same player.
In our work with medtech companies, we have identified specific measures that leadership teams can take to navigate the new tariffs. As we will show, trade compliance capabilities are one lever for medtech players to focus on and turn into a superpower.
Subscribe to our Medical Devices and Technology E-Alert.
The Capability Gap
There is still significant uncertainty about where tariffs will stabilize, but one thing is certain: they will be much higher in the future than they were over the past 40 years, and they will likely stay in place for a long time.
That represents a significant departure for medtech companies, most of which historically haven’t needed to focus on tariffs. For example, in 2024, only about 5% of US medtech imports from Canada and Mexico were reported as compliant with the US-Mexico-Canada Agreement (USMCA). Many of those products were compliant, but since they could be imported quasi duty free regardless, it wasn’t worth the time and money for companies to document them as such.
Because tariffs had such little impact in the past, many companies in the sector do not have strong trade compliance capabilities in place. Building those capabilities will be difficult. First, medtech value chains can be complex, which makes supply chain transparency for trade compliance purposes difficult. Second, tariffs themselves can be complicated—a variety of legal mechanisms are in place or under consideration. And the risk from getting things wrong is high. Companies can face retroactive fines or penalties for goods imported under preferential tariffs and later found to be noncompliant.
Six Steps to Turn Trade Compliance into Competitive Edge
Higher tariff rates are an economic burden, but they also create an opportunity.
The winners will be those that move fast and make trade compliance a core capability within the organization—backed by the appropriate resources and managerial attention and enabled by supply chain transparency and trade analytics.
We recommend the following actions to strengthen trade compliance.
Establish a tariff command center. Create a dedicated command center tasked with tracking geopolitical developments and understanding how those could impact the company’s supply chain and financial performance. The team should be cross-functional and span the geographic markets where the company has production and logistics facilities and/or a market presence.
The overall objective for the command center: to monitor policy shifts, model potential scenarios and their implication on the company’s supply chain and financial performance, track the moves of competitors, and develop response playbooks for how the company can best react.
Create supply chain transparency. Accurate value chain data is a key underlying enabler for trade compliance. This may require investment in data, systems, and solutions to ensure real-time, accurate information.
Some companies are making supply-chain transparency and disclosure of upstream tiers and sourcing patterns a key requirement to become, or remain, a qualified supplier. Others are complementing such data gathering with legal tools such as affidavits about the origins of a certain component or the value of regional content embedded in specific subparts.
AI can also be a crucial tool in improving real-time intelligence across the supply chain. Specialized supply-chain data-mining providers help build value chain transparency up to the second and third supplier tier by tracking and purchasing shipping and customs data at scale. AI-driven monitoring can automatically refresh trade compliance playbooks in response to events.
Develop a single source of truth. Supply chain data must feed into a single source of truth about the products in the portfolio: a centralized digital repository of country-of-origin data, bills of materials, sales patterns, and tariff rates.
AI-driven monitoring can also play a role here. For example, if a country’s tariff rate changes, the tool can recalculate exposure by SKU and auto-trigger work packages to shift sourcing or change production terms.
Maximize qualification for preferential trade agreements and US content requirements. Train suppliers and procurement teams on rules of origin and required documentation. For example, USMCA compliance leads to a full waiver of the US International Emergency Economic Powers Act fentanyl tariffs (25% for products from Canada or Mexico). So it is critical to document regional content value, as well as US content to partially offset the burden from reciprocal tariffs.
Design to tariff cost. Embed trade compliance optimization and validation into upstream processes, including product design, SKU set-up, and supplier onboarding. For example, consider changing product specs to enable reduced tariff burden—for example, by qualifying for preferential trade agreements, reducing tariffed content, or changing product specs such that the product can be reclassified.
Optimize additional trade compliance levers. Leading players are already starting to work with legal advisors to explore additional reclassification opportunities where possible, and to maximize the use of “delivered duty paid” terms with suppliers to minimize the dutiable value on mark-ups. Companies can also closely track tariff payments to qualify for potential refunds.
By developing a better understanding of the company’s exposure—under current tariff regimes and potential future scenarios—leadership teams can take informed steps to mitigate the impact on supply chains and overall financial performance. Companies that proactively address the challenge, with a focus on trade compliance, can shape their future and stay ahead of the competition in a higher-tariff world.
The authors thank Saavin Lidder for her contributions to this article.
