Twice within this decade, which we are not even half way through, global health has been undermined by supply chain disruptions. First, it was the Covid pandemic that brought travel and trade restrictions. Now, it is a mercurial US president bombarding the world with trade tariffs. Travel bans did not prevent the SARS Co-V2 virus and its busy brood of variants from crossing borders but they limited the flow of personal protective equipment, vaccines and drugs to countries in need. High-income countries, which imposed restrictions or hoarded resources needed for an effective global response, paid a price when new virus variants emerging in countries with weakened health systems spread worldwide.
Now, Donald Trumps’s tariffs too will recoil back on the American health system by disrupting supply chains of vaccines, drugs and medical equipment. They will also have ripple effects on the suppliers from other countries who have long provided these resources to American consumers at lower costs. Even as the rest of the world will redirect trade in these health service supplies to non-US markets, American manufacturing will experience a long delay before domestic capacity can be ramped up to a level that meets domestic needs without reliance on imports.
Currently, many American device manufacturers base their production units in other countries which have lower labour costs. Around 69 percent of the medical devices marketed in the US are manufactured outside that country. It is estimated that the American proposal to impose 60 percent tariffs on all products imported from China will affect prices of 13.6 percent of all medical devices currently sold in the US. China supplies respirators, masks and gloves needed for America’s healthcare facilities. Enteral feeding syringes, which are not manufactured outside of China, will be subjected to a 245 percent tariff in the US.
Tariffs imposed on the US’s neighbours too will boomerang. Canada is a supplier of low-cost prescription medications, while Mexico supplies syringes, diagnostic tools and surgical instruments. Medicines imported from Canada in 2024 amounted to $8.4 billion. While US consumers will need to pay higher prices for these imports, the neighbours will be hurt too. Deprived of an assured American market, Canadian pharmaceutical firms may see investments shrinking and shrivel as a result. Canada and Mexico will have to overcome the threat of job losses in industries which export to the US.
Even as the American administration aims to move the manufacturing of medical devices and drugs to the homeland, there will be a considerable time gap before the required scope and scale are achieved. Meanwhile, America’s health system and consumers will have to pay a high price for imported drugs and medical equipment. Even when domestic capacity for pharmaceutical manufacturing is ramped up, higher labour costs in the US will keep drug and device prices higher than what India, China or Brazil can supply. Also, Trump’s aversion to generic drugs may result in only feeble support for low-cost generic drug manufacture in the US. Trump appears to have hit this golf ball into a water hazard that will take many strokes to recover from.
Rising prices of drugs and devices in the US market will also have an impact on countries which depend on US supplies. Several African countries and some in Asia and Latin American were provided drugs and equipment by American suppliers funded by USAID’s international programmes. With the dismantling of that agency, these countries will have to pay high prices for imports from the US or source them from other countries, which can provide less expensive products of similar kind.
Other tariffs imposed by the Trump administration, on goods unconnected to the health sector, will have negative effects too. Exports will decrease as American consumers shy away from higher prices of imported goods. That will result in job losses and lower export revenues. This will impact national revenues, leading to tighter national budgets and lower allocations to health services as part of government spending. Falling incomes will also impair the ability of individuals to purchase healthcare or even nutritious food. South Africa, which was subjected to a whimsical and vindictive 30 percent tariff may have the resilience to withstand that assault but exporters in smaller African nations may have lost their exports when high tariffs were initially levied.
India has the resilience to counter this unwarranted economic assault. The domestic pharmaceutical industry has a large market, domestically as well as globally in non-US territories. As many countries are repelled by the aggressive ultra-nationalist posturing of the US administration, they will seek supplies from India. The European Union too is more likely to increase its trade with India. As political relations with China are showing signs of improvement, India will be the centre piece of BRICS and G-20. Economic cooperation among their member countries can build a bulwark against any tidal wave of Trump’s tariffs.
Even as this happens, India has to steadfastly pursue the path to self reliance. We need to finance and facilitate innovation and expansion in the domestic pharmaceutical industry. Investment for revival of public sector capacity in pharmaceutical manufacture will be needed, so that we can initiate permissions for compulsory licensing when needed. The Doha Declaration provides several relaxations to the restrictions imposed by the World Trade Organization’s TRIPS Agreement. These can be used in case of a public health emergency. The turbulence stirred by Trump—from intemperate tariffs to abrupt disengagement from the WHO—constitute a grave enough threat to be called a global public health emergency.
What may be the consequences if India imposes retaliatory tariffs? The government may choose not to do so, giving room for further negotiations till Trump gets over his tantrum. If India does respond with counter-measures, the cost of imports from the US will rise. They are mainly in the area of medical devices due to the rising burden of non-communicable diseases. India imported approximately $1.45 billion worth of medical devices from the US in 2023-24 (18 percent of all such imports). It’s a critical dependence. Surely, it’s time to step up domestic innovation and production, while engaging with alternative suppliers.
K Srinath Reddy | Chancellor, PHFI University of public health sciences and chair of Centre for Health Assurance at the Indian School of Public Policy
(Views are personal)
(srinath.reddy@phfi.org)