As we slide into the home stretch of 2018, I thought I’d share my thoughts about the events that have already transpired within the medical device industry and the issues likely to impact the sector beyond the mid-term elections into next year. Tariffs and Trade Wars The Trump administration’s trade wars are beginning to impact various industries. Ford, for instance, estimates that steel tariffs have cost the company $1 billion, and Walmart is bracing for higher consumer prices, but the effect on medtech is still uncertain. I wrote this column while visiting several manufacturing plants in China and Vietnam; not surprisingly, companies there are concerned that increased tariffs and trade wars with the United States will significantly impact China’s manufacturing sector. The exact consequences, however, remain to be seen. Much of the uncertainty likely stems from the evolving nature of the tariffs and trade wars. Case in point: In mid-September, U.S. Treasury Secretary Steve Mnuchin invited high-level Chinese officials to a new round of talks in an apparent effort to stave off a wider and more significant expansion of the tariffs. Yet less than two weeks later, China called off the talks and imposed a 10 percent tariff on $60 billion of U.S. products then shortly thereafter cut import charges on numerous non-American goods, a move most likely designed to protect Chinese consumers against their country’s escalating trade war with America. Trump has faced pressure in the United States to back off the fight, but that isn’t likely to happen. During a Sept. 26 press conference, the president insisted the trade conflict has not impacted the U.S. economy, despite claims to the contrary. The tariffs have not really affected the medtech industry so far, though some medical imaging, X-ray machines, and other products are falling victim to the hostilities. One area that most certainly has been affected by the tariffs is tooling (molds) exports from China. The 25 percent tax—imposed with Trump’s first $50 billion batch of springtime tariffs—has, basically, put tooling prices close to par with U.S. toolmakers. And while prices are closing in, I’m not sure the United States can ramp up production to truly overcome the handicap. Mold-making capacity has mostly shifted to China over the last two decades. Consequently, U.S. lead times can still be two to three times as long as some China mold-makers, and with the glut of extra capacity, lead times from China are now even faster.

Click Here For Complete Abstract Text

• Acquisition

• Financial

• Market

• Mergers

• MPO

• 10/1/2018

• Abstract