Trump Tariffs Threaten MedTech: 3 Stocks to Mitigate Risks

In a bold move to hold Mexico, Canada and China accountable for illegal immigration and drug trafficking, President Donald Trump issued an executive order last Saturday, threatening extensive tariffs on imports from these countries. The order was followed by counter-retaliations and other measures, all of which have heightened trade tensions between the United States and its key trading partners, with potential implications for global markets and international relations.In such a situation, medical technology companies, particularly, may face soaring production costs, ultimately resulting in higher prices for healthcare service providers and patients. Additionally, potential supply chain disruptions could delay the availability of critical medical products, including surgical instruments, diagnostic equipment and life-saving devices like pacemakers and insulin pumps. This situation is leaving equity investors uncertain about whether to withdraw their funds from the sector.While there is a chance of potential shrinkage in the profit margins of MedTech makers, certain companies are better positioned to withstand these challenges due to their domestic manufacturing focus or diversified production strategies. Three such stocks are ResMed RMD, Hims & Hers Health HIMS and Medtronic MDT.Trump's Tariffs to Drive Up MedTech Costs and Potentially Disrupt EPSTrump's tariffs on imports from Canada, Mexico and China are expected to have a significant impact on the U.S. healthcare sector, which relies heavily on these countries for medical devices, pharmaceuticals and essential components. The new tariffs include a 25% levy on goods from Canada and Mexico and a 10% tariff on Chinese imports.  China announced countermeasures, including a 15% tax on U.S. coal and liquefied natural gas, along with a 10% tariff on crude oil, automobiles and agricultural machinery. Meanwhile, Canada and Mexico have secured a 30-day suspension of the proposed tariffs, allowing time for negotiations on a potential long-term resolution.We note that a huge number of U.S. medical technology companies source raw materials and components from Canada, Mexico and China. It goes without saying that the sudden imposition of tariffs and retaliations could drive up production costs, which would likely be passed on to healthcare providers and, ultimately, to patients. This could result in fewer patient visits, delayed medical treatments and worsening public health outcomes.Supply chain disruptions are another pressing concern here. These tariffs could lead to delays in acquiring critical components, hampering production and distribution. Medical device manufacturers may struggle to maintain steady supplies, leading to shortages of essential products such as surgical instruments, diagnostic equipment and even life-saving devices like pacemakers and insulin pumps.Going by a Fortune report, Goldman Sachs estimated that every five-percentage-point increase in the U.S. tariff rate would lessen S&P 500 earnings per share by about 1% to 2%. If the planned tariffs become a reality, as per the bank, it would reduce its S&P 500 earnings per share forecasts by roughly 2% to 3%.  Domestic MedTech Stocks Poised Well to Face Tariff ThreatsFrom an investor’s perspective, MedTech firms with strong U.S.-based manufacturing could be better positioned here. Additionally, companies with pricing power and essential products might pass costs onto consumers with minimal sales impact.One-Year Price PerformanceImage Source: Zacks Investment ResearchOur first pick on this list is ResMed. The company has manufacturing facilities in Australia, Singapore, France and the United States and, therefore, does not come under the direct impact of Trump’s tariffs. Currently, ResMed continues to see strong demand for its market-leading mask portfolio, gaining from a competitor’s recall. Continued product development is driving growth within this business globally.RMD carries a Zacks Rank #2 (Buy) at present. The company is expected to report 21.9% earnings growth on an 8.9% revenue increase in fiscal 2025 (ending June 2025). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.The second in this line is Hims & Hers, a San Francisco, CA-based consumer-centric health and wellness platform. With minimal reliance on Mexico, Canada or China, this stock too can be a safe bet for investors now. Hims & Hers addresses a vast unmet healthcare market, leveraging a $360 million U.S. total addressable market across specialties like mental health, weight loss, and dermatology. Its personalized product offerings drive subscriber growth, with 2M+ subscribers contributing to rising recurring revenues. Targeting $100 million from new categories by 2025, this stock holds immense potential.HIMS currently has a Zacks Rank #3 (Hold). The company is expected to report 600% growth in 2024 earnings on a 68.2% revenue surge (earnings scheduled for Feb. 24).The last but not the least is Medtronic. The company recently stated that its exposure to import products from China is less than 1% of its total revenues. This minimal reliance suggests that Medtronic may experience limited direct impact from the tariffs on Chinese imports. We further note that Medtronic is strategically expanding its global presence to address the unmet demand for advanced medical devices.Within Cardiovascular, Medtronic is gaining market share, banking on product launches in CRM and Structural Heart. Hypertension has brought up multibillion-dollar opportunities for MDT. In MedSurg, Medtronic is scaling the production of Hugo RAS. The Surgical and Neuroscience portfolios continue to contribute positively.MDT currently has a Zacks Rank #3. The company is expected to report 4.8% earnings growth in fiscal 2025 on 3.7% revenue growth.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Medtronic PLC (MDT): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Hims & Hers Health, Inc. (HIMS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks