Medical Devices to Packaging: The Hidden Costs of Tariffs on Everyday Goods

In a recent conversation with Dean Bagnall, Director for North America at Lean Six Search and a seasoned expert in Executive supply chain recruitment for the Food & Beverage and Medical Device sectors, we unpacked the complexities of new tariffs and their ripple effects.

These import taxes, designed to boost domestic manufacturing, are reshaping industries by increasing costs for medical devices (75% of which are imported) and triggering supply chain disruptions in food production, from aluminum packaging shortages to labor challenges.

While tariffs aim to strengthen U.S. manufacturing and job growth long-term, Bagnall highlights the immediate pressures on businesses and consumers, including higher prices and “shrinkflation.” Dive into our analysis below, or listen to the full audio conversation for expert insights on navigating this evolving trade landscape.

What actually is a tariff?

Firstly, a tariff is effectively a tax (yes, another tax we humans have to deal with!) that is imposed by a government on goods that are brought into their country from abroad.

These taxes can be either a percentage of the product's value or a specific fixed amount per unit or weight. There are three main reasons why a government imposes tariffs:

1) Raise government revenue by collecting these taxes.

2) Protect Domestic Industries - By taxing imported goods, it makes them more expensive to the manufacturer and ultimately the consumer.

3) Regulate trade - yes, there is meant to be some benefit that comes out of tariffs, and that means there is a controlled flow of certain goods coming into the country, thereby avoiding monopolies on specific products by select companies.

How will the new tariffs affect industries?

Let's take the Medical Device sector for example. The implementation of these tariffs will cause initial chaos in the manufacturing and supply chains of medical devices, as approximately 75% of medical devices marketed in the US are manufactured abroad, with around 60% being exclusively manufactured outside the US.

As you can imagine, these new taxes will increase prices on the majority of devices used, but more importantly, those that are essential.

Now, let's examine the Food and Beverage industry. There will be significant repercussions for the U.S. food and beverage industry because it will affect three leading players in the supply chain.

1) Sourcing of raw materials - these new taxes will make procuring raw ingredients to make our food more expensive as the US relies heavily on imports of these materials from Canada, Mexico, and China.

2) Packaging - The US imports more than half of its aluminum from Canada, so there will be a significant increase in food and drink packaging, as a substantial portion of these products are already packaged in this way. And what couples with this is something called "shrinkflation," which means that to save money and keep their costs down, companies may reduce product sizes. However, don't get too excited about any savings this can offer, as prices will remain the same; you will receive less.

3) Finally, an obvious one, Production Costs! Because not only are we importing raw materials and packaging, but many companies are also importing equipment and machinery, which will become more expensive. Along with machinery, we also have humans making these products, and with stricter immigration enforcement, this could lead to labor shortages and escalating costs.

Is any of this positive?

Now, of course, it all sounds like doom & gloom right now, but as they say, sometimes things need to get worse before they get better!

These tariffs can strengthen domestic production and increase the manufacturing market in the US. This will reduce reliance on international suppliers, and the American Medical Manufacturers Association has expressed strong support for these measures, viewing them as pivotal for revitalizing the sector.

Leveling the competitive landscape: These tariffs aim to mitigate the influx of underpriced imports that challenge in-country manufacturing. By adjusting these tariffs, domestic producers can compete more effectively.

Enhancing job creation (eventually). This is where the worse before better really comes in. When the dust settles, the plans are made, and the path is created, these tariffs are expected to lead to job growth within sectors that require manufacturing.

Finally, product quality & safety. Domestic manufacturing is subject to far greater labor and environmental standards, ensuring that medical devices, which are so vital, meet the highest benchmarks for quality.

About Dean Bagnall: Dean has 12 years of global recruitment experience within the FMCG and Life Science sectors. He is the Director for North America at Lean Six Search.

An expert in supply chain, Engineering, Manufacturing, and Operations senior leadership recruitment, he prides himself on making genuine connections with both candidates and clients. He is a true partner in every sense and thrives on placing professionals in roles that enhance their careers and lives.

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