The 2024 U.S. Election and Trump’s Policies: Navigating Challenges and Opportunities for China’s Medical Device Industry

This article examines how Trump-era policies like tax reform, trade protectionism, and the suspension of the medical device tax have affected Chinese medical device exports, market share, and competitiveness. It also explores potential challenges and opportunities if Trump is re-elected in 2024.

VITANIA SOLUTIONS

11/6/20248 min read

This article is an original piece by VITANIA SOLUTIONS

The 2024 U.S. presidential election is reaching its conclusion, and its outcome could have profound and complex effects on the global medical device industry, particularly on the exports, market share, and global competitiveness of Chinese-manufactured medical devices. This article delves into the policies implemented by former President Trump during his past term, examines how these policies impacted Chinese-manufactured medical devices, and considers potential challenges and opportunities if Trump is re-elected, especially in light of recent developments.

1. Review of Trump Administration’s Medical Device Policies

Under President Trump’s leadership, the U.S. government implemented a series of policies aimed at revitalizing American manufacturing, protecting domestic industries, and reducing dependency on imported products. These policies were particularly impactful in the medical device industry, focusing on tax reform, trade protectionism, and regulatory adjustments.

1.1 Tax Reform: Tax Cuts and Jobs Act

In 2017, the Trump administration passed the Tax Cuts and Jobs Act, which lowered the federal corporate tax rate from 35% to 21%[1]. This move aimed to enhance the global competitiveness of U.S. companies, attract overseas capital back to the U.S., and encourage domestic investment and production.

Impact on the Medical Device Industry:

Increased Capital Investment: The lower tax rate and one-time full expensing policy encouraged medical device companies to invest more in research and production facilities, helping boost the technical capabilities and production capacity of U.S. medical devices.
Industry Reshoring: Tax incentives lowered the operating costs in the U.S., leading some companies with overseas manufacturing facilities to consider relocating their production lines back to the U.S., reducing dependency on imports.

However, for companies relying on low-cost overseas production, the tax reform may not have fully offset the cost advantages of manufacturing abroad. The actual impact varies based on company size and operational model.

1.2 Trade Protectionism: Tariffs and Trade Friction

The Trump administration adopted a tough trade policy, imposing tariffs on imported goods from multiple countries, particularly targeting China[2]. Specific measures included:

Section 301 Tariffs: Imposing a 25% tariff on hundreds of billions of dollars' worth of Chinese goods under Section 301 of the 1974 Trade Act, which included medical device products[3].
Expanded Tariff Scope: Covering various medical devices, including imaging equipment, surgical instruments, and diagnostic devices.
Impact: These tariffs aimed to reduce the trade deficit and protect U.S. manufacturing but also escalated trade tensions between the U.S. and China, increasing uncertainty in global supply chains.

1.3 Suspension and Repeal of the Medical Device Tax

The Affordable Care Act (ACA) introduced a 2.3% excise tax on medical devices sold in the U.S. in 2013[4]. This tax was widely regarded as increasing device costs and inhibiting industry innovation and investment.

Trump Administration Actions:

Medical Device Tax Suspension: In 2018, Trump signed legislation suspending this tax, which positively impacted U.S. medical device manufacturers.
Complete Repeal: In December 2019, Trump signed the Further Consolidated Appropriations Act, permanently repealing the medical device tax[5]. This move was widely praised in the industry for promoting medical technology innovation and investment.

Impact:

Reduced Tax Burden: Companies had more funds to invest in research, production, and market expansion.
Encouraged Innovation: The removal of tax barriers incentivized companies to develop new products and technologies.

1.4 Regulatory Reforms in Medical Device Oversight

The Trump administration promoted FDA regulatory reforms to accelerate the approval and market entry process for medical devices:

Faster Approval Process: Optimized approval procedures, reducing the time for new products to enter the market.
Innovation Promotion: Supported new technologies and digital health development with a more flexible regulatory framework.

Impact:

Increased Market Competition: Faster approvals allowed new products to enter the market more quickly, increasing competitive pressure.
Adaptation to Regulatory Changes: Companies needed to align with new regulations to ensure compliance with the latest requirements.

2. Impacts on Chinese-Manufactured Medical Devices

The Trump administration’s policies had multifaceted and profound effects on China’s medical device industry, primarily in the following areas:

2.1 Increased Tariffs: Erosion of Price Competitiveness

The tariffs imposed on Chinese medical devices imported into the U.S. directly led to higher prices in the American market, resulting in:

Decline in Market Share: U.S. buyers may turn to suppliers from other countries or opt for domestic products.
Compressed Profit Margins: To remain competitive, Chinese companies may reduce their ex-factory prices, sacrificing profit margins.
Supply Chain Instability: Uncertainty from tariffs impacts long-term business relationships, adding commercial risk.

2.2 Supply Chain Adjustments: Restructuring the Global Supply Chain

Trade friction prompted many companies to reevaluate their supply chain strategies:

Relocation of Production: Some companies relocated production from China to Southeast Asian countries like Vietnam, India, and Malaysia to avoid tariffs.
Diversified Supply Chains: Companies sought to diversify suppliers, reducing dependence on a single country and increasing supply chain resilience.
Localized Production: Some companies established production facilities in the U.S. to meet local demand.

2.3 Technology Transfer Restrictions: Limited Innovation Capacity

Due to stricter U.S. export controls on critical technology, Chinese medical device companies face greater obstacles in obtaining advanced technology:

Difficulty Accessing Technology: Limited access to advanced medical technology and equipment affects product upgrades and innovation.
Increased R&D Costs: Companies need to develop core technologies independently, increasing R&D investment and time.
Restricted International Collaboration: Limited opportunities to collaborate with U.S. companies, impacting global market expansion.

2.4 Strengthened Investment Review: Increased Foreign Investment Risks

The Committee on Foreign Investment in the United States (CFIUS) strengthened its scrutiny of foreign investments during Trump’s term, especially transactions involving sensitive technology and personal data[6]. This created challenges for Chinese companies in the U.S.:

Increased Transactional Complexity: Longer review cycles and increased uncertainty led to the cancellation or modification of some transactions.
Strategic Constraints: Limited opportunities for acquisitions to gain advanced technology and market channels.

3. Recent Developments and Their Implications

3.1 Key Issues in the 2024 Election

According to industry reports, key medtech issues in the 2024 election include[7][8]:

Future of the Medical Device Tax: Although the tax has been repealed, the new administration may reevaluate tax policies impacting the industry.
FDA Regulatory Direction: The government’s approach to FDA leadership and policies will directly impact device approval processes and regulatory requirements.
Trade Policy and Supply Chain Security: Balancing global supply chains with national security concerns will be a central policy focus.

3.2 Trump’s Support for TikTok: A Shift in Stance and New Opportunities

Recent reports indicate that Trump has publicly supported TikTok during the 2024 election, encouraging voters who enjoy TikTok to support him and citing record-breaking engagement on the platform[9]. This shift could have significant implications for Chinese tech companies, especially those using TikTok for marketing.

Platform Accessibility Assurance: Trump’s support may signal a reduction in previous bans or restrictions, ensuring Chinese companies can continue marketing on TikTok in the U.S.
Expanded Audience Reach: TikTok’s large U.S. user base, particularly among younger people, may provide companies with an opportunity to engage a broader audience.
Improved Policy Environment: Trump’s stance on fair competition may reduce policy discrimination, fostering a fairer environment for Chinese medical devices in the U.S. market.

4. Potential Impacts of the 2024 Election

4.1 Continuation and Changes in Trade Policy

The election outcome will directly influence the direction of U.S. trade policy:

Tariff Uncertainty: If Trump is re-elected, tariffs may remain or increase, further pressuring Chinese medical device exports.
Trade Agreement Adjustments: The new administration may reevaluate trade agreements with China and other countries, affecting the trade environment.

4.2 Strengthening Domestic Manufacturing and Supply Chain Security

Policy Focus:

Government Support: Subsidies, tax incentives, and government procurement could support domestic medical device companies.
Localized Supply Chains: Encouraging domestic production of essential medical supplies and equipment to secure supply chain resilience.

4.3 Changes in Medical Device Regulatory Policy

FDA Regulatory Direction: The new administration may adjust FDA leadership and policy, impacting approval speed and regulatory requirements.
Support for Innovation: Government support for medical technology innovation, including research funding and fast-track approvals, will directly affect industry growth.

5. Strategic Recommendations for Chinese Medical Device Companies

To address challenges and seize opportunities, Chinese medical device companies need to adjust strategies to maintain competitiveness and market position.

5.1 Strengthening Digital Marketing: Utilizing TikTok and Other Platforms

Optimize Marketing Strategy: Leverage favorable policies by investing in TikTok and other digital platforms, and devise marketing plans targeting the U.S. and global markets.
Localized Content: Create localized content to resonate with American culture and consumer preferences, enhancing engagement and brand recognition.
Enhanced Interaction: Engage users through live streaming, interactive activities, and user-generated content to build loyalty.

5.2 Boosting Independent Innovation: Increased R&D Investment

Technological Breakthroughs: Develop core technologies and key components, achieving domestic substitution and enhancing product quality.
Product Upgrades: Develop high-end medical devices to meet global demand for high-quality medical devices.
Intellectual Property Protection: Strengthen patent applications and protections, building technical barriers and enhancing international competitiveness.

5.3 Diversifying International Markets: Expanding Emerging Markets

Regional Expansion: Strengthen market presence in Europe, Southeast Asia, Africa, and Latin America to reduce reliance on a single market.
Localized Operations: Customize products and services to meet local demand and regulations, improving market adaptability.
Strategic Partnerships: Collaborate with local companies and healthcare institutions to expand market networks and increase brand influence.

5.4 Strengthening Global Compliance Management: Enhancing Compliance Capability

Regulatory Research: Understand target markets' laws, regulations, and industry standards to ensure compliance in products and operations.
Quality Management: Establish quality management systems aligned with international standards, such as ISO 13485, to enhance product quality and credibility.
Compliance Training: Train employees on compliance to prevent legal and commercial risks.

5.5 Enhancing International Cooperation: Win-Win Partnerships

Technical Cooperation: Collaborate with international research institutions, universities, and companies to boost innovation.
Mergers and Acquisitions: Seek overseas M&A opportunities within regulatory limits to gain technology and market access.
Participation in Standards Setting: Actively engage in international organizations and standard-setting, enhancing influence and speaking power.

6. Future Outlook and Considerations

Global Medical Device Industry Transformation

Driven by global population aging, rising health awareness, and technological advancements, the medical device industry is embracing new opportunities. However, geopolitical uncertainties, trade friction, and intensified technological competition pose challenges.

U.S.-China Competition and Cooperation

Intensified Competition: U.S.-China competition in high-tech sectors will persist, with medical devices as a key focus.
Cooperation Potential: U.S. and China could still cooperate in global health and public health domains, such as in fighting pandemics and developing new drugs and medical technologies.

Policy Environment Impact

Stricter Regulations: Countries may strengthen medical device regulation, requiring companies to enhance compliance and risk management capabilities.
Trade Policy Changes: Changes in trade agreements and policies will directly impact global supply chains and market access, requiring companies to remain sensitive and adaptable.

The outcome of the 2024 U.S. presidential election will have profound implications for the global medical device industry, especially for Chinese-manufactured medical devices. Trump’s policies over the past years have posed numerous challenges for Chinese companies, including increased tariffs, technology restrictions, and market entry difficulties. If he is re-elected, these policies may be extended or even intensified. However, Trump’s support for TikTok and the repeal of the medical device tax also present new opportunities, particularly in digital marketing and innovation.

To navigate the complexities of this landscape, Chinese medical device companies must proactively adjust strategies, enhance independent innovation, diversify markets, strengthen compliance management, and deepen international cooperation. Leveraging digital platforms like TikTok can also bolster brand promotion and marketing, enhancing global competitiveness.

In an environment of rising global healthcare demand, both challenges and opportunities coexist. By continually enhancing their capabilities, Chinese medical device companies can position themselves successfully in a dynamic international market, contributing to global healthcare advancement.

References