The healthcare sector may have escaped the worst of Donald Trump’s so-called “Liberation Day” tariffs - but Panmure Liberum is warning investors not to get too comfortable just yet.
In a new note, the broker describes healthcare as a “safe-ish haven” amid the broader trade turmoil.
That cautious qualification reflects one big caveat: while pharmaceuticals are currently exempt from new import duties, there’s no guarantee they’ll stay that way.
For now, Panmure reckons 85% of the UK-listed healthcare companies it covers will see little to no impact. But it’s a mixed picture, especially for the medtech end of the sector.
Companies like Smith & Nephew PLC (LSE:SN), Advanced Medical Solutions Group (AIM:AMS), and Niox are facing the biggest potential headwinds.
None of them manufactures in the US, meaning their sales into the market could be hit with tariffs of up to 34%. In a worst-case scenario, Panmure estimates a 12% hit to Smith & Nephew’s profits and around 6% for AMS – though it stresses both firms can take steps to soften the blow, from applying for exemptions to shifting production.
Others, like Hikma and Oxford Biomedica, may actually benefit thanks to their existing US manufacturing footprints.
With the pharma industry under pressure to onshore more supply, these companies could become more attractive partners in future deals.
The Nairobi Protocol – a piece of trade legislation that exempts medical devices designed for the treatment of chronic conditions – is currently doing a lot of heavy lifting when it comes to shielding the sector from full exposure.
The problem is, that these exemptions are highly specific and reliant on slow-moving bureaucracy. Any tweaks to US customs interpretations could change the picture quickly.
That’s why Panmure says it’s wise to expect volatility. This is, after all, just the opening salvo.
With Trump signalling more tariffs could follow – and hinting that pharmaceuticals could be next – companies are already modelling different scenarios.
For now, investors in the healthcare sector can take some comfort that the storm has largely passed them by. But, as Panmure’s analysts note, it may be “only the initial shot across the bows”. The real negotiating – and real impact – may be yet to come.