Johnson & Johnson Forecasts $400M Tariff Impact Primarily from U.S.-to-China Medical Device Exports

Apr 16, 2025 10:33 CST Updated 10:33

Johnson & Johnson

Medical Device R&D and Manufacturer

Yesterday, Johnson & Johnson released its Q1 2025 earnings report. During the conference call, Johnson & Johnson executives stated that the expected increase in global tariffs would impact the company's financial forecast.$400 million in losses, most of which came from its exports of medical devices from the United States to China.。

CFO Joseph Wolk said that based on the goods and raw material tariffs formally announced by the Trump administration so far, as well as retaliatory measures adopted by the international community, the company’s medical technology division would bear the brunt. Although the White House has proposed future tariffs on pharmaceuticals, an investigation is currently underway.

"I don't want to take that $400 million lightly," Volcker said on the investor conference call. "The program has been implemented in phases, annually and in batches, and after that, most of this amount will be included in the cost of goods," he added. "Therefore, this amount will be recorded in the inventory of the balance sheet and offset through the income statement in future periods. This is how we are considering it."

Volker said that the estimate took into account the impact of import tariffs on products manufactured in Canada and Mexico that fall outside the scope of the North American trade agreement, as well as the impact of international steel and aluminum tariffs — the latter having "a very small impact."

He said, "This includes tariffs on China and China's retaliatory tariffs. In terms of that $400 million, this might be the highest amount among all tariffs. Therefore, it needs to be clarified that this refers to U.S.-origin products shipped to China – this could be the harshest punitive factor."

CEO Joaquin Duato stated that if the Trump administration's goal is to increase production within the United States, imposing tariffs on medical products is not the right approach, and warned that these tariffs could "cause supply chain disruptions, leading to shortages."

Duato said: "If you want to build manufacturing capabilities in the medical technology and pharmaceuticals sectors in the United States, the most effective answer is not tariffs but tax policy."

"In fact, since President Trump's tax reform in 2017, investments in medical technology and the pharmaceutical industry have significantly increased," he added, citing Johnson & Johnson's announcement last month of plans to increase U.S. investments by 25%, amounting to over $55 billion within four years, including the construction of a new biologics plant in North Carolina."

As for the future development direction, Volker said that due to the signed medical device transportation contracts, the company has "very limited" ability to mitigate the impact of tariffs by adjusting prices and passing on costs.

"We know that these tariffs are highly volatile," Volker said. "Our responsible action now is to quantify what we believe the impact will be in 2026, and then see if it helps with negotiations with other countries, and what actual changes will occur by the second half of 2025."

In its latest financial guidance, the company currently projects total operational sales for 2025 to reach between $91.6 billion and $92.4 billion, an increase of $700 million from the initial forecast announced in January. Johnson & Johnson attributes this growth to its $14.6 billion acquisition of Intra-Cellular Therapies and its Caplyta therapy for treating schizophrenia and bipolar disorder.

In the first quarter of this year, Johnson & Johnson's total sales reached $21.9 billion, representing a 4.2% increase from the beginning of 2024 after accounting for international currency fluctuations. This includes $8 billion in global medical technology revenue, with an adjusted growth rate of 4.1%.

Jessica Moore, Vice President of Johnson & Johnson's Investor Relations, stated that anticancer drugs such as Darzalex, Erleada, and the CAR-T cell therapy Carvykti played a significant role in this series of new drugs. Sales in Johnson & Johnson's oncology division grew by approximately 20% in the first quarter, reaching $5.68 billion. Notably, the sales of the highly anticipated EGFR×cMet bispecific antibody drug Rybrevant (amivantamab) were disclosed together with lazertinib, with total sales in 2024 amounting to $327 million, falling far short of Johnson & Johnson’s previous projection of $5 billion. Nevertheless, Johnson & Johnson still indicated that internal company forecasts predict Rybrevant’s sales to reach $3.6 billion by 2027.

Johnson & Johnson's Cardiovascular, Metabolic and Retina division also achieved double-digit sales growth in the first quarter, while sales growth in the Neuroscience, Pulmonary Hypertension and Infectious Diseases divisions was more moderate.