The Economic and Security Objectives Shaping U.S.-China Medical Trade 

When President Donald Trump announced “Liberation Day” tariffs on most goods imported into the United States, pharmaceutical imports were exempted. Nonetheless, within days, Trump promised that major tariffs on the industry were coming “very shortly.” In the following weeks, the U.S. Department of Commerce announced a national security investigation into imports of pharmaceuticals and pharmaceutical ingredients. Industry insiders have suggested that the tariffs on the pharmaceutical sector could be narrower than tariffs on other sectors, and mostly focused on national security concerns.  

Unlike more aggressive trade actions in other sectors, this investigation signaled a more cautious approach—reflecting a broader recognition of the dangers of disrupting a fragile and globally interconnected pharmaceutical supply chain. 

Maintaining a consistent supply of medicine and medical devices in the event of disruption is a core consideration for the United States. Beijing shares similar concerns, worrying that health care could become the next cutting-edge sector after semiconductors to be targeted by Washington. As tensions between the two countries rise, the perception of interdependence in the health care sector could heighten sensitivities in both Washington and Beijing, shaping policy discussions and the business climate around trade, security and industrial strategy. 

Connected, But Not Fully Interdependent

U.S.-China trade in medical products represents a small but growing part of overall bilateral trade, increasing from only 0.6% of total trade in 2018 to nearly 3% by 2022.  

Bilateral trade of medical equipment and supplies has remained relatively stable, with China maintaining a trade surplus of USD 4.87 billion in 2024, down from a peak of around USD 6 billion in 2021. In contrast, the pharmaceutical trade has been more volatile. In 2024, the United States ran a trade surplus of USD 1.18 billion with China, down from a peak of USD 3.47 billion in 2023 and a stark reversal from a deficit of USD 4.07 billion in 2022. These fluctuations could be explained by the United States’ demand for finished drugs from China and China’s need for advanced immunological products from the United States. China’s share of U.S. imports of active pharmaceutical ingredients (API) remained steady at around 17% over the past decade.  

These data suggest that while the United States and China maintain a closely linked trade relationship in the health care sector, they are not fully interdependent. Neither country can exert full control over the other’s production chain. However, due to domestic structural imbalances, both countries play a significant role in ensuring each other’s access to critical pharmaceutical imports, such as API and high-end products. This reality has created concerns, heightened under the current geopolitical climate, about potential disruptions to critical supply chain nodes.  

De-Risking and Self-Reliance

United States

During the COVID-19 pandemic, the United States suffered from a critical shortage of personal protective equipment (PPE). Prior to the pandemic, only about 10% of the N95 masks used in the country were produced domestically. This low capacity resulted in shortages that persisted for months. Research has indicated that the shortage extended to other health products as well, including generic drugs and APIs.  

This experience triggered a wave of public discussions in the United States over potential shortages of critical supplies in future crises. This concern translated into policy: to ensure domestic production of PPE, the health care sector was one of the few sectors where President Joe Biden raised tariffs from the first Trump administration, levying a 25% tariff on facemasks, a 50% tariff on medical gloves and a 100% tariff on syringes.  

The BIOSECURE Act followed a similar mindset, seeking to restrict American companies from working with specific Chinese biotech firms. Policymakers were concerned by the increasing reliance on Chinese pharmaceutical contract manufacturing, with 79% of U.S. pharmaceutical firms in a 2024 industry survey reporting that they produced at least one product through Chinese contract development and manufacturing organizations. Although the Act is currently stalled in Congress, it demonstrates the U.S. government’s potential to take a similar approach towards health care as it currently takes to technology.  

China

Chinese policymakers have repeatedly stressed the importance of the biomedical industry and local manufacturing in recent years. When the central government outlined its key development ambitions for 2025 during the annual Two Sessions, it listed the biomedical and medical device industries as key emerging sectors. This recognition has both economic and strategic goals: building up domestic capacity to produce high-value commodities while enhancing supply chain resilience.  

China’s vision for a resilient local biomedical industry is closely tied to its growing emphasis on technological self-reliance. This idea is especially relevant in the context of U.S.-China relations, as strict export controls on advanced technology are key factors in China’s growing tensions with the United States. 

This vision for enhancing the biomedical industry’s competitiveness has already been translated into practice. Various local governments, including Beijing and Shanghai, have issued policies to support the biomedical industry at every stage of the production chain, implementing measures to encourage local talent cultivation, R&D, manufacturing and commercialization. At the central level, the Ministry of Finance has drafted a new definition of “domestic products” in government procurement, which is largely calculated based on the extent to which products are manufactured within China. These policies echo the dual economic and strategic effect China aims to achieve, strengthening value-added industries while building capacity to remain flexible amid external uncertainty.  

Navigating the Two Countries’ Core Interests

With both countries recognizing the necessity to exert control over biomedical supply chains under geopolitical pressure, U.S.-China trade frictions on pharmaceuticals, API and medical devices are likely to intensify. The Trump administration’s recent national security investigation and the discussion over the BIOSECURE Act both signal potential escalation, and China is likely to maintain a defensive stance against U.S. measures. Therefore, it is important for multinational corporations in the health care sector, especially those operating in both countries, to prepare for potential escalation by developing risk mitigation strategies, while being sensitive toward each country’s pursuit of self-reliance and concerns regarding excessive dependence on foreign inputs.  

To adapt, health care companies should seek to balance the two countries’ competing core interests, especially when it comes to local investments in R&D and manufacturing. By considering how localization efforts in one market may be perceived differently in another, companies should strategically communicate with key local stakeholders about their investments in both countries to avoid heightened scrutiny. At the same time, given both the United States’ and China’s preference for localized supply chains, companies could also seize opportunities to capitalize on their commitments.