Despite ongoing trade tensions and tariff policies, hospital financial performance has shown signs of improvement as the beginning of the year, notably for nonprofit hospitals. This resilience comes amid important uncertainty and market volatility stemming from national tariff policies.

The Tariff Landscape: A Shifting Battlefield

In April, the U.S. administration announced reciprocal tariffs impacting numerous countries, with some facing higher levies than others. These tariffs, though, have been subject to frequent adjustments as trade negotiations evolve.

• Initially,steeper tariffs were slated to take effect on April 9.
• Later that same day, the administration suspended most of these higher tariffs for 90 days, excluding China, while maintaining a baseline tariff of 10%.

this fluctuating habitat has triggered considerable market volatility, with benchmark rates experiencing daily swings of 20 to 48 basis points, according to data from Kaufman Hall.

Market Reaction and Temporary Truce

Throughout April, the U.S. and China engaged in tariff threats, some exceeding 100%. However, in May, a temporary agreement was reached, effectively suspending most tariffs imposed by both countries for 90 days. This “truce” led to a significant upswing in financial markets, with the S&P 500 rallying 3.3% and the Dow Jones Industrial Average jumping 1,100 points.

Expert Perspectives on Tariff Impact

The volatility of tariff policies has created challenges for hospital executives, making it tough to accurately assess the impact on supply chains and budgets. Paul Keckley, managing director of the Keckley Report, noted the difficulties in predicting the effects:

The volatility of these tariff policies is making it difficult for hospital executives to pin down the effect they will have on supply chains and budgets. CFOs are also weighing the effect tariffs will have on the economy and inflation.
Paul Keckley, Managing Director, Keckley Report

Concerns Over Pharmaceutical Supply Chains

The impact extends beyond finished products to include raw materials for pharmaceuticals, many of which originate in China. The American Hospital association (AHA) has voiced concerns about potential disruptions to the supply of active pharmaceutical ingredients (APIs), crucial components in drug manufacturing.

mainly come from China
American Hospital Association

According to the AHA, approximately 30% of APIs come from China, perhaps hindering domestic drug production efforts.

Medical Device availability at Risk

China is also a significant source of medical devices, particularly single-use items like blood pressure cuffs and stethoscope covers. Disruptions to the availability of these instruments could impede clinical procedures and compromise patient safety, according to the AHA.

Healthcare Job Growth Remains Steady

Despite the uncertainties, the healthcare sector has demonstrated stability in key areas. Citing data from the Bureau of Labor Statistics, Kaufman Hall reported that healthcare added 51,000 jobs in April, slightly below the average of 52,000 over the previous 12 months. Job growth was particularly strong in hospitals (+22,000) and ambulatory healthcare services (+21,000).

Hospital Margins Show Improvement

Median hospital margins increased to 3% in April, up slightly from March. Hospital margins from January to April were 3.3%, exceeding the same period last year. While operating margin dropped 3% year-over-year, it improved 6% year-to-date compared to 2024.

AHA’s Concerns Over Drug and Supply Shortages

The AHA has expressed concerns about potential drug and supply shortages resulting from tariffs on pharmaceuticals, medical devices, and personal protective equipment. Tina Freese Decker, 2025 AHA Board Chair, emphasized the potential impact:

Tariffs on those items…could threaten the availability of crucial medications and devices, and could raise costs for hospitals and exacerbate shortages and supply chain disruptions.
Tina Freese Decker, 2025 AHA Board Chair

Decker also highlighted the importance of exemptions to ensure access to essential imports, citing the impact of supply chain disruptions following Hurricane Helene.

We’ve already seen the impact of supply chain disruptions in the aftermath of Hurricane Helene…To continue providing the care our communities rely on, hospitals and health systems need exemptions to ensure access to essential imports.
Tina Freese Decker,2025 AHA Board Chair