During its quarterly earnings report, executives at Johnson & Johnson said they expect escalating worldwide tariffs to put a $400 million dent in the company’s financial forecasts—largely from its exports of medical devices from the U.S. into China.
Chief Financial Officer Joseph Wolk said that—based on the tariffs on goods and raw materials that have been officially announced so far by the Trump administration as well as the retaliatory measures seen internationally—the company’s medtech divisions will be shouldering most of the burden, though future tariffs on pharmaceuticals have been proposed by the White House, with investigations now underway.
“That $400 million, I don't want to be cavalier about that,” Wolk said on a call with investors. “The program has been phased in as a partial year, and then you have this mostly being captured as cost-of-goods,” he added. “So it's going to sit on the balance sheet in inventory and be relieved through P&L in future periods. That's how we're thinking of it.”
The estimated figure accounts for the impact of import tariffs on products made in Canada and Mexico that fall outside North American trade deals, plus the duties on international steel and aluminum—the latter “to a very small degree,” Wolk said.
“It includes the China tariffs as well as the China retaliatory tariff, and that is probably the most substantial out of all the tariffs, in terms of that $400 million," he said. “And so, just to clarify for everybody, that is products of U.S. origin being shipped into China—and that's probably the most penalizing factor.”
CEO Joaquin Duato said that if the Trump administration’s goal is to onshore more production, tariffs on medical products aren’t the right path, and warned that they can “create disruptions in the supply chain leading to shortages.”
“If what you want is to build manufacturing capacity in the U.S., both in medtech and in pharmaceuticals, the most effective answer is not tariffs, but tax policy,” Duato said.
“As a matter of fact, since President Trump’s 2017 tax reform, investments in manufacturing both in medtech and in pharmaceuticals have significantly increased,” he added, while citing J&J’s plan announced last month to increase U.S. investment by 25%, equaling more than $55 billion over four years, which includes the construction of a new biologics plant in North Carolina.
As to the path forward, Wolk said the company is “very limited” in how it can mitigate the impact of tariffs in terms of altering its prices and passing on the costs—with contracts already set in place for medical device shipments.
“As we know, these tariffs are very fluid,” Wolk said. “The responsible action for us now is to quantify what we see as the impact in 2026—and then see what happens with respect to [whether] it lends itself to negotiations with other countries, and what's actually in place as we get into the later part of 2025.”
For its current financial guidance, the company slightly bumped up its operational sales estimates from its previous forecast in January—from about $91.3 billion to $92 billion—following its recent $14.6 billion acquisition of Intra-Cellular Therapies and its Caplyta therapy for schizophrenia and bipolar disorder.
For the first quarter of this year, J&J’s total sales of $21.9 billion were up 4.2% over the start of 2024, when accounting for changes in international currencies. That included $8 billion in worldwide medtech revenue, which saw 4.1% adjusted growth.
Duato attributed those gains in part to its Abiomed and Shockwave acquisitions in cardiovascular disease as well as its surgical vision and wound closure businesses.
In addition, with cases resuming in February after the company’s paused U.S. rollout of its Varipulse pulsed field ablation system, J&J has now completed 5,500 procedures internationally, he said.
However, that performance was somewhat offset by one-time costs in its orthopedics division, which has been approaching the end of a two-year restructuring plan that aims to have the company exit less profitable areas.
At the same time, Wolk said the company is implementing a similar program to narrow the focus of its surgery business.
“Focusing on portfolio renewal, we plan to exit certain non-strategic product lines globally and optimize select sites across the network,” Wolk said. “We anticipate some modest short-term revenue disruption in surgery of approximately $250 million in total over the next two years, but these actions will improve our ability to accelerate growth and enhance profitability. The program is expected to be completed in 2027 with costs estimated at approximately $900 million.”