Cardinal Health warned Thursday that if President Donald Trump follows through with threatened tariffs next month, higher prices for some of the company's products will follow.
Trump is set to impose a 25% tariff on goods from Canada and Mexico and a 10% tariff on goods from China starting Saturday.
Related: Trump's tariff threat troubles medtech industry
About a third of the company's global medical products and distribution segment is Cardinal-branded products and the other two-thirds are products it sells from other national brands. About half of the Cardinal-branded products are sourced from North America, split between the U.S. and Mexico.
“We'll continue to do what we can to minimize the impact as it relates to tariffs, but make no mistake, if there are widespread tariffs anywhere from the 10% to 25% range, I anticipate there will be corresponding price increases,” said CEO Jason Hollar during the company's fiscal second-quarter earnings call.
Hollar said Cardinal Health will try to mitigate those price hikes, but with 1% to 2% margins, it will be unable to absorb the full impact. He said the company is well-positioned to pass on those price increases. Cardinal Health sells medical products including cardiovascular devices, compression systems, gloves, infection control supplies, syringes and pharmaceutical products.
The company has near-shored some of its products to Latin American and brought more production onshore. Hollar said 90% of its syringe products are produced at Cardinal Health facilities in the U.S.
“We no longer manufacture out of China,” said Hollar. “We source a little bit, although with more recent tariffs, we've reduced that further, so we're definitely well below 10% at that level.”
The company has the capability to make half its Cardinal-branded products in the U.S. but such a switch would not make sense because the domestic manufacturing costs would be higher than the financial hit of the tariffs, he said.
For its fiscal second quarter, Cardinal Health reported net earnings of $400 million, or $1.65 per share, compared with $368 million, or $1.50 per share, in the year-ago quarter. Revenues totaled $55.3 billion, down 4%. Its global medical products and distribution segment generated $3.2 billion in revenue and reported a segment profit of $18 million.