Investing.com -- The latest tariffs imposed by the Trump administration are not a major concern for the China healthcare sector, Jefferies analysts said Thursday.

The tariffs, which include a baseline of 10% and reciprocal tariffs resulting in a 54% cumulative rate effective April 9, have exemptions that lessen their impact on Chinese healthcare companies.

Specifically, drugs and active pharmaceutical ingredients (APIs) remain exempt from these tariffs, continuing the precedent set by prior trade policies.

Analysts highlighted that even if tariffs are imposed on these items in the future, Chinese biotech companies often have U.S. partners, which mitigates the risk as these companies are not direct exporters.

Moreover, any tariffs on bulk drug makers could be passed on to U.S. pharmaceutical companies.

Contract Development and Manufacturing Organizations (CDMOs), such as Wuxi companies, are also in the exempted categories.

If this exemption were to be canceled, Chinese firms would still hold cost and efficiency advantages over non-U.S. competitors.

Notably, Wuxi Bio has already established a presence in the U.S. with a 4 kiloliter (kL) capacity in New Jersey and plans to expand to 36kL by 2027.

Medical equipment, however, will be subject to the 54% tariffs. Still, analysts believe that the impact will be manageable, pointing out that the U.S. market is not a key growth driver for companies like Mindray and United Imaging, which have limited sales exposure in the U.S.

The National Security Commission on Emerging Biotechnology (NSCEB) is expected to release a final report soon, which could include strategic recommendations for U.S. leadership in biotech innovation.

Although the NSCEB may focus on limiting Chinese acquisitions of U.S. biotech assets, it has faced internal resistance.

“The BIOSECURE Act expired on Jan 3, and we believe it is unlikely the Trump administration will reinitiate the legislation,” analysts said.

They think that U.S. policymakers are likely to prioritize legislation with a higher return on investment (ROI) rather than focusing on the BIOSECURE Act.

Jefferies also notes that the use of Chinese CDMOs could potentially reduce U.S. pharmaceutical costs by 30-60%, which is a bipartisan issue in the U.S.

“Given that lowering drug prices in the U.S. is supported by both Republicans and Democrats, giving U.S. pharma companies the flexibility to operate efficiently and maintain an optimal cost structure is essential,” the analysts continued.

“Notably, of the two components of cost + efficiency, the latter is usually overlooked,” they added.

In terms of investment restrictions, Jefferies recalls that during Trump’s first presidency, most healthcare-related proposals were not implemented, largely due to industry resistance.

The investment bank also believes the European Commission is less likely to impose tariffs on Chinese medical devices, considering the trade deficit the EU has with China in this sector.

In terms of investment recommendations, Jefferies maintains a positive outlook on China healthcare stocks, recommending WuXi Biologics (HK: 2269 ), WuXi XDC (HK: 2268 ), Akeso Inc (HK: 9926 ), Genscript Biotech Corp (HK: 1548 ), Hansoh Pharmaceutical Group (HK: 3692 ), and United Laboratories (HK: 3933 ) for investment.