The US medical equipment and supply industry: What happened?
America now depends on overseas suppliers for more than half of its medical equipment and supplies, up sharply from a few years ago. That’s based on a PPI analysis of government trade and industry data, What happened?
As we go through this terrible pandemic, U.S. healthcare providers are suffering from a surprising shortage of medical equipment and supplies. Even after President Trump invoked the Defense Production Act on Wednesday, there doesn’t seem to be an easy spigot of domestic factory production to turn on, and overseas factories are serving their own hardhit populations.
Part of the problem is that the U.S. has become increasing dependent on overseas sources for its medical equipment and supplies. Until 2016, the U.S. economy consistently maintained a trade surplus in medical equipment and supplies. But things changed in the past few years (chart). Demand rose and domestic production expanded, hiring 18,000 new workers since 2015.
But here’s the rub: Domestic production of medical equipment and supplies did not expand enough to meet demand. As a result, the long-time trade surplus in medical equipment and supplies turned into a rapidly widening trade deficit, hitting $7 billion in 2019.
As a result, an estimated 52% of medical equipment and supplies now come from outside the United States.
Where is the new surge of imports coming from? It’s not just China. In fact, imports of medical equipment and supplies from Europe have soared by $4.3 billion since 2015, or 33 percent. Imports from Asia (excepting China) are up $2.7 billion, or 43 percent. And of course, with these regions facing their own crisis, the flow of goods has slowed down.
This was not a case of hollowed-out manufacturing–employment in the U.S. medical equipment and supplies manufacturing industry is at an all time high. Nevertheless we didn’t expand fast enough.
In pandemics, like wars, it’s better to have your own factories.
Note: For trade purposes, we track NAICS 3391. For domestic sales and employment, we track the combination of NAICS 339112 and 339113.