GE HealthCare expects $500M revenue reduction from tariffs
GE HealthCare was the first of the big-three heavy iron medical imaging companies to report its first quarter 2025 earning results April 30.
Despite the economic disruption and negative impact on stocks, tariffs have yet have not affected GE's bottom line, and the company reported year-over-year increases in profits. But, GE expects tariffs to impact the company later in the year, if they continue, especially if rerouting supply chains and moving more production to the U.S. is required.
"Our first quarter results reflect strong execution as we start the year, with revenue and profit growth that exceeded our expectations. Record double digit growth was driven by strength in the U.S. market, with a particular focus in imaging systems for cardiology and oncology," GE HealthCare President and CEO Peter J. Arduini explained during the earnings call.
GE Vice President and CFO Jay Saccaro said Q1 earnings were $4.8 billion, which represents 4% organic growth. Broken down by business segment, imaging systems earned $2.14 million, which GE said was a positive 5% year-over-year change, mostly driven by U.S. purchases and expansion of large enterprise accounts.
Advanced visualization saw revenue of $1.24 million, a 3% growth from last year. Again, growth was driven by strong U.S. sales and demand for digital systems and artificial intelligence (AI), mainly across ultrasound and interventional imaging. GE's patient care solutions saw 2% growth from last year with $753 million in revenue. This was driven mainly by U.S. sales of monitoring systems.
The GE pharmaceutical diagnostics division saw 8% growth, with earnings totaling $632 million. Notable changes in Q1 included the launch of GE's first commercial doses of its new cardiac PET radiopharmaceutical flurpiridaz (Flyrcado). It also completed the acquisition of the Japanese radiopharmaceutical company Nihon Medi-Physics, which GE expects to collect earnings of at least $150 million from over the rest of 2025. GE also saw increased sales growth for flutemetamol F-18 (Vizamyl), a PET brain radiotracer to estimate beta-amyloid neuritic plaque density patients with cognitive impairment.
Arduini said numbers suggest GE is gaining market share in a significant number of geographies where it competes with other large imaging vendors. He presented positive numbers in all areas for the report, but new adjusted earnings forecasts reflect the impact from tariffs and an ongoing trade war.
Arduini estimated impact of tariffs is expected to be about $1.75 per GE share, but tariff mitigation efforts hopefully will bring this figure down to about $0.85 per share of net, incremental impact.
"We are expecting a total tariff impact for the year of around $500 million for the year. The most significant of those are the bilateral China tariffs, amounting to about $375 million. And it really does goes both ways. We do ship a significant amount of product from the U.S. to China, and vice versa," Saccaro said.
Tariffs expected to negatively impact GE later in 2025
"We are expecting a more significant impact from tariffs in the second half of 2025," Saccaro said.
The impact of tariffs on GE has so far been relatively small, around $10 million, but Saccaro expects the impact will become much more "dramatic" later this year, with estimates of less than $100 million in the second quarter, and about $200 million in the third and fourth quarters.
"We estimate the incremental tariffs announced since February will negatively impact adjusted earnings before interest and taxes (EBIT) by approximately $475 million," Saccaro said.
Earnings per share (EPS) for GE stocks were originally forecasted to see 3%–6% growth in 2025, but it is now forecasted in the latest earnings call to see a 9%–14% decline year-over-year.
"Overall, if the global trade environment improves and these tariffs are not in place for the entire year, or rates decrease, we would see a benefit...compared to what we shared today," Saccaro said.
Expected impacts of tariffs and the trade war
"In an effort to be transparent about our view of the environment and its correlation to our business, we are showing how we expect tariffs to impact our 2025 results if they stay at current elevated levels. We have conservatively assumed that the bilateral U.S. and China tariffs will continue, accounting for 75% of our total net tariff impact. We also assume U.S. reciprocal tariffs on the rest of the world announced on April 2 return to pre-pause levels on July 9," Arduini said.
The 25% tariffs on Mexico and Canada are also expected to resume, Arduini added, but with United States-Mexico-Canada Agreement (USMCA) exemptions for eligible imports continuing. This will be key for GE since it manufactures some of its products in Mexico, and has components that move back and forth across the border with Mexico as part of its supply chain.
But tariffs impact GE beyond China and Mexico. Overall, GE said its global footprint includes 43 manufacturing sites across 17 countries. But, GE has the largest U.S.-based manufacturing profile among diagnostic imaging-makers.
"We have moved swiftly on tariffs and have taken responsible and sustainable actions to mitigate over 50% of our gross exposure," Arduini explained. This includes the company taking action on production and component sourcing moves that will further offset the company's exposure to tariffs. But these moves will take longer to execute and likely will not kick in until early 2026.
"With the efforts being made to optimize our supply chain, in 2026 we expect less than 85 cents of adjusted earnings per share impact from tariffs, under the current tariff structure," he said.
Arduini added that there are large margins in the healthcare industry that offer some wiggle room on dealing with increasing costs due to tariffs.
GE also expects to drive growth in 2026 with the introduction of its photon-counting computed tomography (CT) system, total body PET, growth in radiopharmaceuticals, and its next-generation high-end vascular lab.
GE plans to move manufacturing and supply chains
With a large number of factories around the world, GE prefers to manufacture products in the local country where possible, but it does produce components at foreign locations that are shipped to its various factories, including the U.S. GE makes iodine contrast and components that are used in the U.S., which now face increasing prices under tariffs.
"We obviously want to see how the tariff matrix plays out around the world, because you don't want to initiate a move until you actually understand what that rate might look like, where you would move to another country," Arduini said. "We already make a lot of the same products in different countries, so we could throttle down production in one country and throttle up in another. We are already in the middle of doing that in our vascular imaging business, molecular imaging business and our CT business."
Saccaro echoed those comments, noting that further tariff mitigation efforts will likely be taken in 2026. During the COVID-19 pandemic, GE began trying to source and manufacture in the countries where products are sold to avoid serious supply chain disruptions. The company will likely accelerate that effort to relocate manufacturing and find alternative sourcing for supply of materials in its logistics chain. These supply changes will likely start having an impact by the start on 2026.
Tariff mitigation efforts
Saccaro said mitigation efforts include more compliance with USMCA tariff exemptions for eligible imports, duty draw-back, and bonded logistics routes.
Duty drawback is a program that allows businesses to recover a portion of the duties, taxes and fees paid on imported goods when those goods are later exported. It is a refund mechanism for import duties when the goods are no longer retained in the U.S., such as components that are imported to manufacture an imaging system and that system is then sold outside the U.S.
Bonded logistics is often used for goods that need to be processed, repackaged, or further manufactured before being released for domestic consumption. This delays duties and taxes paid until products are ready for final importation. It can also be used for re-exportation of goods.
China is seen as second largest healthcare market in the world
In addition to China being a large manufacturing hub for system components, GE also views the republic as the second largest healthcare market in the world after the United States. For this reason, Arduini said it is important for the company to maintain a presence there. Additionally, GE also exports a large amount of U.S. made goods to China. But with 145% U.S. tariffs against Chinese made goods and 125% Chinese tariffs on U.S. made goods, GE officials said they are getting penalized in both directions in the trade war.
To stay in that market and remain competitive, GE will need expand its local production there if tariffs are continuing into the foreseeable future.
"Related to China, we continue to take a measured approach. We are assuming China in its sales performance will be negative in the first half of 2025, with a sequential improvement in the second half of the year, leading to a low single digit decline for the year," Saccaro said.
Dave Fornell has covered healthcare for more than 17 years, with a focus in cardiology and radiology. Fornell is a 5-time winner of a Jesse H. Neal Award, the most prestigious editorial honors in the field of specialized journalism. The wins included best technical content, best use of social media and best COVID-19 coverage. Fornell was also a three-time Neal finalist for best range of work by a single author. He produces more than 100 editorial videos each year, most of them interviews with key opinion leaders in medicine. He also writes technical articles, covers key trends, conducts video hospital site visits, and is very involved with social media. E-mail: [email protected]