Philips Slashes 2025 Profit Forecast Amid U.S.-China Tariff Pressures

Dutch healthcare giant Philips has lowered its 2025 profit margin outlook, citing up to €300 million in tariff-related costs as U.S.-China trade tensions ripple across the medical technology sector. The company plans supply chain shifts and localized production to cushion the blow, even as uncertainty clouds the future of healthcare tariffs.

In a sign that global trade tensions are taking a deeper toll on the healthcare industry, Dutch medical technology company Philips has cut its profit margin forecast for 2025, citing an expected tariff hit of €250 to €300 million ($283 million-$340 million). The announcement sent Amsterdam-listed shares tumbling as much as 4% in early Tuesday trading. Philips, best known for its respiratory devices, diagnostic equipment, and consumer health products, faces a complex challenge: mitigating the fallout from escalating tariffs between the U.S. and China while safeguarding its largest market. With the United States accounting for 40% of its projected 2024 sales and a third of its tax base, the stakes are high. “We are seeing the impact of tariffs despite substantial mitigation efforts,” CEO Roy Jakobs told investors during a post-earnings call. Philips is working to buffer the financial strain by adjusting prices, reorganizing supply chains, and boosting localized production.

The company’s mitigation strategy includes ramping up output at its 46 U.S. manufacturing sites and deepening its localization efforts in China, where domestic operations already supply 90% of Philips’ products sold in the country. “It’s not just about moving supply chains,” Jakobs noted. “We’re also engaging with governments across China, the EU, the Netherlands, and the U.S. to advocate for the exclusion of medical technology from the current tariff regimes.” Analysts warn that the healthcare sector may have little choice but to absorb short-term cost increases if tariffs are imposed. Meanwhile, Washington’s ongoing investigation into the pharmaceutical industry hints at potential new levies on a broader range of health-related products.

Philips plans to lean on tariff relief measures such as the Nairobi Protocol, which exempts certain devices for chronic disease treatment, to shield some of its imports from fees. Yet Jakobs acknowledged that cost-cutting measures “do not exclude job reductions,” though he emphasized that “it’s far beyond people alone.” Factoring in the projected tariff burden, Philips now expects its adjusted EBITA margin to fall to between 10.8% and 11.3% for 2025, down from its previous estimate of 11.8%-12.3%. J.P. Morgan analysts commented that the company’s new forecast “appears to factor in a resumption of all tariffs at currently announced rates,” leaving room for upside if policies soften.

Despite the pressure, Philips reaffirmed its 2024 sales growth outlook of 1%-3%. Its latest quarterly results showed revenue of €4.10 billion, a 2% year-on-year decline in comparable terms but slightly ahead of analyst expectations. Strong North American performance helped offset declining sales in China. Philips’ challenges mirror competitors like GE HealthCare and Siemens Healthineers, both grappling with the looming impact of trade disputes. GE HealthCare has already warned of a $500 million hit to its annual tariff profits, while Siemens Healthineers is set to release its results later this week. As governments continue to wield tariffs as tools in broader geopolitical contests, healthcare manufacturers find themselves caught in the crossfire, balancing patient needs, policy shifts, and investor expectations.