US makers of masks and gloves get lifeline: higher tariffs on Chinese-made products
May 15, 2024

May 14 (Reuters) – President Joe Biden’s move to hike tariffs on Chinese goods should help U.S.-based medical mask and glove makers, a sector that has largely flamed out after surging during the COVID-19 pandemic.

Industry executives on Tuesday said Biden’s tariffs could boost demand by helping level a price differential with cheap imports from China, and could foster investments needed to bring some stalled projects online, although some think the 25% duties need to be even higher.

India-based research firm Mordor Intelligence estimates the U.S. personal protective equipment (PPE) market is $14 billion.

The tariffs on personal protective equipment were announced alongside ratcheted-up import levies on more than a dozen goods categories that Biden says are key to maintaining U.S. competitiveness in sectors critical to national security and the transition to a green economy. Altogether, the new tariffs cover a total of $18 billion in goods.

In the case of PPE, critical shortages for items like masks and gloves sparked a rush to open domestic production during the COVID pandemic. The federal government, according to a website maintained by the Department of Health and Human Services, funneled $1.2 billion into these efforts.

At the peak of the pandemic, at least 26 start-up mask factories had emerged. But nearly all of them shuttered or drastically scaled back after the flow of cheap imports from Asia resumed.

Other projects got off the ground, but never found customers willing to pay the price of made-in-the-U.S. alternatives.

One is United Safety Technology, which received $96.1 million from the emergency COVID funds to retrofit an old Bethlehem Steel mill in Baltimore into a state-of-the-art medical glove factory. The new plant today sits unfinished.

Dan Izhaky, the company’s CEO, welcomed the Biden move.

Tariffs on gloves are set to rise from 7.5% to 25% in 2026, which Izhaky said should narrow the price gap between his product and his competitors, encouraging investors to help fund completion of the Baltimore plant. He declined to say how much he needs to open his factory.

Tariffs won’t solve all the issues. “For gloves,” he said, “the rate should be about 50% and it should be effective immediately, but 25% is a start.”

He said he did not “understand the rationale” for the two-year delay in implementing the tariffs. “I can only speculate that they don’t think there’s enough domestic production online just yet.”

Izhaky is part of a group of PPE manufacturers that formed to lobby for government support – the American Medical Manufacturers Association. Other producers in this group have also invested in factories but lack orders for gloves.

Another founder of the association is Thomas Allen, who runs a small mask factory outside New York City that opened in 2020. He has invested about $4 million in his firm – Altor Safety – which received some small New York State grants but no federal funds. He said the new tariffs should help him win more customers. Tariffs on masks are set to rise to 25% this year from a range of 0% to 7.5%.

“I think this will trigger increased demand,” he said, adding that he can meet that easily. He currently only operates one shift, but could increase to three, and has idle equipment available.Premier Inc (PINC.O), a major purchaser of medical products for U.S. hospitals, said there is currently “an abundance of supply” of PPE. It was not yet clear how the new tariffs would impact the prices Premier pays for protective gear, or whether increases would be passed on to customers, said Soumi Saha, senior vice president of government affairs.

“If you go through the multiple elements that are incorporated into the tariffs from a healthcare perspective, PPE is probably the one that we are the least concerned about,” she said.

Reporting by Timothy Aeppel; Additional reporting by Patrick Wingrove in New York; Editing by Dan Burns and David Gregorio