Juggling the Orthopedic Manufacturing Challenges of 2025: Nearshoring, M&A, and Tariffs
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Attending the AAOS 2025 Annual Meeting in San Diego and recent MPO Medtech Forum in Costa Rica has given us an excellent supply of thought-provoking fodder. Needless to say, this provision of issues does not include the challenges sparked by the current presidential administration.
Certainly, global trade dynamics are constantly changing (often by the hour as of late). The three-month pause on “reciprocal” tariffs proposed by President Donald J. Trump provides the perfect opportunity to assess the levies’ potential impact on the orthopedic industry, particularly regarding M&A and the sector’s supply chain. Preparing to navigate the choppy waters of this unsettled sea will undoubtedly be challenging but the tariffs may create some unexpected strategic opportunities for the industry’s top companies.
Tariffs are not a new phenomenon. In recent years, orthopedic manufacturers have been notably impacted by tariffs, especially those imposed by the U.S. government on imports from such key regions as China, Mexico, Canada, and Europe. These tariffs have fundamentally reshaped the orthopedic industry’s operational and strategic landscape, directly affecting the companies ranked in ODT’s Top 10 Companies list last year, which includes such prominent players as Stryker Corp., Zimmer Biomet Holdings Inc., Smith+Nephew, Medtronic, Arthrex Inc., NuVasive Inc., Orthofix, Enovis, DePuy Synthes (Johnson & Johnson MedTech), and Globus Medical Inc.
Obviously, one of the most immediate and substantial tariff impacts is the increased production costs for orthopedic manufacturers, many of whom depend heavily on imported raw materials, components, and specialized machinery. As of late April, tariffs have significantly raised costs on imported components, including metals like titanium and cobalt-chrome alloys essential in orthopedic implants and instruments. For companies that rely extensively on globally sourced materials—i.e., Stryker and Zimmer Biomet—these additional costs pose a significant financial strain.
To mitigate these negative impacts, many orthopedic companies are reconsidering their manufacturing strategies. A push towards reshoring and nearshoring has gained momentum, driven by the need to minimize tariff exposure and reduce logistical complexities. Arthrex and Globus Medical, among others, have begun exploring the possibility of establishing additional manufacturing capacity in the United States or a geographical neighbor such as Mexico or Costa Rica, where trade agreements may offer tariff exemptions or reductions.
Some orthopedic manufacturers have already embarked on the Costa Rica nearshoring trend and are reaping the benefits of a nearby production/supply base. A roster and brief discussion about these companies follows.
Smith+Nephew: Well before the pandemic, S&N was considering regional offshoring and inaugurated a $55 million manufacturing facility in the Coyol Free Zone, Alajuela, in 2016. This manufacturing plant produces sports medicine-related devices, including instruments and implants for minimally invasive surgeries. The facility supports the company’s global demand for COBLATION technology used in arthroscopic procedures.
Johnson & Johnson MedTech: Perhaps in preparation for Trump 2.0, J&J MedTech announced plans two years ago to build a 200,000-square-foot manufacturing facility in Alajuela. This plant is one of the company’s largest outside the United States and will produce orthopedic implants along with other devices and components.
Viant Medical: By some accounts, the company has invested $25 million to double its cleanroom space to 110,000 square feet, enhancing its capacity to deliver high-quality medical devices for surgical technologies and orthopedic implants.
Cretex Medical: This medtech supplier broke ground on a 65,000-square-foot production facility in Cartago in 2024. Scheduled to come online later this year, the plant will help support the company’s growth and proximity to global customers.
Harland Medical Systems: Offering specialized hydrophilic coating services for medical products and orthopedic devices, Harland is planing to commence operations in The Green Park Free Zone, Alajuela, in 2025.
ATL Technology: Comprising approximately 65,000 square feet in San Rafael, Alajuela, ATL has been in Costa Rica for quite some time, serving medtech companies across various sectors, including orthopedics.
As OEMs and their suppliers consider nearshoring to minimize tariffs, they are still prone to supply chain disruptions that could force both parties to reassess their global sourcing strategies. Some of ODT’s Top 10 companies have been simplifying and whittling down their supplier list for years to leverage globalized, efficient value chains; but now these companies face longer lead times and are tasked with rapidly finding alternate suppliers. This disruption extends beyond procurement—it impacts inventory management, customer service levels, and the overall agility of supply chains critical for responsive manufacturing and innovation cycles.
Tariffs’ ripple effects extend into innovation and product development, too. Orthopedic R&D budgets could face potential pressure, as companies allocate more resources to managing higher material costs and restructuring supply chains.
Reduced R&D budgets and new tariffs may act as a double-edged sword, further slowing large corporate innovation yet inadvertently creating favorable conditions for increased M&A activity. The added economic pressure from tariffs could fuel consolidation as smaller or mid-sized companies with novel technology are unable to bear the financial burden or they get an offer they can’t refuse, or they transition to become acquisition targets. Larger financially robust firms like Stryker, Zimmer Biomet, and Medtronic—which have consistently used acquisitions to expand their market presence and technical capabilities—may choose to capitalize on this opportunity to acquire niche manufacturers struggling under tariff or other regulatory cost pressures.
Tariffs can also accelerate market exits and divestitures. Companies like Johnson & Johnson MedTech and Stryker might further streamline operations by divesting non-core businesses or product lines heavily impacted by tariffs and using the proceeds to fund investments in innovative technologies or strategic acquisitions. This portfolio reshaping and optimization may lead to a healthier, more competitive industry overall. Stryker’s surprising divestiture of its spine portfolio earlier this year is a prime example of such a strategy. Sometimes less is more.
While tariffs indubitably introduce complexity, they also provide a strategic impetus for companies to fundamentally reassess and strengthen their supply chains. Orthopedic behemoths like Zimmer Biomet and Arthrex now have the opportunity to build more resilient and diversified supply chains that reduce long-term exposure to geopolitical risks and tariff volatility.
Enhanced agility in manufacturing and supply chain management can become a significant competitive advantage, positioning firms to better withstand future global disruptions.
Moreover, this forced re-evaluation and potential decentralization of manufacturing may encourage regional specialization. This may include continued additional outsourcing in nearshoring and reshoring locations.
Despite the immediate disruptive impacts, tariffs present the orthopedic industry with both challenges and strategic opportunities. Companies that proactively navigate these tariff-induced disruptions—through thoughtful near/reshoring, strategic M&A, technological innovation, and optimized supply chain strategies—stand to mitigate short-term costs and potentially gain significant long-term competitive advantages.
While tariffs pose immediate hurdles related to costs and supply chain management, they simultaneously open doors to strategic consolidation, innovation, and operational improvements. For orthopedic device manufacturers, the current tariff environment underscores the importance of agility, adaptability, and strategic foresight in maintaining and enhancing competitive leadership in an evolving global marketplace, regardless of location. Tariffs undoubtedly are a threat to medtech innovation and costs, but they also can be a boon to the industry as well. It all depends on the choices companies make going forward.
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
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