J&J prepares for $400M in tariff costs amid strong earnings

Johnson & Johnson said Tuesday it is preparing for an estimated $400 million in extra costs from U.S. tariffs, even before new drug tariffs promised by President Donald Trump take effect.

The company revealed the plans during its first-quarter earnings report, highlighting that the $400 million does not yet include the potential impact of Trump’s upcoming pharmaceutical tariffs. The president has repeatedly said he intends to impose new duties on imported drugs, though no formal timeline has been given.

J&J posted strong financial results for the quarter, reporting a 2.4% increase in revenue to $21.89 billion. Net profit surged to $11 billion, a sharp rise from $3.26 billion during the same period last year. However, despite the positive earnings, company executives stressed that trade tensions and tariffs pose a growing concern for their operations.

According to WSJ, during a conference call with analysts, Johnson & Johnson said the current tariffs on Canada and Mexico, as well as levies on steel and aluminum, are already forcing the company to adjust its planning. These tariffs are expected to have a wide-ranging impact across the company’s business lines, not limited to one specific division.

One of the biggest hits may come from products shipped from the United States to China. China has imposed retaliatory tariffs on a number of American goods, adding another layer of complexity for companies like Johnson & Johnson that operate on a global scale.

Executives used the opportunity to make a clear appeal to the Trump administration: focus on tax policy instead of tariffs. Chief Financial Officer Joseph Wolk appeared on CNBC Tuesday and said tax cuts help businesses manage these kinds of trade pressures. When asked by CNBC host Joe Kernen whether Trump’s policies had encouraged further U.S. investment, Wolk pointed to the benefits of the 2017 corporate tax cuts.

Speaking during the earnings call, Company CEO Joaquin Duato said, “If what you want is to build manufacturing capacity in the U.S., both in medtech and in pharmaceuticals, the most effective answer is not tariffs, but tax policy,” according to the Wall Street Journal.

J&J is confident in recession-proof nature of the healthcare sector

President Trump is currently pushing to extend the 2017 tax cuts. A Republican budget plan passed the House last week, but disagreements remain within the party over how much to cut from essential government services.

Even with the threat of a recession, Johnson & Johnson said it is prepared to navigate tougher economic conditions. The company cited the healthcare sector’s resistance to downturns, as demand for medical treatment remains steady regardless of economic performance. “Nobody really wants to get sick,” the Journal noted, pointing out that consumers have little choice when it comes to medical care spending.

On Monday, the Department of Commerce announced it had begun a Section 232 investigation into whether pharmaceutical imports threaten national security. Section 232, part of the Trade Expansion Act of 1962, allows tariffs to be imposed for defense-related reasons. Trump has used the same law in the past to justify tariffs on products like steel, lumber, and automobiles.

In this case, the administration argues that America’s trade deficit is itself a national security concern, especially when it comes to critical goods like medicine.

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