How do CSL, ResMed, Cochlear and Ansell fare against Trump tariffs?

Australian healthcare stocks face a challenging landscape due to new tariffs under the Trump administration, with Morgan Stanley highlighting CSL and ResMed as the best equipped to handle these risks.

The Trump administration recently introduced a 90-day pause on reciprocal tariffs, resetting the rate for most countries (except China) to a universal 10%. This shift directly impacts healthcare companies, with varying degrees of exposure:

• Ansell (ASX: ANN): Manufacturing sites in Sri Lanka, Malaysia, India, Thailand, and China are subject to US tariffs.

• Cochlear (ASX: COH): Expected to be exempt from tariffs as part of the US Harmonized Tariff Schedule.

• CSL (ASX: CSL): Pharmaceuticals currently excluded from US reciprocal tariffs, but an update on pharmaceuticals is expected soon.

• Fisher & Paykel (ASX: FPH): Mexican manufacturing exempt from tariffs via the US-Mexico-Canada Agreement (USMCA). However, New Zealand manufacturing faces a 10% tariff.

• Ramsay Health Care (ASX: RHC): No direct impact from US tariffs.

• ResMed (ASX: RMD): Ex-US manufacturing in Australia, Singapore, and Malaysia faces a 10% tariff. The company has not provided any commentary on potential exemptions.

• Sonic Healthcare (ASX: SHL): No direct impact from US tariffs.

To counter the financial strain of these tariffs, Morgan Stanley estimates Ansell would need to hike prices by 6% to 7%, ResMed by 2% to 3%, and both CSL and FPH by about 1%. These relatively small adjustments suggest most companies can manage the impact, though Ansell’s heavy reliance on Asian manufacturing makes it more vulnerable.

Interestingly, the financial impact is aligned with recent share price performance. Over the past month, Ansell has underperformed with a 12% dip, while Fisher & Paykel leads the pack with a 4.0% gain.

ASX healthcare share price performance, with Fisher & Paykel (black), Cochlear (yellow), Sonic Healthcare (teal), Ramsay Health Care (blue), CSL (red), ResMed (orange) and Annsell (green) |Source: TradingView

Performance During the Global Financial Crisis

The broader economic outlook adds another layer of uncertainty, with Trump’s tariffs fueling fears of a global slowdown. Analysts from Goldman Sachs, JPMorgan and even betting sites like Polymarket see the probability of a US recession by year-end between 30% and 52%.

This has driven investors toward defensive sectors, with only three S&P/ASX 200 sectors — Telecommunications, Staples, and Industrials — showing gains year-to-date.

Reflecting on the Global Financial Crisis from December 2007 to June 2009, Australian healthcare stocks demonstrated resilience. While the S&P/ASX 200 fell 38%, the healthcare sector dropped just 15%, outperforming the market by 23%.

GFC Performance Across Three Charts

Morgan Stanley’s analysis shows that five of the six covered companies, excluding Fisher & Paykel, posted earnings growth in 2008–09. Fisher & Paykel, despite a dip in FY08, rebounded sharply the following year.

Source: Morgan Stanley Research

Source: Morgan Stanley Research

During this period, Ramsay Health Care was the only stock to rise, while Ansell, Sonic Healthcare, and Cochlear faced the steepest declines.

Source: Morgan Stanley Research

Preferred healthcare picks

Amid this backdrop, Morgan Stanley favors CSL and ResMed as the top healthcare picks. Both companies show strong earnings growth, minimal earnings volatility, and appealing valuations compared to their 10-year averages.