US President Donald Trump has already fired off a barrage of orders to dismantle Biden-era climate policies, boost domestic energy production, and reform immigration policy.

While market commentators rush to call out winners and losers, understanding how these policy shifts impact companies requires deeper analysis. Below, we'll examine how tariffs may affect one of the market's leading healthcare companies.

Steep Tariffs Against Mexico and Canada

Trump said on Tuesday, around 12:00 pm AEDT that his administration was considering 25% tariffs on Canada and Mexico as soon as 1 February.

"We're thinking in terms of 25% on Mexico and Canada, because they're allowing vast numbers of people — Canada's a very bad abuser also — vast numbers of people to come in, and fentanyl to come in," President Trump said Monday.

The news sent the market sharply lower, with the S&P/ASX 200 trading up just 0.13% at noon, down from 1.26% just an hour earlier.

S&P/ASX 200 intraday chart on Tuesday, 19 January 2025

A Closer Look – Fisher & Paykel

Fisher & Paykel (ASX: FPH) is a leading manufacturer, designer, and marketer of products and systems for respiratory care, acute care, and the treatment of obstructive sleep apnea.

The company manufactures approximately 30-40% of its products from its manufacturing plant in Mexico, according to Goldman Sachs.

"Whilst its products were largely exempt from tariffs across Trump’s first term, a change to this approach would likely increase operating costs for the company," the analysts said in a note last week.

In FY24, the North American region generated approximately 46% of Group revenues – this implies a substantial hit to gross margins.

"A 4% price increase to US customers would largely offset the extra shipping costs of FPH moving supply to the US from its New Zealand manufacturing plant on our estimates," says Goldman.

In addition, Mexico is a major exporter of medical devices to the US. The introduction of tariffs will affect various healthcare companies, and if the broader industry chooses to raise prices in response, it could help offset the impact for FPH.

Intraday Price Action

FPH shares opened higher on Tuesday and trading around 1% higher at 11:50 am AEDT.

As the tariff speculation started to unravel, the shares experienced a sharp downward correction, hitting lows of -3.9% at 2:33 pm AEDT.

Fisher & Paykel intraday chart on Tuesday, 19 January 2025

Pros and Cons

While Fisher & Paykel Healthcare's ability to raise prices offers a potential buffer against tariff impacts, it introduces fresh uncertainties. The key questions remain: Will the company pass these costs to customers, and how might price increases affect demand?

This is the kind of uncertainty that drives share price volatility, much like what we saw above (rapid downward pressure followed by a small bounce).

Despite these near-term headwinds, Goldman Sachs maintains a bullish stance with a BUY rating and a $42.70 price target (implying upside of around 24%). The investment bank argues that "the market is under-appreciating the growth opportunity from the step-up in new product launches and expansion in its Total Addressable Market (TAM)."

While the medium-to-long term growth story remains compelling, investors will have to deal with some near-term volatility and overhang around the drag to earnings from potential tariffs.