Tariff Impact And Strategic Opportunities In The Animal Health Market

Report Overview

The escalating U.S. tariff regime and global trade tensions are reshaping the veterinary sector, exerting pressure on input costs, supply chain stability, service affordability, and long-term industry planning. The September 26, 2025, announcement imposing a 100% tariff on branded and patented pharmaceuticals, effective October 1, 2025, unless companies are actively constructing U.S. manufacturing facilities; marks a significant escalation, doubling landed costs for many imported veterinary biologics, vaccines, and specialty therapeutics. Although most finished veterinary pharmaceuticals are currently excluded from punitive tariffs, the exposure of upstream components such as active pharmaceutical ingredients (APIs), excipients, feed additive precursors, and diagnostic consumables; remains high. China alone supplies 40-50% of veterinary APIs and 30-40% of medical supplies used in the U.S., making tariff-induced cost escalation inevitable.

This cost pressure is already evident across critical consumables such as syringes, surgical gloves, IV sets, and lab reagents, many of which face 25% or higher duties. These increases are often passed down the supply chain, compressing clinic margins and raising end-user service fees. Large animal practices and livestock producers are particularly vulnerable, as bulk vaccine purchases and feed additive inputs magnify the financial impact. Higher operational costs may lead producers to cut back on preventive care, increasing disease risk and undermining biosecurity programs, potentially resulting in higher downstream costs for food systems and public health.

Supply chain disruption adds another layer of complexity. Tariffs and retaliatory measures have led to shipping delays, customs bottlenecks, and backorders of critical veterinary products. February’s blanket 10% tariff on Chinese imports led to a 41% month-on-month decline in veterinary shipments, with lingering shortages for some APIs and medical devices. Clinics, especially small animal practices with limited buying power, may be forced to hold larger inventories to mitigate uncertainty, tying up capital and reducing operational flexibility. Specialty and referral hospitals risk postponing advanced diagnostics or elective procedures due to drug and equipment shortages.

On the client side, rising costs could alter behavior, with pet owners postponing preventive visits, declining elective procedures, and delaying diagnostics is negatively affecting animal health outcomes. For producers, higher costs could result in reduced veterinary intervention, potentially exacerbating production-limiting diseases and reducing farm productivity.

Globally, the tariff environment catalyzes a gradual reconfiguration of manufacturing and sourcing. Companies are exploring nearshoring options in Mexico and Canada under USMCA or diversifying to lower-tariff regions like Vietnam. However, these strategies require significant time, investment, and regulatory approvals, exposing the industry to near-term volatility. Political unpredictability further complicates planning, as today's exemptions could be reversed tomorrow.

The tariff impact extends beyond short-term price hikes; it is driving a structural shift in how veterinary medicines, supplies, and services are produced, distributed, and consumed. Animal health companies must pursue supply chain diversification, digital procurement, and inventory optimization. At the same time, policymakers may need to consider targeted tariff relief for veterinary products to protect animal welfare, food security, and public health.

Tariff Implications for Small vs. Large Animal Practices

The table below summarizes the implications of tariffs on different types of veterinary practices:

Source: GVMA

Sector Impact Analysis

Veterinary Medicine Sector

Despite exemptions for most finished pharmaceuticals, the veterinary medicines sector faces significant exposure to the ongoing tariff environment and trade uncertainty. Supportive components like APIs, excipients, biologic reagents, and feed additive precursors are still vulnerable to tariffs, driving up production costs and compressing manufacturers' margins. These cost increases will likely be passed through the supply chain, increasing prices for distributors, clinics, and end-users.

Reciprocal tariffs from key trading partners, including China, India, and the EU, further threaten the competitiveness of U.S. veterinary exports, potentially reducing market access and disrupting established supply chains. Global biologics and medicated feed additive producers are particularly at risk due to the complexity of their raw material sourcing and cold-chain logistics, where even minor cost escalations or delays can impact production schedules.

Key Veterinary Product Categories And Their Proposed Tariff Status

The table below summarizes key categories and whether they fall under the proposed tariffs:

Source: GVMA

Additionally, persistent trade uncertainty discourages long-term investment and capacity expansion, as companies hesitate to commit capital under volatile policy conditions. Collectively, these dynamics raise the likelihood of elevated veterinary drug prices, delayed product availability, and supply chain bottlenecks, presenting ongoing economic and operational challenges for the U.S. and global animal health markets.

Veterinary Medical Equipment & Supplies Sector

The veterinary medical equipment and supplies sector is also experiencing significant challenges due to ongoing U.S. tariff policies and reciprocal trade actions. While finished veterinary pharmaceuticals have been exempted from new tariffs, essential medical supplies such as syringes, needles, IV sets, surgical gloves, lab reagents, imaging machines, and dental tools are not uniformly excluded. This discrepancy has led to increased costs for these critical items, as tariffs are typically applied at the point of importation and are often passed down the supply chain to veterinary clinics and end-users.

The financial strain is particularly severe for small animal practices, which rely heavily on imported consumables. Distributors are unlikely to cover the cost for a 25% tariff on imported surgical gloves, for instance, that would directly raise prices by $25 per case. As a result, veterinary clinics may be required to pay more for the same products, which might increase client service costs. Tariffs may also lead to supply chain disruptions, leading to delays and shortages of essential supplies, which might threaten clinic operations and patient care.

Veterinary Services Sector

The veterinary services sector is another that suffers greatly by ongoing U.S. tariffs and volatility in international trade. The rising costs of imported drugs, vaccines, and supplies like syringes, anesthetics, and personal protective equipment (PPE) are an issue for small animal clinics that handle pets like dogs and cats. Clinic margins might get strained by even moderate price increases, which could result in higher service fees or an overall decrease in the use of elective and preventive treatments. Disruptions to the supply network might result in shortages of essential drugs or supplies, that might impact operational effectiveness and treatment continuity.

Due to the volume of their inputs and regulatory restrictions, large animal practices-including veterinary clinics for livestock and horses-face increased risks. Cost increases for vaccines, antibiotics, and feed additives brought on by tariffs may have an impact on farm profitability and herd health initiatives. Drug delays or shortages can jeopardize preventive care and raise the risk of disease, especially for specialized or seasonal medications. Field operations

may be further disrupted by delays in PPE and imported equipment.The veterinary services sector is vulnerable to operational and financial risks due to trade uncertainties and tariffs. Large animal practices deal with health and productivity issues at the herd level, while small animal clinics have to handle client demands as well as daily expenses. This highlights the industry's widespread vulnerability to disruptions in international trade.

Contribution of China Imports to the U.S.

The table below shows the % of veterinary products used in the U.S. veterinary sector that originate in China:

Source: Virginia Polytechnic Institute and State University

Impact of Tariffs on Veterinary Costs in the U.S.

The table below summarizes expected rise in different veterinary costs in the U.S.:

Source: Virginia Polytechnic Institute and State University 

Geographical Impact Analysis

U.S.-China Impact Analysis

The U.S. imports a substantial portion of its veterinary products from China, including Active Pharmaceutical Ingredients (APIs), diagnostic tools, and medical supplies. Recent tariffs have increased the cost of these imports, leading to higher prices for veterinary clinics and, consequently, pet owners. For instance, a 25% tariff on surgical gloves translates to an additional $25 per case, which is often passed down the supply chain. Furthermore, additional tariffs on products like syringes, surgical gloves, and infusion pumps might come from the U.S. Commerce Department's Section 232 investigations into imports of medical equipment and personal protective equipment (PPE), which could drive up costs considerably.

China is a major exporter of veterinary products to the U.S. The introduction of a blanket 10% tariff in February 2025 led to a 41% month-on-month decline in shipments to the U.S., with further decreases in subsequent months. In retaliation, China imposed tariffs up to 125% on U.S. goods, including veterinary-related items. As a consequence, China's industrial sector is being disrupted, leading to decreased production and export volumes.

Both countries' commercial networks are being impacted as the result of the reciprocal tariffs. Chinese producers face decreased demand along with potential overcapacity, while U.S. veterinary clinics confront shortages and delays in obtaining necessary supplies. These trade barriers have also prompted shifts in sourcing strategies, with some U.S. importers seeking alternatives in countries like Vietnam and Mexico. Therefore, the ongoing trade tensions between the U.S. and China have introduced significant challenges to the veterinary industry in both countries, affecting costs, supply chains, and the availability of essential products.

U.S. India Impact Analysis

The veterinary businesses in both countries are likely to be significantly impacted by the increase in U.S.-India tariffs. The availability and cost of veterinary medicine may be directly impacted by supply chain volatility caused by the wider trade tensions, even though some pharmaceutical and veterinary products are exempt from the tariffs. India supplies a substantial share of active pharmaceutical ingredients and finished veterinary medicines to the U.S., including antiparasitic drugs, vaccines, and other livestock health products. Any disruptions in logistics, raw material sourcing, or production can increase costs and delay supply to U.S. clinics and livestock operations.

In the U.S., veterinary clinics and livestock producers may experience higher prices for essential medications, equipment, and consumables that rely on imported components. This can elevate operational costs, compromise the affordability of animal care, and strain preventive treatment programs, especially for livestock and companion animals.

Uncertainties in the worldwide supply chain render it challenging for domestic veterinary manufacturers in India to source raw materials, which affects timelines for production and export readiness. Smaller veterinary clinics might face supply shortages and narrower profit margins. Given the circumstances, the tariffs show how susceptible veterinary supply chains are to geopolitical threats.

U.S. European Union (EU) Impact Analysis

The veterinary businesses in both regions are expected to be greatly impacted by the U.S.-EU trade agreement, which imposes a 15% tariff on the majority of European goods, including veterinary medications. Tariffs are expected to hike the price of imported veterinary supplies in the United States, including medications needed for companion animals and livestock. This may increase operational costs for veterinary clinics and livestock producers, potentially affecting animal healthcare services' affordability and timely delivery.

Manufacturers that export veterinary medications to the U.S. might experience additional costs as a result of the tariff, which might reduce their competitive edge and impose price hikes for the EU. When compared to higher tariffs imposed on nations like China and India, which face rates exceeding 50%, the 15% tariff is comparatively moderate, regardless of its importance.

All factors taken into consideration, the tariff highlights how susceptible global veterinary supply chains are to trade regulations. To maintain animal health standards and guarantee continuity in the availability of veterinary medicine, both regions will require supply chain resilience measures, regulatory changes, and strategic sourcing.

U.S. Rest of World Impact Analysis

The veterinary industry faces strain as a consequence of the ongoing hikes in tariffs between the U.S. and its major trading partners, which are drastically altering trade flows. Tariffs on imported raw materials, equipment, and active pharmaceutical ingredients (APIs) from Canada, Mexico, and Asia have risen the cost of producing veterinary pharmaceuticals and biologics in the United States. Longer lead times and higher costs of inputs for manufacturers may lead to interruptions in product availability and increase expenses for veterinary clinics and livestock producers.

Canada and Mexico, major partners of the U.S. under the USMCA, are both experiencing counter-tariffs that increase the cost of veterinary goods flowing into the U.S. and vice versa. This is particularly impactful for cross-border supply chains where bulk vaccines, feed additives, and diagnostics are manufactured in one country and packaged or distributed in another. Canadian countermeasures have made U.S.-made veterinary medicines more expensive in Canada, potentially shifting procurement toward EU or domestic suppliers.

Vietnam offers a different perspective. Its export-driven economy is facing heavy losses due to U.S. tariffs, which reduce its competitiveness in supplying APIs, feed premixes, and low-cost generics to the global veterinary market. This creates supply constraints and cost pressures for countries dependent on Vietnamese imports, including the U.S.

Tariff Tracker, by country & category

Source: JD Supra, LLC

Supply Chain Impact Analysis

The tariffs have significantly disrupted veterinary supply chains, driving up costs and complicating procurement across pharmaceuticals, vaccines, diagnostics, consumables, and pet food ingredients. Many veterinary drugs rely on imported active pharmaceutical ingredients (APIs) from India and China, and tariffs have raised landed costs, pushing up prices for antibiotics, NSAIDs, anesthetics, and preventive treatments. Veterinary biologics and vaccines are particularly vulnerable because they require specialized inputs and equipment sourced globally, making substitution difficult. Clinics also face higher costs for essentials like syringes, gloves, and diagnostic kits, while pet food producers contend with tariffs on vitamin premixes, fishmeal, and packaging materials.

Beyond cost inflation, tariffs have created customs bottlenecks and longer lead times, often delaying critical supplies by several weeks. This has forced distributors and clinics to hold larger inventories, increasing working capital requirements, while squeezing margins for smaller practices that struggle to pass costs to clients. Companion-animal owners may defer preventive care or elective procedures, potentially increasing disease prevalence, while livestock producers face rising vaccine and feed additive costs that affect farm economics and productivity. Diagnostic labs are also impacted, as tariff-driven reagent costs raise testing prices, potentially reducing disease surveillance.

These pressures risk weakening biosecurity programs and increasing zoonotic disease threats. Animal health companies respond by expanding domestic manufacturing, expanding their suppliers, seeking exemptions, and restructuring their supply chains to be less susceptible to disruption. Reshoring, however, increases structural costs, and supplier shifts are slowed by regulatory approvals. In the long term, tariffs could accelerate consolidation in the veterinary industry and prompt greater use of inventory planning and digital procurement tools. Overall, U.S. tariffs have increased costs, delayed supply, and strained margins across the veterinary ecosystem, with downstream implications for animal health, public health, and food security.

Future Opportunities

The latest U.S. tariff actions intensify pressure on the veterinary health sector, adding significant cost volatility and strategic uncertainty. As per September 26, 2025, articles from multiple news platforms, effective from October 1, 2025, a 100% tariff on branded and patented pharmaceutical products will apply unless companies are actively building manufacturing plants in the U.S. This measure directly affects veterinary pharmaceuticals especially branded biologics, vaccines, and specialty therapeutics doubling landed costs for importers and potentially raising treatment prices across both livestock and companion animal markets.

The new tariffs amplify supply chain risk and incentivize global animal health companies to localize production. U.S. regulators have clarified that exemptions will apply if construction of domestic manufacturing facilities has begun, but it remains unclear how existing U.S.-based production sites will be treated. This ambiguity creates planning challenges for multinational veterinary drug makers weighing capital investment decisions.

USMCA partners Canada and Mexico continue to benefit from their preferential status. Mexico will likely see accelerated investment in nearshore veterinary vaccine and drug production to serve the U.S. market tariff-free. However, abrupt policy reversals or stricter transshipment monitoring could quickly erode these advantages, adding to the unpredictability of sourcing strategies.

Producers, distributors, and providers of veterinary care are currently having to contend with a rapidly evolving pricing landscape. Further cost pressure is exacerbated by tariffs on heavy trucks and equipment used for handling livestock, and the possibility of rising medicine prices may put a strain on disease control initiatives and budgets for preventive care. Clinics and producers may respond by forward-buying critical supplies or diversifying suppliers to hedge against future price shocks.

Best/ Base/ Worst Case Scenario Analysis

Overall, the rapidly evolving tariff framework injects a high degree of uncertainty into the veterinary sector. To stay competitive, companies must adopt agile, risk-adjusted strategies-regionalizing supply chains, leveraging trade agreement benefits, and actively monitoring policy updates-to stay agile. While these measures present near-term cost challenges, they could catalyze a more robust, North American-centred veterinary pharmaceutical manufacturing base, improving long-term supply chain security.

Recent Developments

• On September 26, 2025, U.S. President Donald Trump announced a 100% tariff on imports of branded and patented pharmaceutical drugs, effective October 1, 2025, unless companies have or are building manufacturing plants in the U.S. This move could significantly impact India's pharmaceutical sector, which supplies 45% of generic and 15% of biosimilar drugs used in the U.S.

• On September 26, 2025, generic drugs, which constitute a significant portion of India's pharmaceutical exports to the U.S., were exempt from the U.S. tariffs. However, uncertainty remains due to a U.S. Section 232 investigation assessing whether pharmaceutical imports threaten national security, potentially targeting complex generics and biosimilars in the future.

• On September 25, 2025, the U.S. Department of Commerce initiated Section 232 national security investigations into imports of medical devices, personal protective equipment (PPE), and industrial robotics. These probes aim to assess the impact of foreign supply chains on U.S. economic security with the possibility of imposing new tariffs.