GE Healthcare's Tariff Turnaround: Unlocking $0.85 EPS Upside in a Thawing Trade Landscape

The U.S.-China trade war has been a thorn in the side of global manufacturers for years. But for GE Healthcare, the 90-day tariff truce—set to expire July 9—offers a rare opportunity to reverse a $0.85-per-share earnings drag and reclaim its growth trajectory. With China’s healthcare market set to expand by 10% annually through 2030 and U.S.-China trade relations showing incremental progress, now is the time to position for a valuation rebound.

The $0.85 EPS Drag: A Tariff Truce Catalyst

GE Healthcare’s Q1 2025 results revealed a stark truth: tariffs have cut its 2025 adjusted EPS guidance by $0.85, slicing the midpoint of its forecast to $4.00 from an earlier $4.68. The pain is concentrated in China, which accounts for 75% of the net tariff impact, thanks to its dual role as both a major export market for imaging systems and a critical supplier of components.

But here’s the kicker: the 90-day truce—announced April 2 and extended until July 9—has already started to ease pressure. CFO Jay Saccaro confirmed that if tariffs remain at current levels post-truce, GE could mitigate the full $0.85 drag by 2026 through supply chain reconfiguration and localized production. However, the timeline for relief could accelerate if the U.S. and China agree to further tariff reductions. In a bullish scenario where bilateral tariffs drop by 100 points (e.g., China’s rate falling from 145% to 45%), EPS could jump by $0.40 annually, pushing 2025 guidance back toward its pre-tariff range.

China: The Growth Engine and Geopolitical Pivot

China isn’t just a cost center—it’s GE Healthcare’s second-largest market and a growth driver. The country’s healthcare spending is projected to hit $2.1 trillion by 2030, fueled by rising demand for precision oncology and cardiology imaging. GE’s recent $1.2 billion acquisition of Nihon Medi-Physics—a radiopharmaceuticals leader—positions it to capitalize on this trend, particularly in PET scans, which are soaring in popularity.

Critically, China’s “local for local” manufacturing strategy is shielding margins. By shifting production closer to end markets, GE has reduced reliance on cross-border shipments, cutting tariff exposure by $375 million in 2025 alone. This gives it an edge over European rivals like Siemens Healthineers, which have struggled with similar tariff pressures. CEO Peter Arduini noted that GE’s U.S. cardiology and oncology imaging orders surged double digits in Q1, driven by hospitals prioritizing high-margin diagnostic tools.

Analysts See Undervaluation: Why the Stock Is a Buy Now

The market hasn’t fully priced in the upside. While shares rose 4% post-Q1 results, GE Healthcare trades at $78.50, below the average analyst target of $87.52. This gap narrows when considering two catalysts:
1. Trade Deal Extensions: A prolonged tariff truce or negotiated rate cuts could erase the $0.85 EPS drag by year-end, re-rating the stock.
2. China Healthcare Spending Surge: The government’s push to modernize rural hospitals and expand Medicare coverage could boost orders for GE’s CT scanners and PET systems, which are priced 20% lower than European alternatives.

The Bottom Line: Act Before the Truce Expires

The clock is ticking. With only 80 days left until the current truce ends, investors have a narrow window to lock in a stock trading at a 22% discount to its 2024 earnings power. A resolution to U.S.-China trade tensions would not only remove the EPS drag but also unlock China’s $100 billion imaging market, where GE holds a 32% share.

For income investors, the $1 billion buyback announced in Q1 adds a safety net, while growth investors gain exposure to a company primed to dominate in precision care—a $50 billion market by 2027.

Action to Take: Buy GE Healthcare stock now at $78.50. A resolution to trade tensions by Q4 could push shares toward $90+, while even a modest 50-basis-point tariff reduction would add $0.40 to EPS, justifying a 10% upside. This is a rare moment where geopolitics and fundamentals align for outsized returns.

GE Healthcare (GEC) is a buy below $85, with a $95 price target if trade risks subside.