Navigating Tariff Volatility in Healthcare Stocks: Merck, UnitedHealth, and Moderna's Strategic Moves

The healthcare sector faces unprecedented headwinds as recent tariff announcements threaten to disrupt supply chains, inflate costs, and reshape competitive dynamics. For investors, the volatility presents both risks and opportunities. Companies like Merck (MRK), UnitedHealth (UNH), and Moderna (MRNA) are responding with divergent strategies—some proactive, others reactive—to navigate this new landscape. Here's how to parse the risks and identify pockets of value.

The Tariff Landscape and Sector Vulnerabilities

The U.S. tariffs on imports from China, Canada, and Mexico—now up to 20% and escalating further—have exposed critical vulnerabilities in the healthcare supply chain. A full 30% of active pharmaceutical ingredients (APIs) used in U.S. drugs originate from China, while rare earth materials for medical devices and imaging equipment are also heavily reliant on Chinese exports. Meanwhile, Canadian and Mexican imports of medical supplies, such as syringes and contrast dyes, face 25% tariffs, exacerbating costs for hospitals and insurers.

The American Hospital Association (AHA) warns that tariffs could push supply costs up 15% within six months, forcing providers to pass these costs to patients or insurers. For pharmaceutical companies, reshoring production or diversifying suppliers is the only defense—but these moves require time and capital.

Merck: Investing in Reshoring to Mitigate Risk

Merck has emerged as a leader in proactive risk management. The company has allocated $12 billion since 2020 to U.S. manufacturing, with plans to invest an additional $9 billion over the next four years to insulate itself from tariff impacts. In April 2025, it acquired Verona Pharma for $10 billion, bolstering its lung-disease portfolio and reducing reliance on foreign-made APIs.

Merck's shares have held up well despite tariff fears, up 18% YTD as investors reward its strategic foresight. The company's focus on reshoring also positions it to capitalize on any eventual tariff carve-outs or exemptions.

UnitedHealth: Navigating Indirect Costs and Patient Pressure

UnitedHealth, the nation's largest health insurer, faces indirect but significant risks. Higher drug prices—projected to rise 3.84% annually—could strain its margins as it absorbs cost increases or negotiates with providers. Over 90% of hospital finance leaders say they'll shift tariff-driven costs to patients, which could pressure UnitedHealth's PBM (pharmacy benefits management) business and overall profitability.

While UNH's shares remain stable (up 7% YTD), the company's ability to control drug costs through its Optum division will be critical. A prolonged tariff-driven price spike could test its value proposition to employers and patients.

Moderna: mRNA Supply Chain Challenges and Opportunities

Moderna's mRNA platform is a double-edged sword. While its vaccines and therapies offer long-term growth potential, its supply chain is highly dependent on global partners for raw materials and manufacturing. The company has not yet disclosed detailed reshoring plans, leaving it vulnerable to tariffs on Chinese or European imports of critical components.

MRNA's shares have underperformed peers (down 12% YTD) as investors price in supply chain risks. A strategic pivot to U.S. manufacturing or partnerships with domestic suppliers could unlock value, but execution remains uncertain.

Tactical Allocation Strategy: Where to Invest Now

The key to capitalizing on this volatility lies in sector-specific risk management:

1. Overweight Merck (MRK): Its aggressive reshoring and M&A activity make it the most insulated from tariffs. The stock's P/E of 14.5x (vs. sector average 16.2x) reflects current pessimism about near-term costs but ignores its long-term advantages.

2. Cautious on UnitedHealth (UNH): While its defensive characteristics remain intact, the stock's P/E of 18.7x is vulnerable to margin compression. Wait for clarity on tariff impacts or a pullback to a $380–$400 price range before buying.

3. Selective on Moderna (MRNA): Avoid the stock until it clarifies supply chain strategies. A $100–$120 price range could present opportunities if the company announces domestic manufacturing partnerships.

Final Takeaway

The healthcare sector is at a crossroads. Companies that have invested in reshoring or supplier diversification—like Merck—will thrive, while others like UnitedHealth face near-term headwinds. Investors should focus on risk-adjusted opportunities in resilient names while avoiding those overly exposed to tariff volatility. For now, Merck's stock offers the best balance of defensive qualities and upside potential.

Data as of July 7, 2025. Past performance does not guarantee future results. Always conduct your own research before making investment decisions.