Philips navigates U.S. trade investigation with tariff mitigation, strategic investments 

AMSTERDAM – Royal Philips is controlling what it can in response to a U.S. investigation into the potential national security risks associated with imported medical equipment and other tariff-related threats, says Roy Jakobs. 

A previous investigation under Section 232 of the Trade Expansion Act of 1962 resulted in higher tariffs for the steel industry. 

“We are, of course, following the 232 and are engaged because we're engaged in Europe and U.S. and China in advocating strongly that actually we can lower tariffs and actually forgo further impact on patient care,” Jakobs, president, CEO and chairman of the board, said during a recent conference call to discuss the company’s financial results for the third quarter of 2025. “So, in that sense, kind of, a) we are actively engaging in a dialogue; and b) we are preparing ourselves to focus on the controllable so that we can deal with any consequences.” 

As part of the investigation, launched on Sept. 2, 2025, the Department of Commerce is examining the extent to which domestic production of medical equipment can meet U.S. demand, and the role of foreign supply chains in fulfilling that demand. 

Existing financial impact of tariffs and mitigation efforts 

Philips expects tariffs to have a net impact of EUR 150 million to EUR 200 million for full-year 2025 – and that’s after substantial mitigation. Mitigation in the third quarter focused on inventory management, specialty programs, exemptions and cost disciplines, said Charlotte Hanneman, executive vice president, CFO and member of the board. 

“We also advanced medium-term initiatives meaningfully, including our supplier network and commitment to manufacturing location optimization,” she said. 

Operational changes and investments 

In August, Philips announced a USD 150 million investment in Reedsville, Pa., which will not only expand production of AI-enabled ultrasound systems, but also strengthen both cost efficiency and local supply continuity, Hanneman said. 

“We will continue progressing similar initiatives across the portfolio, carefully balancing regulatory, operational and customer considerations,” she said. 

Meanwhile, Philips Respironics recently filed a Workforce Adjustment and Retraining Notification (WARN) notice with the Pennsylvania Department of Labor and Industry of its plans to lay off nearly 200 employees at three facilities in Westmoreland County, Pa. These layoffs are part of a previously announced workforce reduction. 

Sleep & Respiratory Care business update 

Company officials provided limited commentary on the Sleep & Respiratory Care segment. When asked about a new FDA warning letter concerning three facilities producing ultrasounds and medical systems, and its potential impact on its ability to re-enter the CPAP market in the U.S., Jakobs clarified: “These are two separate topics,” he said. “This is a separate warning letter we need to address, and we are in full remediation of it. We don’t expect any commercial impact of it.” 

Philips has resumed CPAP sales in markets outside the U.S., which continues to contribute to growth in the Sleep & Respiratory Care business. However, performance in the ventilation segment is offsetting that momentum, Jakobs said. 

“That actually is going at the cost of the sleep momentum,” he said. “So therefore, in the mix, you see that there is a slight pressure on the sales because of that ventilation reset. But we are very encouraged and excited by the fact that in sleep, both on the devices (and) the masks, we see it stepping up.”