New Zealand medical device firm Fisher & Paykel Healthcare will consider switching factories making products bound for the United States from Mexico to New Zealand if U.S. President Donald Trump’s administration taxes Mexican imports.
The company, a major global supplier of specialized respiratory equipment for hospitals, is one of the first companies with Mexican operations to disclose how it would respond to the Trump administration’s proposed tariff on imports from across the U.S. southern border.
Shifting production to New Zealand could raise production costs, said Fisher & Paykel Healthcare’s chief executive Lewis Gradon. The firm did not yet know by how much because it was uncertain what the Trump administration’s policies were.
“Tariffs are never good,” the CEO said in a phone interview with Reuters.
“We’ve got two plants, one in New Zealand and one in Mexico. We have the capacity to supply the United States from New Zealand if that makes more economic sense,” he said.
The White House said on Thursday Trump could pay for a wall all along the border with Mexico with a new 20-percent tax on goods from Mexico.
But the U.S. president’s office later walked it back, saying it was not endorsing the border adjustment tax and it was merely an example of a way of making Mexico pay up.
“Anyone in business prefers stability and predictability. The 20-percent tariff seems to be evolving,” Gradon said.
Fisher & Paykel would still manufacture products destined for its non-U.S. markets in Mexico, Gradon said, and could benefit from the cheaper labor costs there as the Mexican peso weakens.
The peso fell 0.6 percent against the dollar following the White house’s announcement that a wall on the southern border could be financed with a new tax on goods from Mexico.
The peso was the worst-performing major currency last year, weakening 20 percent against the dollar as Trump closed in on the U.S. presidency.
SECOND MEXICAN FACTORY
Jitters over the proposed tariffs sent shares in Fisher & Paykel Healthcare down 3.1 percent on Friday, its largest daily percentage loss in more than two months.
The firm’s largest shareholders include Australian fund manager Northcape, New Zealand state-owned insurer AC, and U.S. fund Vanguard Group.
Fisher & Paykel Healthcare, which produces devices including masks for treating sleep apnea and humidifiers for mechanical ventilation, is scheduled to start work this year on a second factory in Mexico, where it currently employs about 700 people and produces almost a third of its products.
The device maker originally began producing in Mexico in 2009 as an insurance policy against any large scale disaster affecting operations, such as an earthquake hitting New Zealand.
Now, its Auckland operations are considered the back-up option for U.S.-bound exports, which along with Canada account for just under half of the firm’s revenues, as American protectionism grows.
Fisher & Paykel Healthcare expects full-year net profit after tax to be between NZ$ 165 million ($ 119.44 million) and NZ$ 170 million, according to forecasts provided in November.
(This version of the story was refiled to correct company name to Fisher & Paykel Healthcare throughout)
(Reporting by Charlotte Greenfield; Editing by Bill Tarrant)