Since spring 2025, the U.S. government has rolled out the broadest tariff measures in decades: reciprocal tariffs, expanded duties on steel and aluminum, and ongoing Section 301 tariffs on goods from China. The implementation of tariffs has raised the landed cost of imported assets, materials, and replacement parts across many industries, including healthcare. Healthcare facilities rely on these materials for the construction of buildings, leasehold improvements, and other component parts used in specialized medical equipment, many of which are imported. The volatility related to rapid changes in trade policy has created an environment of uncertainty and unpredictability. While legal challenges and policy shifts continue to create uncertainty, the immediate effect for providers has been higher costs and more complex capital planning decisions. A final ruling from the Supreme Court regarding the legality of certain tariffs is pending, with oral arguments to be heard in November 2025.

For hospitals and health systems, this isn’t just a short-term budgeting and procurement challenge; these tariffs may cause ripple effects across the entire balance sheet. As construction costs continue to increase, fair market values for used equipment continue to climb, capital expenditure (CapEx) decisions are shifting, and even insurance coverage and property tax values may be impacted. Tariff-driven replacement costs may prompt hospitals to extend the useful life of certain assets—such as imaging systems, diagnostic equipment, and IT infrastructure—beyond traditional depreciation schedules, delaying significant capital expenditures.

In short, tariffs that increase the cost of a new building or equipment costs can also reshape how you plan, value, insure, and manage the real estate and personal property assets already owned.

What Changed

2025 Reciprocal Tariffs: A baseline tariff now applies to a wide range of imports, with country-specific rates layered on top. This affects both direct imports and U.S.-assembled equipment that depend on global inputs.
Steel & Aluminum Duties Expanded: More vehicle parts, trailers, and appliances are now covered, raising costs for metal-intensive builds such as ambulances, racks, and HVAC systems.
China Section 301 Tariffs Raised in 2024: Higher rates remain in place for steel, aluminum products, and key technology inputs. While some exclusions have been extended, they are narrow in scope.

How Tariffs Flow into Secondary-Market Prices

Even when assets are assembled domestically, critical inputs are often imported or benchmarked globally, including steel castings, semiconductors, rare-earth magnets, and power supplies. Historically, most tariff costs are passed through by construction firms and equipment manufacturers directly to buyers, resulting in higher replacement costs, increased resale values, and supply shortages.

What We’re Seeing for Real Estate

Healthcare real estate has seen significant cost escalation in recent years. While much of the increase occurred in 2022 due to post-COVID supply chain disruption, tariffs are now creating additional layers of expense. Prices for certain materials, such as steel, aluminum, and copper, have risen above the consumer price index (CPI) over the last 12 months. The Cumming Group states that the increases are “largely due to lingering tariff effects and limited supply from major global producers.”

JE Dunn created a calculator to estimate the financial impact of tariffs using their cost benchmarks, import data from the Bureau of Economic Analysis, and current tariff rates. As of August 26, 2025, this calculator estimates that a $10 million healthcare project would cost about $573,761 (~5.74%) more because of tariffs, with steel driving $451,000 of that increase.

In one instance, VMG Health observed a $1.4M (4% of hard costs) “escalation/tariffs” line item in a new-facility construction budget—on top of the typical 3% construction contingency. Additionally, based on conversations with reputable general contractors (GCs), GCs are now reviewing subcontractor bids line by line and requesting justification or support for any price increases attributed to tariffs.

Conversations with market participants have indicated further anticipation of future price hikes due to tariffs. In an article titled “Logistics and Supply Chain Impact,” JE Dunn notes that warehouse demand surged in Q1 2025, with customs bonded warehouses in especially high demand, as these facilities allow importers to delay tariff payments until goods are sold. VMG Health will continue to monitor these trends.

To minimize costs where possible, developers and health systems are value-engineering new facilities and delaying or scaling back capital projects. High construction costs, combined with persistently elevated interest rates, have led to higher rental rates for newly constructed facilities, as these rates are typically calculated by multiplying the construction cost by a rent constant.

Higher rates for new construction properties are leading some tenants to seek out second-generation space to save on costs, especially for more traditional clinic space as opposed to higher acuity uses.

Higher build-out costs have driven up tenant improvement allowances for first-generation space. The demand for relatively modern, existing, Class A medical outpatient space increased rental rates and created record-high occupancy rates in many markets. We are also seeing adaptive reuse projects where medical tenants convert traditional office or retail spaces to fulfill their needs. Higher construction costs coupled with tariffs creates greater demand for high-quality, modern, existing space—apart from certain specialty or higher-acuity facilities, which are still being constructed from the ground up.

What We’re Seeing by Asset Type

The impact of tariffs varies depending on the category of healthcare asset. Imaging equipment, for example, is highly sensitive to global supply chains. MRI and CT systems rely on semiconductors, rare-earth magnets, and precision components: Even a 10% tariff can add up to $200,000 to the cost of a $1–2M scanner. Rising replacement costs have pushed potential buyers toward the secondary market, increasing demand for refurbished systems and individual replacement parts for existing systems.

Ambulances and other fleet vehicles have also been affected. Elevated steel and aluminum costs keep replacement costs high, and with limited availability of new vehicles, used pricing remains strong—particularly for newer, low-mileage units.

Tariffs have also impacted information technology assets, specifically tariffs on semiconductors and electronics, resulting in an increase in cost of PACS workstations, servers, and networking infrastructure, making hospitals more reliant on secondary supply sources. Smaller devices and general office or medical equipment, many of which are subject to Section 301 tariffs, have also experienced cost increases. For smaller practices and clinics lacking the purchasing power of larger health systems, refurbished equipment has become a practical alternative.

Finally, leasehold improvements have risen in cost as tariffs increase the prices for steel, lighting, HVAC and other core materials, driving up replacement costs. The resulting increase has created a gap between what it would cost to replace these leasehold improvements today and their current accounting value, assuming consistent, expected, depreciable life estimates.

Broader Implications for Health Systems

CapEx Budgeting: Higher near-term replacement costs may encourage a delay in asset purchases and increase used-equipment demand while impacting used-equipment availability. Equipment service providers could see stronger demand and higher pricing, as facilities maintain assets longer. Real estate investment and new construction will likely be carefully scrutinized, potentially resulting in project delays, scaled-back plans, or project termination.
Useful Life & Depreciation: Hospitals may want to review their current useful life policies and consider extending asset life expectations, based on revised capital expenditure budgets and potential changes in expected usage and replacement cycles.
Insurance: Depending on the definitions contained in the insurance policy, reliance on traditional cost indices may understate the necessary cost to replace assets in the event of a catastrophic failure. Tariff-driven increases could leave facilities underinsured unless policies are updated to reflect increased costs.
Property Tax: Higher secondary-market values can also impact the fair market value opinions that factor into property tax assessments, depending on jurisdiction and valuation method.

Tariffs are shifting demand toward cost-effective alternatives (e.g., refurbished equipment, adaptive reuse, and second-generation space) while driving interest in existing, modern healthcare assets. The VMG Health team is monitoring these trends closely to help clients navigate this evolving landscape.

Clinics Increasingly Lean on Refurbished Assets

For many smaller healthcare providers, investment in refurbished equipment has become less of a choice and more of a lifeline. As tariffs push the price of new systems up by 15–30%, many clinics and community hospitals simply cannot afford to wait—or pay—for brand-new imaging technology. Instead, refurbished equipment offers a compelling, practical solution at a more cost-effective price point.

For example, Lake Charles Memorial Health System in Louisiana, facing rapid outpatient growth and capital budgeting constraints, turned to Siemens refurbished imaging systems. These units were fully rebuilt and rigorously tested to original standards, delivering substantial cost savings with no loss in scan quality. One radiologist even said they couldn’t distinguish scans from refurbished units versus new ones.

Refurbished systems typically cost 30–70% less than new equipment, and clinics can immediately channel savings back into patient care. When both budgets and lead times on new equipment are stretching tight, refurbished equipment means quicker implementation. Clinics can expand diagnostic capacity within existing infrastructure, an ideal option for older facilities or urgent diagnostic needs while avoiding construction costs.

Refurbished equipment is no longer an alternative, but a strategic choice that allows smaller providers to maintain quality care, control costs, and deliver services without delay or compromise.

How VMG Health Supports Clients

At VMG Health, we understand how tariffs, supply chain dynamics, and shifting market forces influence healthcare facilities. Our Real Estate and Capital Assets teams integrate these realities into every valuation and advisory engagement. We benchmark comparable cost data against tariff-adjusted replacement costs and analyze the impact of warranties, installation, usage hours, and software to account for risks related to useful life, depreciation, CapEx, insurance, and taxes. Our clients receive accurate, defensible fair market value opinions and actionable insights that guide smarter decisions.

While some of these effects may be temporary or change over time, we closely monitor these developments and their effect on both real estate and capital assets to stay ahead of changing market dynamics. Whether your organization is considering constructing or leasing a new facility, evaluating equipment purchases, or reassessing insurance and tax positions, VMG Health can help you navigate today’s tariff-driven environment with clarity and confidence.

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