On 2 April 2025, the US administration announced a new set of tariff increases, including a blanket 10% tariff on all goods entering the United States and a list of new duties on goods from 185 countries which President Donald Trump perceives as the ‘worst offenders’ in terms of unfairness in trade. A week later, on 9 April, Trump announced a 90-day pause on higher-band tariffs with the exception of China to allow countries to come to the negotiating table. Analysts, however, remain unconvinced whether the US administration will be able to strike bilateral deals in such a short period.
The resurgence of US tariffs signals a broader shift in global trade, a retreat from decades of unfettered globalization toward a fragmented, protectionist landscape. This shift is forcing multinational corporations across sectors to revisit strategies last seen in the 1990s when businesses navigated high tariffs by decoupling physical production from intangible value. While industries from automotive to tech face similar pressures, two sectors – medical technology (medtech) and luxury goods – exemplify the challenges and solutions emerging in this new era. Their stories reveal a universal truth: in a world of rising tariffs, companies must separate what they make from what they create to survive.
At the core of this shift is transfer pricing, the practice of setting internal prices for cross-border transactions. Historically, companies bundled costs like R&D, branding, and regulatory compliance into the transfer price of physical goods. But tariffs apply to the total value of imported goods, including these intangible costs, effectively taxing companies twice: once through corporate taxes on local activities, and again through tariffs on the same embedded expenses.
A $5,000 luxury handbag might cost just $500 to manufacture. The remaining $4,500 represents intangible value: Italian design, French craftsmanship, global marketing.
A $5,000 luxury handbag might cost just $500 to manufacture. The remaining $4,500 represents intangible value: Italian design, French craftsmanship, global marketing. When tariffs are applied to the full transfer price, companies pay duties not just on the leather and stitching, but on the brand equity cultivated over decades – a cost already incurred (and taxed) in Europe.
For medtech firms, the FDA approval process represents a massive US-centric investment, often $75m-$100m per device and covering clinical trials, legal compliance, and American labor. By embedding these costs into the transfer price of diagnostic cartridges or machines, tariffs tax regulatory compliance again, despite these expenses being rooted in US operations.
The solution, pioneered decades ago, is to isolate physical production from intangible services. This strategy, now resurgent, applies universally.
Step 1: Minimize the tariff base
Step 2: Bill intangibles separately
Result: Tariffs apply only to the physical product’s base cost, while intangibles escape duties.
While this strategy seems straightforward, modern customs authorities are far savvier than their 1990s counterparts. US Customs and Border Protection (CBP) evaluates the “dutiable value” of imported goods, which includes:
If services are seen as a condition of sale or directly tied to the imported good’s value, CBP may reclassify them as part of the dutiable value, nullifying the tariff savings.
To avoid CBP recharacterization, companies must:
While luxury and medtech illustrate the extremes of intangible value, the principle applies broadly. Industries reliant on intangibles such as brands, IP, and regulatory compliance are most vulnerable to “tariff on tariff” scenarios. Other examples could include:
While decoupling tangible and intangible value would resolve the transfer pricing headache, the strategy is not without its challenges.
The policy may invite greater scrutiny from tax authorities, with governments challenging artificially low transfer prices. Companies must prove factory costs align with market rates (e.g., $500 handbags vs. $5,000 retail).
Second, it requires legal entities across multiple jurisdictions to host IP, design, or regulatory services, adding another layer of complexity.
Lastly, the ongoing policy volatility means that a strategy that works today, such as leveraging tariff exemptions or favorable tax rulings, may be obsolete tomorrow.
In a deglobalizing world, the past is prologue and the survival playbook of the 1990s is back in vogue.
The return of tariffs is not just a medtech or luxury problem, it’s a structural shift in global trade. Companies across industries must recognize that the efficiencies of globalization rely on fragile assumptions about open borders. To adapt, they must relearn the 1990s lesson: what you make and what you create are not the same. By decoupling production from intangibles, businesses can prevent innovation, brand equity, and regulatory investments from becoming collateral damage in trade wars.
For medtech, this means treating FDA compliance as a service, not a cost to bury. For luxury, it means monetizing heritage separately from handbags. For all industries, it means acknowledging that the future of global trade will be written not in boardrooms, but in the fine print of transfer pricing agreements.
In a deglobalizing world, the past is prologue and the survival playbook of the 1990s is back in vogue.
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