Trump’s Trade War Hits the Cannabis Community
Regardless of your political leanings generally, or thoughts about Donald Trump, you probably don’t want to spend more money or make less money. Unfortunately, Trump’s trade war with China is about to hit the cannabis community as the price of equipment and devices from vaporizers to grow equipment to cell phones, to many things in between, are set to increase soon, pushing prices higher for businesses and consumers.
Arnaud Dumas de Rauly, co-CEO of The Blinc Group, a vapor and cannabis incubator, and treasurer for the Vapor Technology Association, testified about the detrimental impact of Trump’s proposed tariffs on his business sector as part of The Office of the U.S. Trade Representative public hearings regarding the proposed tariffs on July 24th. CNBC reported on the tariff’s consequences for vaping businesses, other cannabis-related companies, consumers, and patients:
Companies that import vaping products will have to either absorb the additional cost of the tariff, source production in another country or increase the prices charged to consumers.
However, the profit margin on those devices is only between 10 percent and 15 percent and few alternatives exist for making them, Dumas de Rauly said. As a result, the extra cost of the tariff will be largely passed on to consumers by way of higher prices.
That will impact the “entire cannabis consumption market — including medical and recreational marijuana,” he said.
“There’s no question that tariffs will raise the price of those products, which producers and importers will try to pass on,” added Dan Ikenson, the director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute, a nonprofit think tank in Washington, D.C.
As Juan Carlos Negrin, President of the New Jersey Marijuana Retailers Association, explained to Forbes, cannabis companies are particularly vulnerable to increased costs because of the 280e IRS tax provision prohibitions normal deductions of business expenses from their taxes. Negin stated that “A tariff on goods the companies use in daily operations will have a substantially negative impact on their earnings”
With the cannabis industry so overregulated and ultracompetitive, any increase in business costs that force consumers and patients to pay more are certainly not welcome. A few important lessons come to mind for me. One, it’s always good to diversify, so your business isn’t so susceptible to the whims of any president, especially one that makes policy via Twitter. Secondly, this reinforces the importance of politics to the cannabis industry. It is imperative that we united to elect officials that wholeheartedly support the cannabis industry and to end harmful policies, such as unnecessary tariffs and draconian tax policy.
If cannabis is your industry, then politics is your business. For the cannabis industry to thrive like it should, we must always remember the importance of politics. We’ve made great strides in recent years, but Trump’s tariffs are just one example of how our burgeoning industry can be impacted by an election and a policy choice or two.
The International Cannabis Business Conference has been combining business and politics better than any global B2B since it began four years ago. Politicians of all levels, as well as government regulators, are always featured at the ICBC and the Portland event on September 27-28 is no exception. Don’t miss your opportunity to learn the latest and network with top professionals from around the world. Get your tickets by September 12th to save $200.