Trump’s Tariff War with China Burns the Legal Weed Industry, Too
Trade warp: Californians may see prices go up by as much as 25 percent.
The high cost of doing business in the California marijuana industry just got higher, as President Trump’s trade wars affect the price of legal weed. SF Evergreen spoke to several owners of California cannabis companies, who tell us that the tariff costs have already hit home. Reefer retail prices could spike by as much as 25 percent.
The most severe effect will be on the cost of vape pens, cartridges, and their batteries, which are almost exclusively made in China. But the tariffs are also driving up childproof packaging and testing lab equipment, as these are among the many sectors that rely on Chinese imports.
“Even Trump’s ‘Make America Great Again’ hats are made in China,” says Margot Wampler, founder of cannabis sales and distribution firm Lifted Networks. “Any business that orders hats, T-shirts, lighters, rolling papers, that stuff all comes from China. This affects every business everywhere.
“The cannabis industry is already one of the highest-taxed business sectors,“ she adds, rattling off a litany of state taxes, sales taxes, local city taxes, and gross receipts. “Any additional tax burden in the form of import tariffs from China is just going to add an additional cost to the components that make up the cannabis products. Which is just going to get passed on to the consumer.”
Consider the example of childproof packaging, now required of every California cannabis product sold.
“You have to do a Mylar bag or you have to do a jar,” she explains. “You can find some American glass, but it’s really expensive. Primarily, all of those mylar bags and glass jars are made in China.”
Wampler even sought out a local source for glass, hoping to find tariff-free alternatives for a client who needed glass bottles. “But guess what, those are still all also made in China,” she says.
On June 15, the Office of the United States Trade Representative imposed 25-percent tariffs on Chinese “imports containing industrially significant technologies.” You’d think that U.S. companies would just find domestic manufacturers to avoid the tariffs. But in many cases, there aren’t any domestic manufacturers.
“That’s not going to incentivize the industry to go with U.S. producers,” says Elvis McGovern, founder and CEO of Populist Cannabis (formerly People’s Cannabis). “Because U.S. producers either don’t exist, or are much more expensive. Most of this equipment is about four or five times the price if you buy it stateside rather than as a Chinese piece of equipment.”
“It’s still cheaper to buy the Chinese equipment,” he adds. “The quality American goods are much larger-scale and at much higher prices than we can afford. So now, we’re just eating this 25 percent tariff.
“It doesn’t change anything. It just slows down the rate at which cannabis companies can grow and expand.”
The pinch of the Trump tariffs is not some far-off theoretical threat that could get staved off at the last minute. The bills are already coming due for U.S. businesses.
“I just got hit with the first of two 25-percent import taxes,” McGovern tells us.
Operators like him don’t actually get the goods they ordered until those tariffs are paid, generally out their own pocket.
“You pay the manufacturing company,” he explains. “They build your machine, then throw it in a container or an air crate. So you’ve got to pay for the shipping. Then it goes through Customs. Customs won’t release it until you pay the 25 percent.”
The national lobbying group National Cannabis Industry Association (NCIA) is making a government relations effort to get vape pens and cartridge equipment taken out of the tariff package.
“That’s not going to affect the rising costs for steel or aluminum,” says NCIA media relations director Morgan Fox. “But at the very least, it will help alleviate one of the biggest and most specific tariff cost drains on the industry.”
The legal marijuana industry is trying to blow back against Trump’s trade huffing and puffing. But vape pen users looking at higher price tags should not hold their breath hoping for immediate relief.