Why Cannabis Consumers Are the Likely Losers The U.S. China Trade War
By Zane Bader, guest contributor
The cost of being a cannabis consumer may soon be increasing due to President Trump’s announcement that the United States will be imposing billions of dollars of tariffs on Chinese goods. This has led China to respond with similar tariffs on U.S. products that will negatively impact the domestic cannabis industry and its consumers.
The area hit hardest will be the vaporizer market, and other areas such as lighting equipment and packaging will also be affected.
Starting August 23, the U.S. will impose a 25 percent tariff on $16 billion worth of Chinese goods, with an emphasis on electronic products, including e-cigarettes and vaporizers. As reported by the Washington Times, “Officials in Shenzhen say that more than 100 companies in the province produce over 90 percent of the global e-cigarettes.”
The new tariffs will directly hit companies like Convectium, a manufacturer of vape cartridges, batteries, filling and capping machines, and packaging systems for cannabis retailers. Danny Davis, founder and CEO of Convectium, explained the scope of this impact: “All Convectium products are engineered in the U.S., but several are produced in our factories in China and then imported. This is the industry standard so we know we are one of many being impacted.”
Davis was not the only industry leader that told us about the importance of manufacturing in China to the success of their company. Arnaud Dumas de Rauly, Co-CEO of The Blinc Group, elaborated on how this will be impacting the cannabis industry. saying, "The rationale behind this administration's trade war against China is twofold: Stealing American jobs and stealing American IP & know-how. However, as it pertains to vaping products, neither of these are in the USA to begin with—they have always been in China.”
The impact these tariffs will have on vaporizer manufacturers and consumers is inevitable. Businesses will be forced to lose money due to the increased costs, or consumers will pay more for products like batteries and vape cartridges.
Mr. de Rauly anticipates that vape hardware, which already has low profit margins hovering between 10-15 percent, will drive the cost of the tariffs to be passed onto consumers. Mr. de Rauly also anticipates that “this will limit patient/consumer access to cannabis products, especially in states like Florida and New York whose medical programs rely on vaping products.”
Some companies are actively trying to minimize the impact on consumers. “Convectium has committed to paying a portion of this 25 percent cost increase on behalf of our clients," Convectium's Davis told Smoke Cartel. "We took this stance because we value their businesses and want to shield their profits from the full impact.”
Beyond the monetary implications, the growth of the cannabis industry could slow as a whole. James Bradley, Chief Marketing Officer of the indoor grow light firm Fohse, likens this to the classic debate between free trade and protectionism.
“Free Trade allows companies like Fohse to drive the cannabis industry forward by giving them affordable access to state-of-the-art grow tech. Our ability to affordably source premium quality raw materials and labor from around the world is a big reason why cannabis cultivation facilities are advancing so rapidly,” said Bradley.
“At the end of the day these tariffs steal the savings enjoyed from Free Trade competition and give them to a small group of privileged companies under the guise of closing our trade deficit with China.”
As the trade war advances, these tariffs will only continue to to negatively impact the cannabis industry and the American manufacturing sector as a whole.
Whether it’s increased costs, loss of profits, or a slowed market, the vaporizer market is bound to start seeing the effects in the coming months.
Mr. de Rauly sums up what he believes the manufacturing industry’s thoughts are on the trade war: “It just doesn’t make sense.”