Trump Tariffs And Cannabis Industry

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President Donald Trump listens during a meeting with steel and aluminum executives in the Cabinet Room of the White House, Thursday, March 1, 2018, in Washington. Trump's announcement that he will impose stiff tariffs on imported steel and aluminum has upended political alliances on Capitol Hill. (AP Photo/Evan Vucci)

It’s more than soybean farmers and car makers who could feel the effects of Donald Trump’s tariffs on Chinese products. The legal cannabis industry will take a hit as well.

Vaping devices, and batteries, filters and cartridges created for vaping devices are all subject to the new tariffs said Arnaud Dumas de Rauly, Co-CEO of The Blinc Group. His company develops and sells technologies and products related to vaping and other ancillary cannabis products, and runs an incubator program that helps develop, research, and brand technology related to cannabis and nicotine vaping.

On July 24th, Dumas de Rauly testified as part of The Office of the U.S. Trade Representative public hearings regarding the proposed tariffs, saying that they will raise prices for medical marijuana patients and other consumers who use vaporizers.

By increasing prices on Chinese-made products, Trump has essentially forced American manufacturers to take time out of running their businesses to find alternate suppliers, “or price themselves out of competition with other manufacturers,” said Juan Carlos Negrin, President of the New Jersey Marijuana Retailers Association.

Smoke Wallin, president of Vertical, a multi-state cannabis growing and production company, said the tariffs have created a sense of urgency around finding new suppliers in America for vape pens, even though the Chinese manufacturers are much less expensive.

The tariffs have consequences beyond just higher consumer costs Dumas de Rauly said. Higher prices lead to decreasing sales and a reduction in tax income for the states. The ​ State of Colorado collected ​ over $247M in Cannabis tax revenue in 2017and “25% of sales come from cannabis vaping products,” said Mr. Dumas de Rauly.

Beyond vaporizer components, “any items essential to the day-to-day operations of a cannabis business, from construction equipment to cell phones, will likely increase in price,” said Kevin Hagan, a strategic advisor who consults on cannabis policy issues at Princeton Public Affairs Group.

This could hit the legal marijuana industry harder than some others. Cannabis companies are especially vulnerable to extra expenses and changes in their input costs said Negrin, because they are not allowed to deduct business expenses from their taxes, so their profit margins can be  low, he said. “A tariff on goods the companies use in daily operations will have a substantially negative impact on their earnings,” he said.

“The Trump tariffs will undoubtedly hurt the rural parts of Washington State,” said Greg James. He connects with marijuana companies through the two magazines he publishes, Marijuana Venture and Sun Grower. “There could well be a snowball effect that results in the outdoor growing community having an even harder time selling their crop,” he said.

Source: Forbes

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