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Trump’s Trade Wars Hit Cannabis Businesses Hard

Donald Trump Trade War Tariffs China Cannabis Business Cannabis Now
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Economics

Trump’s Trade Wars Hit Cannabis Businesses Hard

In a fast and furious exchange of retaliatory tariffs, Donald Trump and China’s president Xi Jinping appear to have initiated a trade war this week. The cannabis sector is particularly vulnerable, according to industry insiders.

Under the Trade Expansion Act of 1962, the U.S. president has the power to unilaterally impose tariffs if it deemed a matter of national security. President Donald Trump this week used that power — and things escalated rapidly.

Trump on July 6 imposed tariffs of 25 percent on some $34 billion worth of Chinese imports, citing “unfair trade practices.” This is a reference to claims of industrial espionage and intellectual property violations. China immediately retaliated by imposing tariffs on $34 billion in U.S. exports to China. On July 10, Trump struck back again, imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.

Gregg Gorski, general manager of Smokebuddy, a producer of hand-held personal air filters, says Trump’s move will have a clear impact on his business. “A 25 percent duty on anything that comes from China costs importers that much more,” he told Cannabis Now. “With Trump’s order, 1,300 items got an extra 25 percent duty.”

And Smokebuddy’s filters, which are produced at a small plant in China’s southern industrial hub of Guangzhou, are among them.

“Our costs went up by 25 percent,” says Gorski. “So we have to add another 25 percent to our price when we sell to our distributors. So they have to raise the price when they sell to the store, and the store has to raise the price when it sells to the end-buyer. We can’t eat the increase because we were already running on a 30 percent margin. So the increase would eat into our bottom line.”

The same principle applies to a wide range of products. “Everything that’s made in China that we consume in U.S. has gone up,” says Gorski. “Computers, cell phones, televisions, construction equipment. It doesn’t just affect us as the importers, it’s affected the entire U.S. economy.”

Smokebuddy has been producing its line of personal filters, designed to eliminate second-hand smoke, for 10 years. “In 10 years, we’ve never raised our prices,” says Gorski. “Now due to tariffs, we’ve had to raise the price — but we don’t make any more money. We have to give that extra to the government.”

Gorski says the Smokebuddy “serves a purpose for people who want to be discrete with their smoking.” He is based at the company’s Los Angeles office, which employs 12 people, but frequently travels to the Guangzhou plant, which employs 40.

Explaining the logic of using Chinese labor, Gorski echoes the language of globalization: “Costs in the U.S. would have been double that in China. We could have done it here, but that would have left the door open to someone else doing it in China for half the costs.”

He points to vape pens, lighters and butane gas as other cannabis-related products that will be impacted by Trump’s edict.

The hope that Congress will restrain Trump looks slim. On July 11, the Senate approved a measure calling on Trump to consult with Congress on the tariffs by a vote of 88-11. But the measure is non-binding. Faced with the certainty of a Trump veto, Senate Republican leaders have not acted on a bipartisan bill to impose actual binding limits on Trump’s ability to impose tariffs.

And the same cycle of tariffs and retaliatory tariffs also unfolded this week with Canada and Mexico.

China is meanwhile attempting to rally opposition to Trump in the World Trade Organization — giving us the unlikely prospect of the Communist Party-ruled country posing as the champion of free trade against a protectionist United States.

TELL US, have you felt any effects from Trump’s new tariffs?

4 Comments

4 Comments

  1. Arnaud Dumas de Rauly

    July 24, 2018 at 7:03 am

    The impact will be greater than expected and no one in Cannabis is doing g anything about it. This will not bring jobs back to Americans, multiple pieces of research prove it. For more information on the public hearing which will happen today in DC: https://www.prnewswire.com/news-releases/trumps-trade-war-will-stifle-the-cannabis-industry-300685576.html

  2. Jack

    July 15, 2018 at 9:20 pm

    Hopefully this will cause an AMERICAN company to stand up and start making your filters Here using American workers. The biggest problem the USA has to overcome is Americans want high wages yet want to pay Cheap import prices. Ask Pittsburgh what happened when Chinese steel made where labor is pennies on the dollar undersold American steel. Americans need to buy American products first and foremost or we will end up where no one can afford anything as jobs will be scarce and you cant outsource your paychecks. OPEN your EYES.

    • sonny

      July 23, 2018 at 7:45 pm

      thank you jack,i was just going to say the same thing.

    • Maxcatski

      July 27, 2018 at 3:36 pm

      Personally, I believe in free trade. The tariffs on Chinese goods are no more strategic than the tariffs on steel and aluminum from Canada. Do you think Smokebuddy is strategic to American interests? If so, get out your dictionary and look up the word “strategic”. Tariffs simply drive up consumer prices. Down with the War on Trade!

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