The cannabis industry has been blindsided by the latest wave of sweeping tariffs enacted by the U.S. government, and it’s about to hit both producers and consumers where it hurts most, the wallet.
While some might joke about “smoking their way through the economic gloom,” the reality is far from lighthearted. With U.S. President Donald Trump’s newly announced tariffs affecting imports from countries like China, Canada, Mexico, and the European Union, the legal cannabis space is bracing for significant cost increases across the board.
For many cannabis brands, international supply chains are critical to operations. Items like vape cartridges, tins, specialty glass, and packaging components are notoriously difficult to source domestically. China, in particular, is a hub for manufacturing cannabis hardware. Now, those supply lines are being taxed, hard.
“Those relying on exports from nations with tariffs, such as China, will need to take a serious look at how they might absorb the extra costs or alter partnerships,” said Bryan Gerber, CEO of Hara Supply, the world’s largest manufacturer of cones and combustibles.
Unsurprisingly, stocks in publicly traded cannabis companies, Tilray, Canopy Growth, Organigram, and Terrascend, tumbled between 5% and 10% following the announcement. But the pain won’t stop with Wall Street. Most of these new costs will be passed directly to consumers, especially as the industry’s already thin margins leave little room to absorb a 10–15% bump in operational expenses.
“Most cannabis businesses don’t have the margin flexibility to absorb a 10%-15% increase,” said Mike Forenza, managing partner at AE Global, a cannabis packaging manufacturer. “Those costs will trickle down the supply chain.”
That trickle-down could turn into a flood pushing customers away from licensed retailers and straight back into the illicit market, which continues to offer lower prices, often without the same quality control or safety standards.
It’s not just hardware and packaging that are taking a hit. Cultivators may also see rising prices on grow essentials like compost and peat, much of which is sourced from Canada. In a globalized supply chain, tariffs on even one link can unravel the whole operation.
“We work with a manufacturer who imports their glass from China, the wood is imported from Canada, and it’s put together in Mexico all before it’s distributed in U.S. How is that getting taxed?” said Brad Wasserstrom, president of the supply chain firm Wasserstrom Co. “That’s a challenge for everyone and ultimately it will come down to the consumer level.”
With demand already starting to soften, these new tariffs could further stall an industry that’s still trying to find solid footing. From multi-state operators to small batch craft producers, everyone in the legal cannabis space will be forced to rethink how they source, price, and survive.
Source: Reuters
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