By Mrinalika Roy
(Reuters) – Planning to smoke from tariff depression? Think about it.
U.S. President Donald Trump’s comprehensive tariffs on Wednesday will raise the price of cannabis products in the country as many companies rely on Asia for manufacturing. The latest taxes will accumulate in early any responsibilities to countries such as China, Canada, Mexico and the EU.
Analysts and executives say items such as canned cans, vape hardware and professional glass are still difficult to source domestically, and the company remains largely dependent on Asia, especially China.
“Those who rely on exports to countries that have tariffs with China need to seriously consider how they absorb the additional costs or change the partnership,” said Bryan Gerber, CEO of Hara Supply, the world's largest cone and combustible manufacturer.
Stocks of cannabis companies such as Tilray brand, canopy growth, organisms and Terrascend traded 5% to 10% on Thursday.
Most of these tariff charges will be passed on to consumers. Higher costs may allow more consumers to enter the illegal market, further weakening the profit margins of legal cannabis companies.
“Most cannabis businesses don't have the flexibility to grow 10%-15%” said Mike Forenza, managing partner at AE Global.
Higher costs have reached demand.
“Manufacturers are passing these tariffs to lower costs, which will ultimately affect our customers. We are starting to see market softening and inbound order rates start to slow down,” Brad Wasserstrom said.
The ongoing North American trade dispute could exacerbate the problem. Importing cannabis crops including compost and peat from Canada will make them more expensive.
“We work with a manufacturer that imports glass from China, the wood is imported from Canada, it has been brought together in Mexico and then it is distributed on us, how is it taxed?” Wasserstrom said.
“It’s a challenge for everyone and it will ultimately come down to the consumer level.”
(Reported by Mrinalika Roy in Bangalore; Editors by Sayantani Ghosh and Alan Barona)
