Unexpected Effects: Cannabis Industry Takes Hit From Trump Tariffs


Since the beginning of 2018 many industries have felt the effects of the “Trump Tariffs”, one of the unexpected victims of this new trade war, however, is the cannabis industry.


(Vape pens are becoming increasing popular among cannabis patients and recreational users)


A lot of the goods sold and used within the industry like vape pens, bongs, grow equipment, extraction equipment, and other important technologies, often come from China due to the low cost. This allows a moderate profit margin for businesses within the cannabis space, which is needed because many cannabis based businesses are not yet allowed to deduct all business expenses from their taxes due to out of date federal regulations which results in lower profit. Which makes the already expensive task of running a business in the cannabis industry even more unforgiving. This along with higher tax rates for certain cannabis businesses further increases the difficulty for these businesses to stay afloat. Considering any cannabis business in the U.S. still can’t work directly with banks for financial support, it’s an unwanted issue the industry is now facing.

However, while the new tariffs are unfortunate, this will open a an opportunity for new entrepreneurs to fill the void with American made products. The main obstacle however, is even these new opportunities will be affected by the tariffs since steel and aluminum imports now face a 25% tariff. This leaves little room for U.S. based companies to lower their already high production and sourcing cost unless they source out locally made steel and aluminum.


 

Some business owners in the cannabis space are already taking time from their businesses to source out domestic goods, time that could have been used in other more important aspects of their business.

The tariffs aren't just affecting the cannabis industry and medical marijuana patients, in 2017 the State of Colorado collected just over $247 million in tax revenue from the the cannabis industry, it’s said that at least 25% of that comes from the sales of vape pens. How this will effect 2018’s tax revenue for legal states across the U.S. is still unknown.


(https://www.colorado.gov/pacific/revenue/colorado-marijuana-tax-data)

The cannabis industry has already created well over billions in tax revenue for the country and 100,000+ jobs which makes the industry a force to be reckoned with. As the year continues I believe that we will only see these numbers grow despite the many obstacles that comes up along the way. As with all things, the stress created by the tariffs will pass as business owners continue doing what they do best, adapt and overcome.

 

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13 Aug 2018


By A.J. Sappenfield
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