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War on Weed: How Trump’s Trade War Impacts the Cannabis Industry

Make America Great Again … or Make America’s Economy Fall Off a Cliff. President Donald Trump’s tirade trade policy is looking a lot like economic strangulation and economic warfare. As a result, cannabis businesses and consumers will suffer.

 Let’s look back for a moment. On March 2, 2018, Trump declared via Twitter – his numero uno choice of social networking platforms – that “When a country (U.S.A.) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”

Trump has once again shaken the foundations of global trade, slapping steep tariffs on billions of dollars’ worth of goods from the European Union, Canada, Mexico, and perhaps most importantly, China.  China is the biggest target for Trump, with 11.7% of the total goods going between the two countries subject to tariffs.

Tariffs act as a tax on goods coming into the country.  According to Trump’s tariff war, goods coming into the U.S. from elsewhere would be hit with an additional 25% duty. That makes those goods more expensive and tougher to secure.  The reality is, countries attacking each other’s trade with taxes and quotas will only lead one place: hurt nations’ economies and increase rising political tensions between them.

Currently, nine states plus the District of Columbia allow recreational marijuana use, and 30 states and D.C. permit some form of medical marijuana. Come November, more states are likely to follow suit.  Legal sales of marijuana are projected to jump to more than $20 billion by 2022, from approximately $10 billion in 2018. But as the U.S.-China trade war erupts, a slew of consumer goods, including cannabis, could be subject to as much as 25% in tax.

Imported, Chinese-made vaping devices could be subject to the new tax. Vaping devices, batteries, filters, and cartridges created for vaping devices are all subject to the new tariffs. Between 70 and 90 percent of all vaporizer products are made in China, according to reports.

While most of the companies that make vapes and products are based in the U.S., the actual devices are mostly manufactured in China. Much of the cannabis and cannabis concentrates on the market today are grown and sold in the U.S., but the devices used to consume them are manufactured in China. Those devices can cost anywhere from $50 to $500.

So far, we’ve seen tariffs on imported steel, aluminum, solar panels, and washing machines. But cannabis companies are especially vulnerable to changes in their input costs because they are not allowed to deduct business expenses from their taxes. That lowers their profit margins. Business owners in the vaporizer industry say they are planning to pass along the costs to the consumer. Some companies are also looking at whether they can source the devices from other countries not subject to the tariff.

Canada, the European Union, Mexico, and China argue that they should not be slapped with tariffs, and as such, have filed a suit against the U.S. with the World Trade Organization arguing the tariffs are illegal.

All this time at www.newsmunchies.com we’ve been talking about cannabis legalization and criminalization concepts, but President Trump might just entirely drive cannabis out of business.

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