Cannabis industry supply chain already feeling effects of Trump’s tariffs

OG Article

Chris Casacchia

April 10, 2025

Licensed cannabis operators and ancillary companies are bracing for rising business costs, lost customers and vendor backlash in the wake of President Donald Trump’s erratic blanket tariffs that have rattled the global economy and stoked fears of a recession and accelerated inflation in the United States.

Higher prices are expected to take a toll on wide swaths of the industry’s supply chain, from building and cultivation equipment to product components, packaging and raw materials, according to more than a dozen executives and economic experts queried by MJBizDaily after Trump’s “Liberation Day” edict that torpedoed decades of U.S. foreign trade policy.

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The tariffs’ effects are already being felt by cannabis businesses – particularly those caught in retaliatory salvos by international vendors – and are leading others to seek more domestic suppliers if and where they can.

Some retailers and brands are planning to pass on some of these rising costs to customers.

They contend margins are already thin in the highly regulated and taxed marijuana sector that competes against a flourishing illicit market, likely to be emboldened by the tariff hikes.

Trump’s so-called “reciprocal” tariff order, particularly targeting manufacturing hubs in Southeast Asia and the European Union (EU) with higher rates, briefly went into effect Wednesday morning.

These tariffs are paid by U.S. businesses to import goods from other countries.

By Wednesday afternoon, Trump had reversed course and announced a 90-day pause on the escalating tariffs, except for China.

Cannabis operators ‘dangerously exposed’

Under the president’s reciprocal tariff plan, several countries in Southeast Asia and the European Union that supply cannabis and ancillary companies with equipment such as point-of-sale systems and raw materials faced double-digit tariff hikes.

China is now facing a 145% tariff after Beijing failed to lift its 34% retaliatory tariff by Trump’s imposed Tuesday deadline in an escalating trade war with the United States’ largest importer and third-largest exporter.

The tariff on China initially was 125%, but Trump on Thursday raised it to 145%.

A sweeping 10% tariff, which remains on all products imported from roughly 90 countries, went into effect April 5, triggering a record, two-day sell-off that zapped $6.6 trillion in value from U.S. stock exchanges, The Wall Street Journal reported.

Trump’s policy reversal Wednesday sparked a major comeback on U.S. trading indexes and fueled historic gains, the Associated Press reported.

The AdvisorShares Pure US Cannabis ETF, which tracks U.S. marijuana companies, was still trading near a 52-week low on Wednesday, with shares closing at $2.14.

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“Tariffs are no longer a geopolitical footnote,” said Arnaud Dumas de Rauly, founder of cannabis consultancy MayThe5th and chair of VapeSafer, an industry trade group.

“For our industry, they’re a direct threat to profitability and scalability.”

He added: “The cannabis industry is dangerously exposed to global supply-chain risks – many of which just got a lot more expensive overnight.”

Rising material costs

Trump’s policies are already influencing material construction costs, procurement strategies and project risk, industry observers said.

The cost of key inputs such as aluminum, electrical gear and security equipment – a regulatory requirement for plant-touching operators – have increased 10% to 40%, according to Todd Friedman, director of strategic partnerships for Dag Facilities, a Florida-based commercial construction company that designs and builds cultivation operations for cannabis companies.

Material costs for steel framing and conduit have nearly doubled in some regions while lighting and surveillance equipment, commonly sourced from China and Germany, have seen double-digit increases, Friedman added.

Procurement terms are also adjusting, cannabis business leaders said.

Price quotes, once valid for 30-60 days, have been minimized to a few days.

Upfront deposits or full prepayments also have been initiated to secure pricing, adding more strain to cash flow.

In response, contractors are including larger contingencies into bids and contract clauses for sudden price-hike adjustments.

“Clients may face unexpected requests for early payments or need to revise funding strategies mid-project,” Friedman warned.

“Ultimately, tariffs are reshaping how construction projects are planned and executed.”

China’s tariffs hit vape hardware

Most U.S. vape product manufacturers, such as Pax, are in a particular bind since the vast majority of components, including rechargeable lithium-ion batteries, are sourced from China despite recent shifts to other countries, MJBizDaily reported in March.

After Trump’s latest retaliatory strike, the San Francisco-based company is facing an eye-popping 150% cumulative tariff on pods, batteries and all-in-one devices manufactured in China.

That’s because the Biden administration retained a 25% tariff on vape products made in China implemented in 2018 during Trump’s first term.

The company’s Pax Plus and Pax Mini are produced in Malaysia, which was facing a 24% retaliatory tariff.

Economic uncertainty, an anathema to business forecasting and expansion, appears to be the new normal.

“The cannabis and vape supply chains are uniquely complex, and companies across the board are scrambling to assess what these new costs will look like long-term – and how to best absorb them,” Pax spokesperson Laura Fogelman told MJBizDaily via email.

“Countries that once seemed like the most viable manufacturing alternatives to China may no longer be, and the sourcing of component parts is becoming an even more critical part of the equation.”

Tariffs’ impact on genetics

Home growers and licensed cannabis cultivators sourcing premium genetics oversees can also expect price hikes.

“Tariffs on international imports – particularly from key seed-producing countries like the Netherlands and Spain – are likely to lead to a price increase of approximately 10%-20% for European seeds in the U.S. market,” said Eugene Boukreev, head of marketing at Fast Buds, which bills itself as one of the largest auto-seed banks in the world.

The Czech Republic-based company, which sells seeds directly to buyers in over 50 countries, expects tariffs to have a moderate impact on operations.

“European genetics are occasionally used for pheno-hunting and breeding projects, but the overall cost structure of our core business remains stable,” Boukreev added.

“We’re committed to absorbing as much of the additional cost as possible and maintaining current pricing for our customers for as long as we can.”

Kansas City, Missouri-based cannabis producer and brand Illicit Gardens is taking a similar approach with customers.

“The new tariffs are expected to indirectly impact our costs on everything from lighting equipment to packaging,” David Craig, the company’s chief marketing officer, said via email.

“In an industry already navigating tight margins and heavy regulation, even small increases in supply chain expenses can add up.”