Navigating Tariffs—How Cannabis Companies Are Adapting to Evolving Trade Policies

Cannabis News

Apr 14

Written By FP Team

As cannabis businesses faces President Trump's fluctuating tariffs, many are pivoting their strategies to minimize costs without burdening consumers.

Cannabis News

Words by FP Team | 2 Minute Read

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Key Facts

Impact of Tariffs on Supply Chains: The American cannabis industry is significantly affected by President Trump's tariff policies, particularly those that impose high tariffs on imports. This poses challenges for businesses that rely on a global supply chain for essential materials.
Adapting to Rising Costs: Cannabis companies are developing strategies to manage rising costs due to tariffs without directly passing the burden onto consumers. However, some experts warn that price increases may become inevitable.
Domestic Production Challenges: Many cannabis businesses, like Dizpot, highlight the lack of technology and production capabilities in the U.S. for necessary packaging materials, which complicates efforts to shift production domestically.
Shifts in Manufacturing Locations: Companies such as Custom Cones USA and Ispire Technology are relocating production from countries like China to the U.S. and Malaysia, respectively, in an effort to mitigate the impact of tariffs and improve logistical efficiency.
Logistics and Supply Chain Diversification: Logistics operators like Talaria are responding to increased input costs by diversifying their supply chains and implementing more efficient operations to help manage financial impacts on their clients.

American cannabis, businesses are grappling with the impacts of President Donald Trump's shifting tariff policies. These developments are particularly challenging for a sector that relies heavily on a global supply chain, predominantly originating from outside the United States.

Despite efforts by the Trump administration to boost U.S. manufacturing, many cannabis companies find themselves ill-prepared to meet rising demand within certain operational areas. Industry insiders have indicated that, rather than surrendering to tariff pressures, companies are adopting various strategies to manage costs and mitigate potential fallout—without shifting the burden onto consumers. Yet, some experts warn that price increases may become unavoidable.

The technology required to produce the vast amount of packaging needed to support a productive and compliant industry simply does not exist in the United States.
— John Hartsell. Co-Founder. Dizpot

John Hartsell, co-founder of Dizpot—a packaging and logistics firm based in Phoenix—points out a significant hurdle. “The technology required to produce the vast amount of packaging needed to support a productive and compliant industry simply does not exist in the United States,” he says. This reality underscores the complex interplay between regulations, consumer needs, and international trade.

One notable response comes from Custom Cones USA, a company specializing in plastic pre-roll tube packaging. In light of rising tariffs, the company relocated its production to the U.S., where costs have aligned more closely with those overseas. Co-founder and COO Fredrik Rading highlights the benefits of this move, including a reduced shipping time—cut from two months to just weeks—allowing for lower inventory costs. However, the core components of their product lines continue to be manufactured in Indonesia and India, which are recognized as global hubs for such goods.

Recently, a 145% tariff was imposed on some key imports from China, following the president’s announcement of a 10% blanket tariff on all goods entering the U.S. The ripple effects are being felt across the industry. Reading explains, “If these tariffs remain, the cost of pre-rolls will inevitably rise.” The prohibitive nature of domestic production, especially for small, hand-crafted items, presents a significant barrier to profitability.

Similarly, Ispire Technology, part of the e-cigarette company Aspire, is pivoting its manufacturing approach by relocating some production from China to Malaysia. Plans to establish a new factory aim to accommodate multiple production lines dedicated to cannabis vape products. Dennis Lider, Ispire’s vice president of cannabis, emphasizes a strategic shift towards pod-based systems, a solution that could alleviate some tariff-related costs by reducing the number of high-duty components needed with each purchase.

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Yet, tariffs are not only affecting manufacturers. The ripple effects extend to logistics operators like Talaria, based in Philadelphia. As the burden of increased input costs trickles down, Talaria is employing various strategies to cushion the financial blow to its customers. These strategies include diversifying the supply chain to include more domestic vendors and streamlining operations through better routing software and warehouse automation. The company’s CEO, Ari Raptis, notes that precise route planning and resource allocation become vital in safeguarding margins in such turbulent times.

As the cannabis industry navigates these new economic realities, the tension between maintaining consumer prices and managing production costs is palpable. With some manufacturers facing backlash from Canadian partners amid ongoing trade complexities, companies like Custom Cones are also planning to open distribution centers in Canada to streamline import logistics.

In this challenging environment, it is clear that American cannabis businesses are adapting to profound changes. As they recalibrate their strategies in response to tariffs, the long-term implications for pricing and production capabilities will likely continue to shape the industry's future. The path forward is fraught with unpredictability, yet innovation and resilience remain at the forefront of this new chapter in cannabis commerce.