As the president fumes and pouts, the cannabis industry is set to pay a price — now, and into the future.
Despite appointing an antebellum drug warrior with Ronald Reagan values as the nation’s top law-enforcement official and elevating other hardcore anti-marijuana conservatives to key positions, on aggregate so far, President Donald Trump has been seen mostly as marijuana-neutral.
In June, the president said he’d likely support a bill introduced by Senate Democrats that would let states set their own marijuana policies. This friendly gesture stood in “stark contrast,” the New York Times observed, to earlier in the year, when the president watched Attorney General Jeff Sessions eviscerate some Obama-era protections without making a peep. In turn, states have continued to push forward with marijuana reform, and the domestic marijuana industry has continued to grow unabated.
This period of prosperity amid “benevolent neglect” may soon change — and change quickly, and for the worst — and in a most Trumpian way: By carelessness, neglect, and accident.
Likely Cannabis-industry Casualties
The worse it gets for Trump and members of his inner circle caught in multiple corruption probes, or the worse Republican prospects appear in the midterm elections — and with a growing roster of Trump confidants taking guilty pleas or granted immunity to testify, while Republican lawmakers in Texas appear vulnerable to Democratic challengers, neither look very good — the more likely the president is to escalate his trade war with China, analysts recently told CNBC.
Though American cannabis companies still cannot extend beyond state borders except illegally or as part of licensing deals, legal marijuana is a global business, and was so well before the first exports of Canadian cannabis oil reached Europe.
This is because cannabis is a consumer business. Cannabis is replete with consumer products and accessories: vaporizers, rolling trays, glassware.
Cannabis is also reliant on industrial equipment — grow lights, plastic sheeting, packaging. And marijuana products produced overseas are likely collateral damage in such a spat.
Recently, with talks between Trump administration and Chinese trade officials at an impasse, the two countries imposed yet another round of punitive tariffs on goods flowing in both directions.
Some of these products are extraneous, but others are indispensable. More to the point, most of the above are often sourced from China. Thus, key components that allow cannabis to be cultivated and consumes are likely casualties in any Donald Trump trade war.
Specifically, “vapor product devices,” including “batteries” and “pre-filled pods and cartridges” — the integral parts of the fastest-growing method of consuming cannabis — sourced from China have been singled out for higher tariffs, marijuana executives testified at an Office of the U.S. Trade Representative hearing earlier this summer.
Vaporizer products represented 25 percent of marijuana sales in Colorado in 2017. Since the raw materials needed to manufacture these products must be imported anyway, rising tariffs on Chinese imports that would render these products unavailable or more expensive would cut sales, thereby hurting state tax revenue while also not bringing back jobs to American shores.
And so, while effects have yet to be felt in the American marijuana industry, as industry figures told Marijuana Business Daily, the future bodes ill.
The Wrong Trend at the Wrong Time
A few days after new tariffs were imposed on goods flowing between China and the United States in both directions, Trump brushed off the possibility of renewed talks with Chinese trade officials.
“It’s just not the right time to talk right now, to be honest with China,” the president said. “It’s too one-sided for too many years and too many decades, and so it’s not the right time to talk.”
If this continues, vaporizer cartridges and components will become more expensive. Marijuana grow equipment may also become more expensive.
As production costs rise, so will consumer costs. Considering an estimated 20 percent of marijuana consumers are staying on the black market in part because of rising costs, this is the wrong trend at the wrong time.
There is strong evidence to support the contention that Trump does not or cannot understand how global trade works, but is instead motivated out of something — personal animus, probably, though just as easily by acid reflux or something he saw on TV most recently — to settle unknown scores.
This is probably the best explanation for why, even as he squares up with China, Trump is simultaneously taking aim at Canada, the current worldwide leader in marijuana exports and investment.
Trump recently announced a “new” North American trade agreement that is missing Canada.
It’s not yet clear if the president can actually craft a trade deal that excludes the country of Prime Minister Justin Trudeau, who Trump appears to loathe. Tariffs between the U.S. and Canada will stay the same, and U.S. trade representatives sounded hopeful that the president’s desire to banish Canada from his sandbox could just be ignored.
And the recent huge investments in Canada’s marijuana industry made by liquor giants have little to do with cross-border trade — and won’t, until the U.S. changes its federal marijuana policy to allow for international trade like Canada’s
Still, such bellicosity, coupled with official hostility towards marijuana, will not encourage investors or entrepreneurs, including the U.S. cannabis brands courting investors from Canada, and the international firms like alcohol giant Constellation Brands sinking even bigger sums into Canadian marijuana companies.
The Increased Cost of Doing Canna-business
Trump says, repeatedly, that he seeks only fairness and the redress from decades of bad deals. How these deals are bad, exactly, he has yet to articulate. What he is doing is isolating America not only from its most trusted trade partners — the Chinese and U.S. economies are so intertwined they may as well be an ourobouros — but also signaling that the U.S. is better off alone, by itself.
That is bad news for any cannabis firm in American with a 10-year plan that includes attempting what Canadian firms are doing now, and supplying the world with weed.
More and more products necessary to the cannabis industry are also designed overseas. If tariff fights are escalated to intellectual property rights or other restrictions on requisite components, it will also increase the cost of doing business.
Simply put, Trump’s ongoing trade tantrum means nothing good for the American worker, and rising costs and increased headaches for the American marijuana industry — all while firms north of the border have a head start on cornering the global market, a lead the American government has handed them.
If, a generation from now, the costly marijuana products available in stores are stamped with red maple leaves instead of the red-white-and-blue, you will know who to blame.