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The U.S. China Tariff Trade War Could Decimate Vaping

The U.S. China Tariff Trade War Could Decimate Vaping

 

The U.S. China Tariff Trade War Could Decimate Vaping

Buckle up, vape entrepreneurs and vaping community! A 25 percent U.S. tariff on vaping products and other electronics imported from China was enacted last week, a move that could potentially batter the fast-growing industry and make vaping more expensive.


The escalating trade battle between the U.S. and China has spooked all kinds of industries that are dependent on products from China for their survival. But perhaps no other industry faces a worse battering than vaping. Why?


Simple: the overwhelming majority of vaping hardware comes from China, regardless of where the company is based. Adding to that, vaping is a young industry whose full potential has not yet taken hold yet. Last, one of the benefits of vaping over conventional smoking is price. Vaping is on the whole cheaper than old-fashioned combustible cigarettes, but soon that might no longer be the case if the trade war continues to heat up.


We'll note here that while hardware will be hit hard in the months to come, e-liquid isn't included in this round of new taxes. Even if it were, this wouldn't be of any real consequence as the vast majority of e-liquid we consume is produced either domestically or in Europe.


The tariff will “decimate this young and burgeoning U.S. industry," said Brittani Cushman, president of the Vapor Technology Association in an article on Inc.


Business owners in the vapor industry say they have no choice but to pass along the costs to consumers, leading to price hikes in the long haul across the globe. The price increases, estimated at 10 to 25 percent on every Chinese-imported product, could turn away new and veteran vapers who see the pinch on their wallets.


But what will have even more impact is that China also "owns" the world's battery market, which is "the biggest concern of mine for the industry," added Aaron LoCasio, founder and CEO of the vapor products distributor Greenlane.


What does that mean? Well, without access to cost-effective devices and batteries, a good deal of nicotine vaporizer companies could be in serious hot water.

Todd Skezas, founder of San Diego-based Vapor Authority, reported in Born2Invest that retail sales in the U.S. vape market are on track to reach $5.5 billion in 2018, up from $3.5 million in 2015. However, recent studies indicate vapers are price sensitive: A 10 percent price increase in e-cigarettes could reduce sales by 12 to 19 percent.

“This is a low-margin business, and tariffs would very likely result in smaller shops and providers going out of business completely,” said Skezas.

As of last week, President Donald Trump imposed levies on $200 billion worth of China’s goods, according to Reuters. And he isn’t stopping anytime soon; there's talk of more tariffs to come.


LoCascio says that his company has a stockpile of products in his warehouse, and he might order more products made in other countries. The problem is, hardly any other countries besides China make vape hardware, and the ones that do tend to specialize in expensive, niche-market products like mechanical mods.


LoCascio also warned the same products being hurt by tariffs could take a second hit from local state taxes and fees. Pennsylvania, California, and Minnesota, for example, already apply high taxes on vape devices. For vape sellers in those states, he says that adding a tariff “could be disastrous."

Until we know how this all shakes out, our advice in the meantime is: Hurry up and stockpile your favorite products before prices go up and try reusable hardware instead of disposables. Then, put your seat backs up and tray tables in their upright position, because it doesn’t look like the trade war will be ending anytime soon.

acuity