Canadian Cannabis: Sort of Free Trade
President Trump’s tariff threats are a hot topic in Canada.
It also made me think about our weed exports and the global trading framework.
Cannabis trade matters to Canada…
> Booming exports
Many large and small LPs rely on medical cannabis exports for revenue and gross margin. The good news: our ~C$475M in international sales command ~70% of global market share. Exporters, however, are beginning to face serious competition from domestic and emerging nation producers in their international markets.
> Legalizing markets are opening apace
For example, Costa Rica is expanding the number of cultivation licenses and their medical cannabis program. Switzerland recently announced the go-ahead for an adult use market. Holland’s adult use pilot program will pick up steam in 2025.
> Trade hypocrisy introduces risk
While Canada technically allows imports, there are strict limits to what can be brought in plus import permits are very hard to come by.
Legally speaking, Canada is on shaky ground vis-à-vis international trade agreements. Canada is the only country with a large medical cannabis market that does not allow imports.
Our trading policies and government apathy is increasing LP vulnerability in key markets. A major trade dispute is underway between Canada and Israel over alleged LP dumping. Israel has threatened up to 175% tariffs on some weed. products.
Canada has also been accused of protectionism by growers & officials from Australia and Jamaica. The Colombian government has complained to the WTO.
The issue is not going away.
…..and the rest of the World
> New cultivation is coming on stream
Canada’s dominance is being challenged plus the World is not waiting for the US (market & operators) to set the pace. Cannabis is now an economic priority in disparate countries like Morocco, Argentina, and New Zealand.
> Illegal trade flourishes
A large and illegal cannabis trade already exists, with ramifications on corporate profitability and global regulations. For example, California brands are being smuggled into Mexico and Thailand. Canadian weed has illegally reached Hong Kong, Italy and Germany. Brand and product counterfeiting is widespread.
So yeah, trade policy and flows matter.
Going forward, LPs must understand that:
1. Canada’s market will eventually be pried open and with it comes a flood of low-cost foreign imports;
2. They will maintain local & global competitiveness by focusing on value enhancement (e.g., branding, innovation) plus adroit M&A and risk mitigation;
3. It makes strategic sense to secure first mover advantage in adjacent markets within the EU and ASEAN trading zones;
4. They must push the Feds to enhance export promotion support including trade financing;
Call me. I help firms identify, penetrate, and win in profitable export markets while minimizing risk.
#trade #LPs #exporting #Israel #Germany #canada #Australia