How Will Trumponomics Affect Cannabis?
Most cannabis US election talk has revolved around President Trump’s character, social policies and the likelihood of regulatory reform under his watch. Much less attention has focused on the impact of his proposed economic policies on the cannabis space.
A caveat: it’s very early and Trump is prone to making unexpected, often radical policy swings. And we need to see the fine print before fully weighing in.
Here’s my take on the first signs of Trumponomics:
> Increasing tariffs: 60% on Chinese goods, 10-20% on the rest of the world
Our industry imports a variety of inputs from China and overseas including packaging, vape hardware and equipment. Higher tariffs will raise the cost of goods sold in the short term, further squeezing margins. Rising tariffs could also spark a wider trade war with major supply chain and cost ramifications.
> Deporting millions of irregular migrants + immigration restrictions
The US is already seeing tight labour shortages, particularly for low skilled workers. For perspective, roughly half of the workers on America’s farms have no legal status. Wholesale deportations could exacerbate worker scarcities in areas like cultivation, logistics, business services and retail, leading to operational hiccups and wage inflation. This will undoubtably compromise margins and service levels.
> Reducing government red tape and inefficiency
Trump’s new Department of Government Efficiency promises to cut $2T from the Federal budget, a very tall order over 4 years. However, there are plenty of bureaucratic areas that could stand some improvement. A judicious streamlining of policies and practices could spur more cannabis growth and start-ups.
While cannabis legalization could fit this mandate, it may not be on Trump’s radar screen. He may view weed as a lower economic priority, a States rights issue or a GOP political hot potato.
> Cutting corporate and personal taxes
Coupled with removing 280E, new tax reductions will produce a sugar rush that will boost cash flows, profits and the equity markets, not to mention consumer spending. Alas, there may be a fly in the ointment: too much stimulus could drive up debt levels, overheat equity markets and end Fed rate cuts.
Trump is aiming for radical change and has many of the political levers to make it happen. However, Rome wasn’t built in a day. This scale of change will be messy & costly and there will be many unforseen effects.
Moving forward, sensible cannabis managers will be updating their strategies, plans, and pricing levels. I can help.
Let’s talk about how to fine tune your financial model, rationalize your product assortments and build in more supply chain resilience.
#trump #trumponomics #costs #margin #tariffs #labour #taxes