Why Tariffs are the Best Thing to Happen to US Cannabis Right Now

“Never let a good crisis go to waste” Winston Churchill

The world is reeling from a US-instigated tariff war, a once-in-a-lifetime economic shock…

But it could also be a unique opportunity for many American cannabis firms.

▶️ Much ado about nothing

The legally insular US and Canadian cannabis sectors will emerge relatively unscathed from higher tariffs, given that they have domestic supply chains. The global weed trade is also excluded from US tariffs.

▶️ A modest financial impact

Foreign-supplied inputs make up a small proportion of the typical bill of materials and COGS.

Some imported items like packaging and vape hardware as well as equipment may increase in price. Some importers will pass along the full tariff, others only a percentage while others, nada.

📌 Still, a need for vigilance

This is not the time to be cavalier about any increases when cost reduction is job 1, and operators already have cuspy gross margins, are stuck with high fixed and SG&A costs and face declining market prices.

Absorbing some or all of these tariff-related costs will further degrade a poor margin situation.

NOW IS THE TIME TO THINK STRATEGICALLY AND ACT JUDICIOUSLY

💡 Go for a 5-10% price increase

Across the board cost shocks like tariffs are a great opportunity for companies to increase margins, restore brand profitability and re-align pricing to value delivered.

📊 Here’s why…

The much publicized 10% tariff has primed consumers to expect higher prices on ALL goods. Your price increase won’t appear out of the blue or outlandish, especially to low information or impulsive buyers.

🛒 Take a page from CPG and retail:

These sectors usually take input-related price increases for well-publicized (and short term), economy-wide rises in the cost of energy and ingredients. They use consumer indifference and confusion around these shocks to claw back margin and reset their pricing to targets – and keep them there.

Notice they never reduce their prices when those input costs later decline?

💰 The result: margin and profit expansion.

🧨 There are risks

Broadly, tariffs can bring on a recession (leading to reduced demand for weed) and a capital flight to safe harbours (triggering a fall in valuations and a reduction in available capital).

You need to think about pricing, strategically. If you are in ultra-competitive local markets or serving price sensitive consumers, you may be ceding market share.

Firms also need to carefully plan price increases. Begin with some controlled tests.

It’s worth the gamble, especially if the extra margin gained on all products significantly outweighs the loss of some price sensitive buyers.

🏆 Your income statement will thank you.

PS: don’t price collude. It’s illegal.

DM me. I help companies strategically price their brands for maximum profitability and competitiveness.

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