Other Michigan industries will likely be hit harder by higher tariffs than cannabis, but lighter consumer wallets may still indirectly impact the industry, said Western Michigan University Professor Nick Young.
“(Consumers) are going to choose rent and groceries over cannabis and if those economic pressures really start coming down, the cannabis industry will be in a tough spot,” said Young, a specialist in the cannabis industry.
Pieces of the industry are likely to be impacted more, such as the cartridges that are used to consume the oils, known as vape, Young said. Most of those empty vape products are produced in China, which has been hit with heavy tariffs.
The cost of packaging, which is required for everything in the cannabis industry, is also expected to take a hit.
“What I’ve seen is not only an increase in price, but there’s also a little bit of a hit back to where the price of moving a shipping container from China to the U.S. has gone up. A month ago it was $7,000. Today, it’s $28,000 for that same cargo container,” Young said.
He said that was even before tariffs were applied.
However, the practical application of that increase would not be astronomical. He pointed to the cartridges coming out of China costing about 50 cents per unit, but with the increase they could go to $1. The consumer could end up seeing an increase of around $1.50 to $2.
“It’s just a piece of the cog that goes up. So I think cannabis is actually OK to deal with it because our raw materials are grown in the state,” he said.
When it comes to the bottom line for the state, Young said it may end up helping the tax base, which would depend on if the volume of sales was maintained. Some of that would depend on price points and if people were willing to go through the other surrounding legalized states to buy cannabis in Michigan.
Some of that bottom line could be impacted by the summer tourism industry in the state.
The last point would be if the retailers actually raise the price of their product and don’t decide to absorb the increased production or packaging costs to keep existing customers.
If there is an increase, that hike would be subject to more tax, which would be an increase going to the state.
“There’s an optimization line there where the price and the volume are optimized for that type of tax revenue, so it can actually go up if the consumer is willing to stomach it. It’s just everything is getting more expensive. It’s maybe about time that cannabis catches up,” he said.
This article was provided by Safer Michigan Coalition