Trump’s Tarrifs: A Changing Trade Landscape for Cannabis Operators
As cannabis businesses gear up for a competitive 2025, a new challenge is emerging that few anticipated: the return of Trump-era tariff policies. These imposed trade policies could reshape the economic landscape for the industry. While federal law still bans cannabis imports, the ripple effects of tariffs on critical areas—like packaging, cultivation equipment, and extraction technology—could significantly disrupt operations and profitability.
If your cannabis business relies on goods from overseas—particularly China—you could see a substantial increase in your cost of goods sold (COGS) and operating expenses as tariffs escalate.
In this article, we’ll break down:
- What Trump’s tariffs mean for cannabis operators
- Which parts of your supply chain are most vulnerable
- How to stay tax-efficient and financially resilient in a complex trade environment
How Trump’s Tariffs Affect the Cannabis Industry
Although federal law prohibits international cannabis trade, cannabis businesses import many essential materials and technologies—especially from China. Trump’s tariff plan could hit these categories hard:
- LED grow lights and automation systems
- HVAC and dehumidification systems
- Hydroponic and irrigation infrastructure
- Packaging and child-resistant labeling
- Stainless steel extraction and post-processing equipment
If reinstated at full strength, tariffs on Chinese goods could reach up to 125%, dramatically increasing costs on key cannabis inputs and creating price pressure across the entire industry.
And the challenge doesn’t stop there—China has threatened retaliatory tariffs of up to 34%, further complicating the pricing landscape and weakening the predictability of supply chain contracts.
Key Areas Where Trump’s Tariffs Could Impact Cannabis Businesses
1. Rising Packaging & Labeling Costs
Custom packaging, sustainable materials, and child-resistant solutions—often sourced from China or Mexico—could become significantly more expensive. Given strict state-by-state packaging rules, this could mean higher compliance costs and thinner margins.
2. Higher Capital Expenditures for Cultivators
Most indoor cultivators rely on foreign-made lighting, climate controls, and fertigation systems. Tariffs may drive upfront costs by 15–30%, delaying ROI and pressuring expansion budgets.
3. Strain on Small & Mid-Sized Operators
Unlike MSOs with larger capital reserves or supplier diversification, smaller cannabis businesses may lack the leverage to absorb or negotiate around tariff-driven increases—making cash flow planning critical in 2025.
Financial & Tax Strategies to Stay Resilient
Tariffs are just one part of a larger economic shift this year—but proactive financial planning can help protect your bottom line. Here are some smart strategies:
Reassess Your COGS Strategy
Many cannabis businesses overlook how tariffs affect their cost of goods sold. Track imported components in detail and work with a CPA to ensure accurate classification and tax treatment.
Leverage IRS Code §471(c)
For eligible cannabis businesses, Section 471(c) provides more flexibility in inventory accounting. Proper use can help offset tariff-related expenses in your COGS, reducing taxable income.
Optimize Depreciation with Section 179
If tariffs make new equipment more expensive, consider accelerating depreciation through Section 179 or bonus depreciation rules. This can free up cash flow and reduce your tax burden in the year of purchase.
Lock in Supplier Contracts Now
With tariffs looming, negotiate fixed-price agreements for key imported goods. This gives your business more stability heading into Q4 2025 and helps with forecasting.
FAQs: Trump’s Tariffs in 2025
Can U.S. tariffs directly affect cannabis businesses?
Not directly—federal law prohibits importing or exporting cannabis products. However, these tariffs do significantly impact the imported materials that businesses use for cultivation and production.
Which countries are most impacted by these tariffs?
Primarily China. Trump’s proposed tariffs could affect over $300 billion in goods, with high-impact categories for cannabis including electronics, machinery, and packaging.
Will these tariffs increase prices for cannabis consumers?
It’s likely. Operators facing increased input costs may pass these expenses on, especially in competitive or high-tax states like California or Illinois.
Can cannabis businesses deduct tariff-related costs?
Yes—businesses can deduct tariff expenses as part of COGS or as ordinary business expenses, as long as they categorize them correctly. A cannabis-focused CPA can help you stay compliant and maximize your deductions.
Don’t Let Trump’s Tariffs Derail Your Growth in 2025
Trump’s tariffs introduce a significant economic wildcard for the cannabis industry this year. Although they don’t directly target cannabis, they impact packaging, equipment, and infrastructure—putting financial pressure on dispensaries, cultivators, and processors nationwide.
By staying informed, auditing your supply chain, and implementing smart tax strategies, your cannabis business can weather the storm—and even find new opportunities for growth.
📢 Need expert tax and financial guidance for your cannabis business? Schedule a free consultation with GreenGrowth CPAs today and learn how to offset rising costs, reduce taxes, and protect your margins.
