American vapers and the industry that provides their vaping gear are being squeezed on multiple fronts. In addition to the daily news stories featuring politicians demonizing JUUL, and impending FDA restrictions on e-liquid flavors, now the Trump administration is imposing tariffs on Chinese vapor products.
The first round of tariffs on vapor products takes effect today, imposing a 25 percent tax on all shipments from China of e-cigarettes, mods, batteries, and similar devices.
Tariffs are import taxes added to products from another country, intended to create an economic benefit for competing American-made products. But, since there is no substantial production of vapor products in the United States, the tax will simply punish American importers, wholesalers, retail sellers, and ultimately vapers themselves.
“For the vast majority of American vapers, the choice is not going to be an American-made product versus a Chinese-made product with a 25 percent tariff,” says American Vaping Association president Gregory Conley. “It’s only going to be the latter, which isn’t much of a choice at all.”
The tariffs will be assessed on finished products (not individual parts) being shipped from China beginning today. That doesn’t necessarily mean prices will increase immediately. But the smaller the business, the less likely it will probably be to attempt to absorb losses from the taxes for very long.
Geoff Habicht, president and co-founder of Smoking Vapor – manufacturer of the mini vape Mi-Pod and several other brands — says the effects will vary by product. “On products where the margins are lower (which is almost all hardware), we need to pass the entire increase along and it has a higher impact — because our cost to manufacture and the consumer retail price are already tight, so the retail increase will be close to 15-20 percent. On products with better manufacturing margin, the 25 percent tariff may only have a 8-10 percent increase at retail.” Habicht says that possible price concessions from parts suppliers, and a favorable exchange rate might help keep costs down too. Of course, the exchange rate could also work to raise costs.
“We do not think that customers will see the price increase immediately,” says MyVpro manager Josh Stephenson. Detroit-based MyVpro has an online retail and wholesale business. “Distributors and wholesalers may sell what is currently in their warehouse first, observe how the market is going, and decide which products they should import and what (if any) the price adjustment should be.”
“For most products listed on our websites,” says Stephenson, “we purchase directly from the manufacturer. With no distributors in between, we can get better control of the price to make customers feel less of a burden from these tariffs.”
The effects of the tax will be felt more quickly at brick-and-mortar vape shops. Most small shops have more than one link in the distribution chain between themselves and the manufacturer, which gives them less control over buffering the tariff costs. That means they’ll be hurt sooner too, since customers may shift purchases to online businesses that have lower operating costs.
James Jarvis owns six Vapor Station stores in Ohio, and an e-liquid manufacturing business. He’s also president of the Ohio Vapor Trade Association (OHVTA). Jarvis says some vape shops will feel the pain immediately. “Some companies will start to close stores — especially in more financially challenged areas, because this increase will put the cost to the consumer out of their price range and potentially push them back to combustible cigarettes.
“This tariff has forced me to make the decision to close one of my locations,” Jarvis added, “as I will not be able to absorb the cost in that location since that town is very economically sensitive.”
Tariffs are aimed at giving American products a competitive advantage here at home. But if there are no American-made vapor products, everyone loses: customers buy fewer products or wait to buy, retailers struggle, distributors and importers buy less from Chinese companies, and the factories in Shenzhen reduce R&D budgets and lay off workers. No one wins in this war.