Trump’s China Tariffs May Impact UK

In the UK Vaping Industry Association piece, Barnaby Page considers what Trump’s Chinese tariffs mean for the vape and novel nicotine sector.

He states the reality that the biggest impact will “naturally be felt in the United States and China”. 

As almost all vapers are aware, the bulk of vape device manufacturing takes place in China – in particular, the city of Shenzhen. All the products currently being made there will be subjected to huge tariffs. At one point this was 150% of the products value, but the number could be different every day next week.

While a lot of people think that China will pay these tariffs, the truth is the cost will be shouldered by American companies importing Chinese vape products into the United States. In turn, these American companies almost always add the cost of tariffs to the final selling price of goods – so, ultimately, if a 150% tariff is applied to a vape the end consumer will be the one paying it.

Page says: “[The vapes] will now be subject to a huge level of tariffs when they arrive in the US, currently totalling 180% on the price paid by the importer to the Chinese exporter (including the tariffs imposed in the previous Trump administration).

“And that will mean either a big increase in vape prices for American consumers, or a large quantity of products being imported illegally, without the tariffs paid – or both. (We’re assuming that importers and retailers won’t simply absorb such high tariff levels, which seems immensely unlikely.)

“A lot will depend on enforcement. Remember that most vapes sold in the US are technically illegal anyway (because they have not been approved by the Food and Drug Administration, or FDA), so retailers and consumers may not be very worried about breaking the law a bit further. But raids by law enforcement on retailers could change that, and of course more products might be stopped at the American border.”

Barnaby Page points out that this will mean it is not just an American-Chinese issue. The vape sector in other countries may well be affected too, in several ways.

“If Chinese companies cannot export so much to the US – their biggest market – they will look elsewhere. Of course, some might just leave the vape industry. But others will surely try to increase their exports to other countries, especially in Europe. This could increase competition, and drive prices down. It could also increase the illicit market in Europe,” Page says.

Alternatively, he posits, there is the potential for prices in the UK to actually go up.

“If Chinese companies lose much of their US business, they might try to compensate by raising prices elsewhere. This could also benefit the illicit market. (Are you seeing a pattern here?)”

A third consequence Page points to is the possibility that Chinese vape manufacturers relocate manufacturing facilities to other countries that currently live under the threat of lower tariffs. Latin America, Europe, the Middle East and Africa number among the regions that Page sees as offering benefit to the Chinese.

But, “this would probably have the effect of increasing prices, too, because it is unlikely that production in these countries would immediately be as efficient as it currently is in Shenzhen.”

Page warns that moves such as this run the risk of “a game of economic whack-a-mole” as the US seeks to block Chinese companies attempting to avoid tariffs on their products by closing the loophole by applying large tariffs on the countries they relocate to.

“Whatever happens with Chinese firms, the western Big Tobacco companies might benefit. If Chinese supply to the United States decreases, the US vape industry would not have the resources to meet demand by manufacturing more vapes within the United States – but Big Tobacco would. (And, unlike the Chinese companies, Big Tobacco has products approved by the FDA.)

“While seemingly bad news for independents, this could encourage more product innovation by the tobacco companies. Demand for heated tobacco and pouch products as alternatives to vapes could also grow, and again this would encourage product innovation.”

In the long term, Page believes the outlook is impossible to forecast, but in the short term, “it would be a mistake to think that the European nicotine sector will be unaffected by the US-Chinese dispute.”

References: 

• Ecigintelligence website - www.ECigIntelligence.com
• UK Vaping Industry Association - https://ukvia.co.uk 

Photo Credit:

• Photo by Igor Omilaev on Unsplash, resized and cropped

Dave Cross

Journalist at POTV

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Dave is a freelance writer; with articles on music, motorbikes, football, pop-science, vaping and tobacco harm reduction in Sounds, Melody Maker, UBG, AWoL, Bike, When Saturday Comes, Vape News Magazine, and syndicated across the Johnston Press group. He was published in an anthology of “Greatest Football Writing”, but still believes this was a mistake. Dave contributes sketches to comedy shows and used to co-host a radio sketch show. He’s worked with numerous start-ups to develop content for their websites.