Cannabis vape companies worry tariffs will impact consumer safety

Major cannabis vaporizer companies increasingly are moving manufacturing operations away from China, due in part to a 20% tariff enacted by the Trump Administration.

Now, some operators fear price compression accompanying the tariffs – now totaling 45% for goods manufactured in China – will prompt unscrupulous operators to purchase cut-rate vape cartridges and other inputs, potentially jeopardizing consumer health.

Executives from many U.S.-based vape companies say the process of finding – and, in some cases, building – new manufacturing operations has been a years-long endeavor that is getting renewed attention because of the tariffs.

Shenzhen, China, is a well-known manufacturing hub located near Hong Kong, a financial and shipping powerhouse; together, the Special Economic Zone still is responsible for producing the majority of the world’s vape hardware.

But that is changing, albeit slowly.

Fallout from initial tariffs

In March 2018, during U.S. President Donald Trump’s first term in office, he applied $50 billion in tariffs to Chinese goods, including a 25% tariff on vape products manufactured in China.

The move prompted many U.S. companies manufacturing vapes in China to explore other options, and some executives say they were forced to absorb the price increases because customers in the cannabis industry already were struggling under heavy regulations and taxes.

“Honestly, we didn’t raise our prices; we really absorbed the impact of those tariffs into our cost of doing business for the purpose of keeping prices as low as possible for consumers,” said Laura Fogelman, chief of staff and vice president of communications at San Francisco-based vape company Pax.

“At that point, it was a 25% tariff, which was not insignificant, and that was really what catalyzed our interest in moving manufacturing out of China,” Fogelman told MJBizDaily.

Today, the company’s Pax Pods and batteries are manufactured in China, but other goods such as the brand’s all-in-one vape device made from ocean-bound plastics are produced in Malaysia.

Ispire Technology, the Los Angeles-based, cannabis-focused arm of e-cigarette company Aspire, also has diversified manufacturing operations, with about a third of products finished on the company’s manufacturing lines in Malaysia.

Meanwhile, Ispire is building a second factory in Malaysia capable of accommodating 70 production lines, some of which will be dedicated to cannabis vape products.

During Trump’s first term, all of Ispire’s manufacturing was in China, but increased talk about a trade war and tariffs made executives reconsider their strategy.

“We came to the conclusion it doesn’t matter who is in the White House; the geopolitical train has left the station, and it will not come back,” Michael Wang, co-CEO of Ispire, told MJBizDaily.

“Sure enough, even when President Biden was in office, he continued President Trump’s tariff approach to China, so that further enhanced our belief.”

Manufacturing moves

When looking for a manufacturing base “somewhat shielded from the geopolitical storm,” Ispire identified Malaysia because of its proximity to Singapore – another financial and shipping dynamo, much like Hong Kong.

According to Wang, the governments of Malaysia and Singapore are trying to recreate the manufacturing and shipping collaboration popularized by Shenzhen and Hong Kong, with good results.

While manufacturing in Malaysia initially was slightly more expensive than in China, the new 2025 tariffs levied against Chinese products – a 10% tariff was announced Feb. 1, followed by another 10% tariff last week – could help balance the total cost of goods.

Douglas Fischer is general counsel at vape company Active – formerly known as Advanced Vapor Devices (AVD) – which produces a wide variety of vape cartridges as well as all-in-one vape devices and batteries.

While Active has moved some of its manufacturing operations to Southeast Asia, Fischer emphasized that China will remain a large part of the vaporizer supply chain because so many vape components come from China, such as ceramics, circuit boards, heating elements and borosilicate – a heat-resistant glass used in vape cartridges.

Shipping concerns and workarounds

According to Nick Kovacevich, corporate relations director at Los Angeles-based vape company CCell, shipping costs from China are comparable to those from Southeast Asian countries, including Indonesia, where CCell has begun manufacturing.

“Indonesia has evolved a lot; its economy is really growing fast, and I think they’ve been investing in that infrastructure to be able to support the shipping of those goods,” Kovacevich told MJBizDaily.

While both Hong Kong and Singapore are known as port cities, Kovacevich points out that much of CCell’s inventory comes to the U.S. via air rather than cargo ship.

Wang of Ispire says the amount of vapes that come to the U.S. by air highlights the need for better forecasting on the part of domestic cannabis operators – particularly smaller vape manufacturers and retailers.

“MSO operators are more systematic in nature; they tend to forecast, to plan, to create smooth operation and reduce costs,” Wang said, adding that companies can save up to 70% on shipping costs by using cargo ships rather than air deliveries – but that requires advance planning.

“Smaller operators are very creative, innovative, and that’s how they can win the game against big players, big MSOs: creativity, speed, adopting new technologies faster.

“Those are advantages, but most of them don’t spend enough time to think about logistics costs – specifically shipping costs – so, often, they get themselves into a situation of, ‘I’m down to just one week of supply in my warehouse.’”

A cannabis executive with manufacturing operations in California, who asked not to be identified, said margins are so low in the industry, any cost increases likely will be passed onto the consumer.

“Perhaps this is the straw that breaks the camel’s back, and we see more brands disappear,” he said.

Vape safety concerns

Several vape executives shared concerns that the new tariffs on Chinese imports would prompt U.S. companies to purchase lower quality materials in an effort to keep costs flat.

Such a move, they worry, could jeopardize consumer health.

“You have a lot of vape companies that take great pride in the quality of their products and don’t cut corners – and as a result, their prices are higher than vape cartridges that you could order off of Alibaba, for example,” said Active’s Fischer, who also is president of VapeSafer, an industry group that advocates for the vape industry as well as consumer safety.

“There’s a real concern that, as the prices of vape cartridges rise, those cartridges and components of more dubious origin and quality will become more prominent – and not necessarily even in the regulated market, but in the illicit market,” he said.

The problem, according to CCell’s Kovacevich, speaks to how cash-strapped many U.S. cannabis operators are.

“In a normal industry, you would have seen people loading up on goods” ahead of the tariffs being implemented, as President Trump began speaking about a trade war during the 2024 campaign season.

Instead, Kovacevich said, “There’s not enough capital, so people are just going to wait to cross that bridge when they get to it.”

When shopping for vape hardware, Fischer encouraged cannabis operators to ask suppliers to provide results of heavy metal testing, BPA testing and proof that harmful contaminants are not leaching into cannabis oil when the product is heated.

“They should be able to answer questions about their testing protocol and then, ideally, have the ability to do shelf-stability testing and see if there’s leaching over time,” Fischer said.

Chris Casacchia contributed to this story. Kate Lavin can be reached at kate.lavin@mjbizdaily.com.