The article has been reprinted from Crain’s Detroit Business with their permission.
Shenzhen is in China and it’s more than 7800 miles away from Michigan. The location of Shenzhen, a city with 17.6 millions people on the Chinese mainland is going to pose a problem for Michigan’s legal marijuana market.
Manufacturers in the city produce all of the hardware for vapes — a popular product category, as Michigan cannabis operators sold an eye-watering 53.83 million vapes last year, according to data from industry analysis firm Headset.
The vape hardware industry is now caught up in the President Donald Trump’s international tariffs. He imposed a retaliatory 145% tariff on Chinese products imported into the U.S.
Ryan Ratzloff is the founder and CEO at Lansing’s cannabis processing company Lion Labs. “Our margins for that product are very tight and we barely earn any money.” “We’re not going the eat the cost, but we are going to raise the price.”
Lion Labs bought its vapes from Active Vapor Devices of Seattle. They are one of the biggest importers.
Lion Labs spends $3.50 on each vape and then packs and sells the products to dispensaries. Ratzloff noted that the margin is thin, despite the fact Element’s vapes sell at upwards of 40 dollars. An additional 145% cost for the product would increase Lion Labs’ sourcing costs to $8.57 a unit.
It would cost an additional $1.02 Million.
House Brands Distro in Detroit, which is the manufacturer of House of Dank products, has even more expensive costs.
Travis Murphy, an employee of the company, stated that they produce around 500,000 vapes per month. If they bought their hardware in China at $1 per piece, that would cost them an additional $1.23million per month or almost $15 million annually.
These costs are ultimately passed onto the consumers. The average price of a cannabis vaporizer was $9.37 in March. This is the lowest ever recorded. The average price to import vape equipment is $2 per unit. This cost increases to $4.90. After the tariff, the cost of the product to the end consumer will be $12.27.
The industry, in the interim, is trying to negotiate with suppliers to reduce costs and absorb some of these tariffs.
Active said that Ratzloff imported as much inventory of vape as possible before the effective date of April 9, the tariffs.
Murphy stated that his suppliers have been pressing him to adopt similar measures.
Murphy told reporters that the future is uncertain. We haven’t yet seen any increase in the cost of tariffs. The suppliers may absorb the tariffs or not. “Right now, the most important adjustment is how we prioritize ordering goods and trying to bring them into country before things get worse.”
It’s not clear how pricing may be affected.
Trump and China’s President Xi Jinping are both waiting for the other to blink, in an attempt to avert a potential trade war.
Robin Schneider, Executive Director of the Michigan Cannabis Industry Association told Crain’s that many of their members had received assurances from Shenzhen suppliers they would cover the cost of tariffs.
Schneider wrote an email that “so far, several vape equipment and packaging suppliers have reassured members of our industry’s membership that tariffs will be paid by the factories.” Schneider wrote in an email: “Despite this, it is too early to estimate the economic impact that tariffs may have on our industry.
The length of grace is unknown.
Ratzloff added that Lion Labs doesn’t wait around for the answers. The company is already working to reduce costs by changing the packaging of its vapes, which are also mostly imported.
Ratzloff stated that Lion Labs will be able to save $100,000 per year by switching from the box of its Element vapes, to Mylar packaging with an adhesive.
Ratzloff fears that if the costs are not passed on, the already stressed out industry will continue to cut corners, leading to a potentially hazardous product and a lesser quality.
Adult-use marijuana prices have plummeted 28% since March 2024 to an average cost of just $65.14 for an ounce of marijuana flower. In three years, an ounce of marijuana flower cost on average $184.90.
Some are concerned that vape manufacturers will resort to more shady methods to meet their financial goals, like using unapproved or illicit chemicals. For instance, state regulators recalled in January 16,000 Platinum vape cartridges that contained the banned medium-chain triglyceride, or MCT oil, made by RWB Michigan, a subsidiary of multi-state operator Red White & Bloom Brands.
Processing companies may use MCT oil illegally in their distillate. This is done to boost margins, by decreasing the amount of expensive cannabis distillate that’s created.
Ratzloff explained that if one is on the verge of bankruptcy, they will be forced to make some cuts. The customer will end up paying more money and receiving a lesser quality product.