Posted by Tom Bauer on Sep 4th 2019
The Trouble with Tariffs…
And how they impact a CBD company like Imbue.
First, let me say that Imbue does not endorse a political party or view, and nothing in this journal article should be taken as such. But as a consumer of CBD products, we thought it was important for you to understand the impact tariffs are having.
Tariffs, or duties or fees, on items that are imported are not new in the United States. In fact, the first US tariff was put into effect as early as 1787. Tariffs actually served as the major funding for the Federal government until income taxes were enacted. The idea behind tariffs is they can help protect domestic companies by providing a pricing advantage over their foreign competition. However, to a large degree, tariffs have fallen out of favor in the international community in the “global economy” as they often lead to retaliatory measures on the part of the “tariffed” country. Too much retaliation and a “trade war” can ensue. Since the 1970’s, tariffs in the US have averaged less than 10%.
Certainly there is wide disagreement over tariffs from those who prefer free trade versus those who are more protectionist-oriented, but the bottom line is that they increase the cost of certain items from certain countries, sometimes substantially and often on items that people use the most. And who pays the tariff? That would be the importer who then passes it down the line to wholesalers and distributors…and almost always, the consumer in the end, is the one who pays. But it’s not just the actual tariff, but the compounding markups that accompany the tariff along the supply chain.
When we entered the CBD market, most of our competitors were importing their CBD from China. We never did. We wanted to know exactly how and where our CBD was grown, and that meant here in the US in Colorado. We lead the way with domestically grown hemp CBD, which now comprises most of the market. We did that so we could ensure the quality and purity of our products, something we continue to stand behind.
But there are a few things we had to incorporate that are imported from China, namely packaging such as glass jars, glass and plastic bottles, droppers, etc. And because of the recent tariffs, our costs on these items have increased substantially.
FOR NOW, however, we’ve held firm on our pricing, electing not to pass these cost increases on to you. So what you pay today is the same as what you paid before the current issues with China. And we are committed to do that for as long as we can. But at some point, we may have no choice but to start passing them along. Unfortunately, there are almost no other places in the world who now manufacture these types of products except China, so our options for finding other sources are nonexistent.
SO, whatever your thoughts are on tariffs or political leanings, we’d appreciate you approaching your congressional representatives and asking them to support a quick resolution to the current trade disputes.
Thanks again for your ongoing business and support!
With all our best,