Next Round of Tariffs Could Making Vaping More Expensive

Before the end of the week, President Donald Trump could order a new round of taxes on Chinese imports, and electronic cigarettes could be among the products targeted.

Those higher import taxes on e-cigarettes would raise prices for consumers, strike a blow against public health in America, and jeopardize the future of a vaping industry that may not have ever come into being without the free exchange of goods and ideas across international borders. While it remains unclear whether e-cigarettes will be included in any future round of tariffs, vaping industry representatives argue that raising taxes on vapers would be a serious mistake.

“The imposition of additional taxes via tariffs would most certainly have the consequence of raising the cost of vaping equipment quite significantly,” says Tracy Musgrove, the owner of two retail vaping shops in Williamsburg, Virginia.

In testimony to the Office of the United States Trade Representative—which held a series of hearings in late August on the Trump administration’s proposal to impose more tariffs on Chinese goods—Musgrove said many of her customers switch to e-cigarettes after years of using more dangerous methods of getting a nicotine hit.

“If the cost of vaping far outweighs the cost of smoking, many will be forced to go back to smoking due to financial concerns,” she said.

Higher prices on imported vaping products are not likely to benefit domestic manufacturers, because there really aren’t any. And there’s no way for e-cigarette businesses to re-route supply chains around China because 90 percent of all vaping products are made there.

“There is no alternative,” said Greg Conley, president of the American Vaping Association, a trade group.

The vaping revolution of the past decade is all about international trade. The first e-cigarette was invented in 2007 by a Hong Kong pharmacist named Hon Lik.

Just a little over a decade later, vaping is a $5.5 billion (and growing) industry in America. While most e-cigarette devices and the batteries powering them are made in China, American companies produce the vast majority of the nicotine-laced liquids used to make the vapor that’s inhaled by users. No domestic consumer or producer would benefit these tariffs, save one: traditional cigarette makers.

“Tariffs on e-cigarettes don’t just represent an unnecessary cost to consumers. They are actually an active threat to public health,” Guy Bentley, a public health research associate for the Reason Foundation (which publishes this blog), told the U.S. Trade Representative’s tariff committee last month. “The winners from these tariffs are not domestic e-cigarette producers, but manufacturers of tobacco cigarettes.”

The tariffs would affect 10,000 U.S. businesses and over 10 million American consumers, according to the Vapor Technology Association, another trade group. With the addition of a 25 percent tariff, low-end vaping devices will cost around $40 and middle-of-the-road options could be well over $100, says Brittani Cushman, the group’s president. At the lowest end of the market, vaping devices can be bought for less than $30 today.

Higher costs for consumer goods would become the norm if the Trump administration goes ahead with plans to place tariffs on another $200 billion of Chinese goods. Earlier rounds of tariffs have so far targeted steel, aluminum, and other industrial goods, and while the consequences have been significant, economists warn that the next tranche of tariffs—aimed at a wide variety of items including furniture, clothing, and electronics—will sting Americans more directly.

A vape tariff would be the best example yet of how tariffs fly in the face of good policy.

Public health researchers at the Food and Drug Administration, the American Cancer Society, and the National Academy of Sciences have concluded that e-cigarettes are safer than combustible alternatives. In January, a Georgetown University study found that switching from cigarettes to e-cigarettes could prevent between 1.6 million and 6.6 million smoking-related deaths in the United States.

In other words, the stakes are high. All tariffs cause significant problems, but higher import taxes on vaping devices will prevent some smokers from being able to choose a healthier alternative for getting their nicotine fix—without providing any clear benefits for consumers, American industries, or the economy as a whole.

“Tariffs on e-cigarettes would directly penalize smokers,” said Conley, “for switching to massively less harmful products in order to save their lives.”