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The world is wondering what the real implications of US president Donald Trump’s tariffs will be on China. Currently, most vaping products sold worldwide come from, of course, the Chinese city of Shenzhen. These will now be subject to massive customs duties upon arrival in the US, currently amounting to 180% of the price paid by the importer to the US government (including duties imposed by the previous Trump administration).
However, whether and how the prices of these products will dramatically increase for US consumers is a million-dollar question, as a significant percentage of Chinese products in the US – around 90% – appear to be illegal. This means that tariffs on these products could only come into effect if and after the current US administration decides to take enforcement action against illegal traffickers.
Without any action to address the illegal market for these products, one possible outcome would be the same as it has been so far: no one pays duties on illegally imported products, and the products continue to be marketed at affordable prices for consumers.
Most vaping products sold in the US have ended up in the so-called grey zone because they have not been approved by the US Food and Drug Administration, so neither retailers nor consumers would be overly concerned about further violations of the law. But this is not just a US-China issue. The vaping industry in other countries could also be affected in a variety of ways.
China could look to other export regions
If Chinese companies are unable to export so much to the US – their largest market – they will look elsewhere. They may also consider alternative countries where manufacturers could potentially relocate. Latin American countries, especially Mexico, as well as some in Southeast Asia and Eastern Europe, are at the top of the list of those China could consider.
Some Southeast Asian countries have faced very high tariffs from Trump (though not as high as China), but others, like the Philippines, have been less affected. It all depends on the deals these countries reach with Trump at the end of the currently active 90-day pause. If they succeed, they could become attractive markets for China.
There is also the risk that if China’s export industry (not just companies in this relatively small sector) relocates on a large scale, the US will apply punitive tariffs similar to those currently applied to China to any country it moves into to fill the gap, creating an economic game of whack-a-mole.
Whatever happens to Chinese businesses, large, western tobacco companies might benefit. However, while the biggest trade war so far is between the US and China, it is also possible that other governments will follow the US lead and impose their own tariffs on Chinese products. This would further complicate the impact on prices and consumer access to products.
– Antonia Di Lorenzo ECigIntelligence staff
Image: AI-generated
