Marijuana and Trade War: Will Democrats’ Agenda Intensify?

Sushree Mohanty - Author

Aug. 26 2019, Published 7:30 a.m. ET

The trade war might impact the marijuana industry. The US-China trade war has been an ongoing issue. President Trump imposed tariffs on China in May, which ignited the trade war talks. As a result, China retaliated. Will the trade war take a toll on the marijuana industry as well? Let’s discuss!

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Marijuana and Trade war

A Forbes article in July said that the cannabis industry might suffer from the ongoing trade war. Julia Jacobson, CEO of California-based Aster Farms, said that most of her company’s packaging is produced in China. The products could be hit by 25% taxes.

The tariffs might not impact the sector directly. However, some of the industry’s products and components could be impacted. A blog by Canna Law Blog in May said that hemp seeds, true hemp products, and cigarette papers are few of the products that could be impacted. The tariffs could impact components in vape accessories or product packaging. Notably, the tariffs will impact products that are manufactured in China.

Democrats stepped up for marijuana legalization

In the 2020 election, Democratic candidates are united on marijuana legalization. Many of the candidates support full-scale legalization. However, a few candidates, like Joe Biden, only support decriminalization. In the US, 61% of the public supports marijuana legalization.

A CNBC article in April discussed how candidates Kamala Harris, Elizabeth Warren, and Bernie Sanders supported the Marijuana Justice Act of 2019. Senator Cory Booker of New Jersey reintroduced the bill in February. During their time in Congress, Beto O’Rourke of Texas and John Delaney of Maryland also signed numerous bills supporting cannabis.

We think that marijuana could generate higher tax revenues if it’s legalized on a national level. The revenues could help small farmers and small businesses who are impacted by the trade war.

We have discussed many Democrat candidates’ views on the cannabis industry. To learn more, read:

Today, we’ll discuss Andrew Yang’s view on marijuana.

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President Trump and marijuana

President Trump hasn’t discussed his plans for the marijuana industry yet. However, his opponents have discussed their views. Currently, President Trump focused on the trade war.

President Trump might intensify the marijuana agenda to gather campaign support from young voters. Notably, the marijuana industry could help the economy. In 2018, legal recreational and medical cannabis in the US generated revenues of $8.6 billion and $10 billion. The industry could also boost job growth. The Marijuana Business Factbook from MJBizDaily said that full-time workers could reach 175,000–215,000 in the marijuana industry this year. Will President Trump legalize marijuana? Read President Trump: Is Marijuana Legalization a Key Weapon? to learn more.

Cannabis players’ performance amid trade war

While the trade war is taking a toll on other sectors, cannabis has been engulfed in regulation scandals. CannTrust (CTST) violated Health Canada’s regulations. KPMG withdrew the company’s audit report due to the violations. The stock has fallen 61.6% YTD (year-to-date). Curaleaf (CURLF) and HEXO (HEXO) have also been trapped in scandals.

We saw the sector’s average earnings results. While Innovative Industrial Properties (IIPR) reported outstanding results, Cronos Group (CRON) and Canopy Growth (CGC) (WEED) fell behind.

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Innovative Industrial Properties is driving its stock price with strong fundaments and earnings. The company saw a 155% year-over-year increase in rental revenues to approximately $8.3 million. Innovative Industrial Properties also reported higher revenues and earnings for the second quarter. The stock has risen 123.6% YTD, while it has fallen 3.9% in August.

In contrast, Canopy Growth missed its top-line and bottom-line expectations. The company reported a net loss of 1.2 billion Canadian dollars. Canopy Growth was driven by its upfront capital investments in Canada and Europe. The stock has fallen 23.7% in August and 7.3% YTD.

Cronos Group’s revenues increased in the second quarter. However, the company reported huge operating losses for the sector. Cronos Group drove its stock price decline in August. The stock has fallen 17.4% in August. However, the stock has risen 9.7% YTD. Meanwhile, CannTrust, Curaleaf, and HEXO have fallen 21.2%, 17.8%, and 5.8% in August.

What’s next?

So far, 2019 hasn’t been a good year for cannabis. However, the sector is still hot and progressing. The cannabis sector might be recession-proof. The 2020 presidential election candidates’ stance on cannabis legalization might push the sector to greater heights.

The 2020 presidential election is firing up! We’ll also discuss voters’ point of view about how the trade war could impact the cannabis industry. Stay with us to learn more.


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