Trump’s Tariffs & Social Program Cuts: Potential Impacts On The Cannabis Industry

NEW YORK–Economic policies don’t just shape government budgets; they create ripple effects across industries, shifting market dynamics, consumer behavior, and business strategies. As the cannabis industry continues to grow and normalize, policies under President Trump could determine which businesses thrive and which ones struggle.

Two major developments could have profound effects on the cannabis industry:

1. New tariffs on imports from Canada, Mexico, and China, increasing costs for essential goods.
2. Potential cuts to Medicare, Medicaid, and Social Security, reducing disposable income for millions of Americans—many of whom rely on cannabis for medical relief.

However, not every business is equally impacted by economic downturns. Historically, industries that provide relief and escapism—such as alcohol, tobacco, and now cannabis—have shown resilience during recessions. The key is knowing how to adapt and outcompete in changing economic conditions.

The Impact of Trump’s Tariffs on Cannabis

Trump’s new tariffs—ranging from 20-25% on imports from Canada, Mexico, and China—are already creating challenges for industries that depend on international trade. While cannabis remains federally illegal, making direct imports of flower and finished products impossible, the industry still relies on foreign goods for essential equipment and supplies.

Rising Costs Across the Supply Chain

• Cultivation Equipment: Many U.S. growers depend on imported lighting, hydroponic systems, HVAC equipment, and fertilizers. As tariffs increase, these costs will rise, making it more expensive for cannabis cultivators to operate.
• Packaging & Compliance Materials: States require child-resistant and compliant packaging, much of which is sourced from China and Canada. With tariffs in place, businesses may either absorb the costs or pass them on to consumers, making legal cannabis less competitive with the illicit market.
• Vape Hardware: A significant portion of vape pens, batteries, and cartridges come from China. Tariffs on these products could disrupt supply chains and lead to higher prices, presenting an opportunity for domestic production to fill the gap.

For smaller cannabis companies, rising costs could be a breaking point. Unlike traditional industries, cannabis businesses already face steep financial burdens due to Section 280E of the tax code, which prevents them from deducting ordinary business expenses. With tariffs driving up supply costs, many smaller operators may be forced out, leaving larger Multi-State Operators (MSOs) to dominate the market.

Social Program Cuts and the Medical Cannabis Market

Proposed reductions in Medicare, Medicaid, and Social Security could pose a significant challenge to the cannabis industry—especially the medical cannabis market.

How Cuts to Social Programs Could Affect Cannabis

• Medicaid & Medicare Reductions: Many seniors and low-income individuals rely on Medicaid and Medicare for healthcare. If these programs are reduced or turned into block grants, access to medical cannabis may become more difficult for those already struggling with out-of-pocket costs.
• Social Security Reductions: Seniors who use cannabis for pain relief, arthritis, or sleep disorders may find it harder to afford cannabis if Social Security benefits are cut.
• Financial Pressure on Patients: Cannabis isn’t covered by insurance, unlike traditional pharmaceuticals. As disposable income decreases for millions of Americans, the demand for legal cannabis could decline, forcing more consumers toward the illicit market.

The medical cannabis industry is especially vulnerable, as many patients depend on cannabis as an alternative to opioids or other traditional treatments. If they can’t afford legal cannabis, they may either go without treatment or turn to less safe alternatives, which is a growing public health concern.

Lessons from the Great Depression: Surviving Economic Hardship

History shows that certain industries thrive during economic downturns—especially those that provide relief from financial stress.

During the Great Depression, widespread poverty and food insecurity left millions struggling to survive. Although starvation was not as common as malnutrition, conditions were dire. Government interventions like New Deal programs, soup kitchens, and breadlines alleviated some suffering, while reshaping the economy and laying the foundation for modern social safety nets.

At the same time, industries like tobacco and alcohol proved recession-resistant because demand persisted even in tough times. These industries offered escapism and comfort at a time when people felt little control over their circumstances. Cannabis is now following a similar path. With both recreational and medicinal uses, cannabis offers stress relief, medical benefits, and discretionary enjoyment, making it an attractive option for consumers during economic downturns.

Interestingly, cannabis bucks the usual trend of declining discretionary spending during recessions. During the pandemic, when the economy contracted, cannabis sales surged. More people turned to cannabis for both medical relief and recreational escapism, resulting in increased demand rather than a decline. This suggests that cannabis may act as a counter-cyclical asset, with people increasing their consumption of cannabis during tough times as a form of stress relief.

This trend could continue in future recessions, especially as cannabis becomes more widely accepted. However, long-term success will depend on businesses’ ability to adapt strategically to shifting market conditions.

Winning in a Recession: The Power of Advertising

One of the key lessons from past recessions is that businesses that outspend their competition in advertising emerge stronger.

In downturns, many companies cut their marketing budgets, hoping to save money. But history shows that the real winners are the brands that maintain visibility while others go quiet.

• During the Great Depression, Procter & Gamble doubled down on advertising, which allowed them to dominate the consumer goods market.
• During the 2008 recession, McDonald’s and Amazon increased their ad spending, growing their market share while others reduced theirs.

What This Means for Cannabis Businesses
If you want to outperform your competitors, now is the time to invest in advertising. While some businesses scale back, those that continue to push their brands will capture market share and emerge stronger.

Unintended Consequences: Social Program Cuts and Corporate Accountability

On a positive note, the potential cuts to SNAP, Medicare, and Social Security may directly affect Trump’s base of supporters, many of whom rely heavily on these programs. In many rural areas, Medicare and food assistance are lifelines. By removing these benefits, it could put pressure on corporations like Walmart, which have long relied on government aid programs to subsidize their workers’ healthcare and food costs.

For years, low-wage workers at places like Walmart have depended on government programs to survive, allowing large corporations to maintain low wages. However, if those safety nets are removed, Walmart and similar companies may be forced to increase wages and offer better benefits to avoid mass walkouts and strikes in areas where these programs are crucial.

This could create a paradox, where the same group of voters advocating for reduced government spending might find themselves pushing for higher wages and better benefits from their employers. Walmart and other large retailers would be compelled to raise wages to fill the gap left by cuts to these programs.

While this could lead to higher wages across the economy, it’s important to consider the immediate impact on millions of people who will bear the brunt of these policy changes. Businesses may benefit in the long term, but the pain for many Americans could be profound.

Ultimately, cannabis businesses and other recession-resistant industries should remain vigilant. Economic shifts create opportunities, but the responsibility of advocating for consumers and workers is just as important as being prepared to capitalize on market dynamics.

Want to Out-Advertise Your Competition? Let’s Talk.

If you’re serious about growing your cannabis business, now is the time to invest in advertising while others retreat. We’ve seen firsthand how top cannabis brands use LinkedIn and digital marketing strategies to outcompete in a tightening economy.

Let’s connect! Reach out to me and let’s discuss how you can take advantage of this moment. We have success stories to share on HighlyCapitalized.com about how brands are scaling even in uncertain times.

The cannabis industry will survive and evolve, just as other industries have in past economic crises. The question is: Will your brand be one of the winners?

Reach out at [email protected] to find out more on how you can reach key decision makers at scale with the power of HCN.