Why resilience isn’t optional in cannabis – it’s the business model

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If you’ve been following the headlines, you’d think tariffs are about to break the back of the cannabis industry.

The noise is loud, the reactions are visceral and the broader market panic was palpable.

But before we jump to conclusions, we should pause, take stock and remember one thing: The industry has weathered far worse.

We live in an era of extremes.

Every policy announcement triggers a wave of think pieces, social media hot takes and market fluctuations.

But the truth usually lives somewhere in the middle.

In my view, the world operates like a pendulum – always in motion, sometimes swinging too far in either direction before correcting itself.

Tariffs are no different.

The rhetoric has dialed up, but let’s look at the facts: We’re at a temporary pause until broader trade agreements are ironed out

Tariff implementation takes time, and smart operators in cannabis and beyond have long known this was a possibility.

Some took action months ago – stockpiling inventory, diversifying suppliers or building in-house supplies to manage potential disruption.

In fact, a number of companies began preparing months before President Donald Trump’s “Liberation Day” proclamation on April 2.

What’s at stake for your cannabis business?

When assessing risk, we start by measuring what’s really at stake.

In cannabis, imported goods such as vape cartridges and certain types of packaging might be exposed to higher tariffs.

But let’s put that into context: The majority of a marijuana company’s operating expenses – labor, power, water, taxes – are domestic.

Cultivation inputs such as soil and nutrients aren’t typically coming from overseas. Electricity and water are usually sourced locally.

And in terms of capital expenditures?

Most companies aren’t in a major capital-expenditure cycle right now.

There’s no rush to implement the newest manufacturing machine, for example.

However, those building new facilities – such as Kentucky operators – might feel the squeeze more acutely as building materials experience the impact from tariffs.

But for the vast majority of operators, especially those running leaner post-COVID, this isn’t an existential crisis.

Short-term agility, long-term strategy

The smart operators are already adjusting.

Many stocked up ahead of 4/20, which softens the blow in the second quarter.

Others are delaying purchases, waiting to see how long tariffs last before placing large orders.

This level of planning requires financial flexibility. Not everyone has that, but the marijuana businesses that do are positioning themselves for resilience.

If tariffs become a long-term issue, supply chains will evolve.

That’s not a theory – it’s economic reality.

We’ve already seen U.S. companies move production to Malaysia and other countries that offer more favorable trade terms.

Entrepreneurs will fill the gaps where Chinese goods are no longer competitive.

A vape cartridge that used to be manufactured in Shenzhen might soon come from a more cost-effective country.

The illicit-market risk

What we should be watching more closely is the interplay between tariffs and the illicit marijuana market.

In states where unlicensed sales still thrive, legal operators might struggle to pass on cost increases without losing customers.

If consumers’ buying power is diminished too much in the state-legal channel, some might return to the unregulated market.

This isn’t hypothetical; it’s a structural weakness we’ve seen play out before.

Licensed marijuana businesses operate with high tax burdens and compliance costs.

If tariffs lead to price increases while the illicit market continues to undercut them, it creates a potential imbalance that could reverse the progress the industry has made to date.

Lessons from COVID still apply

This isn’t the first time the cannabis industry has faced difficulty.

COVID-19 disrupted global supply chains far more drastically than anything we’re seeing now.

Marijuana companies adapted quickly then, and they’ll do it again now.

The pandemic taught us that consumers will continue to buy marijuana products, sometimes at higher prices.

They might shift to value brands or cheaper formats, but demand doesn’t disappear.

Investors often underestimate just how scrappy and adaptable cannabis operators are.

They’ve weathered financial headwinds, regulatory uncertainty and operational challenges that would shake more mature industries to the core.

Tariffs might cause some turbulence, but they’re not the end of the world.

In a sector used to being whipsawed by political delay and market speculation, this is just another curveball.

The best thing that leaders, investors and policymakers can do now is stay grounded.

Don’t mistake noise for signal. Don’t let headlines dictate your strategy.

Cannabis has proved itself to be resilient, adaptive and forward-looking.

With the right planning, this moment will be no different.

Anthony Coniglio is the president, CEO and a board member at Connecticut-based NewLake Capital Partners, an internally managed real estate investment trust. He can be reached at info@newlake.com.

Sponsored cannabis industry news from MJbizdaily.com

Why resilience isn’t optional in cannabis – it’s the business model