Tariffs and Cigars—A Bad Mix
It was news that was impossible to miss. On April 2, President Donald Trump announced new tariffs on virtually every item imported into the United States. He ordered a minimum 10 percent charge on all U.S. imports (with very few exceptions) and higher tariffs on certain countries, particularly China. The news stunned the world and rocked financial markets. Even though President Trump soon backed off, initiating a 90-day pause on most of the higher rates, the 10-percent tariff went into effect on April 9. This will affect many American business segments, the premium cigar industry among them.
Industry experts estimate the tariffs will cost the end consumer anywhere from 50 cents to $1 more for most handmade cigars in a zero-tobacco tax state, more in states with tobacco taxes. When the pause on higher tariffs ends, these increases could be twice as much for Nicaraguan cigars, which face an 18 percent tariff. (The tariffs are charged on the import price, so the math is more complicated than simply adding 10 or 18 percent to the retail price you now pay on cigars. Some cigar companies may opt to eat the charge, but that remains to be seen.) Because most companies in this industry operate with large inventories, very few had been directly impacted as we went to press. But price hikes will likely follow in the not-too-distant future.
Tariffs are taxes, and despite political spin they are paid by the company that receives or imports the item, not the country from which it is shipped. Economists debate their effectiveness, but generally speaking higher tariffs mean higher prices on imported goods. The idea is to make imported items more expensive, making it more enticing for a consumer to buy domestic.
We understand the need for tariffs when they protect American industries, but they have no place in the world of cigars.
Just about all of the handmade cigars smoked in the United States are rolled in some other country. While some small factories make cigars in such American cities as Miami, Tampa and New York, they represent a tiny portion of the handmade cigar market. How small? We rated 628 cigars in 2024 in this magazine and in Cigar Insider, our twice-monthly newsletter. Only 15 (2.4 percent) were made in the United States.
America once thrived as a producer of cigars, but that was in the last century, when American labor was not nearly as costly. American-made cigars are now considerably pricier than ones rolled offshore. They have to be, because American wages, American factory space and just about everything else is significantly more expensive.
Even if you love cigars as much as we do, you probably don’t want to make them for a living. It’s a tough job, an artisanal job, and one that skilled laborers in Nicaragua, the Dominican Republic and Honduras do very well. No one welcomes tariffs in this business as they will only make cigars more expensive.
Because the details seem to change often, the outcome is uncertain. But, while tariffs won’t ruin the cigar business, they certainly won’t help.
