Economics Corner: New US Tariffs effect on US Cigar Prices

[El Presidente]

Economics Corner:  New US Tariffs effect on US Cigar Prices 

This is one for our economic minded members. Dominican /Honduran/Nicaraguan cigar imports. Online consumer imports. 

Sort through the maelstrom for me and let me know the results/your thoughts.  

 

[Namisgr11]

18% tariff on Nicaragua. 10% on Honduras and Dominican Republic. My thoughts are that our prices are going up, starting this month. 10% on Australian imports, too. For all intents and purposes, it's a sales tax on all Americans covering all imported goods, other products and supplies, and parts. Yippee... 🤐

 

[WestCoastSmokin]

It sucks because these tariffs are not necessary. 

[rcarlson]

I predict no substantial effect. I think that as agricultural exporting countries cave, non-caving cigar-producing countries will have to compete at the register by eating the tariffs.       

[El Presidente]

We will be busy re-pricing Nudies/MOFOH and see the effect on FOH. 

Of course this could all change in 15 minutes. 

[El Presidente]

Just now, rcarlson said:

I predict no substantial effect.  I think that agricultural exporting countries cave, cigar producing countries will have to compete by eating the tariffs to compete.     

The successful cigar companies will pass it on because they can. Those not so successful may need to eat it up before looking to see if they remain in business as cigar makers. 

Most of the successful NC cigar companies have already increased pricing 3-5-5% in 2025 thereabouts. They won't be covering this whack. 

[rcarlson]

6 hours ago, El Presidente said:

Most of the successful NC cigar companies have already increased pricing 3-5-5% in 2025 thereabouts. They won't be covering this whack. 

Ouch, a 15%-20% increase? One generally following standard inflation followed by another twice as much? That's an unbelievable demand-killing whack, I would think.  

[Odessa]

33 minutes ago, El Presidente said:

We will be busy re-pricing Nudies/MOFOH

Nice marketing statement. 😁

[riderpride]

If it's 18% on Nicaragua, then it'll be a broad increase by ~15%. No manufacturer is going to be granular enough to do the math by country, especially if a particular stick is a 2 or 3 country blend. If you have a Dominican puro, I don't see the prices increasing by much less than Nicaraguan - extra profit. Just another layer of tax passed onto the consumer. Look at natural gas - the tariffs were priced-in to the buyer immediately. 

JMHO.

Cheers

[El Presidente]

6 hours ago, rcarlson said:

Ouch.  a 15%-20% increase?  One generally following standard inflation followed by another twice as much?  That's an unbelievable demand-killing whack, I would think.  

I may have misrepresented the situation. 

Existing RRP increases for top NC brands in the USA in 2025  is 3.5-5%

Without running the numbers, a 10% import tax/tariff will add 2.5-4% on that depending on the cigar producing country. 

I don't see Nicaragua getting any favours and 18% may move that increase 7-8% on RRP.  Honduras Tariff  is 10% as is DR. That gives them a nice advantage overnight. 

Again, haven't run the numbers but I doubt I am far off.  

[rcarlson]

6 hours ago, riderpride said:

If it's 18% on Nicaragua, then it'll be a broad increase by ~15%. No manufacturer is going to be granular enough to do the math by country, especially if a particular stick is a 2 or 3 country blend. If you have a Dominican puro, I don't see the prices increasing by much less than Nicaraguan - extra profit. Just another layer of tax passed onto the consumer. Look at natural gas - the tariffs were priced-in to the buyer immediately. 

JMHO.

Cheers

FWIW, the US produces and can produce NG domestically. It's the export not the import and short term supply that drives consumer price (methinks).   

[El Presidente]

12 minutes ago, Odessa said:

Nice marketing statement. 😁

LOL  Our stock in Florida now is unaffected. However we have 50,000 cigars leaving Honduras for the US in the next 2 weeks. That causes a headache that will require a 4 Negroni analysis 

[Chas.Alpha]

Here’s how China is dealing with it.

[El Presidente]

Charles is about to get a warning 

Cigars people. Cigars. Politics and cigars is more than fine. 

Still, it is unfortunate that the cost of Charles' Chinese equipment needed to spy on his neighbour in the shower has gone up. 

[riderpride]

5 hours ago, El Presidente said:

Charles is about to get a warning 

Cigars people. Cigars. Politics and cigars is more than fine. 

Still, it is unfortunate that the cost of Charles' Chinese equipment needed to spy on his neighbour in the shower has gone up. 

Dang, got too close to the line. I thought @Chas.Alpha was moon watching for cheese research. Turns out it's a different moon. My optimism has failed me again! 

Cheers

[Odessa]

5 hours ago, El Presidente said:

That causes a headache that will require a 4 Negroni analysis 

I am in for analysis as long as Negroni is supplied. Not asking for free Negronis, I will cover my consumption. 😄

[yossie]

So,US cigar production grows? I guess not. It just makes cigar price in US higher.

[Odessa]

41 minutes ago, El Presidente said:

However we have 50,000 cigars leaving Honduras for the US in the next 2 weeks.

Be nice to a freight clerk. He/she could stamp the "ship date" 30 march. 😁

Actually, don't know what date triggers tariff - shipping or arriving...

[MrBirdman]

Biggest concern for US CC buyers is the planned elimination of all de minimum exemptions for tariffed countries (basically everyone). 

Edit: Since I’ve already gotten asked for an explanation of why, I’ll just add it here. Hopefully this explanation doesnt run afoul of the forum rules. 

Basically, the effect on CC of total elimination of the de minimis exemption is pretty simple: it’s the end of online sales to the US as we’ve known it for the past 20+ years. The penalties for lying on formal customs paperwork are so high that I can’t imagine any vendor (or the shipping companies they use) would accept the risk. Maybe I’m wrong on that, but I certainly wouldn’t based on what I know.

How likely is it that they’ll follow through? Really hard to say. ICE doesn’t have the capacity to handle it right now and would probably require Congressional appropriation for the needed capital investment. But in the current world anything is possible. 

[Chas.Alpha]

5 hours ago, El Presidente said:

Charles is about to get a warning 

Cigars people. Cigars. Politics and cigars is more than fine. 

Still, it is unfortunate that the cost of Charles' Chinese equipment needed to spy on his neighbour in the shower has gone up. 

The nearest neighbor I can spy on with my telescope is 2,000,000 light years away. Now, binoculars on the other hand…😳

[SirVantes]

39 minutes ago, Chas.Alpha said:

The nearest neighbor I can spy on with my telescope is 2,000,000 light years away.

And if they ever discover you’re spying, it would be far too late. The perfect crime. 

[Cigar Surgeon]

The way it's been presented is super unclear. It looks like it's additive. There's a baseline 10% that everyone (except for Canada and Mexico) get on the 5th. Then there are country specific tariffs, the so called reciprocal tariffs, that get added on top of that on the 9th.

So Nicaragua would be 28% on the 9th. Honduras 20%. Dominican Republic 20%.

[El Presidente]

8 hours ago, MrBirdman said:

Biggest concern for US CC buyers is the planned elimination of all de minimum exemptions for tariffed countries (basically everyone). 

Temu and Shein ship combined 1 million packages a day the US. overall, 24 million packages globally airmail into the US every day. 

I am not saying it can't be done...but collecting duty tariffs on individual packages takes an infrastructure that currently isn't there. 

[MagicalBikeRide]

5 hours ago, Cigar Surgeon said:

The way it's been presented is super unclear. It looks like it's additive. There's a baseline 10% that everyone (except for Canada and Mexico) get on the 5th. Then there are country specific tariffs, the so called reciprocal tariffs, that get added on top of that on the 9th.

So Nicaragua would be 28% on the 9th. Honduras 20%. Dominican Republic 20%.

This was my understanding while watching, but you’re right, it was unclear.

Bigger picture - and ignoring the uncertainly around everything - I’m pretty sure that other countries will respond over the coming days. For example, I’d expect the EU to bounce this back at similar levels. Makes me think - how many NC cigar manufacturers distribute from the US? @El Presidente might know..? Say like Fab5 does - from factory to Florida and then distribution from there to the world. And will all players now look to find direct to market distribution routes as a way to mitigate? Or is that just impossible from some of the countries where the cigars are made? 

[El Presidente]

1 hour ago, MagicalBikeRide said:

This was my understanding while watching, but you’re right, it was unclear.

Bigger picture - and ignoring the uncertainly around everything - I’m pretty sure that other countries will respond over the coming days. For example, I’d expect the EU to bounce this back at similar levels. Makes me think - how many NC cigar manufacturers distribute from the US? @El Presidente might know..? Say like Fab5 does - from factory to Florida and then distribution from there to the world. And will all players now look to find direct to market distribution routes as a way to mitigate? Or is that just impossible from some of the countries where the cigars are made? 

Lets see how it plays out as there is little detail on specifics right now. That is par for course with this administration. The devil will be in the detail when they get around to it. 

We could move distribution base to Asia for MOFOH DESNUDO but it may not be worthwhile dependent upon how the tariffs are calculated. Simply pass the cost on would appear to be the best option.