California’s legal cannabis industry, long weighed down by high taxes and regulation, is facing new threats: steep federal tariffs on key imports and a proposed statewide ban on disposable vapes.

New tariffs on imported vape hardware, packaging, cultivation tools, and compost are expected to raise costs significantly for cannabis businesses, many of which rely on Chinese suppliers. 

“Those relying on exports from nations with tariffs, such as China, will need to take a serious look at how they might absorb the extra costs or alter partnerships,” said Bryan Gerber, CEO of Hara Supply.

MJBizDaily reports that some brands are preparing to pass those costs on to consumers, making legal cannabis even less competitive with the illicit market. The site noted the “flourishing illicit market” is “likely to be emboldened by the tariff hikes.”

That’s a growing concern in California, where illegal cannabis sales continue to outpace legal ones nearly a decade after voters approved recreational use.

"The black market is very pervasive and it's definitely larger than the legal market," said Bill Jones, head of enforcement for California’s Department of Cannabis Control.

Adding to the pressure is AB 762, a bill from Assemblymember Jacqui Irwin that would ban all disposable vapes -- including cannabis products — defined as any device that isn’t both rechargeable and refillable. Because current law prohibits refillable cannabis vapes, the bill would effectively ban the entire category.

At an Assembly Environmental Safety and Toxic Materials hearing on April 8, Amy O’Gorman Jenkins, Executive Director of the California Cannabis Operators Association said in written testimony that “characterizing these as “single-use” or “non-reusable” is misleading: a half-gram device delivers around 150 doses, and a full gram provides more than 300. These are used over weeks or months, not discarded after one session.”

Irwin argues the bill is about environmental safety, citing concerns over battery acid from discarded vapes. “We must transition away from these harmful single-use devices, and AB 762 will do just that,” she said at a news conference in February in Sacramento.

O’Gorman Jenkins also warned in her testimony that removing regulated vapes from store shelves would push consumers back into the ”unregulated and unsafe illicit market, which faces none of the legal, environmental, or product safety requirements.”

“California’s legal cannabis industry is among the most regulated in the world. In contrast, the illicit market faces none of these requirements,” she said.

“The public health risks are real,” Jenkins said, referencing the 2019 EVALI outbreak, which the CDC linked to illicit-market vapes. “Removing compliant, tested products does not protect consumers—it exposes them to far greater harm.”

Meanwhile, illegal cannabis cultivation—often tied to international criminal networks—continues to expand.

A team of four journalists from two nonprofit news organizations, ProPublica and the Oklahoma-based The Frontier recently published a two-part series on Chinese organized crime's grip on America's illegal cannabis market, which has led to increases in other crimes, including money laundering and human trafficking.

These operations, unconstrained by regulations or tariffs, can offer products at a fraction of the cost of legal businesses. 

With major companies like MedMen and Gold Flora closing or entering receivership, many in the industry say the combined impact of tariffs and bills like AB 762 could be devastating.

“If we keep increasing costs on the legal market without cracking down on the illegal one,” one executive warned, “we’re just making it impossible for the good guys to survive.”

Twenty-one states have implemented legislation to legalize and tax recreational cannabis sales: Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington