Cigar Prices To Rise Due To New U.S. Tariffs
The new tariffs imposed by President Donald Trump on nearly every item shipped to the United States took the cigar industry by surprise. The executive order, signed on April 2, will result in higher prices on selling cigars and cigar accessories in the United States, and cigarmakers say those price increases will make their way to the end consumer. Unless the president changes his mind and eliminates the tariffs, cigar smokers very soon will be paying more for cigars, lighters and other cigar-related goods in retail stores and on websites.
President Trump’s move initiated a minimum 10 percent tariff on exports from just about every country, and cigars coming into the United States from the Dominican Republic and Honduras are now subject to that 10 percent tariff, which went into effect on Saturday. Several countries were assessed with even higher tariff rates, among them Nicaragua, which makes more cigars by hand than any other country on earth. Cigars from Nicaragua were set to be subject to a tariff of 18 percent. (Early reports had this figure at 19 percent.) They went into effect on April 9, but around midday on April 9 President Trump changed course, announcing a 90-day “pause” on most of these extreme tariffs, moving such countries as Nicaragua to the same level, 10 percent, as the Dominican Republic and Honduras. It's likely there will be more changes before the end of the 90 days.
Industry experts estimate that the tariffs will cost the end consumer anywhere from 50 cents to as much as $2.10 more for each handmade cigar in a zero-tobacco tax state, and even more in states with tobacco taxes. That means another $12.50 to $52.50 or more on a box of 25 cigars.
Tariffs are taxes, levied by countries on imported goods. Despite political spin, they are not paid by the country or company that makes (or exports) the product, but by the company that receives or imports the item. And the burden is almost always ed on to the consumer, which means higher tariffs directly lead to higher prices on imported goods.
“There is no doubt that the new tariffs will have a major effect on the cigar industry,” says Drew Newman of J.C. Newman Cigar Co. “If these tariffs remain in place, we expect that the tariffs will be ed on to consumers, causing cigar prices in the long term to rise by the amount of the tariffs.”
“The 10 percent tariff on cigars from the Dominican Republic significantly increases our costs. We’ve already been managing inflation-related pressures, and this adds another layer,” says Lissette Perez-Carrillo, of E.P. Carrillo Cigars. “While we’ve worked to absorb these increases, the additional costs may ultimately impact pricing. Unfortunately, this is a challenge the entire industry is confronting.”
“The last thing we want to do is raise prices for the consumer,” says Rocky Patel, one of the world’s most famous cigarmakers. He owns his own factory in Nicaragua, and also has cigars made under contract in Honduras. Patel says prices will rise, but not immediately. “Most of us have inventory—we’re not going to the cost of standing inventory.” When asked how long it would take until the higher prices were initiated, he estimated it could take until June. “We’re probably looking at two to three months,” Patel says.
At J.C. Newman, prices won’t change until May 1 at the earliest. “Our family has made the decision to not raise our prices at this time. We will honor our existing prices and continue to offer our traditional trade show specials to brick-and-mortar retailers through May 1,” says Newman. “We have already imported most of the cigars we anticipate needing to fill trade show orders and we want to do everything that we can to help keep costs down for our customers. However, if the new tariffs remain in place, or worse, are increased, we will be forced to increase our prices because we cannot absorb the new tariffs in the long run.”
The news was so fresh that some cigar companies weren’t certain where things would end up. “We are evaluating the situation,” says Javier Estades, chief executive officer of Tabacalera USA, one of the world’s largest cigar companies, which makes the non-Cuban Romeo y Julieta, Montecristo, H. Upmann and many other cigar brands. “As always we will try to minimize the impact on the consumer and our customers without disrupting our operations.”
An Import-Dependent Industry
It’s hard to find a product that is more import-dependent than a handmade cigar. A cigar can be rolled in the Dominican Republic using a mix of tobaccos from many countries, such as Ecuador, Nicaragua, Cameroon, Mexico, the United States or any combination. The box that holds it might be made in China, the lighter used to set it aflame might come from , the cutter from , the band adorning it printed in the Netherlands. High tariffs will have all sorts of impact on the cigar business.
Nearly all of the handmade cigars smoked in the United States are imported. While there are some small factories that roll cigars in cities such as Miami, Tampa, Florida and Union City, New Jersey, they represent a tiny portion of the entire handmade cigar market.
The reasoning behind the tariffs is to encourage American consumers to buy items made in the United States, rather than abroad, but there are very few American-made cigars, as American labor costs are significantly higher than in the countries where fine cigars are made—and making cigars by hand is a labor-intensive process. The average annual salary in the United States is more than $66,000, according to the latest Social Security data, compared to roughly $10,000 in the Dominican Republic and around $3,000 for Nicaragua and Honduras.
Last year, the United States imported more than 400 million handmade cigars, 99 percent of them rolled in a trio of countries, Nicaragua, the Dominican Republic and Honduras. (While Americans also smoke cigars rolled in Cuba, the embargo prohibits any of them from being legally sold in the United States.) Nearly 60 percent of the handmade cigars imported by the United States are rolled in Nicaragua, approximately 24 percent come from the Dominican Republic and about 15 percent are Honduran. All of these cigars are now subject to tariffs, 10 percent in the case of Honduras and the Dominican Republic, 18 percent for market-leader Nicaragua.
The math isn’t as simple as adding 10 or 18 percent to the price of a cigar. Tariffs are charged on the import cost of a cigar, not the retail price. The import price for a handmade cigar varies, but it’s fairly modest, typically about $2 to $4. (A company that owns its own cigar factory will have a lower import cost than companies that have their cigars made under contract.) When a cigar is imported into the United States, the importer pays the federal excise tax, which is capped at 40 cents per cigar. There’s a profit added for the importer, then it’s sold to a retailer at a wholesale price incorporating all of those charges. Most, but not all, handmade cigars in America have a wholesale price that is half of the suggested retail price (referred to as keystone pricing), meaning a cigar that sells for $10 at retail has a wholesale price of $5.
Because the tariffs are assessed at the import point, adding cost at that level inflates each step in the pricing structure, from importer profit margin to retailer margin, which is how a 40-cent tariff can end up costing a consumer an additional $1.24, or how a 72-cent tariff will add more than $2 to your expense.
Even cigars made in the United States won’t escape the Trump tariffs, at least not entirely, as most are made with some (and, in many cases, all) imported tobaccos. So, while the cigars themselves won’t be subject to the tariff, the tobaccos brought into the United States to make them will, inevitably resulting in increased prices.
Bad Timing
The timing for these price increases is far from ideal, as they are going into effect on the eve of the industry’s largest, and most important, trade show, the PCA, which begins on Friday in New Orleans. “The new tariffs have upended everyone’s trade show plans,” says Newman.
Also, there was no notice. President Trump made the announcement of the sweeping tariffs last Wednesday, with the changes taking place almost immediately. (The news was not taken well by financial markets, with stock indexes plummeting in a way not seen since the outbreak of Covid in 2020.)
“The timing of this announcement is very challenging,” says Newman. “Unlike in 2009 when we had advance notice of the S-CHIP tax increase, this time cigar companies have no opportunity to import additional cigars before the new tariffs take effect and to those savings on to retailers and consumers.”
“This came quick, and it was totally out of our control,” says Les Mann of S.T. Dupont, the luxury cigar accessory maker. The company makes its top-of-the-line lighters in (now subject to a 20 percent tariff) and its jet lighters are produced in China, subject to 54 percent. “We are doing the best that we can to get through this situation that was out of our control, and one week before the most major trade show on the planet.”
Much like cigars, cigar accessories are largely made outside of the United States. Nearly all the jet-flame lighters used in the cigar business, for example, are made in China. Chinese goods were already facing a 20 percent tariff before April 2, and now President Trump added 34 percent more, taking the tariff rate to 54 percent. That will take the price of a $100 lighter made in China to $154.
The Repercussions
Many in the cigar industry are concerned about the new tariffs, and think they will negatively impact the market.
“Consistent price increases have become my number one concern for a while,” says Craig Cass, owner of several Tinder Box cigar stores in the Carolinas. “We are beginning to get some pushback from our A-buyers on the ever-escalating ultra-high-end releases. When the tariff announcement hit, the timing could not be worse since more 2025 increases were coming anyway. Now that percentage increase will go north.”
Cass was making adjustments ahead of his trip to the PCA trade show. “That will be one of our focuses at PCA: Find quality that post-price increase can stay in the $8 to $12 category. We want to cover that buyer. . . . Spending habits in general could change.”
Newman agrees. “Ultimately, we expect that the new tariffs and the declining economy will cause cigar enthusiasts to seek out more value-priced cigars,” he predicts, “or enjoy cigars less often.”
Despite the unwelcome news, cigar industry veterans remained optimistic. “We are not going to panic,” says Michael Cafagno, owner of Tobacconist of Greenwich, a prominent cigar retailer in Connecticut. “We’re an industry that has been faced with adversity and we will deal with these challenges in stride.”
“A century ago, my great-grandfather paid a 65 percent tariff on imported Cuban tobacco,” Newman adds. “As difficult as these new tariffs are for the cigar industry, I am certain that we will overcome this tariff challenge once again.”
“I understand the purpose of the tariffs but I think there needs to be some exceptions,” says Patel. “Hopefully we can talk to the istration and get some sort of exemption. . . . It seems we’re always dealing with adversity along the way. We just want to make cigars.”
