Trump Announces 18 Percent Tariff Rate for Nicaragua

On Thursday night, the Trump administration released dozens of new tariff rates ahead of the White House’s self-imposed Aug. 1 deadline.

Among them is Nicaragua, the country that exports roughly half of all premium cigars sold in the U.S. Effective next week, Nicaragua’s tariff rate will increase from 10 percent to 18 percent.

The 18 percent is not new. That is the rate that the White House announced in April during President Donald Trump’s “liberation day” event, though at the time, it was unclear if the rate was 18 or 19 percent. A week later, Trump announced that he would be suspending those announced rates and instead many countries would pay lower rates for 90 days, dropping Nicaragua’s rate from 18 or 19 percent to 10 percent.

That temporary change was supposed to expire in early July but was extended to Aug. 1. Nicaragua is the only major cigar-producing country affected by the temporary changes.

The new 18 percent rate won’t go into effect until Thursday, Aug. 7. Furthermore, all goods loaded by Aug. 7 that arrive in the U.S. before Oct. 5 will get the pre-Aug. 7 rates.

In response to the tariffs, dozens of cigar companies have increased prices, some passing the tariff onto consumers, while others claiming that they are absorbing the tariff. All of those price increases were announced after the rates were temporarily lowered, which will open the door to companies increasing rates again, this time adjusting to the increased Nicaraguan tariffs.

The tariff is applied to the “direct import price,” which is neither the wholesale price that retailers buy the cigars for nor the price that consumers pay for cigars. Unlike state tobacco taxes, which are calculated based on the wholesale price, the tariffs are baked into the wholesale price. Because of this, the tariffs won’t simply be passed onto consumers; consumers will likely end up paying at least, but oftentimes more than double whatever the increase is. In states with a percentage-based tobacco tax, that amount will increase too and the tariff-related price changes will also increase the sales tax paid.

Earlier on Thursday, multiple judges on the U.S. Court of Appeals for the Federal Circuit showed skepticism at the White House’s justification for enacting the tariffs without Congressional approval. The 11-judge panel was convened as part of multiple lawsuits that are challenging the Trump administration’s emergency justification for the tariffs. Regardless of how the appeals court rules, the matter is widely expected to end up in the Supreme Court.