I. Internationalization of production capacity to avoid tariff barriers

1. Transfer production base to Southeast Asia or Mexico

The U.S. policy of high tariffs on Chinese e-cigarette products (such as the new 34% tariffs in 2025 plus the original tariff rate) directly raises the cost of exports. Enterprises can enter the U.S. market by setting up production bases in Southeast Asian countries such as Indonesia and Vietnam, or in Mexico, taking advantage of lower local tariff rates or free trade agreements (such as the U.S.-Mexico-Canada Agreement). For example, Smallsmart International's plant in Malang, Indonesia, which is already in production and is expected to have an annual output value of $860 million, can effectively smooth out the impact of tariffs.

This move also diversifies geopolitical risks and avoids single-market dependence.

2. Optimize global supply chain management

Overseas factories produce core components (e.g. atomizer cores), while domestic factories are responsible for non-core links, reducing overall costs and avoiding tariff restrictions.

Strengthen intellectual property layout and compliance management

1. Respond to patent litigation and 337 investigations

U.S. companies frequently initiate patent infringement lawsuits (e.g., JUUL has repeatedly initiated 337 investigations), enterprises need to conduct patent screening in advance to avoid design infringement. Industry associations (e.g., China Electronic Chamber of Commerce) can jointly respond to lawsuits and share the high attorney's fee (the attorney's fee in a single case may exceed one million dollars).

Historical cases show that settlement is a common way to resolve the case, and companies can obtain patent authorization or adjust the product design through negotiation.

2. Meet FDA Compliance Requirements

The U.S. FDA strictly regulates the “adulteration” of e-cigarettes, and companies need to ensure that their products meet the standards of the Federal Food, Drug, and Cosmetic Act (FD&C) in order to avoid being placed on the “red list” of import alerts that can lead to the detention of goods.

If they are already on the list, they need to submit continuous and compliant shipment records and third-party test reports to apply for removal from the red list.

Optimizing export structure and tax planning

1. Utilize export tax rebate policy to reduce costs

China has implemented a tax rebate (exemption) policy for the export of electronic cigarettes, and manufacturers and foreign trade enterprises can maximize the tax rebate benefits through reasonable planning of business models (e.g., self-managed exports or separate accounting for processing on behalf of the company). For example, manufacturing enterprises are exempted from tax but not refunded for self-managed exports, while foreign trade enterprises can enjoy tax exemption and refund for exports.

2. Adjust pricing strategy and reseller model

Consumption tax on e-cigarettes is calculated on the basis of the price that the distributor sells to the wholesaler. Enterprises need to avoid lowering the price through related transactions to avoid tax and optimize the distribution of profits in the sales chain at the same time.

Diversified market development and brand upgrading

1. Expand Europe, the Middle East and emerging markets

Although the U.S. market accounted for nearly 40%, but the growth is slowing down and the policy risk is high. Can turn to the European Union, the Middle East and other e-cigarette regulatory lax areas, or layout of the local consumer market in Southeast Asia (such as Indonesia, Malaysia)

2. Enhance brand premium and technical barriers

Through R&D innovation (e.g. ceramic atomization technology) to improve product value-added and enhance bargaining power. For example, the technological barriers of Simcoe International, a global leader in atomization technology, can alleviate the pressure of price competition.

V. Industry Collaboration and Policy Lobbying

1. Joint industry associations for international discourse

Through organizations such as the China Chamber of Commerce for the Import and Export of Machinery and Electronic Products (CCCME), we have coordinated enterprises to respond to U.S. trade investigations, while promoting the signing of international patent cross-licensing agreements.

2. Participate in international standardization and compliance certification

Take the initiative to participate in the development of international standards, such as ISO, to promote the internationalization of China's e-cigarette standards and reduce technical barriers to trade.

Summarize

Chinese e-cigarette companies need to use a combination of production capacity transfer, compliance management, tax optimization and market diversification strategies to help themselves, as well as strengthen technology R&D and brand building. Despite the double pressure of tariffs and regulation in the short term, headline companies are expected to further consolidate their dominant position in the industry reshuffle through industry chain integration and internationalization.