The CAA Goes to Washington: Scott Pearce Makes the Case Against Cigar Tariffs Before Federal Trade Officials
When Scott Pearce walked into the hearing room to face the Section 301 Committee, he carried with him the weight of an entire American industry — one measured not just in billions of dollars but in decades of hand-rolled craftsmanship, tens of thousands of family-run shops, and a culture of leisure that has endured every regulatory storm Washington has thrown at it. This was the final public hearing on a proposed tariff schedule with potentially seismic consequences for anyone who appreciates a quality smoke, and Pearce was there to make sure the government heard exactly what was at stake.
The Hearing: What Happened and Who Was Listening
Cigar Association of America (CAA) President Scott Pearce testified before the Section 301 Committee, an interagency group that includes the Office of the U.S. Trade Representative (USTR), the Department of Commerce, the Department of the Treasury, the Department of Labor, and other agencies that assess the impact of trade policy. The composition of that panel alone signals how seriously the federal government is treating the current wave of tariff deliberations — these are not trade wonks operating in a silo, but a coordinated cross-agency body whose decisions ripple into every corner of the American economy.
This was the final public hearing on the proposed tariff schedule, which would set a 12.5% rate for most cigar-producing countries. For the cigar world, that number is not an abstraction. It translates directly into higher costs at every link in the supply chain, from the importer's freight bill to the price tag hanging in the humidor of a neighborhood tobacconist in Ohio or Tennessee.
Pearce's message to the Committee was direct: cigars belong in Annex A, the exemption reserved for products that would cause economy-wide disruption, cannot be produced domestically at scale, or where tariffs would not move the needle on the underlying problem. It was a precise, legally grounded argument — one designed to meet the administration on its own terms rather than simply pleading for mercy.
The Core Argument: Why Premium Cigars Are a Special Case
An Industry That Cannot Be Replicated Domestically
The central pillar of Pearce's testimony rests on an uncomfortable geographic truth that no tariff can change: Americans purchased nearly 10 billion cigars in 2025, and about 80 percent were imported, with roughly 99 percent of large cigars coming from abroad. Honduras, the Dominican Republic, and Nicaragua produce over 98 percent of cigars sold in the U.S., based on tobacco varietals and hand-rolling expertise unique to those countries.
That expertise is not a gap that can be closed with domestic investment and the right incentives. The specific soils of the Jalapa Valley in Nicaragua, the Cibao region of the Dominican Republic, and the Jamastran Valley of Honduras produce tobacco leaves with flavor profiles that have been refined over generations. The master rollers who produce premium handmade cigars — the torcedores who can produce hundreds of perfectly calibrated sticks per day — represent a craft tradition that cannot simply be transplanted to American factory floors. Tariffs would raise prices without shifting a single job home.
The Leverage Argument Doesn't Hold Water Either
Pearce also attacked the strategic logic of including cigars in the tariff schedule at all. Cigars are not meaningful leverage in these trade relationships. The U.S. already runs a trade surplus with the Dominican Republic and Honduras, and Nicaragua is already subject to a separate, targeted Section 301 action that recently concluded, determining that goods qualifying under the DR-CAFTA trade agreement, including cigars, would be exempt. In other words, subjecting cigars to a blanket tariff in the name of trade fairness makes little sense when the arithmetic of the existing trade relationship doesn't justify it.
The American Businesses That Actually Get Hurt
The instinct to frame tariffs as protecting American industry runs into a serious problem in the cigar sector: the damage falls squarely on American operations. Higher prices mean fewer cigars sold, shrinking the more than $800 million a year CAA members pay in federal excise taxes, plus state revenues. Fewer sales also hurt U.S. tobacco farmers, who export about $170 million a year in cigar leaf, and more than 3,500 Main Street tobacconists, 83 percent of them single-store, family-run businesses employing roughly 50,000 people.
That portrait of a small-business-heavy retail ecosystem deserves more attention than it typically gets in macro trade debates. The image of a cigar retailer as some wealthy luxury merchant is largely a myth. Most tobacconists are operating tight-margin businesses in strip malls and downtown storefronts, surviving on repeat customers and the kind of service a website cannot replicate. A sustained price increase — especially one that compounds through the keystone pricing structure the industry uses — could be enough to push marginal shops over the edge.
Pearce addressed the American operations abroad as well. U.S.-owned cigar operations abroad pay above local market wages, follow the law, and provide benefits well beyond what is required. These are the companies getting it right, not the ones this action is meant to address. That argument goes to the heart of what trade enforcement is supposed to accomplish: holding bad actors accountable. Lumping well-run American-owned manufacturers in Honduras and the Dominican Republic into the same enforcement action as companies that exploit labor or engage in currency manipulation is a misapplication of the tool.
The Pricing Multiplier Problem Every Cigar Smoker Should Understand
There is a mechanic in cigar retail that most consumers never think about until it affects them directly. Consumers will not only pay the tariffs but they will probably pay more than double the actual value of the tariffs. Cigar companies and retailers typically operate on a keystone pricing structure, meaning that if a retailer buys a cigar for a wholesale price of $5, a retailer doubles the price and sells it for $10. That means a tariff that adds 75 cents to the import cost of a box does not add 75 cents to the retail price. It adds closer to $1.50 or more once it has been marked up at every stage of the distribution chain.
For a casual buyer picking up a $10 stick once a month, that is an annoyance. For the enthusiast who has a standing order and smokes daily, the cumulative impact over a year could easily run into hundreds of dollars. And for the retailers themselves, who have already built their inventory pricing around existing cost structures, absorbing or passing on mid-cycle increases creates friction with customers and disrupts the trust relationships that keep regulars coming back.
Who Scott Pearce Is — and Why His Presence in That Room Matters
Pearce did not arrive at the Section 301 Committee as a newcomer to the policy fight. The Cigar Association of America named Scott Pearce as its incoming president, effective May 28, 2024. Pearce, who was serving as the Executive Director of the Premium Cigar Association (PCA), brings over 20 years of association experience to the role. His background matters because navigating the federal regulatory and trade apparatus requires more than passion for the product — it demands institutional knowledge of how these bodies work, what arguments land, and which levers actually move.
Pearce had been the executive director of the PCA since 2018, when it was known as the International Premium Cigar & Pipe Retailers Association (IPCPR). During that stretch, the premium cigar industry faced an existential threat from FDA regulation, a global pandemic that upended the trade show model, and the early rumblings of the tariff environment now reaching a crescendo. He knows what a genuine crisis looks like and what a manageable one looks like. The current tariff fight, in his assessment, falls into the latter category — manageable, if the right case is made at the right time.
Prior to joining the PCA, Pearce was the director of marketing for the American College of Radiology, a role he held for nearly eight years, and also served in a similar position at the International Road Federation for nearly six years. That non-tobacco background gives him credibility as a professional association executive rather than simply an industry lobbyist — a distinction that matters when testifying before skeptical federal officials.
When his appointment to the CAA was announced, the praise from the board was pointed. Chris Howard, CAA board member and chair of the committee that recruited Pearce, said: "Scott is uniquely positioned to grow and bring innovative lobbying and advocacy to CAA. His depth of experience working in industry and trade groups and his most recent experience with PCA provides CAA a leader who is prepared to take on the difficult issues our association faces." The Section 301 hearing is precisely the kind of difficult issue that description had in mind.
The CAA's Membership: Why the Stakes Are This Large
The CAA primarily represents a diverse group of companies that include the largest premium cigar brands — Altadis U.S.A., Davidoff, Drew Estate, and General Cigar Co. — as well as others like AJ Fernandez, J.C. Newman, and Perdomo. The country's largest retailers — Cigars International, Famous Smoke Shop, and JR Cigar — are also members, as are tobacco growers. Its membership also includes companies that focus on non-premium cigars like Djarum and ITG Brands. That breadth means a tariff that cuts into premium import volumes does not stay contained within a single niche of the market — it touches manufacturers, distributors, large-format retailers, and independent shops simultaneously.
The CAA has been steadily expanding that membership base in recent years. The organization recently added La Aurora USA and Manifatture Sigaro Toscano, the former an arm of the oldest cigarmaker in the Dominican Republic and the latter an old-school, Italian-based company. Each has both machine-made and handmade cigar operations, with one founded more than 100 years ago and the other more than 200. Adding manufacturers with that kind of institutional heritage signals that the CAA is broadening its tent — and that more of the industry's players understand the value of unified federal advocacy in an increasingly hostile regulatory and trade climate.
The Broader Tariff Environment: A Year of Turbulence
How the Current Fight Evolved
The Section 301 hearing Pearce testified at is the culmination of a tariff environment that has been building pressure on the cigar industry since early 2025. A new policy setting a 10% universal tariff on all goods imported into the United States kicked off a cascade of industry anxiety that has only intensified. The proposed 12.5% rate that Pearce pushed back against at the hearing represents the next phase — one that, if enacted without exemptions, would layer additional cost onto a market already absorbing the initial tariff shock.
The country-by-country picture is particularly complicated for cigar buyers. For key cigar-producing nations, the reciprocal tariffs have varied: the Dominican Republic and Honduras facing 10% matching the universal rate, Nicaragua seeing 18% reflecting its own 36% tariff on U.S. goods, and Costa Rica at 10% despite imposing a 17% tariff on American goods. For a category like premium cigars — where the country of origin is often a significant part of the product's identity and value proposition — these inconsistencies create real confusion about what pricing will look like going forward.
Importantly, Pearce's testimony addressed the Nicaragua situation head-on. The country's cigars had already been the subject of a separate Section 301 action, and the conclusion of that process found that DR-CAFTA qualifying goods — which include cigars — should be exempt. Folding them back into a broader tariff action undercuts that prior determination and creates the kind of policy inconsistency that trade lawyers and manufacturers find difficult to plan around.
What the Market Data Shows
While the policy fight plays out in Washington, the CAA's own data captures what's already happening at the import level. Premium large cigars remained the market's most stable segment in 2025, and Q1 2026 confirmed that trend, with a 13% rise in cigar leaf imports signaling industry confidence in forward production. That forward confidence is exactly what tariff uncertainty threatens to undermine. Companies that are investing in inventory and leaf production are making multi-year bets — bets that become far riskier when federal trade policy can shift their cost structure by double digits between the time a commitment is made and the time product reaches shelves.
Earlier import data told a more complicated story. The first quarter of 2025 revealed a market in transition, with a strong rebound in March likely driven by pre-tariff buying that helped stabilize overall numbers. That kind of front-loading — companies rushing imports ahead of anticipated cost increases — is a classic market distortion caused by tariff uncertainty. It creates artificial spikes and subsequent lulls that make inventory planning genuinely difficult for retailers who need predictable supply.
The FDA Front: A Second Battle Running in Parallel
Tariffs are not the only fight the CAA has been waging. Even as Pearce prepared for the Section 301 hearing, the organization has been engaged in a parallel regulatory battle over how premium cigars are defined under federal law — a definitional question with major practical consequences for which products receive regulatory protections.
Pearce has said that "the Circuit Court recognized that the definition of a premium cigar was never fully vetted either through FDA rulemaking or through litigation," and that the court's order provided the industry "with an opportunity to provide science, law, and fact to support a proper definition." CAA's brief highlights the unnecessary risks posed to the entire premium cigar industry because of multiple ambiguities and unjustifiably narrow qualifiers in the definition previously supplied by the FDA.
Surveys and datasets that track usage patterns of tobacco products have confirmed there is no scientific basis to conclude that youth use "premium cigars," whether they be traditional or hand-rolled flavored cigars. Therefore, excluding those products would be arbitrary and counter to the spirit and intent of the vacatur ruling, Pearce argued. The stakes of that definitional fight intersect with the tariff battle in an important way: a narrower FDA definition of "premium cigar" means fewer products receive exemption protections, and those same products then face both tighter regulation and higher import costs simultaneously.
The Legislative Pressure from Below: State-Level Tax Threats
Federal tariffs are not the only fiscal pressure compressing margins for cigar retailers and consumers. The CAA's own legislative conference in Washington earlier this year surfaced data that underscores just how aggressive state governments have become. Adam Hoffer of the Tax Foundation put a specific number on the state tax environment: tobacco tax increases were proposed in 37 states in 2026, with active legislation still running in 14 of them. That is a staggering number, and it means that even if Pearce's federal tariff argument succeeds entirely, retailers in most of the country will still be dealing with escalating state-level costs.
The CAA has been active at the state level too. Illinois adopted a $0.75 tax cap for cigars, with special thanks going to CAA's team in that state for carrying the project over the finish line. That kind of state-specific win matters because without a cap, cigars in high-tax states can face ad valorem levies that make even a mid-range stick prohibitively expensive — again through the same multiplier effect that makes tariffs so punishing at the retail end.
Historical Context: The Industry Has Survived This Before
It is worth stepping back to remember that the premium cigar industry has absorbed significant cost shocks before and emerged intact. The last major recession coincided with the introduction of SCHIP in 2009, when the Obama administration dramatically increased federal excise taxes paid for tobacco products. For cigars, this was an increase from 4.875 cents to 40.26 cents per cigar, taking effect in April 2009. Many predicted that SCHIP would decimate the handmade cigar industry. Despite SCHIP and the 2008 recession, cigar imports rose and are much higher today than they were 17 years ago.
That historical precedent cuts both ways. On one hand, it argues for resilience — the premium cigar category has a devoted consumer base that will absorb some level of price increase rather than give up a ritual that carries significant personal meaning. On the other hand, the SCHIP era demonstrated that sustained cost pressure does reshape the market: smaller brands struggle, consolidation accelerates, and some retailers never reopen after closing their doors during the lean years. The industry that survived was real, but it was not unchanged.
What Comes Next — and What It Means for You
The Section 301 Committee's final public hearing has now concluded, and the decision on whether premium cigars will receive an Annex A exemption rests with federal officials who are weighing an enormous volume of competing interests across every sector of the economy. The cigar industry is not the largest voice in that room, but Pearce's testimony was structured to make the strongest possible case within the specific criteria the administration has already established.
Pearce argued that cigars belong in Annex A — the exemption reserved for products that would cause economy-wide disruption, cannot be produced domestically at scale, or where tariffs would not move the needle on the underlying problem — and that the administration has already established a precedent for exemption that the cigar industry clearly meets. That is a disciplined argument, and whether it succeeds will depend on how rigidly the committee applies its own stated criteria.
For anyone who keeps a humidor stocked and follows the smoke with interest, the practical stakes are real. A 12.5% tariff, filtered through keystone pricing at the wholesale and retail levels, means the Honduran or Dominican box that cost you $150 this spring could easily push past $180 or more by year's end. The boutique Nicaraguan blends from small-batch producers — already priced at a premium — face the sharpest proportional increases because their margins leave less room to absorb cost without passing it on. And for the independent tobacconist who has built a loyal local clientele, the question of whether he can hold his regulars at the new price points is not theoretical — it is the question his business survives on.
Scott Pearce and the CAA made their argument as forcefully and precisely as the forum allowed. The hearing is over. Now the waiting begins.
