In a small industrial roastery in Washington, D.C., the inviting aroma of roasted coffee lingers in the air. It’s where Lost Sock Roasters, a local company, roasts and packages its coffee beans – destined for its two cafes, customers’ homes, and local bakeries and restaurants.
After nearly a decade leading the company, co-founder Jeff Yerxa says the strong coffee aroma is barely noticeable anymore. “I can’t even smell it anymore,” he says, laughing.
But something else has been catching his attention lately: tariffs.
In July, President Trump announced plans to impose a 50% tariff on all products from Brazil – the world’s largest coffee producer and responsible for about 30% of U.S. coffee imports. This adds to the 10% tariff that affects nearly everything the U.S. imports. This looming tariff threat has sent shockwaves through the American coffee industry, generating particular fears among small roasters like Lost Sock.
“When people go to the local coffee shop, whether Starbucks or any other, they will probably buy some kind of Brazilian coffee,” says Monica de Bolle, senior researcher at the Peterson Institute for International Economics. “A 50% tariff will destroy that market.”
Although the tariffs on imports will only begin on August 1st, the uncertainty is already shaking the sector.
The tariff threats go beyond Brazil imports: the Trump administration announced a series of tariffs on imports from other coffee-producing countries, such as Vietnam (which produces 17% of the world’s coffee), Colombia (8%), and Ethiopia and Indonesia (6% each).
Yerxa says he’s trying not to react until he’s sure the details are final, but notes that profit margins are already slim. “The uncertainty is probably the worst.”
“In the end, the consumer is the one who will bear the burden,” he says. “I don’t want to raise prices, but we’re seeing a potential 30% increase in coffee costs.”
Trump’s message rings hollow for business owners
The Trump administration defends its trade policy and the dozens of tariffs imposed on various countries as necessary to protect American jobs, renegotiate trade deals, and reduce the trade deficit.
For roasters like Yerxa and Colby Barr, CEO of Verve Coffee Roasters, much of the government’s reasoning doesn’t hold up. The U.S., except for small coffee farms in Hawaii and California, does not produce coffee on the same scale that Americans consume.
Why the customer will pay more
Much of the coffee in the U.S. comes from Brazil due to the country’s large-scale production capacity, low costs, favorable climate, and flavor profile, say Yerxa and de Bolle.
“Most of the industry relies on these coffees as the base for their blends,” says Yerxa, referring to the mixing of beans from different regions.
Lost Sock, for example, is best known for its single-origin and high-quality coffees. It uses Brazilian beans in some of its blends – products that stem from long-standing relationships with two cooperatives in Brazil.
Transporting those beans from Brazil to Washington, D.C., is a long process involving international partners, contracts negotiated months to years in advance, and a lot of planning. Lost Sock coordinates with producers and exporters and orders specific quantities of specific beans from specific Brazilian farms, exports the coffee, and stores it in a U.S. warehouse.
The importer adds a margin for logistics, and Yerxa then factors that final price per pound into Lost Sock’s wholesale and retail prices.
And where do the tariffs come in?
Initially, that’s something the importer would have to pay when bringing the beans to the U.S., he says. “That tariff would just be another item on the bill we receive when we clear the coffee. And then, for us, we take the coffee price and, again, it’s added to the price per pound of that coffee when we set wholesale and retail prices.”
De Bolle explains that if the tariffs take effect on August 1st, it could take a few months before customers feel the price increases at coffee shops or restaurants. That’s because those businesses usually buy in bulk and have coffee stock that can last a while – stocks like that can last several months, she says. People who buy their coffee beans at the supermarket may feel the tariff impacts more quickly.
“For those who don’t have stock, that is, the average consumer who goes to the supermarket… and buys their coffee, those price increases might be felt sooner,” says de Bolle, adding that coffee is perishable and stocking beans can only benefit a business, or consumer, to a certain extent.
The ripple effects
In the long term, if these tariffs seem valid, Lost Sock may have to consider dropping the use of Brazilian coffees in some blends, says Yerxa. Dropping long-standing partnerships in Brazil, however, is not an option for him.
But if Brazilian coffee prices rise, roasters will rush to buy from other sources, warns Barr of Verve Coffee. And those other coffee-producing countries, like Vietnam, are also facing tariffs.
“It’s very, very difficult, and almost impossible, to prepare for this,” says Barr. “Tariffs don’t help the coffee producer. They don’t help small and medium-sized businesses across the country and they don’t help the consumer. Why are we doing this?”
Source: npr.org by Jaclyn Diaz