In a small industrial roastery in Washington, D.C., the nutty and inviting aroma of roasting coffee hangs thick in the air. It’s where Lost Sock Roasters, a local company, roasts and packages its coffee beans.
After nearly a decade managing the company, Jeff Yerxa says the strong coffee aroma barely registers anymore. “I don’t even smell it anymore,” he says laughing.
But something else is catching his attention these days: tariffs.
President Trump announced plans to impose a 50% tariff on all goods from Brazil – the world’s largest coffee producer and source of about 30% of U.S. coffee imports. This looming tariff threat has sent shockwaves through the U.S. coffee industry, generating fears especially among small roasters like Lost Sock.
“When people go to the local coffee shop, whether Starbucks or another, they will mostly likely be buying some form of Brazilian coffee,” says Monica de Bolle of the Peterson Institute for International Economics. “A 50% tariff will kill that market.”
Yerxa says he’s trying not to react until he knows the final details, but says profit margins are already tight. “It’s the uncertainty that’s probably the worst.”
“In the end, the consumer will bear the brunt of this,” he says. “I don’t want to raise prices, but we’re looking at potentially 30% higher costs for coffee.”
Trump’s message rings hollow for business owners
The Trump administration defends its trade policy and the dozens of tariffs 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 administration’s reasoning falls flat. The U.S., aside from small coffee farms in Hawaii and California, does not produce coffee on the scale that Americans consume it.
“It’s a tax on Americans’ mornings,” says Barr.
The last few years have been volatile for the coffee industry, contributing to a big increase in coffee market prices even last year, says Barr. Price volatility can be attributed in part to the COVID-19 pandemic and consecutive low-productivity coffee harvests in Brazil last year, says Yerxa. These weak harvests, in turn, are due to drought and high temperatures and, more generally, climate change, which has negatively impacted coffee harvests for several years.
Why customers will pay more
So much coffee in the United States comes from Brazil because of 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 to form the backbone of their blends,” says Yerxa, referring to the blending of beans from different regions.
Lost Sock, the D.C. coffee company, is best known for high-end single-origin coffees sourced from nearly a dozen countries a year. But it uses Brazilian beans in some of its blends – products that stem from its long-standing relationships with two cooperatives in Brazil.
Bringing those beans from Brazil to D.C. is a long process that involves international partners, contracts negotiated months or years in advance, and a lot of planning. Lost Sock coordinates with producers and exporters, and places orders for 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 incorporates that final price per pound into Lost Sock’s wholesale and retail prices.
And where do the tariffs come in?
This initially is something the importer would have to pay as soon as they bring the beans into the U.S., he says. “That tariff would just be another item on the invoice we receive when clearing that coffee. And then, for us, we take the price of that coffee, 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 go into effect on August 1st, it could take a few months for customers to feel price increases in coffee shops or restaurants. That’s because those businesses usually buy in large quantities and have coffee stock that can last a while – stocks like that can last a few months, she says. People who buy their coffee beans at the supermarket may feel the tariff impacts more quickly.
“For people who don’t stock up, that is, the regular consumer who goes to the supermarket… and grabs their coffee, those price increases might be felt sooner,” says de Bolle, adding that coffee is perishable and stocking beans only takes a business or consumer so far.
The ripple effects
In the long term, if it seems like these tariffs will persist, Lost Sock may have to consider dropping Brazilian coffees from some blends, says Yerxa. However, breaking long-standing partnerships in Brazil really isn’t 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, also face tariffs.
“It’s really, really difficult, and more like impossible, to truly 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