Tariffs could brew trouble for Americans' daily cup of coffee

NEW YORK: For many Americans, the day doesn't begin without a cup of coffee. But a new round of tariffs on coffee imports may soon make that daily ritual cost more.

Coffee prices in the United States jumped 14.5% in July from a year earlier, with the average retail price for a pound of ground coffee reaching 8.41 US dollars, according to the US Bureau of Labour Statistics.

The increase came before the United States imposed a 50% tariff on coffee from Brazil earlier this month, the world's top producer, a move that could push coffee prices even higher.

"A 50% tariff would not only affect us, but likely eliminate all Brazilian coffee coming into the United States," said Dan Hunnewell, co-founder of Coffee Bros, a New York-based coffee roastery. "It's just not sustainable."

The company's founding brothers launched an online petition urging an exemption for coffee, saying that these new policies are "choking" global trade. "These tariffs were designed to boost domestic manufacturing, but coffee cannot be produced at scale in the United States," said the petition.

"You can't reshore coffee. You can't grow enough coffee in the United States. Hawaii and Puerto Rico together produce less than 1% of what the US consumes. It's impossible to make up the other 99 %," Hunnewell said.

The United States consumes over 3 billion pounds (1.36 billion kg) of coffee every year, making it the world's largest coffee market. From coffee giants to small and mid-sized business brands, the impact of rising tariffs is being felt across the industry.

"Tariffs have hit us from a multitude of areas," said Hunnewell. While Coffee Bros doesn't source its coffee from China, the company relies on Chinese suppliers for packaging, and prices have surged.

"That price has increased, not only for the packaging itself, but just shipping out of China has become more expensive and lengthy," said Hunnewell.

However, alternatives in the United States are limited, he added.

"You cannot get the same quality in the US that you can get out of China. And those that actually do make the coffee bags we put our roasted coffee in, in the US, they get all of their raw materials from China," Hunnewell said.

"So no matter what, if you try to order your coffee bags from a local company, all of their raw paper and foil-lined bags, all that material is coming from China. You're still, in one way or another, getting hit with a tariff."

Major coffee retailers are also grappling with the fallout. Starbucks could see a 3.5% annual increase in costs for its packaged beans and ready-to-drink beverages division, according to TD Cowen analyst Andrew Charles.

Starbucks has indicated that it will freeze prices through fiscal year 2025, though its CEO Brian Niccol has not ruled out future adjustments, Yahoo Finance reported.

US food and beverage manufacturer J.M. Smucker, which owns popular coffee brands like Folgers and Cafe Bustelo, has implemented multiple price hikes since October 2024. The company plans a fourth increase this year, citing higher green coffee costs and US tariffs on imports from Brazil and Vietnam.

"The areas where we see exposure from tariffs are, first of all, in direct materials. Within direct materials, the primary driver is green coffee, which we view as an unavailable natural resource in the United States. So we procure from Brazil and Vietnam, among others," Tucker Marshall, chief financial officer of J.M. Smucker, said during the company's earnings call in June.

Industry experts said that while tariffs on Brazilian coffee could drive up prices, the bigger challenge for US coffee companies is maintaining flavour consistency. Coffee is typically blended to a specific flavour profile that consumers expect, and even small changes can affect customer satisfaction.

If Brazilian coffee becomes less desirable due to tariffs, the market will inevitably seek alternatives, and finding a replacement is "very difficult and fraught with danger," said Michael J. Nugent, president of MJ Nugent & Co., a futures risk management firm.

Consumers are accustomed to specific brands and flavours, and any minor changes in blend or taste can lead to lost customers, he added.

While understanding the administration's motivation behind tariffs, Hunnewell said, "They're moving too fast and not really understanding the complexities of every business that can be impacted."

"Coffee, chocolate, tea -- tens of thousands of businesses are affected by tariffs, and these small businesses cannot in any way bring their operations back to the United States," Hunnewell said. 

By RSS/Xinhua