US coffee shops face a bitter reality as tariffs put pressure on local businesses, resulting in steep price hikes for the country’s beloved beverage.
The price of coffee in the US is set to rise as tariffs put pressure on local businesses. The vast majority of coffee consumed in the US is imported, with most coming from Brazil and Colombia.
Tariffs and Their Impact
Since April 5th, ‘coffee imports have been affected by a 10% US tariff against most countries.’ This has resulted in price hikes for coffee suppliers, who are now passing on the costs to consumers. Jorge Prudencio, owner of Bread Bite Bakery in Washington DC, said his Colombian-imported coffee supplier has increased prices after the tariffs went into effect.
Tariffs are taxes imposed on imported goods by a country's government.
They can be used to protect domestic industries, generate revenue, or retaliate against trade partners.
The average tariff rate varies across countries and products, with some tariffs as high as 20% in the United States.
Tariff policies have significant impacts on global trade, influencing prices, employment, and economic growth.
For instance, a study found that a 1% increase in tariffs can lead to a 0.5% decrease in international trade volume.
Businesses Feel the Pinch
Many US businesses are feeling the effects of the tariff hike. Kamal Mortada, manager of Au Lait café just down the street from Prudencio’s bakery, said he has seen a decrease in customers buying coffee with syrups and milks. Instead, people are opting for plain coffee, leading to a reduction in sales.
The Rise of Inflation
Inflation has been rising steadily, reaching a 40-year high under former US President Joe Biden. This has led to price hikes across various goods, including coffee. The price of eggs, a crucial ingredient for many bakeries, has also increased significantly, affecting businesses like Prudencio’s.
The US economy is driven by a mix of industries, including technology, healthcare, and finance.
The service sector contributes significantly to GDP, with sectors like retail, hospitality, and professional services playing crucial roles.
Manufacturing, particularly in automotive and aerospace, also remains vital.
The country's strong consumer spending power, fueled by low unemployment rates and rising wages, supports economic growth.
Additionally, the US has a highly developed financial system, facilitating international trade and investment.
A Threat to Small Businesses
The tariffs will represent just the latest in a series of price hikes for small businesses like Qualia Coffee Roasters, run by Joel Finkelstein. He expects sales to decrease due to the tariff hike and other factors, including Trump’s decision to cut funding to USAID, which supported some coffee growers in South America.
A Bitter Price Hike
As the tariffs continue to affect the price of coffee, businesses are struggling to adapt. With prices rising by 25% at Au Lait café, Mortada has changed his consumer habits, opting to brew coffee at home instead of visiting Starbucks. The price of a cup of coffee is expected to rise again, affecting businesses like Telescope Coffee in San Francisco.
A Need for Support
Despite the challenges posed by the tariffs, Prudencio remains confident that people will still come to his shop and buy coffee. However, he acknowledges that recent inflation has affected other parts of his business, including the bakery side. The price of eggs, a key ingredient, has increased significantly, affecting the overall health of the US economy.
A Call for Action
The impact of tariffs on small businesses like those in the coffee industry is a pressing concern. As the US economy continues to navigate inflation and trade disputes, it’s essential that policymakers consider the effects on local businesses and provide support where needed.
