STiR coffee and tea magazine

24 STiR coffee and tea | 2025 Quarter 2 Summer (Jun/jul/Aug) Coffee businesses across the US are responding with characteristic creativity and resilience. These market adjustments come at an already challenging time for the cof- fee industry, which has been navigating historically high prices due to climate change-induced supply shortages in major producing regions. A key question, as Paparelli said, becomes whether these tariffs represent a temporary adjust- ment or a fundamental restructuring of global coffee economics. Historical Context and Domestic Possibilities Coffee's duty-free status in the US traces back to the 19th century—a prag- matic recognition of agricultural reality. Hawaii, Puerto Rico, and niche Califor- nia farms currently produce less than 0.1% of the global supply, with domestic production valued at approximately $54.3 million in Hawaii as of 2019/2020. "Coffee has actually been exempt from tariffs in the United States since the 1800s," noted Cason Crane, CEO of Explorer Cold Brew. While ac- knowledging current limitations, Crane expressed hope that "the administra- tion can negotiate some more targeted deals that recognize things the United States cannot grow coffee outside of Hawaii or Puerto Rico, which account for half a percent of worldwide coffee production." Some agricultural experts see potential in expanding domestic production, even if it remains niche. Research by the US Geological Survey indicates that shade-grown coffee in Puerto Rico could potentially serve dual purposes of biodiversity conservation and agricultural revitalization, offering a fascinat- ing intersection of environmental and economic goals. However, significant challenges remain in scaling production to meet even a fraction of national demand: it's hard to visualize a future where domestic coffee could satisfy the entire US market demand. Critics frequently compare the "Liberation Day" tariffs to the Smoot- Hawley Tariff Act of 1930, which many economic historians believe trig- gered a global trade war and deepened the Great Depression. However, the administration cites a 2024 study claiming that tariffs during Trump's first term "strengthened the US economy" and "led to significant reshoring" in certain manufacturing sectors. This fundamental disagreement about tariffs' economic impact reflects broader debates about globalization, national sover- eignty, and economic development that have intensified in recent years. The Multifaceted Impact on Coffee's Global Web The ripple effects through the global coffee supply chain are multifaceted and contested, like threads being pulled in a complex tapestry, with each tug affecting the entire pattern. As Royal Coffee, a major green coffee importer, explained, "Let's be clear—tariffs are taxes, paid not by foreign governments, but by American companies. That means us." Various outcomes are anticipated as the industry adapts: ● Consumer Price Effects: According to Yale Budget Lab, implement- ing the new tariffs would increase food prices by 2.8%, but coffee could see higher increases, given that the US imports 99% of its coffee. The administra- tion contends that these short-term cost increases could be offset by longer- term economic benefits—a trade-off that's hotly debated among economists and industry players alike. ● Supply Chain Adjustments: The high tariff on Vietnamese robusta coffee and other origins could lead to fascinating shifts in sourcing strategies, possibly benefiting other producing countries with lower tariff rates or creat- ing unexpected alliances. President Trump has stated that such changes are intended to encourage more reciprocal trade relationships, raising questions about whether coffee, a product inherently tied to specific growing regions, can fit into a framework based on reciprocity. ● Trade Relationship Evolution: The new tariff structure could reshape trade dynamics, potentially leading to new negotiations with producing coun- tries. The administration has indicated these tariffs can be lowered when trading partners "take significant steps to remedy non-reciprocal trade arrangements," creating a complex diplomatic chess game with coffee as one of the pieces. ● Industry Adaptation: While small roasters and importers with thin margins may face chal- lenges, this could also spur innovation in the in- dustry. Larger firms like Keurig Dr Pepper may leverage their scale to adapt more quickly, while specialty coffee businesses may emphasize quality and experience to maintain consumer willingness to pay premium prices. This could accelerate exist- ing trends toward premiumization and experience- focused offerings. A Chorus of Perspectives The coffee industry presents varied viewpoints on tariff policy—a microcosm of broader national debates about trade, globalization, and economic sovereignty. US Representative Lloyd Doggett tweeted on April 19, 2025, "Enjoy a cup of cof- fee? Expect higher prices due to Trump's tariff tax since 99% of the coffee Americans drink is im- ported." In contrast, Speaker of the House Mike John- son expressed confidence that despite initial dif- ficulties, the policy would ultimately "make sense for Americans and help all Americans." This re- flects the broader political divide on trade policy that has deepened in recent years, with traditional partisan alignments increasingly blurred. Industry leaders present differing assessments based on their position and perspective. Yan- nis Apostolopoulos, SCA CEO, told Daily Coffee News that tariffs exacerbate price volatility, poten- tially affecting producers and consumers in ways that compound existing challenges from climate change and market concentration. William "Bill"

• Cover