In the runup to the 2024 US presidential election one of the topics repeated over and over was that of tariffs on things imported into the USA. Trump talked about putting tariffs on virtually everything and Harris supported selective tariffs to protect American industry and national security. Where does coffee fall in this argument? Is it possible that the US will someday put high tariffs on all foreign coffee? If so, how much will tariffs raise the price of your coffee?
How Much Does the Cost of Green Coffee Beans Contribute to a Cup of Coffee?
As a rule, about one percent of a $4.00 cup of regular black coffee or $.0.01 goes back to the coffee grower. Coffee coops and large exporters earn more than coffee farmers do. Shippers earn more than coffee farmers do and distributors within destination countries make more than coffee farmers do. Since the vast majority of coffee that people buy is roasted from the store, coffee roasters make far and away more than other folks before them in the supply chain. When you get your coffee from a fancy coffee shop, their markup is also substantial as they receive green coffee beans and roast them before brewing your coffee.
How Much Are Current Tariffs on Coffee?
Current tariffs, at least before the next administration takes over, are such that imported green coffee pays no tariffs. Nor do roasted coffee beans, decaffeinated coffee, ground roasted coffee, or extracts and concentrates of coffee. However, roasted coffee with sauces or syrups added is subject to tariffs as is instant coffee. All coffee imports pay harbor maintenance fees and merchandise processing fees at the point of entry. If you buy coffee while on vacation and bring it back to the USA there is no tax but you do need to declare it.
Why Would Anyone Put Tariffs on Coffee?
For many years small countries all across the globe have put substantial tariffs on American cigarettes. The tariffs are paid upon entry and simply add to the cost of the cigarettes for the consumer. This is a very effective way to tax people without seeming to be levying a tax. The argument made against Trump’s desire to tax all imports from everywhere was that this was simply a poll tax that fell more heavily on the poor than the rich. Like the taxes on cigarettes in many countries such taxes would not be seen as taxes by consumers but rather as price gouging by merchants everywhere in the USA thus sparing the ruling party the pain of a consumer backlash.
A common reason prior to the Trump era for putting tariffs on things has always been to protect American producers. Many Asian countries have been guilty of currency manipulation as well as subsidies to their industries. This has made them able to undercut American prices. When an American industry has sufficient clout they can often get Congress and the President to enact tariffs on competitors even when the result is excess profits for the industry and not really protection against unfair competition.
How Politically Connected Are Hawaiian Coffee Producers?
The only coffee grown in the USA comes from Hawaii. Hawaii produces less than one percent of the world’s coffee. Hawaiian coffee is popular and expensive. Because of its high quality and fame, Kona coffee has substantial pricing power. And nobody else gets to (legally) sell “Kona” coffee but the folks in Hawaii. Because Kona producers can charge pretty much what they want and are selling all of their production it is unlikely that they are going to ask the government to put tariffs on all foreign producers.
What Would a Twenty Percent Tariff on Imported Coffee Raise for the Government?
The US is the biggest coffee importer in the world at $8.3 billion in 2023. Coffee from Colombia and Brazil was the biggest part of all imports. A twenty percent tariff would raise $1.66 billion revenue. The total price paid at coffee shops for coffee in the USA in 2023 was $48 billion. the total price for packaged coffee including instant coffee was more than $90 billion in 2023. If you tally up total retail sales it comes to about $140 billion a year. If tariffs on coffee imports were simply passed on to the consumer they would only raise the final coffee shop or grocery store price by about four-tenths of a percent. If, however, grocers and coffee shops chose to use tariffs as an excuse to raise prices it could be more!