https://finance.yahoo.com/news/us-coffee-prices-spike-due-203207154.html
How much are you willing to pay for coffee? To what extent can business owners continue profiting on this non-essential good in spite of tariffs? Unfortunately, tariffs on Brazil, Colombia, Vietnam have contributed to an astonishing annual 19% increase in instant coffee since September 2024. According to the article, 99% of coffee is imported to the United States. Trump commented that some "unavailable natural resources” may be exempt from the tariffs, but coffee has not been brought to discussion.
Many manufacturing companies that are relocating to the U.S. have the ability to produce, regardless of climate. The contrary can be said about coffee bean manufactures, as the plants only thrive in a naturally warm and humid environment. Therefore, the cafe business is not as agile. Consumer prices are rising, reflected in the most recent CPI release. The CPI lacks substitution data, which could be prevalent in this situation. Consumers may substitute with other sources of caffeine, like energy drinks. Consequently, inflation data derived from the CPI may underestimate real behavioral changes in consumer spending.
I think rising coffee prices will definitely push some people to switch to cheaper caffeine options like tea or energy drinks. However loyal coffee drinkers will probably keep paying more because it’s a habit.
ReplyDeleteI agree, however, I also think that people also just like the sugar in it or different flavoring. I find it crazy how I would spend almost $10 for a small coffee (with tip and depends on place). I also think it affects how people will tip the workers.
DeleteI agree with your point about the coffee tariffs showing how dependent we are on imports. A 19% price jump really changes people's buying habits, and you’re right that CPI doesn’t reflect those substitutions. It’s interesting to see how small policy changes can go through the whole market
ReplyDeleteI think it's pretty interesting how you said a lot of the manufacturing companies are relocating to the U.S. It may stand to reason that if Trump stays steady on the coffee tax, the coffee industry will find a way to keep it's profits up in the U.S., and it may even have a positive impact on our country in the long-run due to more companies moving to the U.S.
ReplyDeleteIt is interesting to see how different areas of the economy are being affected by the tariffs. I never would have thought about the price of coffee being affected personally, but after reading your blog post, I can certainly see why. I am curious to see how this potential increase in price will affect large companies like Starbucks, but also the potential detriment it could have on all of the local coffee shops.
ReplyDeleteIt’s surprising how something as simple as coffee can show how global trade really affects everyday life. A 19% price jump is huge, especially for something so many people drink every day. Since coffee can’t be grown easily in the U.S., cafes and customers don’t have many options. It makes sense that people might start turning to cheaper caffeine options like energy drinks. It really shows how tariffs don’t just impact businesses, they hit daily habits too.
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