Brewing Trouble? Coffee Prices May Spike if Trump Tariffs Return

The Coffee Crisis on the Horizon: An Introduction

Imagine your morning ritual: the rich aroma of coffee filling the air, that first blissful sip that jolts you awake. But what if that perfect cup suddenly becomes significantly more expensive? That's a real possibility, and it's something Margaret Nyamumbo, founder of Kahawa 1893, a US-based coffee company, is deeply concerned about. Along with investors, consumers and economists, Margaret Nyamumbo is keeping a close eye on President Donald Trump’s back-and-forth tariff policies, and for good reason. Her U.S.-based coffee company, Kahawa 1893, sources its beans from growers in Kenya, Rwanda, Tanzania and the Democratic Republic of Congo.

Meet Margaret Nyamumbo: A Coffee Entrepreneur with a Mission

Nyamumbo, a native of Kenya, left her job in investment banking to found her company in 2018, driven, she says, by a desire to support female farmers in Africa. It’s a mission that’s resonated with customers, who can “tip” farmers from a QR code on each bag of Kahawa 1893 they buy. This innovative approach not only delivers exceptional coffee but also empowers the women who cultivate it. In 2023, the company sold more than $3 million worth of coffee, according to documents reviewed by CNBC Make It.

From Finance to Farming: A Passion Project

What inspires someone to leave the world of high finance for the complexities of coffee importing? For Nyamumbo, it was a deep-seated desire to create positive change. She saw an opportunity to directly support female coffee farmers in Africa, providing them with fair prices and a platform to showcase their incredible work. It's a testament to the power of ethical business and the impact one person can have.

Tipping with a QR Code: Revolutionizing Fair Trade

The QR code "tipping" system is genius, isn't it? It allows consumers to directly contribute to the livelihoods of the farmers behind their coffee. This level of transparency and direct support is a game-changer in the coffee industry, fostering a stronger connection between consumers and producers.

The Big Picture: America's Coffee Dependence

Kahawa 1893 is hardly the only U.S. coffee firm importing its beans — just 1% of the coffee Americans drink comes from domestic growers, according to the National Coffee Association. So, we are almost entirely reliant on imported coffee. Think about it: almost every cup of coffee you drink comes from somewhere else, across oceans and continents. This reliance makes the US coffee market particularly vulnerable to global trade policies.

The Tariff Threat: A Potential Price Hike Looms

Nyamumbo expects some price disruption in the global coffee market if tariffs increase. But why are tariffs such a big deal for coffee importers and consumers alike?

Understanding Tariffs: A Simple Explanation

Simply put, tariffs are taxes imposed on imported goods. When tariffs increase, the cost of importing coffee beans rises, and businesses like Kahawa 1893 have two choices: absorb the cost, which cuts into their profits, or pass the cost on to consumers, leading to higher prices.

The Ripple Effect: From Bean to Cup

The impact of tariffs is like a pebble dropped in a pond. The initial impact is felt by importers, but the ripples spread to roasters, retailers, and ultimately, to us, the coffee drinkers. Higher tariffs mean a higher cost of doing business, which inevitably translates to a higher price at the coffee shop.

Trump's Trade Policies: Uncertainty in the Coffee Market

President Trump's trade policies have been characterized by a certain degree of unpredictability, creating uncertainty in various markets, including the coffee market. This uncertainty makes it difficult for businesses to plan and invest, potentially leading to supply chain disruptions and price volatility.

The Global Coffee Supply Chain: A Complex Web

The coffee supply chain is a complex and interconnected web, involving farmers, processors, exporters, importers, roasters, distributors, and retailers. Any disruption in this chain, such as increased tariffs, can have significant consequences for all stakeholders. Imagine a finely tuned machine: if one gear is thrown off, the entire system can be affected.

How Tariffs Impact Small Businesses Like Kahawa 1893

Small businesses like Kahawa 1893 are particularly vulnerable to the effects of tariffs. Unlike large corporations, they often lack the resources to absorb increased costs or navigate complex trade regulations. For a company with $3 million in annual sales, even a small tariff increase can have a significant impact on their bottom line.

Beyond Price: The Ethical Implications of Tariffs

It's not just about the price of your morning coffee. Tariffs can also have ethical implications, particularly for companies like Kahawa 1893 that prioritize fair trade and support for farmers. Increased costs could force them to reduce payments to farmers or compromise their ethical sourcing practices.

The Consumer's Perspective: Are You Willing to Pay More?

Ultimately, the question is: are consumers willing to pay more for their coffee? Will they continue to support ethically sourced brands like Kahawa 1893, even if prices increase? The answer to these questions will determine the future of the specialty coffee market in the face of potential tariff hikes.

Navigating the Uncertainty: What Can Be Done?

So, what can businesses and consumers do to navigate this uncertain landscape? Are there strategies to mitigate the impact of potential tariffs?

Diversifying Sourcing: Exploring New Origins

One strategy is to diversify sourcing, exploring new coffee origins that are not subject to the same tariffs. This can help to reduce reliance on specific regions and mitigate the impact of trade policies. But, is this practical if a business built it's entire brand on ethical and sustainable practices from one region?

Advocacy and Awareness: Speaking Out Against Tariffs

Another approach is to advocate for policies that promote free and fair trade. This can involve contacting elected officials, supporting industry associations, and raising awareness among consumers about the potential impact of tariffs.

The Future of Coffee: A Call to Action

The future of coffee is uncertain, but one thing is clear: we all have a role to play in ensuring a sustainable and equitable coffee industry. Whether it's supporting ethically sourced brands, advocating for fair trade policies, or simply being mindful of the impact of our consumption choices, we can all contribute to a better future for coffee farmers and consumers alike.

Conclusion: A Wake-Up Call for Coffee Lovers

The potential for increased coffee prices due to Trump's tariff policies is a serious concern. Margaret Nyamumbo's story highlights the real-world impact of these policies on small businesses and the livelihoods of farmers. As consumers, we need to be aware of these issues and make informed choices that support a sustainable and equitable coffee industry. It's time to wake up and smell the coffee – and understand the challenges facing its future.

Frequently Asked Questions (FAQs)

1. What exactly are tariffs and how do they affect coffee prices?

Tariffs are taxes on imported goods. When tariffs on coffee beans increase, importers have to pay more, which can lead to higher prices for consumers as businesses pass on those costs.

2. How can I support coffee farmers directly?

Look for brands like Kahawa 1893 that have direct-trade relationships with farmers or offer unique tipping models, like QR code tipping, where you can directly contribute to the farmer's income.

3. What can I do as a consumer to mitigate the potential price increase of coffee?

Consider buying coffee in larger quantities when prices are lower, exploring less expensive coffee origins, or adjusting your consumption habits (e.g., brewing smaller cups).

4. Are there any coffee-producing countries not affected by potential US tariffs?

The impact of tariffs can vary depending on trade agreements and specific policies. Researching the origin of your coffee and the trade relations between that country and the US can help you make informed choices.

5. How do tariffs impact small coffee businesses compared to larger corporations?

Small businesses often lack the resources to absorb increased costs or navigate complex trade regulations. They may be forced to raise prices more drastically than larger corporations or cut payments to farmers, making them more vulnerable to the effects of tariffs.