Roasted Coffee Tangled in Tariffs
Dan Bolton
In response to U.S. steel and aluminum tariffs, Canada promptly levied a 10% surtax on a large selection of U.S. products valued at $16.6 billion.
These include roasted coffee and range from beer kegs and fence wire to orange juice, catsup, yogurt, sleeping bags, felt pens, and toffee.
Meanwhile, the European Union has released a 10-page list of its own proposed tariffs against U.S. goods that includes coffee grinders but not coffee and is preparing a complaint against the U.S. at the World Trade Organization.
The list of goods marked for “retaliation” by its allies are preliminary, and the immediate impact on the closely tied economies is being assessed, but the decision by U.S. President Donald Trump upends long-standing trade policy.
In general, the world's leading coffee importing countries (United States, Canada, European Union and Japan) do not levy any import duties on green coffee imports. Prior to the onset of what is now a trade war, the U.S. and Canada did not levy import duties on processed coffee. The exemption on soluble coffee remains, but significant quantities of roast coffee cross the border.
Trump said the days of the U.S. being taken advantage of in trade deals “are over” and that America will “agree to a fair deal, or there will be no deal at all.”
Canadian Prime Minister Justin Trudeau said in response that Canadians are polite but firm and when push comes to shove, “we know how to use our elbows in the corners on the hockey rink.”
The 10% Canadian surcharge is effective July 1. This means that the millions of pounds of coffee Starbucks roasts in Seattle for its Canadian outlets will now cost 10% more crossing the border. Washington State businesses are responsible for $198 million per year in Canadian trade.
Starbucks Executive Chairman Howard Schultz spoke out against the tariffs, expressing concerns over the impact of “political rhetoric” on relations with China.
“Every time we have had a conflict of trade it has resulted in a downturn in the economy,” he told CNN. “A country like America should be building bridges, not walls.”
Tim Horton’s, the largest coffee retailer roasting in Canada, stands to benefit. Shares of Second Cup, Ltd., the second-largest specialty retailer by cafes with 286 locations, have been falling for some time and continued their decline from $3 per share to $2.17 as of this report. But Second Cup also roasts in Canada, which means the tariffs may ultimately prove beneficial in pricing against U.S. based competitors. Second Cup has a market cap of $43.3 million.
Canadians, who share the world’s longest open border with the U.S., are affronted that the decision is based on “national security” concerns. They are also driving across the border in droves to purchase American goods at lower prices and wondering whether border guards in the future will pull them over to search their sacks of groceries.