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In 2022, a standard 12-ounce package of coffee from the specialty brand Don Carvajal Cafe was priced at approximately $17. Over recent years, founder Hector Carvajal has raised prices to $20 per bag, and he now anticipates that tariffs could force him to increase that minimum to $25, equating to a 25% hike.
Carvajal is among a multitude of American entrepreneurs facing the challenge of balancing rising costs due to tariffs while striving to retain their customer base.
On April 2, President Donald Trump announced a new strategy involving added import taxes. However, he later revised his approach, suspending country-specific tariffs for the next 90 days while maintaining a universal 10% tariff on all trading partners, with China facing a much steeper increase of 145%.
“The journey of coffee to the consumer involves numerous logistical steps,” explains Carvajal, 28, who runs his business in Westchester, New York.
This complexity arises because the vast majority of coffee consumed in the United States is not domestically grown. Carvajal sources his coffee from countries including the Dominican Republic, Colombia, Brazil, and Costa Rica, placing it under the 10% tariff.
The imposed tariffs “impact farmers, consumers, and business proprietors alike,” he emphasizes.
“Every entrepreneur is feeling the strain,” Carvajal adds. The coffee sector has endured pressure for several years caused by climate change and supply chain limitations, as highlighted by NBC News reporting. “For those of us in the coffee trade, the current situation feels particularly daunting,” he observes.
Adapting to new trade policies demands significant time, resources, and effort from small enterprises. “We find ourselves spending time explaining price adjustments to our customers,” Carvajal notes.
Nonetheless, providing clear explanations for price changes is essential for maintaining customer loyalty and understanding, according to Carvajal. “Customers dislike paying increased prices for products that were less expensive the week before,” he states.
While he strives to keep prices reasonable for his clientele, this sometimes results in reduced personal income and reinvestment capacity. “There’s a limit to how much you can do this if you wish to sustain your business,” he asserts.
The High-Quality Goods Landscape
Collars & Co., a men’s fashion brand located in Bethesda, Maryland, relies on factories worldwide for its production, including those in China, Pakistan, Colombia, and Brazil.
Justin Baer, the company’s founder and CEO, has been preparing for the possibility of higher tariffs since the U.S. presidential election last November. He has been in active discussions with partner factories regarding strategies to manage increased expenses without shifting the burden onto consumers: “We have worked to import as many goods as we can, as swiftly as possible, ahead of tariffs being enacted.”
“We currently have shipments en route,” he mentions. “Our concerns are mounting.”
According to Baer, one of his foremost objectives is to preserve relationships with both overseas factories and customers. Collars & Co. reported $40 million in sales last year, as per documentation reviewed by CNBC Make It.
This success hinges on maintaining high product quality, which Baer attributes to overseas manufacturing capabilities.
“It would require substantial time and investment to develop U.S. factories that could approach the standards established by overseas manufacturers,” he points out.
Only 2% of clothing purchased by Americans is cut and sewn domestically, with about half of that designated for military use, according to The New York Times.
“Workers abroad excel at clothing production and are remarkably efficient, resulting in superior quality,” Baer adds.
Economic Implications of Tariffs
During earlier confirmation hearings, Treasury Secretary Scott Bessent outlined three objectives of Trump’s tariff strategy: establishing fairer trade practices and enhancing U.S. manufacturing, increasing federal revenue through higher taxes from importers, and using tariffs as a bargaining tool in negotiations with other nations.
The immediate repercussions for the stock market were severe; following the announcement of new tariffs, the Dow Jones saw a decline of over 4,500 points, while the S&P 500 plummeted by 12%, marking losses not experienced since the pandemic.
In response to Trump’s announcement of a 90-day pause on specific tariffs, stock prices initially surged, only to decline again the following day, erasing much of the gains from this brief rally.
Baer expresses cautious optimism, yet he remains uncertain whether the tariffs will ultimately boost the U.S. economy through increased revenue and job creation.
Post-election, Baer and his partners started exploring domestic manufacturing options, questioning: “Can we achieve comparable luxury quality here while offering an affordable luxury price in the U.S.?”
Regrettably, he concludes, “thus far, the answer has been no.”
Carvajal’s focus remains on navigating the immediate challenges posed by escalated production costs.
“I recognize that this predicament is now a pressing concern for my business,” he states. “I must find solutions that work for both my operation and my customers, all while adjusting our pricing structure.”
“I’m simply trying to cut through the confusion,” he adds.
Source
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