Ethiopia, popular for its flavourful and high-quality coffee beans, is now facing issues as the new tariffs are modifying the coffee export industry. You might also know that the recent changes in US tariffs have affected Ethiopian coffee imports.
In this blog let us understand more about how the new tariffs pose challenges to the Ethiopian coffee exporters. We will also discuss the global trade changes that shape the coffee export sector in Ethiopia.
Global impact of new tariffs
The coffee industry in Ethiopia is not only affected by the US tariffs, but other countries that depend on coffee exports, like Brazil, Colombia, and Peru, are also facing significant challenges.
Moreover, the global coffee market also shows a major increase in prices. According to the latest reports, the demand for coffee is more than the supply, which increases the price of coffee.
Supply chain disruptions
The implementation of a new tariff is going to increase costs at all stages of the coffee supply chain in Ethiopia. Furthermore, from smallholder farmers to roasters, consumers have to bear the cost of the increase in tariffs. Many coffee producers in Ethiopia who have invested in sustainable farming have dealt with less profitable and exploitative trading systems due to uncertain demand.
Increase in costs
The Ethiopian coffee exporters are currently facing challenges due to a surge in production costs and inefficient logistics. To stay competitive in the coffee bean market, the Ethiopian coffee industry should become efficient in the coffee production and supply chain process.
The recent change in tariffs makes the issues faced by the coffee market more complex. By streamlining the Ethiopian coffee supply chain and logistics, the coffee industry can reduce costs.
A decrease in demand for coffee.
With the introduction of the new tariffs, if Ethiopian coffee becomes more costly, then some US buyers may prefer coffee from other countries or origins. This potential demand shift is going to affect the progress made by the Ethiopian farmers in building direct trade relationships.
Advantages of Ethiopian Coffee in the US Market
Though a new 10% tariff is imposed on Ethiopian coffee, it is less affected compared to other countries which have 46% and 32% tariffs. As a result of this, many coffee buyers may still prefer Ethiopian coffee beans.
However, despite new tariffs, Ethiopian coffee exports are increasing in volume and revenue compared to the previous year. Global demand for Ethiopian coffee and government support for smallholder farmers could be the major reasons behind the increase in demand for Ethiopian coffee.
How do new tariffs affect coffee roasters?
By adapting to the business practices, coffee roasters can navigate the impacts of new tariffs. They have to explore other options, as sourcing green coffee from high-tariff countries increases costs. In addition to that, the current retail and wholesale prices can increase due to a surge in cost, which can impact the demand of customers.
Ways to manage challenges from increased tariffs for coffee roasters
To reduce tariff-related price hikes, roasters can diversify their sourcing from different areas. Reviewing tariff rates of different countries and exploring regions with fewer tariffs can reduce the cost.
Coffee roasters can also work closely with coffee importers to understand the impacts of changes in tariffs. They will help to navigate the complexities of tariff applications.
The increase in cost for customers is unavoidable, so transparent communication with the wholesale and retail clients about the reasons behind the increase in price is important. After all, some customers appreciate transparent communication and will support the businesses.
The tariff can change quickly, so understanding the landscape and staying updated is very important. Following trade organisations and importers will help you to know recent changes and modifications.
How should Ethiopian coffee exporters face new tariffs?
- Streamline supply chain: To stay competitive in the industry, coffee exporters in Ethiopia have to improve efficiency in logistics and storage.
- Branding: By investing in local roasting, packaging, and branding, Ethiopia can export fully finished coffee products to the global market with high profit margins.
- Market Diversification: Depending on a single export market like the US is too risky. So, for Ethiopian coffee exporters, it is better to expand operations in alternative markets such as China, South Korea, UAE, etc.
- Partnerships: Actively engaging with trade organisations, industry groups, and government representatives is important. Such efforts result in long-term benefits as a coffee exporter.
Conclusion
The new tariffs imposed by the US government are about to add cost and complexity for the Ethiopian coffee exporters. However, compared to other origins that face much higher tariffs, Ethiopian coffee still has a competitive advantage.
As Ethiopia is adapting to the new tariffs and challenges, the quality of Ethiopian coffee plays a major part in maintaining its global position. However, the unique, flavourful Ethiopian coffee will remain a favourite for coffee connoisseurs.
