Try to follow this, let’s say the flowers Colombia exports to this country, with roses for Valentines Day now cost seventy-five dollars, now it goes up to one hundred. Their sales fall as fewer people can afford it, or maybe they buy carnations instead.
The increase does not go to Colombia, it goes to the US government. Now roses are a crop that can’t wait, they must sell or lose it all. So, they fold. But they sell other things, and they aren’t going to give us any breaks or deal with us on other matters.
You can only push countries so far; a temporary and brief win ends up with much longer negative outcomes. Your coffee for instance, that can be stored, from other countries that produce prescription drugs, they will not lower prices that Trump raised when he took them off Medicare or Medicaid.
This is bullying on an international level. But this isn’t a playground. Colombia will not forget this, small things or big things we might want will never get beyond the discussion stage. When you negotiate, you’re wise to leave the other guy with his dignity intact. Trump doesn’t do that. As he now represents this country? We’re going to be the last guy anyone goes to, trusts, turns to or helps. Which may be just what he wants.
Today Trump announce a 50% tariff on Canadian goods. “Payback’’ for Canada not agreeing to be part of the US and not sending electricity to this country. It’s the highest in history of any country. No more pretending that it’s usual or acceptable. The man is clearly mad.
You regularly buy coffee that is made in Colombia. You spend $20 each time you buy it. It’s one of the cheaper brands that at least tastes good. I mean, who drinks Folgers, right?
The tariffs kick in. In order to continue to make the same level of profits, the coffee company that makes your coffee increases their product to $25. You go in the next day and see the huge $5 jump. Oh man! That’s absolutely ridiculous!
You notice your 2nd favorite one is at $20 now. So, you decide to buy that instead. So now that Colombian company has lost a customer. You’re one of 100,000 who decided the extra $5 just isn’t worth it. So, they are losing business. This also means that people could lose their jobs as the amount of coffee they have to produce is reduced.
Now, if they eat the cost instead, their profits go down, and the same outcome could happen. They can’t afford to produce as much as they are, so they have to cut back and lay people off. Because this is happening with multiple companies in Colombia, they have to fold. Either that, or tell their businesses that they will have to find new customers, which the U.S. is one of the biggest coffee drinkers so that’s difficult for those businesses.
If they pass the tariffs to the buyer, they can still make money. Less of it, but a lot better than eating the cost in most cases.
The US grows some of its own coffee but it’s not very much. Definitely not to be solely the only one to meet the demand. Thus, no matter what, prices are going to rise. You can do this for any industry. As a consumer or as a business. It plays out the same, they have to pass on the costs to the consumer or potentially face bankruptcy.
If Americans pay the tariffs like Democrats say, why did Colombia fold so fast after President Trump imposed 25% tariffs on their products?
I will make this really simple. Let’s say for example the average American spends 125 dollars per year on Colombian coffee. With approximately 400 million Americans that’s a total of 50 billion per year worth of coffee sold.
Now there are 25% tariffs, but Americans are not suddenly going to spend 156.25 per year on coffee, instead they will keep spending 125 and just buy less of it. So uncle sam now gets 10 billion a year in tariffs, and Colombia now sells less coffee because the price effectively went up, and they get 40 billion in sales.
It’s not that Colombia paid that 10 billion, they just never got those sales. It still hurts them, but the consumer pays it. In the end it’s just another tax that reduces your buying power, do you adjust like everyone else does and you buy less. That eventually slows your economy and hurts everyone. And by the way, it’s also a very regressive tax, that means it’s disproportionately paid by the poor. The billionaires they spend the 156.25 per year cause they don’t notice the change, the average joe, well he drinks less coffee.
