Editor’s note: President Donald Trump announced at 8:31 p.m. in a post on Twitter that the United States and Mexico had reached an agreement and the tariffs, which his administration had planned to implement beginning on Monday, are “indefinitely suspended.”
[O]ne of the largest producers of coffee in the world, Mexico is among the countries that source beans for the Middlebury-based Vermont Coffee Company.
But the tariffs of up to 25% the Trump administration has threatened to impose unless Mexico curbs migration across the southern border would likely change that, Vermont Coffee Company owner Paul Ralston said.
“That will probably mean the Mexicans won’t be selling coffee to us,” he said. “We probably couldn’t absorb that price increase.”
On Friday, it was unclear if the tariffs would go into effect Monday as Mexican and American officials were wrapped up in talks to try to reach an agreement on immigration enforcement that would assuage President Donald Trump.
But the potential ramifications of new restrictions on one of America’s top trading partners has set off another round of uncertainty among many in Vermont’s business community, some of whom have already weathered price fluctuations from the Trump administration’s previous trade actions.
For Vermont Coffee Company, the tariffs the administration has threatened would lead to a cost increase on Mexican coffee that would be hard for the company to manage, Ralston said.
That would likely lead the company to turn to suppliers in other Central and South American countries, though the transition could be difficult and would have a ripple effect, he said. Most organic decaffeinated coffee is processed at a plant in Mexico, making it a valuable supplier. Shifting to other countries also would come at a difficult time for Mexican coffee producers, who are recovering from several years of blight, he said.
“The whole thing with the tariffs and the disruption, it affects all of us, because we’re all buyers and sellers at one point in time,” Ralston said.
As the eighth largest importer to Vermont, Mexico is a significant though not monumental trade partner for the state. In 2018, $52 million worth of imports came to Vermont from Mexico. Though the total imports from Mexico is a fraction of the more than $2.2 billion imported to the state from Canada, Vermont’s largest trade partner, tariffs on Mexico would have an impact in Vermont, according to Economic Development Commissioner Joan Goldstein.
Ultimately, she said, it’s generally consumers who feel the impact of tariffs, and lower income people would feel it most acutely.
Businesses would be faced with the disruptive effect tariffs would have on global supply chains, she said. The higher costs of products from Mexico could cause some Vermont businesses that source items from there to look for other suppliers — though that is a burden for small companies.
“Vermont has a small economy and, you know, we’ve got a lot of small business, and they may not have the wherewithal to just go out and source additional places, different suppliers for their products,” she said.
If U.S. tariffs do go into place, it’s unclear if Mexico would impose retaliatory tariffs, which would impact Vermont business that export to the country’s southern neighbor, according to Goldstein. In 2018, Mexico was Vermont’s 11th largest export market, valued at $46 million.
The U.S. has been enjoying a relatively good economy lately, with low unemployment and businesses expanding, Goldstein said. But imposing the tariffs could have a “destabilizing” effect, she said. “It would be a shame if this, what I’d call unforced error, would happen to slow things down.”
From construction to manufacturing, Vermont businesses in a range of sectors are keeping an eye on the situation. But while there’s wariness that new tariffs could impact building materials, textiles, food products and more, there’s uncertainty about how specifically those changes would manifest, which can pose a challenge for businesses.
Companies like predictability, Charles Martin of the Vermont Chamber of Commerce said Friday.
“I think when you have somewhat volatile circumstances like we’re facing right now, it makes it a little bit more difficult for those businesses to project their costs,” Martin said. “All of that boils down to consumers. Consumers are going to pay more because businesses will need to be paying more for these products.”
Marc Leblanc, who is responsible for buying products for the Vermont-based retailer Lenny’s Shoe & Apparel, is in the process of ordering stock for next spring. Amid the uncertainty about potential Mexican tariffs, many suppliers have committed to locking in the prices they’re currently advertising for products. However, some suppliers have said that if tariffs do go into effect, they’ll absorb only some of the cost, which would leave retailers like Lenny’s to handle the rest of the increase.
That leaves Leblanc to decide if it’s still worth stocking that item at a higher price.
“If I don’t find that it’s cost effective to bring it in for our customers, I’ll try to find an alternative,” he said.
It’s not the first time Leblanc has faced uncertainty when ordering products for the store. Last fall, after the tariffs on China went into place, Leblanc got an email about an order he had already placed informing him that cost of the products would be adjusted up by between 5% and 10%.
It’s typical to change orders from certain companies year to year, adjusting for changes like when a product is offered in a new color. But Leblanc says the fluctuations in pricing due to changes in trade policy is new.
“I’ve been doing this for eight years, and it’s never been an issue before honestly,” he said.
Middlebury College economist Kristina Sargent anticipates that the impacts of tariffs in Vermont would be “small overall, but very concentrated in particular industries.” The state’s aerospace industry might be more susceptible, for instance, because Mexico is a large producer of manufacturing components.
Vermonters could also feel it at the gas pump, she said. Mexico is the third largest supplier of petroleum products to the United States. Food products are another area that could feel a difference. Mexico is the largest supplier of agricultural imports to the U.S., including fresh fruit and vegetables.
“There is surely an avocado toast joke here,” she said of the impact on agricultural products. “But I think that’s a big one.”
While tariffs are likely to have impacts on American consumers and businesses, Sargent is skeptical that they would achieve the Trump administration’s objective of stemming migration over the southern border. Typically, she notes, people decide to migrate because they are seeking better opportunities, often leaving what they see as a bad situation behind.
“If you make Mexico’s imports to the United States more expensive, that actually hurts Mexican production, it actually hurts the economy there, which makes it even more beneficial for workers to leave,” she said. “So it could actually exacerbate the problem that it’s supposed to be solving.”
If tariffs are put in place, there could be pushback from the international community related to the question of whether it is legitimate for the U.S. to target trade with the objective of cracking down on immigration, she said.
“It’s not clear to me that a tariff is the right policy tool for the problem that is being posed to be solved by them,” Sargent said.
For some, the pressures related to tariffs are concerning.
The Vermont Coffee Company has already had to adjust prices related to tariffs the Trump administration has imposed, according to Ralston. Changes to the trade agreements with Canada drove up the cost of paper pulp, which the company uses for packaging.
“At some point along the line, the consumer is going to end up paying for all this,” Ralston said of the increased tariffs the Trump administration has pursued. “I almost wish that would happen sooner, so that might wake up Congress to how foolish this is.”
Ralston sees the economy under the Trump administration moving towards a structure more controlled by fewer, wealthier people.
“There’s been Republican and Democratic administrations that for decades have promoted free trade in North America and it’s been a really good thing for all three economies,” he said. “It’s just a real drag to watch it be torn apart by Trump.”
