Although the US July Consumer Price Index (CPI) report showed food prices remained essentially flat month-over-month, tariff-sensitive commodities including coffee beans, specialty teas, and spices are showing signs of inflation, causing concern among small businesses that sell these products.

Data from the US Bureau of Labor Statistics reveals that coffee prices surged 14.5% year-over-year in July. The average retail price for ground coffee reached $8.41 per pound. Overall, food prices remained unchanged from the previous month but were still 2.9% higher than the same period last year.

Jessica Simons, owner of Bethany's coffee shop in Lincoln, Nebraska, reported that her coffee prices have increased 18% to 25% since January. "We've had to add a 3% surcharge on coffee because we're waiting for new menus to be printed to reflect the new prices. But prices are changing so fast that we can't reprint menus every time there's an increase," Simons explained.

The Tax Foundation, a US think tank, recently calculated that nearly 74% of US food imports, valued at approximately $163 billion, face tariffs. Josh Teitelbaum, senior legal counsel at Akin, noted that companies importing natural resources like coffee or coconut water cannot simply relocate production back to the US to avoid tariffs.

"Their ability to shift sourcing to other countries is limited. No matter where they import from, they're constrained by higher tariffs. The US government does have policies to adapt to this reality in certain situations, but that work is still ongoing," Teitelbaum said.

Anjali Bhargava, founder of Anjali's Cup, stated that virtually all of her company's caffeinated ingredients come from overseas. Anjali's Cup specializes in producing retail spice packages containing turmeric and tea blends. The company sources spices from Vietnam, Thailand, Africa, and South America; tea and pepper from India; saffron from Afghanistan; and specialized retail packaging from China.

"Consumers will still drink tea, but they might buy lower-quality products from companies that can absorb these costs. Small startup brands that value integrity and authenticity could be completely squeezed out of the market," Bhargava said.

Bhargava expressed concern about the 50% tariff imposed on Indian tea, noting that retailers like Whole Foods, where her products are sold, have little room for significant price adjustments. "President Trump described this as punishment for India, but it primarily hurts US small businesses, companies and their employees, as well as American consumers. A 50% tariff on tea, not to mention tariffs on my spices and other essentials, will severely erode my already thin profit margins and may force me to raise prices, which consumers are already hesitant about given the influence of larger competitors."

"These tariffs force businesses to choose between maintaining quality and staying operational. Many small businesses simply won't survive," Bhargava added.

There are also concerns that tariff impacts will spread further to grocery stores and other products. Heather Rice, head of KPMG's product division, noted that cuts to the Supplemental Nutrition Assistance Program (SNAP) under the Great Beautiful Act could further exacerbate these effects, leading retailers to lower their expectations.

"Nearly 9% of spending comes from these beneficiaries. I think the variety of products on shelves will change based on supply sources. From our growing and export perspective, we can supply blueberries 12 months a year. But I think due to tariffs, we might see this change, where we may not be able to supply blueberries year-round. I think we might see a shift in product mix," Rice said.

Non-US grown fruits and legumes also face tariff issues, including bananas and kiwi fruit. Bhargava argued that global trade wars harm everyone's interests.

"Coffee shops are already facing survival challenges and need to protect their profit margins to stay operational. Once high-quality products become unattainable, the entire supply chain is affected. These tariffs will eliminate distinctive, high-quality merchants, causing the US market to lose its vitality."