The Effect Of Brexit On The Price Of Coffee

2
582

We’re told that coffee will go up in price should we have the temerity to leave the European Union without a deal. This is the usual misunderstanding – or lie – about the effects of WTO tariffs of course.

Most coffee is traded in US dollars, meaning the price paid by British importers is affected by any market volatility – such as the Brexit vote, which caused a 13% drop in the value of sterling. With most of the UK’s coffee imported from the EU, Brexit itself could be even worse. If we crash out with no deal, says Stemman, roast and ground beans will be hit with tariffs of more than 7%. And if you were thinking you would just stay home: the price of instant coffee – comprising two-thirds of the 95m cups consumed daily in the UK – is also expected to rise by 9%.

WTO tariffs are maximums that may be charged, they are not minimums of levels that must be charged. So, as we leave we can set tariff levels to absolutely anything we want below those maximums. Given that we’ve not got a domestic coffee industry of any particular size the logic tells us that we should charge zero tariffs upon imports of coffee. To the extent that politics is logical that’s what we will do as well.

Brexit won’t put up coffee prices because of tariffs therefore. Or it will, but only if our rulers are insane. Which is an interesting implication – if you argue that Brexit will put up coffee prices because of tariffs then you are indeed insisting that our rulers are insane.