Scott Horton Show - Just the Interviews - 5/2/25 Bill Pepin on How Tariffs Are Threatening Your Morning Coffee

Episode Date: May 4, 2025

Scott is joined by Bill Pepin, the owner and roaster of Moon Does Artisan Coffee, for a look at how Trump’s tariffs are throwing the global coffee market into chaos. Pepin explains that the continental US cannot physically grow the coffee Americans demand and runs through how new trade barriers are cutting off supply lines that do not have alternatives.    Discussed on the show: Scott Horton Supreme Breakfast Blend Bill Pepin is the owner and artisan roaster Moon Does Artisan Coffee This episode of the Scott Horton Show is sponsored by: Roberts and Roberts Brokerage Incorporated; Moon Does Artisan Coffee; Tom Woods’ Liberty Classroom; Libertas Bella; ExpandDesigns.com/Scott. Get Scott’s interviews before anyone else! Subscribe to the Substack. Shop Libertarian Institute merch or donate to the show through Patreon, PayPal or Bitcoin: 1DZBZNJrxUhQhEzgDh7k8JXHXRjY Learn more about your ad choices. Visit megaphone.fm/adchoices

Well, it's been steadily growing. We transitioned from being a coffee house slash roastery, and we decided for economic reasons around Lake Livingston to just focus on the roasting part of the business. So we shut that part of the business down, and now we're totally a national online coffee roastery. And we're definitely getting help from your show to be that national coffee.

coffee. Oh, great. Well, that's definitely great to hear. So, Moondos, artisan coffees is a little bit of a mouthful. What if I was a little bit slow and didn't get the joke? Would you please explain? Well,

I'll make it super brief. Originally, I had a coffee house down in Mac Allen, Texas along the border. And I didn't roast coffee, so when I was going to open the shop up, I went hunting for coffees. And back in those days, it was just when the internet was starting. So you'd go down

the library and look up industries. And I happen to find this company I never heard of called Starbucks. And I called them. And they were rude. The lady was very rude. And she says, well, we only supply our own outlets. We do not sell to the public, even though they were listed under coffee roasters. So that kind of stuck in my mind. And I went ahead and started my coffee house. And then when I, we decided to sell it because we were having kids and we wanted to focus on the family. And I told my wife, if we ever get back in the business, we're going to, I want to roast my own coffee and we'll be the anti-starbucks and we'll call ourselves Moondos. It was just a joke. I just joke when my, but she loved the name.

And then a number of years later, we had an opportunity to open a coffee house. We said, hey, let's call it Moondos. I said, well, that was just a joke. But my daughter and son and wife all liked the name. So that's how we became Moondos, the anti-Starbook coffee roaster. That's great, because no offense to people in the audience who like Starbucks, but I hate Starbucks coffee, man. I don't want no fancy this and that stuff.

I just want black coffee with a little bit of sugar in it. And then theirs is just always so nasty, man. Well, there is a reason. it that the coffee is very different. For one thing, I only deal with single origin specialty coffee. It's the top 1% of all coffee produced. It's the best of the best. And Starbucks is so big that they really cannot, they would wipe out the entire specialty

coffee industry. So they sell stuff that's below the 1%. They have to because of the sheer size of their outfit. and then because they mix all these different coffees and they're not single I'm talking about their primary coffees for espresso and all that to make their drinks that's a blend of who knows what I blend with a purpose like your blend was blended to create a certain type of coffee for make it a good morning beverage and but with them it's blended because of this they have to they don't you know

So you got coffees from all these different sources randomly thrown together. So Starbucks roast very, very dark, and that kind of covers up everything. So if you roast the coffee extremely dark, you get the dark taste dominates. We do dark roast, but I do it my way. My dark roast is several shades lighter. It still has a nice dark flavor to it, but you can still taste the characteristics of the bean. I don't like that level of roasting, and that's one way where the anti-starbucks, we simply do not roast what they call the Seattle style of roasting, which is it's very dark. There's a lot of roasters out there to do it, Black Rifle pretty much roast their coffee that level too.

We just personally didn't like it. So we do it our way and people are really responding to it. So that's, you know, we just do what we do. We are who we are. Well, good. All right, so this shouldn't be too bad of an infomercial. Let's talk about economics. How's the international coffee business lately?

A mess. Why? Well, COVID started the problem. When we first got in the business in 2021, coffee was quite a bit less expensive than it is. Raw coffee. I'm talking about the import of stuff I get down in Houston that is unroasted than I roast it. it's gone it's more than doubled since then that's the first problem supplies are are not as stable as they used to be it started out being affected by COVID then the next big problem is the drought in Brazil last year Brazil is the number one producer hands down a coffee in the world they produce a lot of the lower grade stuff that ends up in Maxwell house and Folger and all those types of, you know, the mass-produced coffees.

They're a big producer of that, but they also have high-quality specialty coffee, too. They had a serious drought, and it caused the ripples throughout the whole industry. Coffee has traded a lot like oil. It's a world commodity, and if a major producer has problems, it affects the other, because everybody starts changing their coffee-buying habits. The roasters have to switch over to a different cost. coffees and things of that nature. So that is a big part of it.

So we've already got record high prices for raw coffee because of the drought and still some effects from COVID with the shipping problems that that caused. So those factors are already in place. And then now we got this tariff. So the tariff is now creating even more uncertainty, especially since it's on again and off. Right now, they have imposed a 10% tariff on all coffee-producing nations. I mean, it's over, it's not just coffee-producing countries,

but for my purposes, what my business is affected by is every coffee that I sell except Mexico is affected. Mexico is excluded at this time temporarily, but we don't know. they could impose a 24 or 25% tariff on that and that might affect coffee. Well, but that's going to protect all of the American coffee growers like in Kansas and Nebraska, right? No coffee there. The only, the, this is the, this is why I've been kind of on a tirade to say that if you're, okay, if you're going to use tariffs to try to equalize things, that's one thing. But you need to use it like a sergeant scalpel, not a nuclear bomb. And that's what I'm criticizing the way Trump is doing it, is that he is, right now it's 10% on everybody, practically in the world.

For the coffee industry, every single coffee I carry is hit by that except the Mexico. But Mexico is very high right now because everybody's scrambling to buy it because it doesn't have a tariff on it. So it creates shortages and instability, and that's part of what's going on. But everything just got hit in early April with a 10%. So that's in place now. Now here's the worst part of it is we got hanging or hanging over our heads is a reciprocal tariff. Now they put that on hold, but one of the countries, now remember, He said that the Scott Horton blend has Sumatra from Indonesia.

Indonesia has a potential 32% tariff, and that would hit coffee, because I check this with the coffee trade magazines. It would be imposed on coffee. And Sumatra is a very popular coffee worldwide. It's one of the popular blending coffees. And the other country, Ethiopia that we get coffee, it has a 10% one. Now, that one doesn't appear to have. in a reciprocal, but it's already getting hit with 10%.

And they've had their own problems with weather just a few years ago. So these countries, I want to stress, these are not wealthy countries. Indonesia has a couple islands that are doing okay, but overall, they're pretty poor countries. And for a 32% on the Indonesia, I was shocked, to be honest. I don't know what they're doing to make Trump mad. They would threaten them with a 32%. Yeah. Hey, y'all, let me tell you about Roberts & Roberts, Brokerage, Inc. Nobody trusts the U.S. dollar anymore. Foreign governments are stocking up on gold instead of $100 bills. One, they know they

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Now I mean is this going to be the complete margin of failure Where the international coffee trade At least in terms of American demand is going to break down and we're going to all just be drinking Mexican coffee and liking it. We call it victory coffee. The problem is Mexico is a pretty big producer, but they're far from the biggest. They could not supply the United States by themselves. No way.

I run into short-I deal with some pretty big importers out of Houston. And there are times that the Mexico coffees, I get one from the Chiapas Mountains. to me it's the best quiet it's wonderful coffee mexican coffee is very good um but the really good stuff is only going to be grown in those regions it's in the southern end of mexico is the where the coffee's grown and it's you very often run into it running out right now they're out the ones that i get because there was a run on it because of the tariff threats and the fact that Mexico at this point doesn't have one. So this is what happens. This is why you get shortages because you get drastic changes in buying habits of the roasters. I have coffees I want to have

stably available all the time. So that's one of the things I try to do. I try to pick coffees that I like, but also coffees I can get. And that has not gotten a lot harder for all the reasons and it's been made much worse now with the threats of tariffs because there's a lot of uncertainty it's a 90 day suspension on the reciprocal tariffs but we don't know what's going to happen after 90 days and of course like oil coffee is priced on kind of a futures you know a coffee can sit in a warehouse they already have it but it can go up while it's sitting in the car in the warehouse before I even buy it because they're they're pricing it based on what they're going to have to pay to replace it.

Man, you better send me a lot now, or it's too late. Well, I've got some good news for you. Before all this hit, I tried to be ahead of the curve because I do pay attention to this. And I did buy, I have quite a bit of Ethiopia on hand, and I have a lot of Samatra. I just bought a whole bunch of Sumatra. So I'm okay for a while. I'm trying to ride this out. So Scott Horton Blinn is in no danger of being out of stock.

I want folks to know that. Great. And again, everybody, just go to Scott Horton.org and click the link in the right hand margin. And you can drink good coffee and help support this show and help support a good business that's helping to support this show too at the same damn time. So that's really great. And I think it's important, Scott, for folks to realize just how big the coffee industry is in the United States. But it's important to know what part of the industry is big. We do not grow coffee, as we've discussed. Hawaii only produces a tiny bit.

It's $50 to $80 a pound, so only affluent coffee customers can even afford Kona. I can't even get it here locally. I don't think it makes it past the West Coast, so little of it's produced. So the big part of the industry is what you do with the raw bean. It's the processing. it's the roasting and then it's the coffee houses which are very

struggling now coffee I've been reading in the trade magazines that coffee houses all across America are having a hard time making a profit because of the record high cost of coffee they can't just jack up the cup of coffees you know 100% or whatever

without risking losing customers so they're trying not to raise prices but their profit margins are pretty thin inflation is such a destructive force it's just behind everything you know i always used to like to say about how the federal reserve is really just take almost any even social problem in this country it all comes back to this inflationary money but then of course the congress that passed the act the presidency that signed it but still it's just and i'm not the best you know economistician or whatever those guys are called but uh and i don't know exactly all of the pluses

and minuses of hard money but i know it's got to be better than this well there's certainly uh the inflationary dollar uh the way that it's it's set up is doesn't help um you know it's the purchasing power seems to be getting weaker and um and and and it's a big threat honestly Scott, because let me give you some quick numbers from the National Coffee Association and give people an idea. We import about $8.2 billion

while we did that in 2003, $8.2 billion worth of coffee. That, once it filters out into the economy of the United States, turns into $343 billion of added value of

roasting it, distributing it, and all of that. The coffee industry is responsible for over two million jobs. That's $100 billion in wages per year. But all of this, this is so important for folks to focus in on, is based on what you do with the raw coffee. We don't produce it. 99% of the coffee imported is from tropical countries because we cannot grow it here.

We're too far north. We don't have the right of climate except for Hawaii, and they only have a tiny little growing zone so there is no way that will ever be a producer of raw coffee so there's no that industry can't there's nothing to protect the only thing a tariff is going to do is put an already strained industry under more pressure and that is our end of the industry and so you're looking at a industry that is really only going to be our end is going to take the hit. Trump likes to talk about

he's doing more damage to China or you name the country. But in this case here, I can show with absolute certainty when you look at the numbers that it will hurt Americans disproportionately, not the countries that produce it. Because they can

sell their coffee elsewhere. Coffee is a international drink. It's lots of people drink coffee all over the world. markets can get switched around if we make it so hard for the importers then we're going to start having coffee shortages and i don't know about you i got i love my coffee in the morning and i don't want to be doing without it america runs on coffee dude you know your brand and also other people's brands uh yeah i don't know what i would do without it um all right listen i better let you go i have got

much work to do and I'm sure you do too but thank you so much for coming on the show and thank you so much for sponsoring the show and thank you so much for feeding me such great coffee all the time I really well you're very welcome and I appreciate the the attention that you brought to our company and that now this issue because it's it is a very important issue to us personally as well the other roasters around the country yeah we're all going to get a real big lesson in economics here real soon in protectionism and it's pluses and minuses and it's going to hit home on issues like this to a lot of people in a place we're not expecting yeah but I hope people can relate that you know and just think about it coffee's nice and relatable for a lot of people but

spices just think about all the things that are not grown in the United States that we depend on in our food chains and you can see that this can be become a big problem pretty quickly if it's if it's used too indiscriminate them yeah got that right all right well thank you again phil appreciate it thank you all right you guys that is phil pepin he is at moondose artisan coffee dot com and what you should do is not go there what you should do is go to scott horton dot org and then click the nice picture in the right hand margin there it'll take you over there and then you can get scott horton blend and help support this show and help support a good company that's supporting this show.

Thanks for listening to Scott Horton Show, which can be heard on APS Radio News at Scott Horton.org, Scott Horton Show.com, and the Libertarian Institute at libertarian institute.org.