Deep Dive
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Hi there, I'm Ed Butler. Welcome to Business Daily from the BBC World Service. Today, it is 100 days since Donald Trump was sworn in as President of the United States. Thank you very much.
Thank you. Nice crowd. What a good-looking group of people. But for many, it's not the inauguration which has provided the template for his presidency so far. It's the 2nd of April. Or, as Donald Trump would put it... My fellow Americans, this is Liberation Day. Waiting for a long time. Yes, this was the day that he announced huge trade tariffs on every country around the world, impacting almost every industrial sector.
For decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike. American steelworkers, autoworkers, farmers, and skilled craftsmen, we have a lot of them here with us today.
They really suffered gravely. They watched in anguish. And President Trump has set out to change this with what he calls reciprocal tariffs or import taxes, a flat rate of around 10% worldwide at the moment to bring back American manufacturing jobs, he hopes, and to boost the domestic economy.
That, at least, is the theory. Today, we're going to be looking at the practice, though, of what these tax rises mean for just one small group of businesses, those involved in importing Haitian-style foods into the United States. Have things just got really spicy for the US spice trade? That's Business Daily from the BBC. So let's see what I've got here. There we are, black pepper. This is cumin. Cumin.
Oh, it smells great. Coriander, cinnamon, black mustard seeds. Oh, and a personal favourite, smoked paprika.
Oh yes. Now, all of these ingredients mean a great deal to me because I love to cook a curry. And drop them in some hot oil, fry them up with the vegetables and perhaps meats that you might want for that curry. You've got yourself a delicious meal on your hands. You might not have given much thought, of course, about how all of these goods in your cupboard do reach the country where you live. In fact, a lot of us take for granted the splendid global cuisine which we now enjoy. The
The spice industry, though, it's one of the oldest and one of the most lucrative over the centuries. It does rely on the unhindered flow of goods from places where these wonderful spices grow to where they can't. And that's where tariffs may have thrown a spanner into the works. Some of the countries with the largest export markets for spices, Cambodia, India, Vietnam, for example, have had large tariffs imposed on them by President Trump.
30, 40, close to 50% in some cases. Many of those tariff rates have now, of course, been frozen, held at 10% for the next few weeks at least. But the countries of origin for these products are watching and waiting with concern. I spoke to Lien Hoang, she's chairwoman of the Vietnam Pepper and Spice Association, about the initial 46% tariff that her country was facing. A large amount of the US black pepper supply does come from Vietnam. And to
And to put this into context, this would mean a $10 bag of black pepper could cost a US consumer $14.60 in the future. For the 46, I don't think our industry can survive.
We are expecting and forecasting maybe it would go between 0, 10 or 20 maximum. Beyond that, I don't think anyone would go to Vietnam and buy pepper. They don't want to either buy or ship the consignment at the moment.
How are you feeling right now? But if it's higher...
It's really bad. Yes, they're really, really bad. It's really, really bad. That's Lien Huang. Well, tariffs are paid by the importer, in this case, businesses inside the US. To find out how these measures could impact them, I've been speaking to two spice importers, Sana Javari Kadri, who is founder and CEO of a company called Diaspora, which imports South Asian spices, and Ori Zohar, who is co-founder of Burlap and Barrel.
They're both based in California. If it's meant to bolster American industry, we would love a carve out because we are an American employer and we send so much money to the U.S. Postal Service and FedEx and even our whole customer support team is in America. So we've been trying to behave like an all-star American company, creating jobs, bringing money into the industry. And now we recently, our estimates are that we're going to have to budget between $150,000 and $300,000 for tariffs this year.
And that scares us a lot. And so we don't want to pass this along to the partner farmers. We don't want to increase prices for American consumers. And so we're in this funny place where we're just trying to cut costs everywhere we possibly can while kind of holding our breath, waiting for a sanity check to come to all these tariffs.
Sana, I mean, well, we had these very large tariff regimes basically being applied country by country. India was 26%. That was the original tariff regime. India's 26, Sri Lanka's 44. Right, 26 and 44. So those are your two main growing, where the farmers are located who produce the spices that you tend to import.
Now that's all been cut to 10%, at least for the next few weeks. So how big a deal will that be for your bottom line, for your market? Do you think you can bear it?
Yeah. So, I mean, this was the year after almost eight years in business, we were really hoping to be profitable. But I think once we've measured what that 10% tariff is going to do for us, it means that we're not going to break even. And so we're getting all these calls from our farm partners, like my pepper farmer is frantically calling me from the hills of Kerala being like, should I dry this pepper on my farm and send it to you?
Or should I just hold it because, you know, maybe it'll be better in 90 days and we don't know. So we're simply saying send it and we'll eat the cost as a small business. You know, we employ 25 people. I'm seeing peers, specifically small businesses, closing down like day after day. It's pretty scary. Wow. Let me bring in now Eric Newmolin. He's Director of Sales, Marketing and Research and Development at Hella Spice Group.
Canada Inc, which is a very major development and dry blending company right now. You deal in things like these spices, but also other ingredients that go into food. You are looking presumably down the barrel here because whilst these other guys are relatively small companies, you are a much bigger producer and virtually everything you are sending into the US market is now going to be subject to much higher costs.
It's not only that. We're in a little bit different situation. We're operating not only with a blanket tariff, but also with the effects of CUSMA, which was the free trade agreement between Canada, U.S. and Mexico that was put into place in 2016-2017.
What's happened is the products that were actually mentioned in the agreement, we're seeing no tariffs on those. But the ones outside of the agreement, we're seeing 25% tariffs on those products.
So, what's very interesting is, just like in the automotive industry, where parts go back and forth across the border between Canada and the U.S. to assemble cars, we're seeing the same thing with food ingredients. For example, the black pepper that we buy, we buy in container loads.
directly from India or Vietnam. Other things like cumin. Our demand isn't enough to buy a container load of cumin, so we're buying it actually from a U.S. company that distributes to a Canadian company which sells it to us.
So there's a lot of different stages involved. And we're seeing 25% price increases immediately on a lot of different ingredients. For example, something like brown sugar has gone up 25%. Meat proteins that are used in a lot of different products, they're up 25%. And so a lot of our customers that we supply to, which are all the branded products that you see in your grocery stores, they're accepting it.
And in Canada, what they're doing is they're breaking out the cost of the tariffs. And there's government programs that are being put into place right now that help them offset those costs. So the consumers don't see it directly. Okay.
So you're saying basically, and this is an important point, that every type of, let's say, ready meal, pretty much, or certainly any complex processed food product that you might see in a U.S. supermarket is...
is now going to be looking at much higher prices. It's not just some of these exotic foods we've been discussing, but pretty much everything. The standard expectation right now is that U.S. prices, with the impact of most of these tariffs, are going to go up 7% to 8% right across the board.
And it's also because domestic U.S. processors, if their competition is being tariffed, they're not going to sit there and allow their prices to remain the same. They're going to use it as an opportunity to increase their profitability in the marketplace. Sana, I referred there to exotic food products. Perhaps I should apologize for using that term around what you and Ori are doing here. But some will argue this is
Perhaps an off mainstream area that you work in. This isn't something that normal average Americans perhaps will enter their frame of reference. Perhaps it's a bit niche. Perhaps motherhood and apple pie will prevail here and people will just go back to regular old fashioned American foods.
Well, I think the reason I take issue with the use of exotic flavors is in a way spices have become as American as apple pie. So somebody wrote to us saying, why can't you just move more of your supply chain to America? And I said, you're going to have to stop consuming black pepper.
pepper. Like the day that we stop eating that in just about every cuisine that we eat here in America. Yeah. Then we can source less exotic ingredients. But until then, I think there's really a place for what Ori and I do. Ori. Yeah. I think we're, we're small businesses. We're entrepreneurs trying to bring things from where they grow the best from where there's a history and a heritage of producing these ingredients that, that we've become so accustomed to being broadly available to,
at our dinner table and our lunch. If you go back to just things that are grown domestically and locally, you're gonna have a pretty bland and uninteresting diet. I think that would be the first thing to spark a revolution in America.
You're listening to Business Daily from the BBC World Service with my guests Ori Zohar and Sana Kadri, both US spice importers, and Eric Newmeline of Hellespice in Canada, a major development and dry blending company based there. So Eric, let me turn to you. Do you have a plan right now about what you're going to charge your customers for these higher costs you're facing?
We are holding our prices firm for the next 30 days because we do not know what's going to happen. After that, we've told all of our customers that the prices are going to go up to what the prices are going to be. And they're going to get squeezed because the retailers are actually refusing to accept price increases in a lot of cases.
So, you know, somebody is going to be paying the impact of the tariffs and it's going to be, I believe, the processors. And then hopefully at some point in time, the consumers will start to see some creep through of the impact of tariffs.
Sana, are you reigning back all your spending this year? For me, this time of year is performance review season for my team. This time of year, everybody wants a raise. They worked really, really hard and they want to earn more money. And I want to give them that more money. But when I have no guarantee of profitability this year, paying those raises to hardworking Americans gets very difficult.
And that is a penalty on employees that really, really shouldn't exist. Eric, is this going to change your industry in the food production processing end? Is that going to change very dramatically as a result of these higher costs and this disruption? Well, yes, it is actually.
On average, we develop 200 new products a month. And we've seen in the last two months that drop down dramatically. As a company, we were going to put a facility in the U.S. in 2025.
And right now we have decided to hold off on doing that until we get some certainty as to what's going on. So I know ourselves and our competitors are basically closing the shutters, you know, batting it down the hatches, trying to figure out what's going to happen for the next couple of years before anybody starts spending a lot of money. But Eric, as you say, this is all going to force up prices across the board. How much, if just the 10% tariff remains in place...
How much is that really going to be felt, do you think, in U.S. supermarkets in the weeks and months to come? Well, you have to think that on average in a processed food product, let's take a hot dog because it's a very traditional style product. 30% of what goes into a hot dog or one third of it is other ingredients besides meat and water. So of that 30%, 3% to 8% is spices.
So spices, you know, go up by 15 to 20 percent on average. You know, you're talking about two to three percent in the end product cost where you're going to see a price increase on a hot dog. Is there no upside here for American food producers?
I haven't seen it yet. I think that's the history of the spice trade and the spice industry is the right thing to do is to work with places where it's the right climate and the right terroir. Just to give you an example, we bring in Herbes de Provence from Provence in France. What's the American equivalent of that? Like the point is that they come from other places.
Sana.
of how their everyday foods come to them is kind of a reality check that's gonna have to happen. - Ori. - Well, Eric mentioned hot dogs, corianders and hot dogs. Like all I'm trying to say is that like a lot of these like spices that feel from far away places, or I don't know if I cook with them, they're already so entrenched into the American diet and food system. And I think that we're, everyone's trying not to raise prices, but a lot of people are starting to raise their prices. But on the other side of it,
Companies in an uncertain environment, we have to slow down hiring. We have to slow down promotions. We have to slow down innovation. We have to now take all this money that we would have put towards all these fun, interesting ways to build our businesses into these tariffs that are going back to the U.S. government. Do you think Americans really care about this? Do you think they will be listening to this program and thinking,
Here's a bunch of rather niche food producers with very niche subject areas complaining about, you know, what's not working for them. But there is a bigger goal here, a bigger goal, which is making America more self-sufficient when it comes to its food production. But I think the one thing that Americans aren't realizing is they can't be self-sufficient.
Chris
Chris Ying has this great line that is when food moves around, it gets better. And I think that's like should really be like the mantra of this episode, because that's just so true. And it's been true across history that cuisine improves by movement. And I think these tariffs are going to highlight just how true that is.
That's all we have time for. My thanks to Eric Newmillin at Hella Spice Canada Inc. and to Sana Javari Kadri at Diaspora and Ori Zohar at Burlap and Barrel. My thanks to you, of course, for tuning in. That's it for this edition of Business Daily from me, Ed Butler, and my producer, Hannah Bewley. See you soon.
If you're just starting your personal finance journey, Financially Inclined is exactly what you need. I'm Janelia Espinal, host of Financially Inclined, and each week we discuss money lessons you need to know. Listen to Financially Inclined wherever you get your podcasts.