Dr Sangeeta Khorana

Do Economy Professors know how much of your coffee cup cost is made up by roasted coffee cost? Apparently not. Do they need to? Normally not. But, when they’re going to explain on BBC Breakfast how tariffs on roasted beans will affect the cost of your coffee cup, they’d better do.

At least according to the backlash on this morning’s BBC Breakfast statement about post-brexit tariffs on roasted coffee.

Dr Sangeeta Khorana is a Professor of Economics at Bournemouth University and she made her appearance on today’s BBC Breakfast to make her point about how post-brexit trade trariffs will affect your everyday life.

She picked coffe as an example: she said that a 7.5% standard WTO tariff on roasted coffee would bring the average cost of your post-Brexit coffee cup from £2.7 to £2.8. This is a 3.7% increase. If you do your maths, you’ll understand that this statement carries an assumption: the cost of roasted coffee on a £2.7 coffee cup is 50%.

Regardless of what you think about Brexit and how a no deal will affect your everyday life, you should be aware that these numbers are either incomplete (i.e. there’s something else causing that 10p increase) or tout court wrong: your coffee cup cost is made up by staff wages, electricity, coffee machine lease, water, venue rent, cup itself and then beans. The bean themselves cost less than 5% of your coffee cup.

A +7.5% in their cost would roughly cause a 1p increase in the cup price, not 10p.

On a broader scale, in the UK we’re currently assisting to a strange debate around post-Brexit tariffs. While, on the other side of the ocean, Trump’s tariffs are seen as an unfair weapon used against China to boost US economy, here in the UK the narrative is all about how tariffs on EU goods will disadvantage and arm UK economy. So your iPhone will cost x% more and you German car will be y% more expensive. On one side the country imposing tariffs is supposedly gaining an unfair advantage, on the other the country imposing tariffs is suffering a disadvantage. As Dr Sangeeta Khorana correctly pointed out, tariffs are an instrument countries use to protect their internal industries and products. Not the reverse. No country will ever complain when their export tariffs are scrapped by the UK and the 7.5% WTO tariff is a cap towards the top, not the bottom.

Professor’s scare talk on post-Brexit tariffs backlashes against her at BBC Breakfast.