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Investing.com -- Starbucks (NASDAQ:SBUX) shares fell 1% following President Trump's threat of tariffs on Colombian exports, which could potentially impact the coffee giant's supply chain. The decline comes after a tumultuous week in trade relations between the United States and Colombia, with the two nations narrowly avoiding a trade war.
The market's reaction was influenced by concerns over the cost of coffee imports, as Starbucks is known to source a significant portion of its coffee from Latin America. While the specifics of the company's reliance on Colombian coffee remain unclear, the threat of a 25% tariff raised alarms about potential increases in the cost of goods sold.
TD Cowen's analyst Chris Krueger highlighted the unpredictability of the Trump administration's trade policies, suggesting that the "chaos premium" increases the President's leverage in negotiations. Krueger also pointed to the possibility of further tariff impositions on other nations, which adds to the uncertainty for companies with global supply chains like Starbucks.
Stifel analyst Chris O'Cull offered a different perspective, suggesting that the tariff concerns might present a buying opportunity for investors. O'Cull noted that Starbucks has historically secured its coffee supply well in advance, which could mitigate immediate impacts on the company's financials. He also mentioned that a weaker Colombian peso could offset some effects of the tariffs if they were enacted.
The situation deescalated on Sunday when the White House announced that Colombia agreed to accept deported migrants on U.S. military aircraft, averting the proposed tariffs. The draft orders for tariffs and sanctions will be held in reserve, contingent on Colombia's compliance with the agreement.
Investors are now watching closely to see how the resolved trade tensions and ongoing negotiations might affect Starbucks's operations and financial performance in the coming fiscal years.
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