Tariffs are perhaps the most direct existential threat to global coffee trade. Even the threat of US government tariffs for producing countries judge havoc at Futures prices (only to do it again after remaining a threat). But a modern round of tariffs was proposed. Last week, a 50% tariff for all Brazilian imports was announced and this can mutilate the global supply chain.
As reported CNNThe Trump administration sent letters to leaders of at least 22 different countries about tariffs planned for August 1. One of them was the President of Brazil Luiz Inácio da Silva. However, there is a threat of tariffs for Brazilian imports.
First of all, it is not completely clear that tariff goals on the second largest American trading partner behind China. According to CNN, in the remaining 21 letters, the Trump administration stated that they are taking “a special problem with trade deficits that the United States leads with other nations” (we import more of these countries than export) and that the tariffs “would be set in response to other policies that, they think, make American goods sold abroad.”
However, in Brazil, America has a surplus of trade worth $ 6.8 billion – which means that we sell as much for what we buy from them – and does not run a trade deficit since 2007. So what is the meaning of the tariffs? CNN suggests that this may have something to do with the footsteps of the former president of Brazil and Ally Trump Jair Bolsonaro “for the alleged attempt to make a coup.” Trump suggested the same amount in social media, calling this “witch hunt”. Meanwhile, the Brazilian government accepts the procedural and tariff threat to be related, and Da Silva says on Twitter that “Brazil is a sovereign nation with independent institutions and will not accept any form of care.”
The influence of these tariffs on the coffee industry cannot be underestimated. America imported $ 1.9 billion in Brazil in 2024, the fourth leading export. Brazil is the largest coffee producer in the world, and America is the largest trading partner – a third of all coffee in America comes from Brazil – and for Reuters50% of the tariff “can stop modern shipments of Brazilian coffee to the USA”
Coffee experts tell Reuters that tax would basically close all coffee purchases, because Roasters, already on gaunt margins of Razor, could not accept an additional fee that would be completely transferred. In this way, this would lead to huge shuffling in global trade. Brazil would have to see other trading partners, while America would start buying more from other countries, such as Colombia and Vietnam. But even this can cause a raise in prices for Americans, because Brazil “offers a much better value compared to an exorbitant other origin”, according to one of the coffee.
It is expected to affect the Futures market. After cooling the price from a height of USD 4.30/pound to below USD 3.00, it has already increased by 1.3% after the tariff announcement.
Of course, it is not clear whether the tariffs will actually come into force in August. Previous tariff threats have been postponed, and Brazil promised mutual tariffs in response, which will affect the export of $ 50+ billion from America. This is a developing situation and a lot can change within 18 days, but for now the proposed tariff looks like mutually destroyed than negotiations.
