In the world of coffee fare, there is only one constant and that is chaos. On Friday, the Trump administration announced exemptions from “Emancipation Day” tariffs on a number of imports that are not produced domestically. One of them is coffee. It was a monumental announcement, with National Coffee Association President and CEO Bill Murray in attendance issuing a statement the same day praising the move.
Saturday came and the Vice President of Brazil, Geraldo Alckmin, said that actually: there is still a 40% tariff on Brazilian coffee. This should tell you everything you need to know about the current tariff situation.
So what gives? Is this all just a massive sweep of the rug? A massive, handsome headline with no further content? Technically, Emancipation Day tariffs, the 10% reciprocal rates generally applied to all trading partners, no longer apply to goods such as coffee, tea, tomatoes, avocados, tropical fruits and spices. This is true, including goods originating from Brazil. The problem is that in early August, the US government imposed an additional 40% tariff on Brazil, which many believe is retaliation for the impeachment of former Brazilian president and Trump ally Jair Bolsonaro (who was subsequently found guilty of an attempted coup and sentenced to 27 years in prison). And this tariff is still in force.
Vice President Alckmin is reasonable in his response, calling the 10% cut “positive” and “a step in the right direction” – and it is, but only gradually. The tariff exemption was intended to provide “significant relief” to consumers who are suffering from rising grocery store prices (and blaming the president for it). However, when it comes to coffee, one of the key powerhouses, any exceptions that do not fully include Brazil will not work in the same way. In fact, removing the 40% tariff from Brazil alone would have a greater overall effect than removing the global 10% tariff. Because that’s how much we buy coffee from them.
If you want to know how this affects coffee prices, here’s a chart from: Inwestowanie.com showing today’s price movement for Arabica futures.
It looks like a recording of a ping-pong match. That’s why the coffee industry remains in chaos. The only certainty is uncertainty, and it will remain so as long as America, the world’s largest buyer of coffee, and Brazil, the world’s largest producer, are locked in a trade war.
