Tariffs are perhaps the most immediate existential threat to the global coffee trade. Even the threat of tariffs by the US government on producing countries wreaked havoc on futures prices (only to do it again once the threat was stayed). But there’s a new round of tariffs being proposed. A 50% tariff on all Brazilian imports was announced last week, and it could cripple the global supply chain.
As reported by CNN, the Trump administration sent letters to the leaders of at least 22 different countries about tariffs scheduled to take effect on August 1st. One of them was to Brazilian president Luiz Inácio da Silva. But the threat of tariffs on Brazilian imports stands out.
For one, it isn’t entirely clear the purpose of the tariffs on America’s second largest trading partner, behind only China. Per CNN, in the other 21 letters the Trump administration stated they take “particular issue with the trade deficits the United States runs with other nations” (we import more from these countries than we export to them) and that tariffs “would be set in response to other policies that he deems are impeding American goods from being sold abroad.”
With Brazil, though, America has a $6.8 billion trade surplus—meaning we sell that much over what we buy from them—and hasn’t run a trade deficit since 2007. So what is the point of the tariffs? CNN suggests it may have something to do with the trail of former Brazilian president and Trump ally Jair Bolsonaro “for allegedly attempting to stage a coup.” Trump has implied as much on social media, calling it a “witch hunt.” Meanwhile, the Brazilian government takes the trial and tariff threat to be related, with da Silva saying on Twitter that “Brazil is a sovereign nation with independent institutions and will not accept any form of tutelage,” and that “any measure to increase tariffs unilaterally will be responded to in light of Brazil’s Law of Economic Reciprocity.”
The impact of these tariffs on the coffee industry cannot be understated. America imported $1.9 billion in coffee from Brazil in 2024, the fourth leading export. Brazil is the largest coffee producer in the world and America is its largest trading partner—one third of all coffee in America comes from Brazil—and per Reuters, a 50% tariff “could halt new shipments of Brazilian coffee to the U.S.”
Experts in the coffee trade tell Reuters that the tax would essentially shut down all coffee buying because roasters, already on razor thin margins, couldn’t assume the additional fee, which would be passed entirely onto them. Thus it would lead to a massive shuffle in the global trade. Brazil would have to see out other trade partners, while America would begin to buy more from other countries, like Colombia and Vietnam. But even this is likely to result in a price hike for Americans, because Brazil “offers way better value versus expensive other origins,” according to one coffee trader.
This is expected to impact the futures market. After the price had cooled from its $4.30/lb high down to under $3.00, it already jumped up 1.3% after the tariff announcement.
Of course, it is unclear if the tariffs will actually go into effect in August. Previous tariffs threats were postponed, and Brazil has promised reciprocal tariffs in response, which would impact the $50+ billion in exports coming from America. It is a developing situation and a lot could change in 18 days, but as of now, the proposed tariff looks like mutually assured destruction than bargaining.
Zac Cadwalader is the managing editor at Sprudge Media Network and a staff writer based in Dallas. Read more Zac Cadwalader on Sprudge.
