STiR coffee and tea magazine

8 STiR coffee and tea | 2025 Quarter 3 Autumn (Sep/Oct/Nov) US Slaps World's Largest Coffee Producer With 50% Tariffs The US is puportedly — at this moment (subject to change) hitting Brazil with 50% tariffs and threatening to raise the rates on other BRICS-aligned countries. As US stockpiles of green coffee beans start to dwindle, industry professionals wait with bated breath to see if bipartisan lobbying convinces the Trump administration to make coffee exempt from tariffs. On July 7, Brazilian President, Luiz Inácio Lula da Silva, publicly pushed back against Trump's earlier claims that BRICS's (Brazil, Russia, India, China, and South Africa) policies were anti-American and that other countries newly aligned with them (Iran, Ethiopia, Egypt, Indonesia, Saudia Arabia, and the United Arab Emirates) could expect to see higher tariffs as well. The public argument quickly escalated on social media with claims of Brazilian judicial injustice and censorship of American companies. The Brazilian real dropped by 2% after the announcement. US Buys the Most Brazilian Coffee The US president cited a supposed unfair trade deficit with Brazil as partial reasoning for the new 50% tariff. In reality, the Office of the US Trade Representative states that after conducting around $92 billion in trade with Brazil last year, the United States actually achieved a $7.4 billion trade surplus. The US is Brazil's second-largest trading partner, after China. According to the Observatory of Economic Complexity (OEC), Brazil exported $11.4 billion worth of coffee globally in 2024. Not only is the US the largest coffee consumer in the world, but it also imports the most Brazilian coffee ($1.9 billion in 2024), equivalent to around 8 million 60kg bags. Approximately one-third of the coffee Ameri- cans consume is Brazilian. Levying 50% tariffs on Brazil will significantly increase coffee prices in the United States and have a major impact on the global coffee market, as buyers scramble to source from new origins with lower rates. Vietnam Strikes a Deal Trump also announced that the US has struck a trade deal with Vietnam, the world's second- largest coffee grower. In exchange for no tariffs on American goods, the US has reduced its tariffs on all Vietnamese items to 20%. However, transshipment goods from third-party countries that pass through Vietnam will still be subject to a 40% levy. Although Vietnam produces the most robusta in the world, it still needs to import coffee from other countries to meet the manufacturing demands of its massive instant coffee industry. It's unclear how much of the instant coffee coming out of Vietnam will be classified as transshipment by the United States. BRICS Countries Face Trump's Wrath India's hefty US-imposed 25% tariffs went into effect on August 7, but due to the country's ties with Russian oil, the Trump administration has now threatened to tack on an additional 25% putting India on the same level as Brazil. Indonesia recently reached an agreement with the US to reduce its rates to 19%. The OEC reports that Indonesia exported around $1.1 billion worth of coffee globally in 2023, and $275 million of that went to the United States. Indonesia is a vital origin for major US brands like Starbucks, and the US is the largest buyer of Indonesian coffee. While India and Brazil have robust economies, the weaker currencies of other BRICS countries, such as Ethiopia and Indonesia, are likely to suffer under higher tariffs. Lean Times Ahead US coffee prices have yet to dramatically increase, but this is expected to change once the stockpiles that many US importers and roasters accumulated before the tariffs initially took effect begin to run out. With limited domestic sourcing options, American coffee businesses can't avoid paying the new import duties. J.M. Smucker Co., which owns Folgers, Dunkin', and Cafe Bustelo, has already stated that green coffee is the company's most expensive raw material and blames its recent profit loss (Smucker's shares dropped 15.6% in June) on tariffs. The company warns that prices across the board will continue to increase as a result. By Diana Jendoubi Trump's threats against Brazil and other BRICS countries stun the global coffee industry. Coffee Report

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