Brazil, the world’s largest grower and exporter of coffee, finds itself at a crossroads as the United States considers imposing new duties on coffee imports. Indeed, the US is Brazil’s largest customer, with exports projected to be 8.14 million 60kg bags in 2024. This essential trade represents about a third of the US’s overall coffee footprint. As tensions continue to escalate, both Brazilian exporters and US roasters prepare for possible ramifications on the coffee market.
The terrifying tariff, if ratified as planned August 1, would cut off the supply of Brazilian coffee from exporting to the US. This state of play has understandably left industry stakeholders worried about the future of one of the most popular drinks in America.
Implications of New Duties on Coffee Imports
The suggested tariffs would completely prevent new shipments of Brazilian coffee coming to the US. Michael Nugent, a noted industry expert, warned that “a tariff of this size would all but shut down that flow. Brazilian exporters won’t absorb it. US roasters can’t.” This attached feeling goes to show the dangerous line drawn between import prices and market value.
The consequences of such a tariff would mistake likely echo beyond Brazil’s borders. If Brazilian coffee were to become more difficult to source, the US will certainly turn their gaze towards other coffee-producing countries. Colombia, Honduras, Peru, and Vietnam can help meet that supply. However, these substitutes fall short of Brazil’s quantities and/or competitive prices. Above all, countries are clamoring to get this source diversified. They’ll be swimming upstream, and it will be a monumental task to fill Brazil’s energizing role in the market.
“Bottom line: Brazil will sell its coffee elsewhere. The US will buy coffee from someone else — Colombia, Honduras, Peru, Vietnam — but not at Brazil’s volume or price,” – director of a trading house based in the US West Coast.
The Competitive Edge of Brazilian Coffee
In many ways, Brazil has made the global coffee market its playground. It accomplishes this by offering a higher quality-for-price ratio than more expensive coffee-producing countries. This comparative advantage has encouraged a significant number of countries around the world to depend on Brazilian exports. High quality and low prices helped by the massive scale of production have created an ideal combination, making Brazilian coffee a mainstay in roaster commercial and consumer blends.
Brazilian exporters are lined up and getting ready to take advantage. If the US does impose new duties, they will surely find a way to move their shipments to other markets. This possible change is indicative of a smart pivot to keep companies competitive and profitable in a rapidly consolidating and more competitive environment.
US roasters have been wary about the potential impact of these tariffs on the price paid by consumers. Coffee trade sources have cautioned that this new duty could triple the amount American consumers pay for a cup of coffee. If that’s the case, $10 could be just around the corner and prices may bust through their recent highs.
Consumer Impact and Future Outlook
The effects of these proposed tariffs are not limited to ongoing trade discussions. They would eventually trickle down to the American consumers that buy coffee every day. An increase in prices due to higher duties might just be enough to push some consumers away from their favorite morning tradition. Otherwise, consumers may simply look for cheaper options.
According to industry analysts, the current uncertainty in the coffee market is something that needs to be closely watched. Only with a strategic understanding of these new, treacherous waters will both Brazilian exporters and US importers be able to avoid unnecessary profit loss.
