President Donald Trump’s plan to impose a 50% rate on all imports in Brazil from next month would raise the price of coffee, whether served in coffee shops or prepared in the kitchen.
Such a fare would further press the coffee industry as prices hit the overall peak this year. Drought in Brazil and Vietnam, two of the largest coffee exporters to the United States have resulted in lower harvests in recent seasons, raising prices.
Consumers are already paying more at the supermarket. In late May, the average price of 450 grams of toasted and ground coffee in the US was $ 7.93, over $ 5.99 in the same period last year, according to the US Labor Statistics Department.
Brazil was responsible last year for over 8.1 million bags, each with 60 kilos of coffee, which entered the United States. Any sudden change would be a “loss situation for everyone,” said Guilherme Morya, Rabobank coffee analyst in Sao Paulo.
Flow reformulation
Brazilian suppliers, he said, are resisting and waiting to see if any negotiations will save them from the need to find buyers in other countries.
If the new 50% rates come into force, “we will see a reformulation in the coffee flow in the world,” said Morya. “Especially from Brazil to other regions.”
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Big coffee buyers, such as Starbucks, buy their coffee from around the world and often sign contracts months or years in advance for the grains, which isolates them from immediate price shocks. Still, some analysts said there may be a dispute, as some customers have tried to change their supply chains to avoid fares about Café do Brasil.
“With Trump adopting this tariff strategy to hit the mole, this will cause you a lot of uncertainty as a coffee maker,” said Cummings.
Higher quality
But even the change of suppliers brings problems. If manufacturers direct their purchases to Vietnam, another major coffee producer, they will depend on a lower production.
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And in addition to a possible interruption in quantity, the quality of coffee that enters the United States can change. Much of the coffee produced in Brazil is arabic, of higher quality than robusta, bitter, produced mainly in Vietnam and the rest of Asia.
Other suppliers could hardly match Brazilian production, including Vietnam, which saw a recent decline in their coffee production. The country would not be able, in the short or medium term, to “contain the flow,” said David Gantz, economist at the Baker Institute of Public Policy at Rice University.
In Brazil, “some of the exports will probably cease completely,” Gantz added. “Others will continue, but the consumer will eventually pay a higher price.”
