New York: Getting a daily caffeine fix could become more expensive.
President Donald Trump’s plan to impose a 50 per cent tariff on all imports from Brazil starting next month would drive up the price of coffee, whether it’s served in cafes or brewed in the kitchen.
Such a tariff would put more pressure on the coffee industry as prices have peaked globally this year. Droughts in Brazil and Vietnam, two of the biggest coffee exporters to the US, have resulted in smaller harvests in recent seasons, driving up prices.
Consumers are already paying more at the grocery store. At the end of May, the average price of one pound of ground roast coffee in the US was $7.93, up from $5.99 at the same time last year, according to the US Bureau of Labour Statistics.
Trump’s pledge to place tariffs on Brazil’s imports is partly in retaliation for what he considers a “witch hunt” against his political ally, the former Brazilian President Jair Bolsonaro, who is facing trial for attempting a coup.
More than 99 per cent of the coffee Americans consume is imported from South America, Africa and Asia. Last year, the US imported 1.6 million metric tons of both unroasted and roasted coffee, according to the agriculture department.
Brazil accounted last year for more than 8.1 million bags, each with 60 kg of coffee, that came into the US. Any sudden shift would be a “lose-lose situation”, said Guilherme Morya, a coffee analyst for Rabobank based in São Paulo. Brazilian suppliers, he said, are holding tight and waiting to see if any negotiations will save them from needing to find buyers in other countries.
Should the new 50 per cent tariffs take effect, “we’re going to see a reshape in the coffee flow in the world,” Morya said. “Especially Brazil to other
regions.”
If wholesale costs — what restaurant chains or grocery stores pay — for coffee rise by 10 per cent, that could increase the cost of a cup of coffee up by about 25 cents, said Ryan Cummings, the chief of staff for the Stanford Institute for Economic Policy Research.
It would take about three months after the tariff goes into effect for consumers to see higher prices at stores, he said.
Large coffee buyers, like Starbucks, source their coffee from all over the world, and often sign contracts months or years in advance for beans, somewhat insulating them from immediate price shocks. Still, some analysts said, there could be a scramble as some customers try to shift their supply chains to avoid the tariffs on coffee from Brazil.
But even changing suppliers comes with issues. Should manufacturers pivot more of their buying to Vietnam, another large coffee producer, they would be reliant on a smaller output. And in addition to a possible disruption in quantity, the quality of the coffee coming into the US could change.
Much of the coffee produced in Brazil is Arabica, a higher quality than the more bitter robusta mostly produced in Vietnam and the rest of Asia.
New York Times News Service