The proposed 50% tariff on Brazilian imports by President Donald Trump poses significant challenges for coffee enthusiasts across the United States.
As the leading supplier of green coffee beans to the U.S., Brazil contributes approximately one-third of the country’s total coffee supply, according to data from the U.S. Department of Agriculture.
The cultivation of coffee requires a warm, tropical climate, which limits viable growing locations in the U.S. to Hawaii and Puerto Rico. Given that the U.S. is the world’s largest coffee consumer, the nation needs a substantial influx of beans to satisfy its caffeine cravings. According to Mintel’s research, the U.S. coffee market was valued at $19.75 billion last year.
This increase in trade tariffs could further inflate prices for coffee consumers, who have already endured rising costs amid global supply challenges, particularly due to adverse weather conditions in Brazil. Earlier this year, coffee futures reached their highest levels ever, with prices climbing by 1% on Thursday, although still significantly below February’s record price point.
There is potential for Brazil to negotiate with the White House prior to the tariffs taking effect on August 1. Additionally, the food and beverage industry is hopeful that the Trump administration may allow exemptions for essential commodities. U.S. Department of Agriculture Secretary Brooke Rollins noted in a late June interview that exemptions for items that cannot be cultivated in the U.S., including coffee, are being considered.
Should no exemptions be granted, coffee producers such as J.M. Smucker, Keurig Dr Pepper, Starbucks, and Dutch Bros would face significantly increased costs for this vital commodity. Giuseppe Lavazza, chairman of the Italian coffee company Lavazza, stated on Bloomberg TV that the new tariff may result in “a lot of inflation” within the coffee sector.
While roasters will seek ways to reduce the impact of increased tariffs, the challenge ahead remains daunting. Tom Madrecki, vice president of supply chain and logistics for the Consumer Brands Association, emphasized the difficulties inherent in mitigating such steep tariffs on a product that cannot be produced domestically. “Every company is always trying to eke out the next efficiency, but a 50% tariff on a commodity that fundamentally is not available in the U.S. — you can’t really do much with that,” Madrecki explained.
One alternative could be sourcing coffee from non-Brazilian producers, yet companies are likely to still face rising costs for the commodity. Madrecki commented, “A characteristic of tariffs is that not just the inbound cost rises, but it also elevates the pricing floor.” He elaborated that although cheaper coffee may exist in other countries, businesses may still opt to raise prices rather than sell lower than the market ceiling.
At-home coffee brands, including Dunkin’ from J.M. Smucker and Maxwell House from Kraft Heinz, have already raised their prices this year in response to increasing commodity costs. Additional price hikes may be forthcoming, although some retailers may resist further increases.
Keurig Dr Pepper’s CEO Tim Cofer noted in late April that the company is considering further price adjustments in the latter half of the year to counteract the effects of the tariffs. Furthermore, Smucker’s executives alerted investors in early June that coffee tariffs were-impacting profit margins, as coffee comprises about one-third of the company’s revenue.
“Green coffee is an unavailable natural resource that cannot be grown in the continental United States due to its reliance on a tropical climate,” stated Smucker’s CEO Mark Smucker. He disclosed that the company procures approximately 500 million pounds of green coffee annually, primarily sourced from Brazil and Vietnam, the two largest coffee-producing nations.
Vietnam, which recently reached a tentative trade agreement with the White House, accounts for about 8% of the U.S. green coffee supply. Under the terms of the deal, the U.S. will impose a 20% tariff on Vietnamese imports.
For consumers who enjoy a caramel macchiato from Starbucks, the financial repercussions may be less severe. Following several quarters of stagnation in U.S. sales, Starbucks CEO Brian Niccol indicated in late 2024 that the company would refrain from raising prices in 2025, aiming to reclaim customers who noted rising drink prices. In the interim, Starbucks may absorb the additional coffee costs given its diverse supplier relationships and extensive menu, which now includes the popular Refreshers line.
Starbucks imports coffee from 30 different countries, with coffee comprising around 10% of its North American cost of goods sold. Analyst Andrew Charles of TD Cowen projected that the new trade duty could result in a 0.5% increase in Starbucks’ North American costs, assuming that approximately 22% of its beans are sourced from Brazil. He also suggested that Starbucks’ packaged drinks distributed by Nestle could see a 3.5% rise in cost, which could translate to a 5-cent impact on annual earnings per share.
In contrast, for Dutch Bros, higher coffee costs are unlikely to significantly affect the company’s profits, as coffee represents less than 10% of its cost of goods sold. Based on estimates, if Dutch Bros sources more than half of its coffee from Brazil, its costs could rise by just 1.3%.
