American coffee consumers are refraining from entering into new agreements with Brazil, the largest coffee producer globally, following the implementation of President Donald Trump’s 50% tariff this month.
Companies are refraining from entering into new agreements and are looking for more flexibility in current contracts to prevent having to pay increased rates, as reported by brokers, roasters, and exporters interviewed by Bloomberg.
According to the Brazilian export group Cecafé, certain American purchasers are requesting longer delivery periods in anticipation of potential tariff reductions in the future.
“The deals between the US and Brazil are completely stalled,” stated coffee broker Thiago Cazarini, noting that there are no actual purchases taking place.
About 33% of the unroasted coffee in the U.S. originates from Brazil, a nation currently engaged in a trade dispute with Trump. This conflict is partially attributed to Trump’s belief in a politically motivated persecution against former Brazilian president Jair Bolsonaro. Bolsonaro, a political ally of Trump, is being tried for an alleged coup attempt against President Luiz Inacio Lula da Silva, who won the 2022 elections against Bolsonaro.
Trump declared 10% tariffs on Brazil and other nations in April, then enforced 50% rates on the South American agricultural giant, which took effect on August 6.
Central American coffee, as opposed to Brazilian coffee
Zaza Coffee roaster, located in Florida, sources approximately 25% of its coffee beans from Brazil and currently has 14 to 16 weeks’ worth of inventory left.
After using up the grain supply, Zaza plans to substitute it with coffee sourced from Central America, Peru, and Mexico, as stated by JP Juarez, the director of coffee innovation at the company.
“We have a specific timeframe of 14 weeks for a potential adjustment in tariff rates,” Juarez stated. However, if the tariffs remain unchanged, it is unlikely that we will request Brazilian coffee.
Many towers hesitate to alter their conventional blends because it may lead to short-term policies.
Brazil’s significant involvement in the grain market renders its products nearly irreplaceable, as there are limited other sources that can rival its quantities, as stated by Christian Wolthers, CEO of Florida-based importer Wolthers Douqué.
The roasters are reluctant to alter the characteristics of the blends that customers are familiar with, even if it means maintaining consistency at all costs.
The coffee trade between the US and Brazil may continue to decrease, following the current trend seen this year.
The Cuban-style coffee company is one of the roasters importing coffees with predictable tariffs, according to Vice President Bernadette Gerrity. Additionally, the company is increasing its purchase of future coffee contracts to safeguard against increased costs.
Colombia, Vietnam, and Honduras are the primary coffee suppliers for the United States based on volume, as reported by the Department of Agriculture.
Vietnam primarily cultivates robusta coffee, a more affordable type that many Americans are only familiar with from instant coffee.
American imports of these grains could reach the highest levels ever seen in history, as the country imposes tariffs of only 20%, as stated by Laleska Moda, a market intelligence analyst at Hedgepoint Global Markets.
The speaker suggested that the US could also boost imports from Indonesia and Uganda, where tariffs are much lower compared to Brazil.
Honduran coffee prices are currently higher than the future market rates, with limited offerings starting at $0.30 to $0.40 per pound more. Meanwhile, Colombian exporters are not providing prices in anticipation of market fluctuations, according to senior StoneX trader Tomas Araujo.
Europe’s coffee consumption
A shift in the availability of Brazilian grains in the US could lead to more of these resources being redirected to Europe, providing a solution for purchasers in need of identifiable grains to adhere to upcoming forest protection regulations within the region, as stated by Sucafina’s chief trading officer, Dave Behrends.
More grains would be directed towards China’s expanding coffee market, putting American roasters in a pricier position.
Gregory Zamfotis, the CEO of Gregorys Coffee based in New York, mentioned that while they were lucky to receive their latest shipment from Brazil before the highest fares took effect, they will eventually need to import another batch at the increased cost.
The company, along with other small roasters, is getting ready for the consequences.
“A small company would find it nearly impossible to absorb a 10% tariff independently,” noted Daria Whalen, coffee director at Ritual Coffee Roasters in San Francisco. “Some of this cost must be shifted to customers, which may seem daunting at 50%.”
