U.S. coffee drinkers and businesses will pay the price for Trump's Brazil tariffs
Jaclyn Diaz
At a small, industrial roastery in Washington, D.C., the nutty, inviting smell of roasting coffee hangs heavy in the air. It's where Lost Sock Roasters, a local company, roasts and packages its coffee beans — destined for its two cafes, customers' homes and local bakeries and restaurants.
After nearly a decade of running the company with co-founder Nico Cabrera, Lost Sock's Jeff Yerxa says the strong coffee aroma barely registers. "I can't even smell it anymore," he says with a laugh.
But something else is grabbing his attention these days: tariffs.
This month, President Trump announced plans to levy a 50% tariff on all goods from Brazil — the world's largest coffee producer and the source of about 30% of U.S. coffee imports. That's on top of the 10% tariff that impacts nearly everything the U.S. brings in. This looming tariff threat has sent shock waves through the U.S. coffee industry, raising fears especially among small roasters like Lost Sock.
"When people go to their local coffee shop, whether it's Starbucks or something else, by and large they will likely be buying some form of Brazilian coffee," says Monica de Bolle, senior fellow at the Peterson Institute for International Economics. "A 50% tariff will kill that market."
While the tariffs on imports from Brazil, as well as on imports from other nations, aren't set to begin until Aug. 1, the uncertainty is rattling the industry already.
But it's consumers who will end up paying the price, de Bolle, Yerxa and others warn.
"It's a massive price impact," de Bolle says.
Tariff threats extend beyond imports from Brazil: The Trump administration has announced a number of tariffs on imports from other coffee-producing countries, like Vietnam (which produces 17% of the world's coffee), Colombia (which produces 8%) and Ethiopia and Indonesia (which produce 6% each).
Yerxa says he is trying not to react until he knows details are final, but he says profit margins are already thin. "It's the uncertainty that's probably the worst."
"At the end of the day, the consumer is the one that's going to bear the brunt of it," he says. "I don't want to raise prices, but we're seeing increased costs of 30% on coffee, potentially."
Trump's messaging rings hollow for business owners
The Trump administration defends its trade policy and the dozens of tariffs on a number of countries as necessary to protect American jobs, to renegotiate trade deals and to reduce the trade deficit.
In the case of Brazil, Trump also indicated that the proposed tariffs are political retribution for the treatment of former far-right President Jair Bolsonaro, who is currently on trial for trying to overturn the country's 2022 election.
For roasters like Yerxa and Colby Barr, CEO and co-founder of Verve Coffee Roasters, a Santa Cruz, Calif.-based craft coffee roaster and wholesaler launched in 2007, much of the administration's reasoning falls flat. The U.S., aside from small coffee farms in Hawaii and California, doesn't produce coffee at the scale that Americans consume it.
"It's a tax on Americans' mornings," Barr says.
The past several years have been volatile for the coffee industry, contributing to a major increase in market prices for coffee even in the last year, Barr says. The price volatility can be attributed, in part, to the COVID-19 pandemic and back-to-back low-yield coffee harvests in Brazil in the last year, Yerxa says. Those weak harvests, in turn, are due to drought and high temperatures and more generally climate change, which has negatively impacted coffee harvests for several years.
Roasted coffee prices in the U.S. surged 12.7% in June compared with a year prior, according to data from the Bureau of Labor Statistics. Instant coffee saw a 16.3% increase. The average retail price for a pound of ground coffee was $8.13 in June, up more than $1 per pound since the start of the year.
Nika Finkelstein says she's already well aware of the sticker shock that comes with buying coffee out. The 27-year-old sat outside Blue Bottle Coffee at Union Station in Washington, D.C., on a recent July afternoon. She makes coffee at home as much as possible. On the rare occasions she buys one out, she sticks with drip coffee rather than specialty drinks, like a latte.
If tariffs bump prices even higher? "I would just have to reel back on spending money at coffee shops and just make it from home, which I can do — it's just not as fun," she says. "There's a certain romance to being able to go to the coffee shop and sit there and read your book or scroll on your phone."
Why customers will pay more
So much coffee in the U.S. comes from Brazil because of the country's large-scale production capacity, low costs, favorable climate and flavor profile, Yerxa and de Bolle say.
"Most of the industry relies on those coffees to be the backbone of their blends," Yerxa says, referring to the mixture of beans from different regions.
Lost Sock, the D.C. coffee company, is best known for single-origin, higher-end coffees sourced from nearly a dozen countries each year. But it uses Brazilian beans for some of its blends — products that stem from its long-standing relationships with two cooperatives in Brazil.
Getting those beans from Brazil to D.C. is a long process that involves international partners, contracts negotiated months to years in advance, and plenty of other planning. Lost Sock coordinates with producers and exporters, and it places orders with them for specific amounts of specific beans from specific Brazilian farms, exports the coffee, and stores it in a U.S. warehouse.
The importer adds a margin for logistics, and Yerxa then factors that final price per pound into Lost Sock's wholesale and retail pricing.
And where would the tariffs come in?
That is initially something that the importer would have to pay once it brings beans into the U.S., he says. "That tariff would just be another line item on the receipt that we're getting when we release that coffee. And then for us, we take that coffee price, and again it's added on to the price per pound of that coffee, when we come up with the pricing for wholesale and for retail."
De Bolle explains that if tariffs hit on Aug. 1, it could be a few months before customers feel price increases at cafes or restaurants. That's because those businesses generally buy in bulk and have a stock of coffee that could last them a while — stockpiles like this could last a few months, she says. People who buy their coffee beans at the grocery store could feel the tariff impacts more quickly.
"For people who don't stock up, so the regular consumer who's going to the supermarket … and getting their coffee, maybe those price increases will be felt sooner," de Bolle says, adding that coffee is perishable and stocking up on beans can get a business, or consumer, only so far.
The ripple effects
Long term, if it looks like these tariffs stick, Lost Sock may have to consider pivoting away from using Brazilian coffees in some blends, Yerxa says. Walking away from longtime partnerships in Brazil really isn't an option for him, however.
"It feels unfair to pull out of a relationship when the going gets tough," he says. "So we'll probably bear the brunt of it a little bit, but with the hope that the prices in the future will come back down."
But if Brazil's coffee prices go up, coffee roasters will rush to buy from other sources, Barr of Verve Coffee warns. And these other coffee-producing countries, such as Vietnam, are also facing tariffs.
"It's really, really difficult, and more like impossible, to really prepare for it," Barr says. "Tariffs don't help the coffee producer. They don't help the small- and medium-sized businesses across the country, and they don't help the consumer. Why are we doing it?"
