Coffee prices are on the rise after President Trump revealed a 50% tariff on imports from Brazil, which is the largest coffee producer globally. This news has rattled the commodity market and created some instability in futures trading.
Arabica Coffee Futures on the InterContinental Exchange shot up to $288.67 per pound, marking a daily increase of 0.99%. This increase comes after a 2.6% rise the day before, driven by worries over dry weather impacting Brazilian coffee growing regions. However, prices had dipped around 17% in the past month due to expectations of a good harvest and an increase in supply, even though they remain nearly 18% higher compared to last year.
Meanwhile, London Robusta Futures, which serves as a global benchmark for less expensive coffee varieties, had previously soared to around $5,700 per tonne earlier this year, far exceeding the average of about $1,700.
Last year was also significant for Arabica prices, which surged by 70% to reach $4.20 per pound, largely driven by poor harvests and strong investor interest from both Brazil and Vietnam.
Recently, both Arabica and Robusta prices have started to dip slightly amid hopes for better harvests, although growing trade tensions cloud the outlook.
Trump’s tariffs, set to go into effect on August 1, were detailed in a letter posted on Truth Social. The president accused Brazil of “attacking free speech” and mentioned his support for Brazil’s former president, Jair Bolsonaro.
These new tariffs were also framed as a response to “very unfair trade relations” with Brazil, despite the US having recorded a commodity trade surplus of $7.4 billion with the country in 2024.
Brazil’s current president, Luis Inacio Lula da Silva, indicated on Wednesday that Brazil would respond reciprocally to Trump’s tariffs, referencing a new law that grants the government authority to enact proportionate measures.
Bolsonaro, the former president, faces numerous criminal charges related to his actions during and after the 2022 election, including allegedly inciting a coup against democracy and involvement in the January 2023 riots targeting government buildings.
The news about the tariffs quickly jolted the coffee market, with Arabica Coffee Futures in New York increasing over 3.5% on Thursday morning. Arabica beans are primarily sourced from Brazil and used in premium coffee products. One trader commented to the Financial Times that the letter sent “shock waves across the coffee industry,” noting that this tariff will definitely influence the emotional state of the market since the US is a major buyer of Brazilian coffee.
Giuseppera Bazza, chairman of Lavazza Group, which owns Lavazza Coffee, highlighted an additional concern: “The issue is that there are no tariffs between the US and Europe.”
He further elaborated that while there are tariffs between the US and Brazil, as well as other coffee-producing countries, this puts additional strain on coffee companies in the US and will ultimately lead to higher prices for consumers.
The sharp rise in prices underscores Brazil’s vital role in the global coffee supply chain. Presently, the country’s 2025 coffee harvest is about 40% complete compared to 52% at this time last year.
While previously, favorable weather and increased supply had led to lower prices, the imposition of new US tariffs appears to have reversed that trend quite suddenly.
Currencies are also in flux; the Brazilian Real dropped over 2% against the US dollar following the announcement, which could increase Brazilian export sales and further pressure prices in the immediate term.
Analysts remain uncertain about the long-term repercussions of the US tariffs. The market’s quick bullish response stemmed from concerns over potential supply disruptions, but there’s a chance these tariffs might eventually dampen demand for Brazilian coffee, potentially leading to a price correction.
The White House has been approached for comment regarding the situation.
