Brewing Uncertainty: The Coffee Tariff Exemption and U.S. Economic Risks
14min read The U.S. coffee industry stands at a crossroads, its future hinging on whether the government will exempt it from retaliatory tariffs threatening to upend supply chains and consumer prices. With the National Coffee Association (NCA) reporting that coffee imports generate $43 in economic value for every dollar spent and support 2.2 million jobs, the stakes are high. Yet, despite the NCA’s vigorous advocacy, exemptions remain elusive, leaving the sector exposed to cascading costs.
The Tariff Landscape: A Brewing Storm
The tariffs in question—imposed in late 2024 and early 2025—are part of a broader trade policy aimed at addressing perceived imbalances. Key measures include:
- 25% tariffs on imports from Canada and Mexico, critical partners for U.S. roasters reliant on cross-border operations.
- 10%-46% tariffs on coffee from top producers like Brazil (10%), Vietnam (46%), and Colombia (10%), justified under a “reciprocity-first” framework targeting nations with higher average tariffs on U.S. goods.
The NCA has argued that coffee’s unique role in the U.S. economy warrants exemption. NCA President Bill Murray emphasizes that domestic production accounts for less than 0.1% of global output, making imports indispensable. The tariffs risk hiking consumer prices by up to 50%, exacerbating the cost-of-living crisis.
Government Response: A Temporary Reprieve, Not a Solution
In April 2025, the U.S. implemented a 90-day “pause” on fluctuating tariff rates, temporarily capping duties at 10% for most countries. While this provided a brief respite, the pause excludes critical exemptions for coffee, leaving it subject to the same levies as other goods.
The market has already reacted: Starbucks’ stock dipped 5% in early 2025 amid concerns over rising input costs. Even the 10% tariff is problematic. For a $150,000 container of Brazilian coffee, the duty adds $15,000—a burden passed on to consumers or absorbed by thin-margin roasters.
Geopolitical and Economic Fallout
The tariffs’ ripple effects extend beyond U.S. borders. Vietnam’s 46% tariff on robusta—a critical component of commercial coffee blends—could force U.S. buyers to seek alternatives, destabilizing global markets. Meanwhile, Brazil’s 10% tariff, as the world’s largest arabica producer, risks distorting global pricing dynamics.
The African Growth and Opportunity Act (AGOA), which previously exempted coffee imports from sub-Saharan Africa, has been suspended. This jeopardizes specialty coffee imports from countries like Kenya and Rwanda, which rely on duty-free access to the U.S. market.
The Cost to Consumers and Businesses
The NCA warns that tariffs could push the price of a latte toward $10, risking “demand destruction” as consumers cut back. Smaller roasters face existential challenges:
- Cultivar Coffee, a specialty roaster, already raised prices by $1 per bag in 2025 due to climate-driven shortages. Tariffs could force a second increase.
- Royal Coffee, a major importer, now faces $15,000 in added costs per container, requiring costly loans to stay afloat.
A Delicate Balancing Act
The NCA’s exemption request remains under consideration, but the White House’s focus on broader trade objectives has sidelined sector-specific relief. Bipartisan efforts to transfer tariff authority from the executive branch to Congress face presidential vetoes, prolonging uncertainty.
The C Price has dropped nearly 50 cents since early 2025, reflecting panic over supply disruptions and rerouted shipments. This volatility threatens both growers and roasters, who rely on stable pricing to plan investments and contracts.
Conclusion: A Recipe for Economic Disruption
The U.S. coffee industry is caught in a geopolitical and economic vise. With every dollar of imports supporting $43 in economic activity and 2.2 million jobs, the tariffs risk undermining a pillar of the U.S. economy. Even a 10% duty could destabilize fragile supply chains, while higher rates post-pause could trigger a crisis.
Investors should monitor tariff developments closely. Companies like Starbucks and Green Mountain Coffee Roasters (GMCR) are vulnerable to margin pressure, while coffee futures volatility may signal broader inflation risks. A failure to exempt coffee would not only harm businesses but also accelerate the cost-of-living crisis—a stark reminder of the unintended consequences of protectionist policies. The brew is simmering; the question is whether policymakers will stir in the right direction.
