Coffee Prices Soar 21% Year-Over-Year Due to Tariffs, Supply Shortage

In August, the retail price of coffee in the United States reached its highest level this century, driven by the Trump administration's tariffs on imports from Brazil, the world's largest coffee producer. This has exacerbated the supply shortage of coffee, leading to a significant increase in prices.

The U.S. Bureau of Labor Statistics reported that the price of ground coffee in American supermarkets hit a record high of $8.87 per pound in August. The coffee CPI index rose 21% year-over-year, the fastest pace since 1997.

This surge in coffee prices is a notable component of the broader food inflation trend in the United States. The U.S. Bureau of Labor Statistics also reported that the overall CPI in August rose 2.9% year-over-year, the largest increase since January. After a 0.1% month-over-month decrease in July, household food consumption prices rose 0.6% in August.

Over the past year, global coffee prices have surged due to poor harvests in major exporting countries, leading to a decline in production. For the United States, the situation has been exacerbated by the Trump administration's decision in July to impose a 50% tariff on Brazilian coffee imports. Brazil, the world's largest producer of Arabica coffee beans, has historically supplied about one-third of the coffee beans consumed in the United States.

Data from the shipping data service Vizion shows that Brazil's coffee exports to the United States have halved so far this year. The decline in exports accelerated in August, falling more than 75% compared to the same period in 2024. Imports from other major coffee-producing countries, such as Vietnam and Colombia, have not been able to fill the gap left by Brazil.

Thijs Geijer, a senior agricultural economist at the Dutch International Group, noted that previous excess inventory is buffering this shock. However, he warned that if Americans continue to consume coffee at their usual rate, these inventories will eventually run out. At that point, increased imports will be necessary, but the question remains: where will the supply come from?

According to a survey by the U.S. Coffee Association, two-thirds of American adults have a daily habit of drinking coffee.

Looking ahead, climate change is causing increasingly erratic weather in Brazil and Vietnam, leading to a sustained rise in coffee futures prices over the past few months. Poor harvests in these two countries—Brazil dominates the Arabica coffee bean market, while Vietnam is the primary supplier of the cheaper Robusta coffee beans used in instant coffee—have tightened global supply.

In recent weeks, the U.S. food and grocery industry has been pushing for tariff exemptions on products that cannot be economically grown in the United States. Last week, the White House released a list of goods, including coffee, that could potentially benefit from lower tariff rates if new trade agreements are reached with exporting countries.

However, Geijer pointed out that coffee consumers may not yet feel the full impact of the tariffs. He explained that coffee shipped from Brazil's Santos port takes 20 days to reach U.S. ports and then requires additional roasting. "The key is whether roasters pass on the costs immediately or gradually," Geijer added, noting that the full impact of the tariffs on retail shelves may not be felt until October or November.

The temporary CEO of Kroger, the largest supermarket chain in the United States, stated during a financial earnings call that the company has done its best to absorb the rising costs of food and groceries. He added that tariffs occasionally affect some of their pricing.