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Coffee futures jumped on Thursday after US President Donald Trump threatened 50 per cent tariffs on Brazil, the world’s biggest producer, jolting the industry and risking a price surge for US consumers.
In a letter posted to Truth Social on Wednesday, Trump said the US would hit Brazil with the steep tariff rate from August 1, accusing the country’s government of attacking free speech and orchestrating a “witch-hunt” against Brazil’s former rightwing president Jair Bolsonaro.
Arabica coffee prices trading in New York climbed more than 3.5 per cent on Thursday morning in response to Trump’s threat. Brazil is the world’s top producer of arabica coffee, which is used in higher-end brews.
The letter is “sending shockwaves across the coffee industry”, said a trader. “The US is Brazil’s main coffee buyer, so this tariff will certainly hit sentiment.”
Giuseppe Lavazza, chair of Lavazza Group, which owns Lavazza coffee, said on Wednesday ahead of Trump’s threat to Brazil that the US levy of 10 per cent on EU goods was “fine”, but tariffs between the US and coffee-producing countries such as Brazil and Vietnam would be more challenging for coffee companies and would push up prices for American consumers.
“The problem is not to have tariffs between America and Europe. The problem is to have tariffs between US and Brazil, US and Vietnam, US and all the countries where coffee is produced,” said Lavazza. “The final outcome will be a rise in the cost of coffee in the US. So the US market becomes more expensive for consumers.”
Prices of arabica and robusta coffee have been strong over the past few years as poor harvests in the world’s main growing countries, Brazil and Vietnam, have reduced supplies and speculators have piled into the market.
London robusta futures, the global benchmark, reached a record high of nearly $5,700 a tonne earlier this year, up from a historical average of $1,700, while the price of higher-end arabica coffee beans rose 70 per cent last year to $4.20 a pound.
But prices of arabica and robusta have fallen back from their highs in recent months on hopes of improved harvests.
