by Fabio Arangio
The impact of U.S. tariffs on the coffee market and prices
We are living in strange times, where many certainties and economic theories have been called into question, and a now almost global political turbulence makes markets unstable and the prices of consumer goods often unpredictable.
Coffee, a popular drink, once at a popular price
Coffee is one of the most consumed beverages in the world, with over 2 billion cups drunk daily. In Italy, this drink is an integral part of the national culture. In 2024, the average price of an espresso at the bar reached €1.21, +18% since 2021, bringing the total spending of Italians on espresso coffee to €7.26 billion.Today, especially in the historic centers of cities, it is easy to have an espresso at the counter for €1.50. But to tell the truth, last weekend I happened to pay €2 for a simple coffee.
The long and fascinating coffee supply chain
Behind every cup lies a complex global supply chain that starts from plantations in Brazil, Colombia, Vietnam, and Ethiopia and reaches roasters all over the world. This economic interdependence makes the coffee market particularly vulnerable to external shocks, from climate variations to geopolitical tensions.The escalation of green coffee prices: climate, pandemic, and geopolitical instability
As we discussed in the article Increase in green coffee prices and supply costs, recent years have marked an unprecedented period of turbulence for the green coffee market. Data shows a dramatic escalation.Coffee price data over the past 5 years
The price, which in 2020 was around $1,200 per ton, rose in 2024 to about $4,195 per ton, marking an increase of over 90% in just two years. According to other sources, the price exceeded $5,000 per ton, representing an increase of over 400% compared to pre-pandemic levels.In 2024 alone, the average price grew by 70%. In the first 40 days of 2025, it surpassed all previous levels, rising by more than 30% and crossing the 440 US$c/pound mark, more than double the 186.75 US$c/pound of January 2024.
A multifactor cost increase
The causes of this surge are multiple and interconnected. Climate change has severely affected the main producing regions, with prolonged droughts in Brazil and adverse weather conditions in Colombia and Vietnam.The COVID-19 pandemic further complicated the situation, disrupting global supply chains and reducing the workforce on plantations.
Added to these factors are the geopolitical tensions in the Red Sea and the Suez Canal, which have slowed supply flows and significantly increased transport costs. These logistical bottlenecks have created a domino effect, with higher insurance premiums due to the risk of non-delivery, contributing to the overall increase in coffee import costs.
The threat of U.S. tariffs
In 2025, the administration of U.S. President Trump threatened and introduced a new series of protectionist measures that are reshaping international trade balances.U.S. tariffs on Brazil and Colombia
Starting April 5, 2025, Brazil and Colombia, which supply the vast majority of arabica coffee served in U.S. coffee shops, were subject to a base tariff of 10%. However, the situation worsened further with the introduction of punitive tariffs of 50% on Brazilian products, including coffee, for foreign policy reasons.U.S. tariffs on the European Union (EU)
This aggressive trade policy is part of a broader context of tariff escalation. Tariffs for European Union products have been set at 15%, while for India and Brazil, tariffs of 50% apply. The repercussions are not limited to the U.S. market, creating a climate of uncertainty that is reflected in financial markets and in companies’ investment decisions.The potential damage of tariffs for Italian roasters
The Italian coffee industry, strongly export-oriented, is particularly exposed. The warning issued by Giuseppe Lavazza, president of the family business, highlights that even industry leaders recognize the seriousness of the situation. Projections indicate that tariffs could cause significant price increases, with inevitable repercussions on global markets.Growing uncertainty amid announcements and counter-announcements
In recent months, there has been a series of announcements and counter-announcements that have kept tensions high. Political and trade uncertainty is pushing many companies to review their supply and distribution strategies, with Lavazza "accelerating the investment plan in the U.S. to double production" as a defensive strategy.Mitigation strategies for roasting companies
Faced with this complex scenario, companies in the coffee sector are adopting various strategies to limit the impact on their balance sheets and on final consumers.- Geographic diversification of production: Some companies are considering relocating part of their production. Some Italian companies might move, but costs are high and timelines long if they don’t already have an active plant. This strategy, although expensive, can offer medium- to long-term protection against trade tariffs.
- Hedging and forward contracts: To protect against price volatility of raw materials, many roasters are increasing the use of financial derivatives and long-term supply contracts that allow prices to be fixed in advance, thus reducing exposure to market fluctuations.
- Supply chain optimization: Companies are reviewing their supply chains, seeking alternative suppliers in countries not subject to U.S. tariffs and investing in technologies to improve logistics efficiency and reduce transportation costs.
- Product innovation and differentiation: To maintain margins despite rising costs, some companies are focusing on higher value-added products, such as premium blends, certified origin coffee, and sustainable products that justify higher prices to consumers.
- Strategic collaborations: Forming alliances and partnerships between roasters can increase bargaining power with suppliers and share investment costs in new technologies and markets.
- Transparent communication with consumers: Explaining the reasons for price increases can help maintain customer loyalty. Clear communication about external factors affecting costs can generate understanding and acceptance from the market.
The future of the coffee market will depend on companies’ ability to quickly adapt to this new geopolitical and economic scenario. While coffee prices are expected to remain high in 2025, the mitigation strategies adopted today will determine which companies will successfully navigate this perfect storm of adverse factors.
