Brazil, the world’s largest coffee exporter, faces significant risks to its $8 billion coffee trade due to U.S. President Donald Trump’s proposed 50% tariffs on Brazilian imports, set to take effect on August 1, 2025. Announced on July 9, 2025, these tariffs, escalating from an initial 10% baseline, threaten to disrupt Brazil’s coffee supply chain to the U.S., its largest market, which accounts for 16.7% of Brazil’s coffee exports. The tariffs have already triggered volatility in global commodity markets, with coffee futures rising and the Brazilian real weakening by 2.8% in a single day. This report examines the causes, impacts, and strategic responses to the tariff threat, highlighting opportunities for Brazil to mitigate losses through market diversification and diplomatic efforts.
Background
Brazil dominates the global coffee trade, exporting 45.35 million 60-kilogram bags of green coffee in 2024, nearly double its closest rival, Vietnam. The U.S., the world’s largest coffee consumer, imported 8.14 million bags from Brazil in 2024, representing 33% of its total coffee consumption. Coffee is Brazil’s fifth-largest export commodity, generating $8 billion in revenue in 2024, with arabica beans accounting for the majority and robusta gaining traction due to rising global demand for instant and ready-to-drink coffee. The U.S. tariffs, announced amid political tensions between Trump and Brazilian President Luiz Inácio Lula da Silva, target key Brazilian exports, including coffee, beef, and orange juice, and are seen as a response to Lula’s policies and the trial of former President Jair Bolsonaro.
Key Developments
U.S. Tariff Announcement
On July 9, 2025, President Trump escalated tariffs on Brazilian imports from 10% to 50%, effective August 1, citing concerns over Brazil’s domestic policies, including the Bolsonaro trial and alleged censorship of U.S. social media platforms. The tariffs also include a 50% duty on copper imports, justified by a “Section 232” national security assessment. Unlike other countries facing tariffs (e.g., Vietnam at 46%, Indonesia at 32%), Brazil’s relatively lower initial 10% tariff had positioned it favorably, but the new 50% rate threatens significant economic disruption. Trump suggested exemptions for countries manufacturing in the U.S., but no such plans have been confirmed for Brazilian coffee exporters.
Impact on Coffee Exports
- Export Value and Volume: In 2024, Brazil exported $12 billion in agricultural products to the U.S., with coffee comprising a significant portion. The U.S. accounts for 16.7% of Brazil’s coffee exports, valued at approximately $1.34 billion annually. A 50% tariff could increase costs for U.S. roasters by $2,500 per ton, making Brazilian coffee less competitive.
- Market Dynamics: Brazil’s coffee exports include both arabica (70% of production) and robusta (30%), with the latter benefiting from a 15% production increase in 2025 due to favorable weather in Espírito Santo and Bahia. However, the tariff could halt new shipments, as U.S. roasters may struggle to absorb the cost increase, potentially shifting to alternative suppliers like Colombia or Mexico.
- Price Volatility: Coffee futures on ICE Futures U.S. rose 6% on July 10, 2025, reflecting market fears of supply disruptions. Robusta prices reached $5,390 per ton, while arabica prices hit $430 per 60-kg bag, up 108% year-over-year. The ICO’s April 2025 report noted a 54.8% increase in coffee prices compared to April 2024, exacerbated by tariff uncertainty.
Commodity Market Volatility
The tariff announcement triggered immediate market reactions:
- Brazilian Real: The Brazilian real fell 2.8% on July 10, its largest single-day decline in 2025, increasing import costs and inflation pressures.
- Stock Market: Brazilian equities, tracked by the MSCI Brazil index, faced volatility, with coffee-related stocks like JBS SA and Usina São Martinho declining. The B3 stock exchange saw reduced liquidity as foreign investors, holding 55.8% of traded volume, pulled back.
- Global Coffee Prices: The threat of reduced Brazilian supply tightened global coffee markets, with robusta futures particularly affected due to Brazil’s competitive advantage over Vietnam (46% tariff) and Indonesia (32% tariff).
Driving Factors
U.S. Trade Policy
Trump’s tariffs are part of a broader “Liberation Day” strategy to address trade deficits and protect U.S. industries. However, coffee, a commodity the U.S. produces minimally (less than 1% of global supply), is a puzzling target, as tariffs primarily raise costs for U.S. consumers and roasters. The U.S. relies on imports for 99% of its coffee, with Brazil supplying 35% of unroasted beans, followed by Colombia (27%).
Political Tensions
The tariff escalation stems from Trump’s dissatisfaction with Brazil’s domestic policies, particularly the trial of Jair Bolsonaro and perceived restrictions on U.S. digital platforms. Trump’s letter to Lula also referenced a “Section 301” investigation into Brazil’s digital trade practices, signaling potential additional tariffs.
Brazil’s Coffee Market Dynamics
- Production Challenges: Brazil’s 2025/26 coffee production is forecast at 65 million bags, a 0.5% increase from 2024, but arabica output is expected to decline 6.4% due to drought and heat in Minas Gerais and São Paulo. Robusta production, however, is projected to rise 15%, giving Brazil a competitive edge over Vietnam.
- Export Revenue: Despite lower export volumes (41.75 million bags forecast for 2025/26, down 5.6%), high global prices are expected to drive record revenue of $21.6 billion, with arabica contributing $14.76 billion and robusta $6.17 billion.
- Diversification Efforts: Brazilian exporters, led by Cecafe, are accelerating efforts to redirect coffee to Europe, China, and the Middle East, leveraging Brazil’s robust infrastructure and production capacity.
Challenges and Risks
- Economic Impact: The 50% tariff could reduce Brazil’s coffee export revenue to the U.S. by up to $670 million annually, with broader losses estimated at billions across meat, coffee, and orange juice sectors. Domestic agribusinesses may cut output and jobs, exacerbating unemployment.
- Currency and Inflation: Reduced U.S. exports weaken Brazil’s trade balance, depreciating the real and raising import costs, which could fuel inflation.
- Supply Chain Disruptions: U.S. roasters face challenges switching suppliers due to existing contracts and Brazil’s dominance in high-quality arabica. Smaller roasters may face insolvency if prices rise further.
- Diplomatic Fallout: Strained Brazil-U.S. relations could hinder G20 and climate negotiations, complicating Brazil’s efforts to secure tariff exemptions.
Strategic Responses
- Diplomatic Efforts: President Lula has vowed a “moderate but firm” response, seeking exemptions through negotiations with the U.S. Trade Representative. Cecafe is lobbying alongside the National Coffee Association to exempt coffee, citing its $43 economic multiplier per $1 of imports in the U.S.
- Market Diversification: Brazilian exporters are targeting Europe and China, where demand for robusta is growing. China, the second-largest market for specialty coffee, imported 300 million liters of Brazilian ethanol in 2024, signaling potential for coffee trade expansion.
- Domestic Support: Brazil’s FUNCAFE fund ($1.17 billion for 2024/25) is providing credit lines and tax incentives to support exporters, while companies like JBS and Usina São Martinho are investing in mechanization and irrigation to boost robusta output.
- Industry Advocacy: Coffee trade groups are highlighting the lack of U.S. domestic coffee production to argue for exemptions, emphasizing the risk of higher consumer prices and supply chain disruptions.
Implications for Global Markets
The tariffs threaten to reshape global coffee trade:
- U.S. Consumers: Coffee prices could rise significantly, with robusta-based products like instant coffee potentially increasing by 10–15%. Specialty coffee prices may also climb, impacting small roasters and cafes.
- Global Supply Chains: Brazil’s pivot to Europe and Asia could tighten supplies for U.S. roasters, while Vietnam and Indonesia face higher tariffs, reducing their competitiveness.
- Brazilian Economy: The tariff could shave 1% off Brazil’s GDP, given exports’ contribution to the economy. However, robusta’s growth and high global prices may offset some losses.
- Commodity Markets: Continued volatility is expected, with coffee futures remaining sensitive to tariff updates and Brazil’s export redirection efforts.
Brazil’s $8 billion coffee trade faces significant risks from the U.S.’s 50% tariff, set to disrupt its largest market and drive volatility in global commodity markets. While Brazil benefits from a competitive edge over Vietnam and Indonesia, the tariff’s economic impact could be substantial, with potential losses in revenue, jobs, and currency stability. Strategic responses, including diplomatic negotiations, market diversification, and domestic support, are critical to mitigating these risks. As Brazil navigates this trade crisis, its ability to leverage robusta growth and global demand will determine its resilience. The outcome of U.S.-Brazil negotiations by August 1, 2025, will shape the future of the global coffee trade and Brazil’s economic trajectory.
