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Trump's tariffs on Brazil raise coffee prices

Trump's tariffs on Brazil raise coffee prices

Tariffs on the world's largest producer of arabica coffee shock investors in the sector

Coffee futures rose on Thursday after US President Donald Trump threatened 50% tariffs on Brazil, the world's largest coffee producer, shaking up the industry and risking higher prices for American consumers.

In a post on the Truth Social network, Trump said the US would impose high tariffs on Brazil starting August 1, accusing the Brazilian government of attacking freedom of expression and organizing a "witch hunt" against former right-wing President Jair Bolsonaro.

Prices for Arabica coffee traded in New York rose more than 3.5% on Thursday morning in response to Trump's threat. Brazil is the world's leading producer of Arabica coffee, which is used in high-quality blends.

The announcement is “causing a shockwave throughout the coffee industry,” said one trader. “The U.S. is the largest buyer of coffee from Brazil, so this tariff will certainly have a significant impact on market confidence.”

Giuseppe Lavazza, president of the Lavazza group, home to the popular Lavazza coffee brand, said on Wednesday, ahead of Trump's threat to Brazil, that the 10% US tariff on goods from the European Union "is acceptable," but tariffs between the US and coffee-producing countries like Brazil and Vietnam would be much more problematic for coffee companies and would raise prices for American consumers.

“The problem is not tariffs between America and Europe. The problem is when tariffs are imposed between the US and Brazil, the US and Vietnam, the US and all the countries where coffee is produced,” Lavazza said. “The end result of this will be an increase in the cost of coffee in the US. So the US market becomes more expensive for consumers.”

Prices for arabica and robusta coffee have been high in recent years due to poor harvests in major producing countries such as Brazil and Vietnam, which have reduced supplies, while speculators have flocked to the market.

London robusta coffee futures, which serve as a global benchmark, hit a record of nearly $5,700 per tonne this year, well above the historical average of $1,700, while the price of premium arabica coffee beans surged 70% last year, reaching $4.20 per pound.

However, prices of arabica and robusta coffee have fallen from their peak in recent months, due to hopes for better harvests. / Monitor

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