US Drops Tariffs on Brazilian Coffee Amid Trade Negotiations

The Trump administration removed a 40% levy on Brazilian agricultural imports, including green coffee beans, easing a tariff burden that has contributed to higher consumer prices and tighter US supplies. The exemption follows initial progress in trade negotiations between the two countries, according to a White House executive order.

Brazil accounts for 37% of global annual coffee production, US Department of Agriculture data shows. The tariffs, imposed in addition to global reciprocal duties, added pressure to an already strained market as extreme weather reduced harvests and global coffee prices surged.

The tariffs on Brazilian imports had been in place since the administration issued an August executive order declaring a national emergency. In that order, Trump said Brazilian policies threatened US national security, foreign policy and economic interests. He also criticized the prosecution of former Brazil President Jair Bolsonaro and fines imposed on US companies by Brazil’s Supreme Court, including X, Meta, and Google.

Market Reaction

Global coffee prices fell sharply after the tariff rollback. Arabica futures on the ICE exchange closed nearly 2% lower at US$3.6/lb, after dropping more than 6% to a two-month low earlier in the session. Robusta futures fell 2.7% to US$4.5/t, after an earlier 8% decline.

“We need the market to digest this … I do not believe we will go below US$3/lb. If anything, I would be a buyer in whatever market dip comes from this news,” said a Europe-based trader at a global coffee trade house. He added that global arabica supply remains in deficit, stocks are low, and supply risks related to the La Niña weather phenomenon continue.

The United States, the world’s largest coffee consumer, sources about a third of its beans from Brazil. The removal of tariffs is expected to accelerate shipments to replenish low US inventories. “Once the announcement of tariff reductions was made, we will divert a shipment under planning for Germany to go instead to the US,” said Stephen Hurst, Managing Director, Mercanta, a specialty coffee importer.

Trade Policy Context

The new exemptions modify the administration’s global tariff structure, which has faced criticism from US retailers and importers grappling with cost increases. US retail coffee prices rose 40% year over year in September, contributing to broader food inflation reflected in recent public opinion polling.

The tariff decision also comes as the administration weighs broader trade actions. The ongoing Section 301 investigation, launched by the Trump administration in July, is being conducted by the Office of the US Trade Representative (USTR). The probe examines whether Brazil’s policies on digital trade, anti-corruption enforcement and ethanol market access undermine US commercial interests and warrant further trade action.

While the tariff reduction offers short-term relief for US buyers, trade negotiations between the two countries remain unresolved. The administration said further adjustments will depend on continued progress.