The record-high prices you’re paying will go even higher when tariffs take their toll

When President Donald Trump announced broad plans to implement tariffs on U.S. imports from several countries back in April, coffee roaster Chad Seegers’s first thought was that coffee surely wouldn’t be on the list — because the U.S. barely grows it.

Yet the Trump administration’s April rollout of tariffs led to a 10% duty on most imported coffee, including from Brazil, which is among the biggest providers of the commodity. Then in August, the Trump administration raised its import taxes on Brazil to 50%.

Even though the coffee industry knew the president had planned to implement global tariffs on imports, it wasn’t really possible to prepare for them because coffee prices were already high.

“It was tough to take action and try to reserve coffee in advance of tariffs,” said Seegers, who co-owns Low Country Coffee Roasters in Charleston, S.C., with his mother and stepfather.

Raw coffee beans can be stored in a climate-controlled environment for up to a year before they’re roasted, but prices have seen a “parabolic move” in recent years that pushed out a lot of reserve supplies, he noted.

Since 2020, global coffee production has suffered from recurring weather problems, said Fernando Maximiliano, coffee-market intelligence manager at StoneX. “Practically every year, there were droughts in different intensities, as well as frosts, heat waves, high temperatures and other climate extremes that affected coffee production — not only in Brazil, but also in other producing countries around the world.”

The “persistent supply shock” had already been fueling an inflationary process in the coffee market, Maximiliano told MarketWatch. StoneX estimates that global coffee inventories were at around 36 million to 37 million bags in 2024, down from about 58 million to 59 million bags in 2020. One bag is around 60 kilograms, or 132 pounds.

As a result, prices increased — and with that inflationary process already underway, the “imposition of tariffs further intensified the difficulties for the American coffee industry,” said Maximiliano, who’s based in Brazil.

The average U.S. city consumer price for 100% ground roast coffee was at a record high of $8.872 per pound in August, according to data from the U.S. Bureau of Labor Statics, via the Federal Reserve Bank of St. Louis. That was the highest level based on records dating back to January 1980. In December, it was priced at $6.776.

“Clearly, the supply-side shocks caused by climate issues had already been creating an adverse scenario, but the new tariffs have amplified the problem,” said Maximiliano.

On Thursday, coffee “C” futures, the world benchmark for Arabica coffee, saw the December contract KCZ25 KC00 settle at $3.81 a pound on the ICE Futures U.S. exchange. Prices have climbed 19.1% year to date after hitting a record high of $4.29 on Feb. 10 of this year, according to Dow Jones Market Data. Last year, futures prices posted a climb of 40%.

“Ongoing market uncertainty, combined with the diverse characteristics of coffee from different origins, is causing a slow adjustment among U.S. buyers,” wrote Thijs Geijer, senior sector economist for food and agriculture at ING, in a recent note.

He said recent trade data offers an “early glimpse into these shifts,” with coffee exports from Brazil to the U.S. down by over 75% in August compared to 2024 levels. Brazilian traders have held on to their coffee stocks and farmers have delayed sales in anticipation of higher prices, Geijer noted.

Exports from Colombia and Vietnam, meanwhile, have remained “stable” though September, he added, but American coffee supplies are tightening. “The disparity in tariff rates is expected to drive U.S. buyers to reallocate sourcing away from Brazil toward more favorably taxed origins,” Geijer said.

Low Country Coffee Roasters has had to raise its wholesale prices twice this year — marking the first price increases for its customers in six years, said Seegers, who is also managing partner for Insight Wealth Strategies.

“We have had several small, direct family growers from Cameroon to Costa Rica back out of supplying coffee beans to us in the U.S., simply because they don’t want to pay tariffs just on principle,” he told MarketWatch.

His coffee-roasting business has seen its profit margins cut in half — and the tariffs have “created a lot of unproductive work,” said Seegers, since his company has to make sure it has the correct pricing due to tariffs, for example, on Indonesian coffee versus Honduran coffee.

“Raw-bean prices have doubled for us,” he said, but his company has increased prices to its vendors by a smaller 30% to 40%, while retail prices have increased by 25%.

Seegers’s customers — cafes, bakeries and restaurants — told him that the prices they charge for coffee have nearly doubled in some cases. So that’s now a $7 latte, up from $4.50 some 18 months ago, he noted. Brazilian coffee was 80% of his company’s best-selling blend, so his business has had to change some of its main coffee blends.

“We’re simply going away from Brazil altogether, and using higher-quality coffee from other places in Mexico and Central and South America,” said Seegers. “We had a bean from Brazil that was an absolute favorite for many businesses. Between the cost of the raw bean and the tariffs, our cost jumped to $17 [a pound]” — and that “isn’t a level that could remotely be passed on.”

So he sees coffee from Brazil as “simply not feasible” and said that, for now, “that coffee can’t be imported and roasted.”

In his research note, ING’s Geijer said roasters will be trying to renegotiate with their customers. “If they stick with the same-quality coffee, they’ll want to pass on the higher input costs, or they may change blends and trade down to a lower-quality coffee to maintain price levels.

“Either way, it’s not pretty for American coffee connoisseurs,” Geijer added.

Low Country Coffee Roasters, for its part, will not sacrifice quality. “We just can’t,” Seegers said. “We chose to absorb the majority of the cost increases and tariffs, rather than [reduce] quality.”

Seegers said that while his mother and stepfather have tried to make it a fun process — viewing it as a way to discover new coffees they haven’t considered until now — the cost of it has been “heavy” this year. “Not only are our own profit margins getting squeezed, [but] our customers’ businesses are down due to higher prices,” he said.

ING’s Geijer, meanwhile, had some more bad news: He suggested that tariffs haven’t really reached the retail level yet.

In the U.S., “‘high-tariff’ coffee hasn’t yet hit the shelves,” as some roasters have been using existing inventories first, he said. The 50% tariff rate on Brazilian exports to the U.S. took effect on Aug. 6, he noted; it then takes about a month to ship the coffee, which then needs to be roasted, packed and distributed to retailers.

“Expect the tariff impact to start hitting those retailers in the fourth quarter,” said Geijer.

In a July earnings call, Cathy Smith, chief financial officer of Starbucks Corp. SBUX, the world’s largest coffeehouse chain, said that because of her company’s coffee-buying and hedging practices, moving-average coffee costs and tariff impacts will “lag the market.” She said year-over-year coffee cost increases were expected to peak in the first half of fiscal 2026.

So while Seegers’s roasting company won’t sacrifice quality as costs climb, consumers may soon be at their breaking point as inflationary pressures take their toll.

“The consumer substitution of slightly lower-quality, cheaper products may be upon us,” he said.

Victor Reklaitis and William Peters contributed.