North America's Coffee Industry Grapples With The Impact Of A Pointless Trade War – CoffeeTalk

The North American coffee industry is grappling with the impact of the trade war initiated by the administration of U.S. President Donald Trump on their businesses across the region, where operations are highly interconnected. Companies have roasting, packaging, and trading bases in both the United States and Canada to better supply clients. Potential U.S. tariffs and any retaliatory ones will now have to be considered when deciding what to make and where, industry participants said.

Mexico, meanwhile, is a regular supplier of high-quality green coffee to both the U.S. and Canada, as well as an exporter of instant coffee. Starbucks, for example, roasts the coffee used in its hundreds of Canadian stores in the United States. As the political environment moves or tariff markets move, companies will figure out how to navigate that effectively given those conditions in the regulatory environments.

The postponement of U.S. tariffs of 25% on the majority of goods from Canada and Mexico does not seem to have included most of the forms of coffee traded, according to documentation seen by Reuters. The product is mostly absent from the USMCA, the free trade agreement between the U.S., Mexico, and Canada. Most traders are doing that, as they have added a clause in their contracts saying the buyer would pay the additional 25% tariff if it is considered due.

Switzerland’s Nestle has invested heavily in instant coffee operations in Mexico in recent years, including a program with thousands of farmers to boost production of robusta coffee, the main raw material. Bill Murray, president of the U.S. National Coffee Association, said coffee should be exempt from additional tariffs, as tariffs on coffee would impact three in four Americans.

There is also fear in the industry about possible U.S. tariffs on South American countries, where most imported coffee comes from. Brazil, the world’s largest coffee producer and exporter, is on the radar. Brazilian Vice President Geraldo Alckmin and U.S. Secretary of Commerce Howard Lutnick met last week, and officials have started consultations on trade policy.

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