Onerous and erratic tariffs have upended the coffee trade, incentivising loopholes and workarounds. Collectively, these changes herald an uncertain new era for the global coffee industry.
For paid subscribers: A tale of international intrigue, bank fraud, and coffee smuggling from the 1980s that sounds like an episode of Miami Vice.
Onerous and erratic tariffs have upended the coffee trade, incentivising loopholes and workarounds. Collectively, these changes herald an uncertain new era for the global coffee industry.
This is part two of my loosely connected series on the shadowy side of coffee. Part one was on the long and complicated history of coffee smuggling. Future articles will look at land theft, corruption, and all the other ways coffee and crime connect.
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The Trump administration’s punitive tariffs have only been in place for a matter of months, but they are already reshaping the global coffee industry. The United States is still the world’s largest coffee market, which means the president’s slapdash decisions affect all segments of the sector, from roasters to producers to equipment manufacturers.
Brazil’s coffee exports are down as U.S. roasters look elsewhere, impacting producers and leaving China and others to step in and fill the gap. Coffee machine manufacturers are struggling. Meanwhile, consumer demand in the U.S. is falling—all while roasters and cafes begin to increase their prices to cover the cost of this new tax. (The $10 latte looms ever closer.)
There have been some recent signs that the tariffs may be lessened or reversed, but so far they remain inconclusive. A new executive order hints at a tariff exemption for coffee—so long as the countries involved agree to new trade deals with the U.S. Meanwhile, the Supreme Court has fast-tracked a hearing on whether the tariffs are even legal, although we won’t hear anything until November (and this particular court has a history of siding with Trump’s every whim).
In the meantime, U.S. roasters and importers are being hit by five-figure import duties. Depending on the origin, the cost of importing a container of coffee or espresso machines has increased between 10–50%, leaving many companies struggling to stay afloat.
These conditions incentivise those willing to bend the rules. In the past, resourceful renegades have managed to get around pesky barriers like laws and trade embargoes—see my piece on the history of coffee smuggling more generally—and there have already been reports of other industries seeking out loopholes and workarounds to avoid the new tariffs.
With coffee, such outcomes are still speculation at this point. But in an industry with razor-thin margins, there are significant motives for keeping costs as low as possible. More broadly, the tariff fallout points to the beginnings of a realignment in the flow of the global coffee trade—and a further concentration of power with the industry’s biggest players.
Until now, the 21st-century global coffee supply chain, while cumbersome, has just about worked. At every stage in the process, those involved—from exporters to customs officials to transport companies—have been incentivised to make sure the coffee gets where it needs to go.
Throw a wrench into the system, however, and things quickly start to break down. We saw that with global supply chains during the early years of the pandemic, and we’re seeing it again now as a result of Trump’s chaotic tariff policies. The U.S. bought nearly $2 billion worth of coffee from Brazil in 2024; now it’s going to cost 50% more to import that coffee. In 2022, 68% of all Mexican coffee exports traveled north; Trump’s tariff on Mexico is currently 25%. Indonesia sent $275 million worth of coffee to the U.S. in 2023. Its tariff is now 19%. It goes on and on.
The impact on coffee trade has been immediate: Exports from Brazil fell by 20% in July compared with the prior year, at least in part due to tariff-induced uncertainty. In August they fell again, although only to the U.S. Because the tariffs are an import tax paid by the buying company and usually passed on to consumers, analysts are also forecasting a drop in demand as retail prices rise.
“There’s still some hope that coffee is exempt, especially because without exemption things will get worse very, very rapidly”, says Sandra Loofbourow of Loupe Coffee Consulting. Since January, she has been advising producer and exporter clients to diversify their selling markets. “If you have stable and reliable customers in the United States, great—keep working with them as long as it’s feasible. But now is a great opportunity to start exploring and investing in other markets”.
And the coffee itself is just one part of the global industry that has been impacted. There’s also coffee equipment, from consumer-grade grinders to commercial espresso machines, as well as paper cups and retail coffee bags. The bulk of these products are manufactured in China, which is dealing with an especially volatile situation as Trump’s tariff threats against the country veer wildly from week to week.
Michael Szyliowicz, founder of the coffee machine manufacturer SolaBev, tells of a sourcing trip he took in April. “I arrived in Hong Kong for a meeting with one of my manufacturers on Monday. I flew to Malaysia Tuesday for meetings with other suppliers on Wednesday and Thursday, and returned to the United States on Friday. In that week, tariffs increased from 10% to 145%!”
But it’s not only China that has been affected. According to a recent report by Dave Graham in Reuters, equipment manufacturers in Switzerland are already being hit hard. Thermoplan, which makes super-automatic espresso machines for Starbucks and others, says it’s losing $250,000 a week because of the 39% tariff on American imports of Swiss goods. “We’re bleeding,” Thermoplan CEO Adrian Steiner told Graham. “It’s obviously a losing business for us. We don’t have the kind of margins to compensate for that”.
The tariffs are just another obstacle for a sector that has seen several years of turmoil. The repercussions from supply chain disruption and raw material cost spikes during the height of the pandemic are still working their way through the system, with price rises affecting everything from commercial espresso machines to roastery equipment to home brewers.
With all this volatility and increased cost, it makes sense that companies might look for ways to circumvent Trump’s tariffs.
As the coffee industry continues to shift and change, it's important to have independent voices continue to cover and critique it.
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Smuggling has been a part of the global coffee industry throughout its centuries-long history. But today—with some of the biggest coffee-producing countries and makers of equipment hit by the highest tariffs—it wouldn’t be surprising if companies began looking for workarounds.
One of the most likely ways that such modern-day smuggling could occur is via “originwashing”, or “transshipping”—the practice of companies routing their coffee via a different, lower-tariff, country.
“The concept of transshipping in the sense that it evades trade regulations is most commonly understood as ‘relabeling’ a country of origin”, says Yao “Henry” Jin, associate professor of supply chain management at the Farmer School of Business at Miami University. “For instance, something can be made in China but shipped to Vietnam where it is labeled as ‘Made in Vietnam’, which aligns with the ‘originwash’ concept”.
This practice is already happening in other industries. A May 2025 report in the Financial Times found Chinese exporters advertising “originwashing” via Malaysia, Cambodia, and South Korea in response to the tariffs. “We have found numerous cases where the origins of Chinese products were falsified as Korean”, the country’s customs agency said.
Such an approach is difficult to apply to green coffee, but not impossible—one enterprising criminal in the 1980s smuggled millions of dollars worth of coffee into the U.S. by mislabelling its country of origin. “I wouldn’t be surprised at all if this happens”, says Mat North from the nonprofit green coffee trader Raw Material. “It will obviously take some interesting customs work, because these coffees ship with certificates of origin [...] that are generated on export, but I can’t see why it wouldn’t happen”.
Fionn Pooler
The risks for such smuggling are high, as the penalties for tariff evasion can be punitive. But because just 5% of containers shipped to U.S. ports are physically inspected, and with the tariffs increasing the cost of importing a container of coffee by as much as 50%, some companies may decide it is worth the risk. A single container of green coffee can cost as much as $200,000, depending on the origin—adding 10–50% on top of that, multiple times a year, adds up.
Although nobody can say for sure whether this form of smuggling is yet occurring, industry members are aware of the possibility. In a recent statement reported on by Reuters, Márcio Ferreira, the president of the Brazilian coffee exporters group Cecafé, noted that “the tariffs disrupted the market and opened the door to speculative movements”. Although Brazil’s exports to the U.S. fell by 46% in August, exports to Colombia and Mexico rose significantly, Cecafé said. However, Ferreira insisted that transshipping wasn’t a viable way to skirt tariffs, as such attempts would be "very easy for the American government to spot”.
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Trump’s reasoning for imposing retaliatory tariffs on basically every U.S. trading partner is, he claims, to encourage companies to move manufacturing back stateside. “Jobs and factories will come roaring back”, the president said in April. But, especially in coffee, where the raw material itself is subject to tariffs, a more likely outcome is big companies building new roasting plants in low-tariff countries in order to take advantage of the substantial transformation rule.
Officially, in order for an intermediate country to count as the new origin of a given product, U.S. trade laws require it undergo “substantial transformation” there. Manufacturing instant coffee, or simply roasting it, counts as substantial transformation, although decaffeination doesn’t.
That means a multinational could build a factory in, say, Jamaica, and ship coffee there from Brazil for roasting. That coffee, once roasted and packed, would only receive Jamaica’s 10% tariff because it had been substantially transformed. (While big companies building new infrastructure in Global South countries might seem positive, as my article on Nestlé’s Colombian coffee unions shows, the workers and local communities seldom benefit from such investment.)
These moves are happening already, albeit not specifically regarding roasting. Thermoplan is looking to shift production to Germany, while Szyliowicz told me that some Chinese manufacturers he has spoken with are already building factories in Cambodia as a way to achieve lower tariff rates.
One possible positive outcome is that producing countries expand local roasting capacity and export roasted coffee, therefore keeping more of the value at origin. “There are some easy numbers available about how much of the value generation happens just from converting the coffee from green to roasted, and wouldn’t it be cool if producers and exporters were able to retain some of that generated value?” says Loofbourow.
However, such arrangements take significant investment, and the reality is that the companies best placed to move quickly are the multinationals with already-extensive supply chains. “Of course, this move is more accessible to companies who can easily invest in the infrastructure needed to make their companies more vertically integrated”, Loofbourow says. “But it would be really cool to see micro-roasters emerge directly from producing countries or specific coffee farms”.
As I have written before, such local roasting is already happening, albeit on a small scale. At the same time, producers and exporters are increasingly looking to new markets as traditional coffee powerhouses falter. Aside from America’s issues, the European Union’s Deforestation Regulation and accompanying bureaucracy grows ever nearer. Coffee consumption is increasing in regions like Asia and the Middle East, as well as in producing countries themselves. It’s gradual, but it feels like we’re seeing the beginnings of a potential realignment in the global coffee industry’s power centres.
There are still a lot of unknowns regarding the long-term impact of Trump’s tariffs. Will coffee be given an exemption? Will American roasters return to sourcing coffee from Brazil? Will retail prices drop if the Supreme Court strikes down the tariffs? Or are these changes permanent, leading the industry to shrug and move on? (For what it’s worth, economists reckon that high prices will likely remain.)
Fionn Pooler
Of course, it’s worth remembering that the coffee trade is always changing. Priorities routinely shift in response to cultural, economic, and political forces. The pandemic caused a boom in online subscription services and mobile ordering (something that Starbucks tried to harness without much success). Further back, the United States’ support of the 1962 International Coffee Agreement was, at least in part, a way to prevent the spread of communism in Latin America in the wake of the Cuban Revolution. Once the threat subsided, the ICA was toast.
Trump’s tariffs represent another shift, albeit an especially incoherent one—and one whose global ramifications we’re only beginning to grasp.
Ultimately, Trump claims that his trade war is meant to help American business interests and the country more generally, but that couldn’t be further from the truth. U.S.-based importing companies are already paying hundreds of thousands, if not millions, more dollars for their coffee. Consumers are also paying more in the form of price rises from those same companies looking to cover their outlays.
The only people who look set to win are rich Americans, for whom Trump imposed the tariffs in the first place. “It’s possible we’ll do a complete tax cut”, Trump said in April. “I think the tariffs will be enough to cut all of the income tax”. But as the former Secretary of Labor Robert Reich wrote in the Guardian in March, “that tax cut will disproportionately benefit wealthy Americans and big corporations, as did Trump’s first-term tax cut. But revenue raised from tariffs will be coming disproportionately from average working people”.
The likely outcome of this economic policy is not only a weakened U.S. economy, but America’s forfeiture of its current dominant position within the global coffee trade.
What that means in the long term remains to be seen, and of course this could all be moot in a few months. But we are already beginning to see changes—Brazil is now exporting more to Germany than the U.S., while American roasters turn to countries like Colombia in search of cheaper beans. China, meanwhile, is wooing Brazilian exporters with a fast-growing new market as it looks to build its global soft power.
It’s a bitter irony, however, that for all of this upheaval, a few elements remain stable. Most power within the coffee industry is still held by multinationals and those able to secure investment. Consolidation continues apace, while venture capital funds expansion for coffee brands worldwide. And no matter how much things shift, coffee producers are still likely to lose out the most.
“The farmer is getting nothing of this”, North says of the tariff-induced price increases. “In fact, you’ll find, I imagine, the big players really pushing for the lowest cost possible right to try and offset some of it. If they can get that coffee below the C price, that’s a big saving”.
A global realignment in the coffee industry may well be brewing. But in the short term at least, it’s likely that power and profit will remain where it always has.
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