Coffee is more than just a morning beverage for millions of Americans, as the $100 billion industry heavily depends on imports. With 99% of the U.S. coffee supply sourced from foreign producers, shifts in global trade policies could have a significant impact.
Furthermore, as new tariffs loom, coffee prices are expected to increase, affecting consumers, cafe owners and roasters. As of December 2024, the U.S. Department of Agriculture report shows the U.S. top suppliers are Brazil (32%), Colombia (20%), Vietnam (8%) and Honduras (7%).
Why 99% of Coffee Beans Come from Abroad?
The U.S. heavily relies on imported coffee beans, with 99% of its supply originating from other countries, primarily Latin America. A small portion is grown in Hawaii; the vast majority is imported, making the U.S. the second largest importer of coffee. The main reasons why the U.S. is dependent on imported coffee beans are:
- High Consumption: The U.S. is a coffee-drinking nation, consuming a significant portion of the world’s coffee production.
- Limited Domestic Production: The U.S. has a small coffee industry, with most beans grown in Hawaii.
- Global Coffee Trade: The global coffee trade is dominated by countries in Latin America, mainly Brazil and Colombia. They supply a large portion of the world’s coffee.
- Demand From the U.S.: The U.S. imports more than 18% of the world’s imported coffee, highlighting its demand for the beverage.
How Tariffs Could Fuel Inflation in the Beverage Sector?
Tariffs can influence inflation in the beverage sector by increasing import costs, which are then passed on to the consumers. Due to Trump’s new trade policies, the beverage industry is experiencing notable price changes.
- Tariffs and Their Impact: In April 2025, a universal 10% tariff was imposed on all imported food entering the U.S. The countries facing higher tariffs are the EU at 20%, China at 34%, Vietnam at 46%, and Brazil and Colombia at 10%. As the U.S. imports a portion of its beverages such as coffee, wine, and spirits, the new tariffs will increase the cost of these products.
- Inflation in the Beverage Sector: According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) for food and beverages increased by 2.4% over the 12 months ending March 2025. Such an increase reflects the rising costs in the sector, particularly attributed to the new tariffs.
- Industry Response and Economic Implications: Companies like Constellation Brands have adjusted their financial outlooks, citing U.S. tariffs as a key factor. The company expects adjusted earnings between $12.60 and $12.90 per share for fiscal year 2026, down from $13.78 in fiscal year 2025. Such adjustments reflect the broader implications of tariffs on the beverage industry.
How New Trade Policies Could Disrupt the Coffee Supply Chain?
The new trade policies of the U.S., particularly tariffs on imported coffee, are disrupting the coffee supply chain. Such a step is leading to increased costs and operational challenges across the industry.
- Tariffs Increasing Costs: The U.S. imported a 10% baseline tariff on most imported goods, with higher rates for countries like 20% for the EU, 34% for China, 46% for Vietnam and 10% for Brazil and Colombia. As the U.S. imports 99% of its coffee, these tariffs directly increased the cost of raw coffee beans. For example, Wonderstate Coffee, a Wisconsin-based roaster, anticipates an additional financial burden of $250,000 to $300,000 due to 10% tariffs on its imports from countries like Ethiopia, Guatemala, and Peru.
- Impact on Coffee Chains and Retail Prices: Major coffee chains also feel the pressure. For example, Biggby Coffee may incur an 18% tariff on shipments from Nicaragua. Next, Starbucks, which sources coffee beans from Colombia, has experienced a 20% drop in its stock value after the tariff announcements. While Starbucks didn’t raise prices the year, the increased cost may be passed on to the consumers eventually.
The Domino Effect: Coffee Tariffs and the Rise of Substitute Beverages
As tariffs increase the price of coffee imports, a domino effect is reshaping consumer behaviour and beverage market dynamics across the U.S. With coffee prices climbing due to a 10%-46% increase in import duties, many Americans are turning to alternative beverages to get their daily caffeine fix within budget.
1. The Shift in Consumer Preferences
With coffee drinks costing more, consumers are starting to explore different affordable and accessible substitutes, such as:
- Tea: Tea is already a popular choice, especially in health-conscious circles. The sale of tea increased by 9% in Q1 2025, according to Nielsen data.
- Yerba Mate & Matcha: They are both trendy alternatives offering both caffeine and wellness benefits. Such products are drawing the attention of millennials and Gen Z consumers.
- Energy Drinks: The energy drinks were once reserved for athletes and night owls, but their sales surged. Thus offering convenience and fast alternatives to brewed coffee.
- Functional Beverages: Infused waters, kombucha, and mushroom-based drinks are also gaining ground in the market. These drinks are marketed as both energizing and health-supportive.
2. Impact on the Coffee Industry
The price shift is putting pressure on traditional coffee retailers and roasters, who now face competition not just from each other but other caffeine alternatives. Smaller Cafes in the U.S. are feeling the pinch mostly, as they lack buying power to absorb tariff-related costs. Thys, retailers and roasters are responding by:
- Broadening product lines to include tea, matcha and ready-to-drink energy beverages.
- Promoting local and boutique coffee sources like Hawaiian or Puerto Rican beans to reduce import taxes.
- Leaning into subscription models and brand loyalty programs to retain customers amid rising prices.
Conclusion
The new trade policies and tariffs on coffee imports are creating a ripple effect across the U.S. coffee market. It includes driving up prices and challenging both consumers and businesses. With 99% of the U.S. coffee supply sourced from abroad, the increased price is causing supply chain disruption. This has resulted in higher retail prices and the emergence of substitute beverages.
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