Why coffee prices are rising in US

Coffee prices surged to a new high in the United States on Monday, following a brief tariff threat by President Donald Trump against Colombia amid a dispute over deportation flights.

Although the 25% tariff never took effect, its mere mention sent ripples through the coffee market, causing futures contracts for Arabica coffee to rise.

Colombia, the world’s third-largest coffee producer after Brazil and Vietnam, plays a crucial role in global coffee supply.

Arabica coffee futures, traded on the Intercontinental Exchange, increased from $3.48 per pound on Friday to $3.49 on Monday, marking a 0.5% rise. By mid-day Tuesday, prices climbed further to $3.53 per pound, reflecting a 1.7% increase since Friday.

“When President Trump even makes threats about tariffs, the minute you introduce uncertainty into a global trade system, and that’s what global trade is, things are going to get a little crazy,” said Dan Gardner, president of Trade Facilitators, a supply chain and logistics firm.

However, Trump’s tariff threats were not the only factor driving prices up. Arabica coffee prices had already surged by 13% in December, reflecting a 60% year-over-year increase, according to the World Bank.

Persistent supply challenges, particularly in Brazil and Colombia, have kept coffee prices elevated since 2011. Extreme weather conditions have disrupted harvests, and upcoming crop yields are not expected to bring much relief.

“The market just hasn’t really caught a break. The supply has been improving, but still not enough to meet with demand. There has been a growing realization that the impacts will be worse than people were originally thinking,” said Ryan Delany, chief analyst at Coffee Trading Academy.

ALSO READ: US, Colombia strike deal on deportations as tariffs, sanctions suspended

While the US produces some coffee in Hawaii, it remains a major importer, with Colombian coffee being a favourite among American consumers. The country imported nearly $9 billion worth of coffee last year, with Colombia accounting for $1.4 billion of that total—making it the second-largest supplier after Brazil.

Major companies such as Starbucks, Nestlé, and Keurig rely heavily on Colombian coffee, but they often secure prices years in advance. As a result, immediate price fluctuations may not be felt by consumers right away.

Despite this, uncertainty in trade policy has already led businesses to prepare for potential cost increases. “Companies, because they know that the average American doesn’t understand how this stuff really works, they’ll start increasing prices, maybe not all at once, but little by little. So, they’ll have a little cash reserve against when stuff starts coming in and facing those tariffs,” Gardner explained.

Even without tariffs, coffee prices remain high and are expected to keep climbing.

“Coffee is one of those items that has seen rapid increases at the wholesale level that will probably be coming to the grocery store soon,” said Tyler Schipper, economist and associate professor at the University of St. Thomas in St. Paul, Minnesota.

“So people will have trouble separating tariffs that didn’t even pan out, versus what were the underlying price dynamics of coffee even before the Trump administration.”

ALSO READ TOP STORIES FROM NIGERIAN TRIBUNE