Trump's coffee tariff change helps US roasters, hurts Brazil

"It brings some relief for the US coffee supply, but with the 40% on Brazil it will remain difficult," Dutch bank Rabobank says in a note

The robusta coffee fruits are seen in Sao Gabriel da Palha, Espirito Santo state, Brazil May 2, 2018. REUTERS

The Trump administration's decision to eliminate tariffs on most coffee bean imports will be a boon for coffee roasters and importers in the US, but top global grower Brazil will suffer because its coffee remains subject to a steep tariff.

While the measures announced late on Friday eliminate import tariffs on coffee beans from nearly all producing countries, only the 10% reciprocal tariff on coffee imports from Brazil was scrapped, with a 40% duty remaining.

Analysts and coffee industry officials said on Monday the changes will further drive the US, the world's largest market for coffee, to seek beans from Asia and Latin America, while snubbing Brazilian beans.

"It is just a question of price adjusting the trade flows," said Judith Ganes, president of J Ganes Consulting and a senior soft commodities analyst.

Most coffee countries in the Americas, except Brazil, previously had tariffs of 10%, which were eliminated. Asian growers had even larger tariffs, which were also scrapped, meaning they will also be able to supply the US tax-free.

"It brings some relief for the US coffee supply, but with the 40% on Brazil it will remain difficult," Dutch bank Rabobank said in a note.

"Without the full exemption for Brazil it will not really matter as much, as it is still prohibitive to import coffee into the US," said a California-based coffee importer.

Brazil, which used to supply a third of the US coffee beans, continues to negotiate a separate deal.

"The changes distort the market and further hurt our competitiveness," said Marcos Matos, a director at Brazilian coffee exporters association Cecafe. "We are losing market share, while our competitors are gaining it."

Brazil's specialty coffee sector has seen shipments to the US fall 55% in the last three months since tariffs started, Luiz Saldanha, vice president of the Brazilian Specialty Coffee Association, said, adding that things would get worse.

"Existing Brazilian coffee stocks up there (US) are being depleted, the industry is seeking alternatives to replace Brazilian coffee in its blends," Saldanha said.

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