Many caffeine enthusiasts may have noticed the price of their morning coffee has risen rather significantly in recent years. As AAF’s the Shipment often notes, the average price per pound of ground roast coffee has increased nearly 20 percent in U.S. cities this year alone. The Consumer Price Index (CPI) for coffee has increased roughly 26 percent since 2015, and the Producer Price Index (PPI) has soared 60 percent. Historically, coffee price hikes are primarily attributable to supply shocks such as the severe droughts in Brazil and Vietnam that reduce yields. At the same time, coffee demand has remained stable in the United States while emerging economies and China have been experiencing rapid consumption growth, increasing 150 percent over the past decade. Basic economics suggests that stable or rising demand mixed with lower supply will lead to higher prices. This helps explain what U.S. consumers have been experiencing.

Recently, another economic factor has been tossed into the mix. Tariffs. Prior to President Trump’s “Liberation Day,” the tariff rate on coffee imports has been between 0 percent and 0.1 percent. In June, that rate surged to 9.3 percent and is expected to keep rising as a result of the 50-percent tariff on Brazil, the largest supplier of coffee beans to the United States. Tariffs collected on coffee imports have experienced year-over-year increases of up to 15,000 percent. This means that despite the price of robusta and arabica beans declining in recent months, tariff costs have almost entirely counteracted these lower input costs. While import taxes are not as consequential as droughts, history shows that higher prices have had relatively little impact on the insatiable thirst among U.S. consumers. Only time will tell but it looks like while other parts of the world may soon experience a break in ever-rising caffeine costs, the United States may be stuck picking up a new tariff tab.