Trump's Brazil Coffee Tariff Exemption Triggers Sharp Market Selloff—What's Really Driving Prices Lower

Coffee futures experienced significant losses on Friday, with March arabica closing down 7.20 points (-1.91%), marking a 7-week low, while January robusta contracts fell 125 points (-2.70%). The sharp reversal stems from President Trump’s executive order issued Thursday night, which exempts Brazilian food products—including coffee—from the administration’s tariff framework, eliminating a previously imposed 40% levy on Brazilian coffee imports.

The Tariff Relief Effect: Why Markets Sold Off Aggressively

While the removal of tariffs might seem supportive long-term, market participants immediately repriced the commodity lower. The tariffs had artificially constrained supply flows to US buyers, creating artificial scarcity. With that barrier removed, expectations of normalized import volumes triggered immediate selling pressure.

Compounding the tariff relief, the Brazilian real weakened to a 5-week low against the dollar Friday, making Brazilian coffee exports more competitive globally. A weaker currency incentivizes producers to accelerate sales at current price levels, flooding the market with additional selling interest.

Supply Chain Adjustments Following Months of Tariff Disruption

The tariff removal signals a major shift in how American importers approach Brazilian coffee supply. During August-October 2025, when Trump’s tariffs were in effect, US coffee purchases from Brazil plummeted 52% year-over-year to just 983,970 bags. Buyers had shifted sourcing or deferred commitments entirely, knowing costs would be elevated.

This supply chain disruption had created secondary supportive factors: ICE-monitored arabica inventories fell to a 1.75-year low of 398,645 bags Thursday, while robusta stocks hit a 4-month low of 5,567 lots Friday. Approximately one-third of America’s unroasted coffee originates from Brazil, making this tariff episode a major structural market event. Now that tariffs are lifted, the normalization of American purchasing patterns is expected to rebuild depleted inventory positions.

Weather Dynamics Remain Mixed Across Growing Regions

Brazil’s coffee-growing regions face uncertain weather ahead. Climatempo forecasts heavy rainfall into next week across key arabica-producing areas, which supports crop development but weighs on near-term prices. Conversely, Monday’s data showed Brazil’s Minas Gerais region—the nation’s largest arabica producer—received only 19.8 mm of rain the week ended November 14, equivalent to 42% of historical averages, suggesting drier-than-normal conditions for that specific zone.

Vietnam’s robusta supply picture shows a different dynamic. Heavy precipitation delayed harvesting in Dak Lak province, Vietnam’s primary coffee region, with additional showers forecast. However, this weather disruption hasn’t prevented Vietnam from posting strong export volumes: Jan-Oct 2025 coffee exports rose 13.4% year-over-year to 1.31 million metric tons. Vietnam’s 2025/26 production is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags), marking a 4-year high.

Production Forecasts Show Diverging Signals

Brazil’s production outlook is bullish for supplies. StoneX forecasted Wednesday that Brazil will produce 70.7 million bags in the 2026/27 marketing year—29% above the prior year—including 47.2 million bags of arabica. This substantial increase contrasts with earlier 2025 estimates: Conab cut Brazil’s 2025 arabica crop by 4.9% in September to 35.2 million bags, and reduced total Brazilian production by 0.9% to 55.2 million bags.

At the global level, the USDA’s Foreign Agriculture Service projected June 25 that world 2025/26 coffee production will rise 2.5% year-over-year to a record 178.68 million bags. FAS expects arabica output to decline 1.7% while robusta climbs 7.9%. Ending global stocks are forecast to increase 4.9% to 22.819 million bags.

The Stabilizing Factor: Global Export Tightness

One element keeping prices from collapsing further is global export weakness. The International Coffee Organization reported November 7 that global coffee exports for the current marketing year (Oct-Sep) fell 0.3% year-over-year to 138.658 million bags. Despite production gains, the tightening of trade flows suggests structural supply-demand imbalances remain embedded in the market, providing a price floor even as tariff-driven scarcity dissolves.

The Brazil food tariff exemption represents a pivotal policy shift reshaping coffee market structure. Prices will likely stabilize as import patterns normalize, but the scale of upcoming Brazilian production suggests sustained downward pressure through the near-to-medium term.