Business US tariff regime offers new opportunities, poses risks for Ethiopian coffee trade
April 12, 2025
By Addis Getachew
Experts and industry insiders caution that the 10-percent baseline tariffs that Ethiopia is subject to pay under the latest round of economic policy changes from Washington could have significant impacts on the country’s crucial coffee export trade.
Although the administration of US President Donald Trump has announced a three-month pause on its plans to apply baseline tariff rates on most of the world, experts such as Demeke Tsegaye, a banker specializing in coffee export financing, see the tariffs could impact Ethiopian exporters in several ways.
The US is the third-largest buyer of Ethiopian coffee, accounting for around a fifth of revenues each year.
“The tariffs will have direct bearing on the cost; it will bring about an increase in cost. It is within the natural demand-supply principle. Because tariffs drive up the cost of coffee, demand in the US for Ethiopia’s coffee may go down as consumers opt for the cheaper and more readily available robusta coffee supplied in bulk by South American producers such as Brazil, Peru and Colombia, among others,” he said.
However, he observes that the levying of higher tariffs on other coffee producing countries could also grant Ethiopia a competitive edge in the US market.
“But other factors including the cost of production, logistics and general efficiency of the coffee supply chain should also be considered. The Latin American countries, in addition to producing coffee in bulk, are located close to the US market, therefore they have a better competitive advantage,” the independent coffee export financing consultant told The Reporter. “Ethiopia will need to dramatically improve its production and supply efficiencies by cutting on the long, unnecessary processes in the value chain.”
While US green coffee traders and roasters are already feeling the effects of a period of nominally high coffee prices on the New York Arabica futures market (the ‘C Price’), they must now prepare to cover even pricier costs of goods, with many of the world’s top producing countries facing stiffer import costs, according to Roastlog.
The National Coffee Association (NCA) of the United States has previously called for coffee to be exempted from new tariffs.
“Every dollar of coffee-related imports generates USD 43 in value for the American economy, and coffee supports 2.2 million US jobs, all while being America’s favorite beverage,” Roastlog quoted NCA President William “Bill” Murray as saying in a statement. “Since coffee beans cannot be grown in most of the United States, trade policies should take into account the essential role of coffee trade in Americans’ daily lives and in the US economy, to ensure that Americans don’t face even higher coffee prices amid the current cost of living crisis.”
Reports indicate that no less than 124 million people worldwide depend on coffee for their livelihoods. Conservative estimates put this number in Ethiopia at 25 million. All told, from farm to cup, between 600 and 800 million people across the globe work in the coffee industry.
According to the Global Coffee Report (GCR), for the first time ever, the demand for coffee worldwide has surpassed supply, driving prices significantly upward. Coffee updates for 2025 already show a 12 percent increase in the price of coffee in the last six months, with the price of a pound of the green beans jumping to as high as USD 7.50 in January.
It is more than three times the USD 2.40 a pound registered in August 2024, which, according to reports, was a 13-year high.
Observers hope the rising prices could spark a fundamental transformation in the Ethiopian coffee trade, where exporters often sell at a loss in a bid to earn foreign currency to supplement other, more profitable lines of business.
“There were two ways the exporters offset their imminent losses. Either they sold the dollars they earned to importers on wide margins, or they imported goods, such as vehicles, themselves and sold them at high prices in the local market,” said Demeke. “This was not a normal trading practice, and it prevented our coffee from being competitive in the international market.”
The lack of competitiveness played a large role in dwarfing the coffee export industry, which accounts for a third of Ethiopia’s total export revenues. However, the forex reforms of mid-2024 have transformed the trade, and Ethiopian coffee exporters are now beginning to see real profits as a result.
The cost for producing 17 kilograms of coffee (a unit colloquially referred to as a feresula) has jumped to around 8,000 birr, but, at the new exchange rates, this is the equivalent of around USD 3.30 per kilo, or around half the international market rate.
Washington’s tariff regime affecting 182 countries with widely varying rates is expected to impact poor countries more heavily. For example, Lesotho, a Southern African nation that depends largely on its textiles industries for its export earnings, faces a 50 percent tariff.
On April 9, the Trump administration announced a 90-day pause on the tariffs, offering a sigh of relief to global stock markets, which had been in a sharp dive following the initial announcement a few days prior.