Shares of Starbucks and other major US coffee retailers could face higher costs after the Trump administration proposed a sweeping 50% tariff on all imports from Brazil — the world’s largest coffee exporter.
The policy, set to take effect on August 1 unless Brazil negotiates an exemption, threatens to raise input costs for beverage giants that rely heavily on Brazilian beans.
According to TD Cowen analyst Andrew Charles, Starbucks could see a 0.5% increase in North America’s cost of goods sold due to its exposure to Brazilian coffee.
Roughly 22% of Starbucks’ North American coffee beans come from Brazil, accounting for about 2.2% of its total cost base in the region.
A 50% tariff, therefore, would push up input costs and shave off an estimated 1.4% from its earnings.
The impact on Starbucks’ Channel Development segment — which includes ready-to-drink beverages and packaged beans sold through grocery stores — could be more pronounced.
Charles estimated a 3.5% lift in costs for that division, resulting in an additional 0.6% drag on the company’s earnings. In total, the tariff could mean a 5-cent reduction in annual earnings per share.
Consumers may avoid price hikes, at least for now
While the looming tariff could squeeze Starbucks’ profit margins, the company is unlikely to pass on the higher costs to customers, at least not immediately.
Following a year of sluggish US sales and customer frustration over rising prices, CEO Brian Niccol committed to holding prices steady through 2025 in hopes of winning back foot traffic.
Still, persistent cost pressure could eventually limit pricing flexibility.
Coffee futures rose 1% on Thursday in response to the tariff announcement, although they remain below February’s record highs driven by extreme weather in Brazil.
Supply disruptions from drought and frost have already pushed global coffee prices upward over the past two years.
Charles emphasized that Starbucks’ global sourcing — spanning over 30 countries — and its increasingly diverse menu could soften the blow.
Its popular non-coffee beverages like Refreshers now play a growing role in the company’s North America revenue stream.
Dutch Bros and others also in the line of fire
Rival Dutch Bros, which relies on Brazilian beans for over half its coffee supply, could also face margin compression.
While coffee comprises less than 10% of Dutch Bros’ cost of goods sold, Charles estimates the new tariff would drive a 1.3% rise in its annual cost base and lead to a 0.5% reduction in profits.
Other companies, such as JM Smucker — the owner of Folgers — and Keurig Dr Pepper could also see their sourcing costs surge.
Brazil supplies about a third of the US green coffee beans, according to the US Department of Agriculture.
Giuseppe Lavazza, chairman of Italian coffee roaster Lavazza, said in an interview Thursday that the Trump tariff could trigger “a lot of inflation” across the global coffee sector.
Most US coffee cannot be domestically sourced, given that only Hawaii and Puerto Rico offer the right climate for bean cultivation.
Possible exemptions and timeline
The White House still has time to reconsider.
USDA Secretary Brooke Rollins said in June that exemptions are under discussion for essential imports that can’t be grown in the US, such as coffee.
However, until any such measures are formalized, coffee retailers face an uncertain summer.
Starbucks stock is up just 2.69% year-to-date.
Shares rose 21% on the day Niccol was appointed CEO in August 2024, but his turnaround strategy is yet to fully materialize.
No financial targets have been shared so far, and sales have yet to rebound meaningfully.
Meanwhile, analysts say that if the tariff goes through without exemptions, a broad swath of the US coffee industry will have to absorb higher commodity costs — or eventually pass them on to inflation-weary consumers.
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