Ethiopia’s coffee export trade faces new challenges and potential advantages due to recent changes in the US tariff policy. Under the latest economic shifts from Washington, Ethiopian coffee exporters could face a 10% baseline tariff, raising concerns about the impact on this crucial sector. The US is Ethiopia’s third-largest coffee market, contributing to around 20% of the country’s coffee export revenues. Experts are divided, with some warning of increased costs while others see potential benefits if other countries are affected more.
US Tariff Policy and Ethiopian Coffee Exports
Ethiopia’s coffee trade could see a significant shift due to the US’s new tariff policy. The latest move from Washington proposes a 10% tariff on coffee imports from Ethiopia, which could increase the cost of Ethiopian coffee in the US market. While President Donald Trump’s administration paused these tariffs for three months, experts still caution that the long-term impact could be substantial.
Ethiopia is one of the world’s largest coffee exporters, and the US is a major buyer, accounting for roughly 20% of the country’s annual coffee revenues. Demeke Tsegaye, a banker specializing in coffee export financing, explained that higher tariffs could lead to higher costs for Ethiopian exporters. “Tariffs will increase the price of coffee, which may reduce demand in the US, especially as consumers may turn to cheaper robusta coffee from Latin American countries like Brazil, Peru, and Colombia,” Tsegaye noted.
Increased Costs Could Challenge Ethiopian Exporters
Ethiopian exporters already face challenges in maintaining competitiveness due to high production costs and inefficient supply chains. Tsegaye emphasizes that to stay competitive, Ethiopia must improve efficiency within its coffee production and logistics processes. While Ethiopia’s coffee is prized for its unique flavors, the country’s high production costs and distance from the US market put it at a disadvantage compared to Latin American producers.
The tariff situation could be further complicated by increased tariffs on other coffee-producing countries. If countries like Brazil and Colombia face even higher tariffs, Ethiopian coffee could benefit from a competitive edge in the US market. However, Tsegaye believes that this benefit would be limited unless Ethiopia can significantly streamline its coffee supply chain.
Rising Coffee Prices and Global Market Trends
The global coffee market has seen a significant increase in prices. The price of a pound of green Arabica beans jumped to USD 7.50 in January 2025, more than three times the price recorded in August 2024. According to the Global Coffee Report, the demand for coffee has now surpassed supply, contributing to the rise in prices. The price spike presents both an opportunity and a challenge for Ethiopian coffee exporters.
Tsegaye sees the rise in coffee prices as a potential game-changer. “The higher prices may help Ethiopian exporters, who have long struggled with low profit margins,” he said. Previously, many Ethiopian exporters offset their losses by selling foreign currency at high margins or importing goods like vehicles to resell locally. However, this non-standard trading approach has hampered the coffee industry’s international competitiveness.
The forex reforms introduced in mid-2024 have started to yield positive results for the sector. With improved exchange rates, Ethiopian exporters are now beginning to see real profits. Despite this, the sector remains vulnerable to fluctuations in global coffee prices and the impact of US tariffs.
The Broader Impact of US Tariffs on Global Coffee Trade
Ethiopia’s coffee industry is not alone in feeling the impact of US tariffs. Countries that rely heavily on coffee exports, such as Brazil, Colombia, and Peru, could also face significant challenges if tariffs on coffee products rise further. At the same time, nations with lower coffee export volumes might find themselves disproportionately affected by the 10% baseline tariffs.
In addition to coffee, the tariff regime is set to affect goods from 182 countries, with rates varying widely. For instance, Lesotho, a country with a small textile export industry, faces a staggering 50% tariff on its exports. This disparity underscores the potential for uneven effects on poorer countries that rely on specific industries, including coffee.
Calls for Coffee to Be Exempted from Tariffs
The National Coffee Association (NCA) in the US has called for coffee to be exempted from the new tariffs. William “Bill” Murray, NCA President, stated that coffee imports generate significant value for the US economy. “Every dollar of coffee-related imports generates USD 43 in value, supporting 2.2 million US jobs,” Murray said. “Trade policies should recognize the essential role coffee plays in daily life and in the economy, ensuring that US consumers do not face even higher prices.”
What’s Next for Ethiopia’s Coffee Exporters?
The pause on the tariff implementation, announced on April 9, 2025, offered some temporary relief to global markets, including Ethiopia’s coffee exporters. However, the long-term effects of the tariff policy remain uncertain. Ethiopia’s coffee sector, which accounts for a third of the country’s total export revenue, will need to adapt to the evolving market conditions. Experts are hopeful that the higher prices and improved forex reforms will help Ethiopian exporters stay competitive, but the sector’s future will depend on overcoming the challenges posed by rising costs and global trade policies.
