Why is your morning cup of coffee costing more? You can thank Trump’s tariffs

If it feels like coffee keeps getting more expensive, it’s not just you. Coffee prices have skyrocketed—now up 25 percent since the start of the year. This is unusual. The price of coffee hasn’t jumped this much this quickly since the mid-1990s. This jump also marks a sharp break from the past few decades, when rising global supply kept coffee prices in check. Since the 1980s—when Canada first started tracking this essential-to-many-households item—the price of a cup of coffee has grown at only half the pace of other household items and services, while incomes have risen faster. Coffee has also become cheaper relative to other drinks. Over the same period, tea prices have nearly tripled, while alcohol is now five times more expensive. In other words, Canadians can not only afford more cups of coffee today than they could back then, but it has also become more affordable compared with other beverages. But now, that’s changing. The lifeblood of working people and young parents may be taking a bigger bite out of Canadians’ budgets than almost any other regular purchase. While a price index of all items grew just 1.7 percent over the last year, coffee is up more than 15 times that. Prices have climbed steadily since January, with an especially large jump in June—rising 8 percent in a single month. The reason? Tariffs. Coffee’s supply chain is global, with production concentrated in mild climates, but about a quarter of Canada’s coffee comes via the U.S. As a result, Canadian coffee drinkers are paying the price of both the tariffs that the U.S. placed on other countries and the counter-tariffs Canada placed on the U.S. (because processing often happens there, it’s considered “from” the U.S., even if it originally came from elsewhere). Though the same applies to tea, most tea is sourced from other countries, insulating it from the effects of tariffs. The good news is that just last week, Prime Minister Carney announced that tariffs on most U.S. consumer products will be removed in September, including the 25 percent tariff on coffee. But don’t expect coffee prices to return to normal. Earlier this month, President Trump slapped a 50 percent tariff on imports from Brazil, where roughly 30 percent of U.S. coffee originates. As with every other tariff, there’s still hope that this could be changed or scrapped. But if it were to stay in place, it could keep coffee prices high. Of course, Canada could bypass U.S. tariffs on other countries if grocers and coffee shops increasingly source coffee directly from countries like Brazil. And this may actually be good news for Canadian roasters who could find themselves more price-competitive. But untangling the supply chain will take time, and in the meantime, Canadian coffee drinkers will continue to pay a high price. A version of this post was originally published by the Business Council of Alberta. To learn more, read the commentary here.