By Marcelo Teixeira
NEW YORK (Reuters) -North American coffee market participants are seeking clarity on how the trade war started by the administration of U.S. President Donald Trump impacts their businesses across the region, where operations are highly interconnected.
Companies have roasting, packaging and trading bases in both the United States and Canada in order to better supply clients. Potential U.S. tariffs and any retaliatory ones will now have to be considered when deciding what to make, and where, industry participants said.
Mexico, meanwhile, is a regular supplier of high-quality green coffee to both the U.S. and Canada, as well as an exporter of instant coffee.
"There are operations across the (U.S.-Canada) border for roasting and supplying retail channels, on both sides," said the CEO of one of the largest coffee companies in the region, who asked not to be named due to the sensitivity of the issue.
Starbucks, for example, roasts the coffee used in its hundreds of Canadian stores in the United States.
"As the political environment moves or the tariff markets move, we will figure out how to navigate that effectively given those conditions in the regulatory environments," said Starbucks Chief Executive Brian Niccol in a meeting with shareholders on Wednesday.
The postponement of U.S. tariffs of 25% on the majority of goods from Canada and Mexico does not seem to have included most of the forms of coffee traded, according to documentation seen by Reuters, because the product is mostly absent from the USMCA, the free trade agreement between the U.S., Mexico and Canada.
"We have added a clause in our contracts saying the buyer would pay the additional 25% tariff if it is considered due. Most traders are doing that," said Jeff Bernstein, managing director of coffee trader RGC, based in Quebec, Canada.
"We are exporting some coffee from Mexico to a client in Oakland (California), and he agreed with the clause," he said.
Switzerland's Nestle has invested heavily in instant coffee operations in Mexico in recent years, including a program with thousands of farmers to boost production of robusta coffee, the main raw material.
Nestle did not immediately respond to a request for comment.
Bill Murray, president of the U.S. National Coffee Association, said coffee should be exempt from additional tariffs.
"Tariffs on coffee would impact three in four Americans. Many think exports, not imports, are good for America, but unfortunately we cannot grow coffee in the U.S."