In a move that would have wide-ranging effects on the beer industry, President Donald Trump yesterday announced plans to implement a 10 percent tariff on imported aluminum.
The move comes weeks after the Commerce Department recommended tariffs on aluminum and steel as a national security precaution, citing the nation’s inability to build military weapons without foreign steel and aluminum.
President Trump has also proposed a 25 percent tariff on steel.
On Friday morning, Trump fired off a series of Twitter messages arguing that a trade policy shift is necessary due to an $800 billion trade deficit. The tariffs, he claims, will revive the nation’s aluminum and steel industries.
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” he wrote. “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!
“We must protect our country and our workers,” he continued. “Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!”
However, an aluminum tariff spells bad news for several industries, including beer.
“Sixty percent of the beer manufactured and sold in the United States comes in aluminum cans and aluminum bottles,” Jim McGreevy, Beer Institute president and CEO, told Brewbound.
According to the Beer Institute, a 10 percent tariff would cost the beer industry about $347 million annually. It would also put breweries at a competitive disadvantage, McGreevy argued, since wine and spirits companies primarily package their products in glass bottles.
“Spirits and wine have much less of their product in those containers,” he said. “We all know that the beverage alcohol marketplace is fiercely competitive and a $347 million tax increase on beer is going to put us at a disadvantage to wine and spirits.”
Over the last 20 years, the beer category has has shed 35 million barrels — or 11 billion servings of beer — to wine and spirits, and an added aluminum tariff has the potential to exacerbate the losses.
In a press release, the Beer Institute, citing a third party analysis conducted by John Dunham & Associates, an economic research firm, said the 10 percent tariff could also result in the loss of 20,291 American jobs (about half of which are in the beer industry).
According to last May’s Beer Serves America report, which was jointly commissioned by the National Beer Wholesalers Association and the BI, the beer industry is responsible for creating 2.3 million jobs. Brewers, beer importers and wholesalers directly employed more than 198,000 workers in 2016, the report stated.
By comparison, the steel industry — which is the primary focus of the proposed tariffs — employs 140,000 workers. Steel-using industries, meanwhile, employ 6.5 million workers, the Wall Street Journal editorial board wrote today.
Anheuser-Busch and MillerCoors, the two largest beer producing companies in the U.S., employ a combined 25,000 workers. Both companies have condemned the move, and MillerCoors has said the tariffs would result in job losses across the beer industry.
“Like most brewers, we are selling an increasing amount of our beers in aluminum cans, and this action will cause aluminum prices to rise,” MillerCoors wrote via Twitter. “It is likely to lead to job losses across the beer industry. We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us. American workers and American consumers will suffer as a result ofthis misguided tariff.”
The Beer Institute also challenged the notion that aluminum beer cans present a national security risk.
“The largest importer of aluminum to the United States is Canada — one of America’s strongest allies,” McGreevy said via a release.
MillerCoors echoed that statement, tweeting, “While we won’t know the details for a week, the Department of Defense recently reported that aluminum does not cause any national security issues.”
A spokesperson for Anheuser-Busch, which operates 21 U.S. breweries in 15 states, told Brewbound that the tariff would “likely cost U.S. brewers millions of dollars, making it more difficult to grow and further invest in our U.S. operations.”
“We urge the administration to consider the impact of these decisions on the thousands of hard working Americans and millions of beer drinkers that make up the U.S. beer industry,” the spokesperson wrote.
If Trump pushes forward with the aluminum tariff, price increases of canned beverages are likely to be passed along to consumers.
According to the report prepared by John Dunham & Associates, “4.68 percent of the cost of beer is the direct result of aluminum purchases for the production of cans.”
McGreevy told Brewbound that the aluminum tariff would essentially negate the excise tax relief that brewers received under the Tax Cuts and Jobs Act, which the president signed in December.
“Tariffs are taxes,” he said. “This is a $347 million tax increase to beer brewers and beer importers.”
The Tax Cuts and Jobs Act, which included the Craft Beverage and Modernization Tax Reform Act, created an additional $320 million in annual economic growth for the beer industry.
McGreevy also said the BI would continue to work with other aluminum users to make concerns known to the Trump administration before a formal announcement about the tariffs next week. He added that the BI hopes the president will reverse course on the tariffs, but if he doesn’t, he said the trade group will seek an exclusion for aluminum cansheet.
“There’s a broad based problem that the administration is trying to solve, but they’re solving it by taxing other American industries,” McGreevy said. “We’re ready, willing and able to walk over the Commerce Department today and the White House today and sit with others who are affected by this and sit with the aluminum industry and try to find a different approach to solving this problem.”
Impact on Craft Brewers
Cans have become an increasingly important for U.S. craft brewers, who have turned to aluminum packaging in order to save on freight costs and capture consumers who prefer the portability of cans. They also offer new brewers, who may be unable to afford expensive canning lines, a packaging option through mobile canners.
During a Brewers Association webinar, industry consultant Bump Williams said canned offerings now account for 23 percent of total craft dollar sales. He added that sales of canned craft beer grew to nearly $1 billion last year.
BA federal affairs manager Katie Marisic told Brewbound that aluminum cans account for more than a quarter of package production for BA-defined craft brewers last year.
“Brewers that produce less than 10,000 barrels or are just getting started, do seem to trend toward canning as a method of packaging,” she said. “We have concerns that a price increase could be harmful.”
In a statement opposing the tariffs, BA president and CEO Bob Pease and director Paul Gatza said 98 percent of aluminum cansheet used to make beverage containers is produced in the United States, but the tariffs are expected to increase the cost of ingredients — recycled cans, scrap and primary aluminum — used to make the product.
Increased costs could lead to U.S. companies importing cheaper finished can products, Robert Budway, president of the Can Manufacturers Institute (CMI), said in a statement.
Budway added that aluminum tariff would put the aluminum can industry at a disadvantage among competing packages, such as plastic and glass.
“This would ultimately harm U.S. consumers, who would pay more for canned food and beverage products,” he wrote.