Earlier this month, Trump expressed his intentions to place a 25% tariff on imported steel and 10% tariff on imported aluminum. This announcement garnered fierce backlash from foreign governments, industries using steel and aluminum, as well as national security advisors who fear alienating allies with this move. While Trump argues that the tariff is in defense of America’s national security (the reason he can completely bypass Congress to adjust tariffs - Section 232 of the Trade Expansion Act of 1962), strong protests have risen, warning of the potential negative consequences. A generalized tariff could harm allies, American consumers and American workers. Now we all know I’m not necessarily here to talk agendas, trade wars or politics, but I’m guessing you can figure out what direction a beer blogger is going in with this... How will this affect the beer industry?
The last several years have been a renaissance for beer, a craft movement. With this movement, has come a set of new trends - one of them being canned craft beer. The glass bottle is being replaced by the aluminum can for plenty of reasons: lightweight, easier to ship & store, better shielding from light, and the list goes on. Not to mention, the consumers just like them. A whole culture has formed around can releases: the hunting, the Instagram photos and even collecting cans after the liquid has been drunk and the IG stories posted. Hell, there are businesses based around making candles in these cans! And we've all seen the craft beer drinker that decorates his/her Christmas tree in rare release cans (totally guilty of this circa 2014). The point is that we all love beer cans. Breaking down the exact cost to breweries that this tariff will add (about 6 cents more per 6-pack), it may not sound like much. But what does this mean in the already David and Goliath-esque battle between big beer and independent craft?
We are at a time of consolidation that is only going to get worse. Smaller, local breweries are closing and the big conglomerates are strategically buying up craft brands. Hops are getting more expensive and more difficult to procure. Do we remember when AB cut off selling the South African SAB hops to brewers outside of its own conglomerate? When it comes to big beer, they have muscle that they won’t hesitate to flex.
With a new 10% tariff on imported aluminum, that upper hand is only growing stronger. While beer giants aren’t happy about this tariff either, for big conglomerates, absorbing this cost is much more manageable than for Pete, your favorite brewer down the street. According to the Beer Institute, this tariff could cost the U.S. beer industry $340 million per year. It is also estimated that this tariff could cost the beer industry 20,000 jobs. With competiton for market share already so aggressive, an aluminum tariff is coming at a terrible time for independent craft.
As of this past Thursday, Trump has moved forward with the proposed tariffs on steel and aluminum. However, after much lobbying and debating (and promises of retaliation), Trump has agreed to exempt Canada (#1 largest supplier of aluminum & steel to the US) and Mexico - for now. Additionally, Australia has procured exemption from the tariff in a subsequent negotiation. While the new tariffs are scheduled to go into affect in 15 days, we still do not know the final terms. Trump has mentioned the possibility of being more flexible with specific countries instead of enforcing the steep, generalized tariff that he originally proposed.
Only time can tell us what the final tariff will be and how it will affect the growing war between big beer and independent craft. So until then, crack open that (pre-10% tariff) aluminum can of craft and wait for the terms to be announced...