As Washington braced for Bluejacket’s first-ever cans of beer to hit the shelves last week, just across town, President Trump was announcing that he would place a 10-percent tariff on aluminum imports to go into effect as early as this week.
The beer industry is very concerned.
The Brewers Association, which has long advocated against tariffs on can sheet aluminum, put out a short statement affirming their opposition to the measure, while the DC-based Beer Institute projected that it could cause as many as 20,000 job losses and cost the industry as much as $347 million.
Over the weekend, Commerce Secretary Wilbur Ross defended these tariffs, stating—with a Budweiser tallboy in hand—that they will have a “trivial” impact on the price of a can of beer.
Justin Cox, Founder and CEO of Atlas Brew Works in Ivy City, disagrees. He claims the tariff “will absolutely increase the cost of our aluminum cans, which accounts for 20 percent or so of the cost of a case of Atlas beer.”
Even Anheuser-Busch echoed these concerns and urged the administration to reconsider.
But although “Big Beer” and small craft brewers are united in their opposition to these tariffs, the latter will likely feel more of the brunt of any increase.
While about 98 percent of can sheet—the aluminum sheets that breweries use for canning—is produced here in the United States, demand for it is high and growing, especially among small craft breweries. According to the Brewers Association, large-scale producers—those putting out more than a million barrels per year—can around just 10 percent of their beer. Compare that to 40 percent from breweries that produce less than 100,000 barrels per year. As MillerCoors pointed out on in a tweet also condemning the White House’s decision, there just isn’t enough domestically-produced aluminum to go around these days, and this misguided tariff will only make matters worse.
Not only are small breweries canning significantly more than macro breweries, they also pay a higher price for the aluminum they do use. According to Cox, major producers have larger buying power than breweries like Atlas, and he estimates that the largest breweries pay “less than half” of what the small guys do.
As a result, craft breweries are expecting that the higher cost of aluminum will inevitably be passed down to consumers. “That money has to come from somewhere,” Cox told us. “I'm not sure how exactly that will shake out, but likely either in an increase in cost of beer to consumers or a decrease in the dollars we spend on labor. We are currently in the hiring process and will be reevaluating the timing of adding a position, if we do at all, until we get a feel for how this tariff will impact our supply chain.”
In a similar vein, some brewers expect the tariff could very well nullify or at least counteract the effects of the excise tax cuts that the Trump administration and Republicans in Congress recently handed breweries as part of their December tax overhaul. Just as they were gearing up to reap the reward of a tax cut, perhaps by buying new equipment or hiring more staff, the industry suddenly finds itself facing new unforeseen costs.
Is there a way out? The Department of Commerce could exempt aluminum can sheet that is used specifically for beer from the tariff. It could also exempt certain countries like Canada, from which the U.S. gets much of its imported can sheet, either through NAFTA renegotiation or otherwise.
Only time will tell. In the meantime, get ready for the likelihood of more expensive six-packs.