With New Aluminum Tariff, How Will Brewer Supply Chain Be Impacted?

With New Aluminum Tariff, How Will Brewer Supply Chain Be Impacted?

March 15, 2018

President Trump made American manufacturing and trade policies top priorities during his campaign, and last week, he signed a declaration imposing a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. Interestingly, the plan does exempt Mexico and Canada, and potentially other countries, pending continuing trade negotiations.

The primary reason behind the tariffs has to do with a lag in how the U.S. is competing in manufacturing these materials. According to USA Today, the US was the world’s largest producer of aluminum in 2000, with the present-day market share comprising just 1.4 percent, while China’s share has risen to 54 percent during the same time period.

As the world's biggest importer of aluminum, this tariff is expected to have a significant impact on the global economy. What isn’t yet clear, though, is the potential impact to the beer industry. For example, some experts have suggested that the aluminum tariff would cost brewers a mere six-tenths of one cent more per beer can.

Beer producers on the other hand, specifically MillerCoors and Anheuser-Busch, have commented that the new tariff “will likely cost U.S. brewers millions of dollars.” And the Beer Institute, an industry group, said the aluminum tariff could result in the loss of more than 20,000 jobs at bars, breweries and elsewhere along the supply chain.

So which side is correct in its presumption? At this point, much remains to be seen. While an increase of six-tenths of one cent per can may not sound like a lot, there are roughly 67 million cans of beer consumed each year, which could compound that cost significantly.

Additionally, the shift in imported aluminum could impact the supply chain in a variety of ways. For example, we could see the brewing industry move to use different packaging or make less “canned” beer. Additionally, with fewer imported raw materials, supply could decrease and lead to a higher cost for consumers.

Product loyalty is also fickle when it comes to price increases. Rising costs from production, and thus higher beer prices, or a drop in availability could see consumer demand shift to different beer brands or even other types of alcoholic beverages.

While it’s still too early to tell how this new tariff will impact U.S. brewers and the supply chain, those in the industry may want to consider shifting some of the savings from the recently signed tax bill to cover the increased production costs. In the meantime, plenty of questions remain to be answered as the industry begins to navigate this new terrain.

Tags: Global NewsMillerCoorsAnheuser-BuschAlcohol Tariff