'Trump Tariffs Trigger Turmoil: US Breweries Brace for Impact'
For U.S. craft brewer Bill Butcher, President Donald Trump's growing list of tariffs has unexpectedly led to a scarcity of bottles for packaging his beer, leaving him concerned about the future financial implications for his business.
Ranging from Canadian malted barley to aluminum beer cans, Trump’s tariffs have affected various items essential for American craft breweries, impacting enterprises within the globe's largest economic market.
Brewers caution that disruptions in supplies may eventually lead to increased beer prices for customers, despite efforts from importers and breweries to cover extra expenses caused by the tariffs and resulting supply shocks.
Various sectors throughout the nation are experiencing similar circumstances, such as the construction and home appliances manufacturing industries.
In Trump's most recent move, 25 percent tariffs on U.S. steel and aluminum imports came into effect this week.
"As aluminum tariffs have taken effect, large beer producers across the nation are shifting much of their manufacturing back to bottles," stated Butcher, who founded the Port City Brewing Company in Virginia.
Consequently, his supplier will not be able to provide bottles to him past the shipments scheduled for March. Additionally, increased aluminum tariffs drive up the production costs for cans, potentially leading to higher prices in the future.
"There's significant uncertainty. A great deal of disorder has been introduced into our supply chain," Butcher said to AFP.
He generally uses around 90,000 bottles each month, which accounts for about 70 percent of his bottled items, with the remainder being canned products.
However, in the lack of bottled supplies, he plans to resort to using more aluminum cans instead, or increase the sale of beer in kegs.
Justin Cox, the founder of Atlas Brew Works, who uses aluminum cans for packaging his beers, calculates that their cost accounts for roughly one-third of the total expense for a case containing 24 beers.
Cox mentioned that aluminum tariffs increase packaging expenses "for an industry with already narrow profit margins as products move through the wholesale market."
"This ultimately leads to an increased cost for our beer on store shelves," noted Cox, whose operations include locations in Washington and Virginia.
"Approximately 10 percent of each can in the United States typically consists of Canadian aluminum," stated Bart Watson, who serves as the president of the Brewers Association, a trade organization.
He mentioned that this adds more financial pressure on American craft breweries.
'Impossible'
For Butcher, doubt remains regarding the expenses associated with the Canadian pilsner malt used as the foundation for his brews — along with the bottle caps imported from Mexico.
Although both items faced Trump's across-the-board tariffs on Canadian and Mexican imports this month, the president’s subsequent partial reversal of these tariffs provided them with some temporary respite almost immediately.
However, it is still uncertain whether these duties will resume on April 2nd, when Trump has pledged a fresh round of "reciprocal tariffs" aimed at addressing perceived unfair trade practices. Each set of tariffs will be customized for individual countries based on their import taxes on U.S. products and various other elements.
Watson approximates that the U.S. imported roughly $230 million worth of malt last year, with a significant portion being utilized by craft breweries.
He mentioned that most of the barley in the United States is typically secured by major breweries or destined for exports to Mexico.
As a result, craft brewers wind up utilizing malt that includes a certain percentage of imported materials, he noted.
US importers of foreign products pay tariffs, and breweries anticipate that these duties will eventually impact their costs as well.
Butcher informed AFP that it has turned into "unfeasible for us to strategize our business operations or production when the cost of our supplies remains uncertain."
'Sit and watch'
Brendan Chaney, who serves as the logistics manager for Port City, pointed out that tariffs have the potential to function as an economic instrument when applied precisely.
However, he warned that across-the-board tariffs foster an environment of dread reminiscent of the situation five years ago during the onset of COVID-19, which disrupted supply chains significantly.
Butcher and Cox cautioned that small enterprises such as their own possess restricted storage capabilities and lower cash flow, which makes it more challenging to accumulate extra inventory to mitigate the impact of tariffs.
Cox from Atlas Brew Works stated, "We have limited capacity, and for aluminum cans, you must purchase an entire truckload as a minimum."
Cox pointed out that the cost of cans can vary. Brewers get charged for the end product following manufacturing, often long after placing their orders.
"He mentioned that they have to wait and observe, hoping conditions improve before it’s necessary for them to place another order," he explained.
