Tariffs likely to deal blow to energy sector
Worries about steel, aluminum put many craft brewers on edge
From the stainless-steel tanks they use to make beer to the kegs and aluminum cans they sell it in, brewers say the new Trump tariffs pose a direct threat to their bottom line and, potentially, to their customers’ wallets.
The Brewers Association, which represents about 6,000 independently owned U.S. craft brewers, has come out strongly against tariffs, particularly on the type of “can-sheet” aluminum utilized by beverage manufacturers and the raw materials used to produce it.
“It does not have a national security implication,” association CEO Bob Pease said, referring to the rationale cited by President Donald Trump for tariffs of 10 percent for aluminum and 25 percent for steel.
Pease said his group is working with can manufacturers and other beverage groups to try to mitigate the tariffs, and he was encouraged to see, for example, exemptions carved out for Canada and Mexico.
While it is too early to esti-
mate the full cost impact on the industry, he noted that even a 1-cent per can hike could be painful for craft breweries, which tend to be smaller but are subject to minimum-order requirements. A penny hike on 1 million cans would be a $10,000 expense.
“That’s a hit for the brewers, who might pass that increase on to the beer drinker,” Pease said.
Pease noted that 115 billion beer cans were produced last year for craft and major breweries combined.
Texans worry about the economic impact on the growing multibilliondollar craft-beer segment.
“Anything that raises the price of aluminium is a problem,” said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild, which represents more than 200 breweries in the state.
Craft consumers have embraced aluminum cans, and mobile canning lines have enabled startup breweries to affordably package beer for off-premise sales.
Even at Houston’s Saint Arnold Brewing Co., a 24year veteran with a relatively high volume, cans in recent years have made up a “larger and larger part of our business,” founder and owner Brock Wagner said.
“It will have an impact on our bottom line,” he said.
Wagner is facing a more immediate cost risk on the steel side.
To meet growing demand, Saint Arnold is negotiating to purchase four large stainless-steel fermentation tanks he was planning to buy for about $250,000 apiece. Engineers also are doing design work at the brewery in preparation for the huge, 600-barrel tanks that could boost its capacity to nearly 100,000 barrels annually.
The tariff talk has him concerned. Any extra money he has to shell out could put hiring and future expansion plans on hold.
“We’re haggling over quotes right now and wondering if the quotes will hold,” Wagner said.
One of the tank manufacturers is in Germany and the other is based in the U.S., but Wagner has no idea where either gets its raw materials.
“I’ve never asked where they get their steel from,” he said.
Since market forces generally set beer prices, Wagner added, it is unclear how much of any tariff-related price hike the brewers would be able to pass on to consumers. He said the industry could see overall price increases next year.
But Wagner, a former investment banker, seems more concerned about the impact of tariffs or an ensuing trade war on the broader economy.
“History is littered with examples of what a terrible idea this is,” Wagner said.
“That to me is a greater risk than the cost of our aluminum,” he added.