Tariffs on metal may affect beer prices

Posted March 2, 2018 8:22 p.m. EST
Updated July 13, 2018 11:11 a.m. EDT

As President Donald Trump announced sweeping trade tariffs on imported steel and aluminum, raising the specter of a possible trade war, one question has repeatedly come up: Will Americans drink less beer?

More than $100 billion in beer is sold in the United States a year, much of it in aluminum cans. And the industry has argued that proposed tariffs, up to 10 percent on aluminum, would amount to an unintended tax. It said people would lose their jobs as a result, and that higher prices for a six-pack could drive beer drinkers elsewhere for their refreshment.

The Trump administration has said that a flood of metals from other countries pose a threat to national security, and that the tariffs can help bolster domestic industries.

To help make that point, Wilbur Ross, commerce secretary, appeared on CNBC on Friday, saying that there would be a minimal impact across industries. He had with him a series of props, including — what else? — a can of Budweiser beer.

— Aluminum is great, and the U.S. imports a lot of it.

Beverage makers love aluminum cans because they chill quickly, stack easily and keep light out (something that’s especially important for beer). New production techniques mean the cans can be made with less and less aluminum. The wall of a can is 0.097 millimeters thick — about as thick as a human hair.

Aluminum produced in the United States would not be subject to the tariff, but the U.S. imports most of its aluminum. In 2016, 52 percent of aluminum for domestic consumption was imported, up from 11 percent in 2012, according to Interior Department statistics. Canada is the leading source.

But recycling is an essential part of the aluminum story. The metal is 100 percent recyclable — it can be remelted and used over and over — and is one of the most commonly recycled commodities. A typical aluminum can contains 70 percent recycled metal, the Aluminum Association said.

— The beer industry is facing higher costs.

Within hours of Trump’s announcement of a tariff, big brewers responded. After all, about 60 percent of beer is packaged in aluminum.

The Beer Institute, a trade group, said the 10 percent tariff on imported aluminum would amount to a $347 million tax on the beverage industry. It estimated that higher expenses and lost sales would force the layoff of about 20,300 workers.

“Like most brewers, we are selling an increasing amount of our beers in aluminum cans, and this action will cause aluminum prices to rise,” MillerCoors, maker of Coors, Miller High Life and dozens of other brands, said in a tweet storm. “It is likely to lead to job losses across the beer industry.”

The company went on to say it buys as much aluminum as it can from domestic products. “However, there simply isn’t enough supply to satisfy the demands of American beverage makers like us,” the company said. “American workers and American consumers will suffer as a result of this misguided tariff.”

—But on a per-can basis …

A beer can costs about 10 cents to make, the Beer Institute said.

In the unlikely event that the can is made entirely of imported aluminum — no recycled or domestic content — the 10 percent tariff might add a penny to the cost, or 6 cents to a six-pack. That’s probably not enough to drive away many beer drinkers.

That is not to say brewers and other beverage makers may not be penalized for using aluminum cans. Scores of industries, from automakers (Ford placed a big bet on aluminum with its F-150 truck) to candy makers (Hershey buys acres of foil to wrap its Kisses), could face unexpectedly higher costs because of the administration’s decision.

The impact on individual consumers, however, may take more time to gauge.