wBarring a resolution before next week, President Donald Trump’s escalating trade war with China — and increased tariffs on aluminum can sheet — threatens to further impact U.S. beer companies’ bottom lines.
On Friday, Trump announced via Twitter plans to increase tariffs on $550 billion of imported Chinese goods over the next two months in retaliation for China saying it would impose $75 billion in tariffs on goods imported from America beginning October 1.
According to Trump’s proposal, the U.S. will increase tariffs on $300 billion in Chinese imports, from 10% to 15%, starting September 1. The U.S. would then raise the tariffs on $250 billion in other Chinese goods from 25% to 30% beginning October 1.
In a series of tweets on Friday, Trump called China’s proposed $75 billion in tariffs on U.S. goods “politically motivated,” accusing the country of “taking advantage of the United States on trade, intellectual property theft, and much more” for several years.
“In the spirit of achieving fair trade, we must balance this very unfair trading relationship,” he wrote.
According to the Beer Institute, Trump’s tariffs amount to a $347 million annual tax on the beer industry. Should the new tariffs take effect, that number would rise.
MillerCoors, the second-largest U.S. beer company, has said the tariffs have cost it $40 million. Some regional craft breweries, such as Minnesota’s Summit Brewing, say they’ve been hit by $160,000 in extra costs.
In a statement, Beer Institute (BI) president and CEO Jim McGreevy said the additional tariffs on imported aluminum are “raising costs to all America’s brewers who package their beer in aluminum cans.”
“Last year alone, the American beverage industry paid an additional $250 million in aluminum tariffs on metal that wasn’t actually subject to tariffs, increasing the cost of beer production for brewers,” he said. “These additional tariffs will only increase costs even more and put jobs that rely on America’s thriving beer industry at risk.”
Brewers Association (BA) president and CEO Bob Pease told Brewbound that the organization continues to work with members of Congress, as well as industry groups including the BI and Can Manufacturers Institute, to repeal the tariffs.
“Aluminum cans represent nearly [one-]third of package production for brewers and we’re trying to make our case on Capitol Hill as to what impact and what a hardship this is going to be on over 7,000 small and independent breweries,” Pease said. “Plus, the amount of aluminum used by the large brewers, I’m sure dwarfs our members.”
Pease said the BA estimates that beer companies import as much as $150 million in aluminum cansheet annually.
“If you add a 10% or 15% tariff on that, it’s not a small number,” he said.
Meanwhile, alcohol producers and importers are staring down the barrel of a potential increase in the federal excise tax (FET) at the end of the year with the expiration of tax relief for all alcohol producers and importers. A majority of congressional members have backed plans to permanently reduce the FET via the Craft Beverage Modernization and Tax Reform Act of 2019. However, CBMTRA’s passage is not a given.
“That uncertainty makes it really hard to survive or thrive in the business environment,” Pease said. “Craft continues to be a bright spot for the U.S. beer industry, but many of our members are struggling right now. The tariffs are one hit, and if the Craft Beverage [Modernization and Tax Reform Act] bill expires, that’s going to be a double whammy.”
Optimism for a resolution came Monday morning when Trump told reporters at the G7 summit in France that Chinese officials had reached out over the weekend to “make a deal,” CBS reported.
According to The Wall Street Journal, Trump said “anything’s possible” in response to a question asking if he’d consider dropping or delaying the tariffs.
China’s vice premier, Liu He, the top economic adviser to President Xi Jinping, said the country is willing to work out a resolution to end the trade war, according to Reuters.
“We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world,” He said.
Trump responded on Twitter, saying “talks are continuing!”
“Great respect for the fact that President Xi & his Representatives want “calm resolution,” he wrote. “So impressed that they are willing to come out & state the facts so accurately. This is why he is a great leader & representing a great country.”
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Cask Global Canning Solutions, the official supplier of cans for Ball Corporation, alerted customers on Friday that an additional line item for the tariffs would appear on invoices for all can purchases beginning September 1.
“The exact cost increase that will be passed through to our can customers is difficult to quantify as it depends on the amount of imported aluminum from China that feeds into the can manufacturing plants, which is variable through time,” the company said. “This tariff and cost increase affects the entire beverage can industry, regardless of can manufacturer.”
Cask also shared a “customer alert” issued in mid-August by Ball, the world’s largest producer of aluminum cans, that warned customers of a new invoice charge beginning in September, labeled as “Section 301 Import Tax” — named for the section of the U.S. Trade Act of 1974.
“This charge will continue for the duration of the applicable tariff,” Ball said in the alert. “Please be assured that Ball will continue using every available avenue to exclude Cansheet from this additional tariff so that we can seek to keep sustainable aluminum cans from being impacted by this proposed regulatory change.”
The news came three days after the Office of the United States Trade Representative (USTR) announced that the U.S. would impose an additional 10% levy — in addition to an existing 3% historical tariff and a 10% incremental tariff — on Chinese goods, including aluminum cansheet, starting September 1.
Recall that Ball agreed to sell its beverage packaging plants in Beijing, Foshan, Hubei and Qingdao to ORG Technology for about $225 million last December.