With the nation’s can supply tightening, President Donald Trump yesterday announced the reimposition of a 10% tariff on Canadian aluminum, claiming that America’s neighbor to the north was flooding the market.
Trump made the announcement during a campaign speech at a Whirlpool factory in Ohio.
“Canada was taking advantage of us, as usual, and I signed it, and it imposes — because the aluminum business was being decimated by Canada,” Trump said.
The tariff affects primary aluminum, rather than cans or can sheet. But any disruptions to the already overloaded can market could prove troubling for brewers, who are relying on selling packaged beer more than ever due to capacity restraints at on-premise establishments because of the COVID-19 pandemic.
“It just makes what’s already a volatile market for brewers just all that more volatile,” Beer Institute (BI) president and CEO Jim McGreevy told Brewbound.
The price of aluminum rises and falls according to the Midwest Premium, which is the full logistical costs of shipping and storing aluminum in the U.S. and has been the target of industry groups’ ire for several years.
“We think it’s set in a very non-transparent way,” McGreevy said. “It just continues to make a bad deal bad.”
The BI has been urging lawmakers for years to shine more light on aluminum pricing, and several bills that would do so are making their way through the House of Representatives.
An appropriations bill in the Financial Services and General Government subcommittee would encourage the Federal Trade Commission “to work with the Antitrust Division of the Department of Justice on competition issues in aluminum.” Another appropriations bill in the Department of Homeland Security subcommittee would ask the Customs and Border Patrol to “review whether duties on importers of recycled, scrap and primary aluminum … are being properly assessed.” And a third appropriations bill from the Agriculture subcommittee calls for continued review of “aluminum futures markets and its impact on pricing for aluminum end users.”
The reimposition of the aluminum tariff will likely cause the price of domestic aluminum to increase to meet the price of imported aluminum.
“What our experience is in observing the market is that all aluminum, whether coming in from other parts of the world or domestic aluminum has the tariff price now,” McGreevy said. “And that’s a big problem for brewers and other end users of aluminum.”
Tariffs on Canadian aluminum and steel first went into effect in the summer of 2018, but were lifted in May 2019 as the United States-Mexico-Canada Agreement, the new trade agreement between the three largest North American countries, came into view. Last month, the BI and 16 other trade groups — including the Brewers Association, which represents that country’s small and independent brewers — wrote to Trump asking that the tariff exemption for Canadian aluminum remain in place.
“Although a tariff may sound like a good way to help U.S. smelters in the short-term, it comes at a steep price for all U.S. manufacturers who purchase aluminum,” the letter said. “This will create a situation in which American manufacturers pay the tariff twice — once as a tariff surcharge and second as part of a much higher premium.”
In response to the reimposition of the tariff, Canadian prime minister Justin Trudeau said Canada will impose its own retaliatory tariffs.
In response to the American tariffs announced today, Canada will impose countermeasures that will include dollar-for-dollar retaliatory tariffs. We will always stand up for our aluminum workers. We did so in 2018 and we will stand up for them again now. https://t.co/gYH0ziOVM4
— Justin Trudeau (@JustinTrudeau) August 6, 2020
Because repeal of the tariff seems unlikely in the near future, the best course of action for relief McGreevy said is to shine light on the Midwest Premium and its effect on pricing.
“It can’t stop the tariffs from happening,” he said. “But we can try to mitigate their impact by
telling policymakers that there’s a problem with the Midwest Premium that can be solved through greater transparency.
“We’d love to see the tariff go away today,” he continued. “But in the absence of that, a focus on the inadequacies of the Midwest premium for the end user is our work.”
Canned beer accounts for about 60% of the total volume of beer sold in the U.S. under normal conditions. But since March, when the COVID-19 pandemic forced the closure of bars and restaurants nationwide and caused draft sales (usually about 10% of beer’s volume) to dry up almost completely, can sales spiked as high as 67%.