LIMA — President Donald Trump’s recently imposed 10 percent aluminum and 25 percent steel tariff will not only have a negative impact on beer production but also could affect breweries, bars and consumers.
The tariff on imports from Canada, Mexico and the European Union was imposed by President Trump in March as a result of a perceived natural security threat on importation of steel and aluminum, Beer Institute CEO Jim McGreevy III said.
This has had a adverse affect on beer production, as 40 percent of aluminum beer cans and bottles are made from aluminum imported from Canada, McGreevy said.
“I don’t see the overall point of the tariff, and I don’t see how it benefits anyone because we will all suffer,” said Mark Reinicke, co-owner of Vino Bellissimo, 2412 Cable Court, Lima, which sells wine and craft beers. “We’re not happy, and my friends in the beer industry are not happy. Their mindset is that we will have to deal with the expense and that it will have to be passed on.”
Reinicke estimates that with the new tariff, a six-pack of beer that costs $6.99 will increase to $9.99.
“You’re looking at a $3 increase,” said Reinicke. “Is there a reason to be concerned on our part? Yes, because we are a part of the trickle down. Although we don’t brew beer, we deal exclusively in craft beer.”
Nick Moeller, owner of Moeller Brew Barn, 8016 Marion Drive, Maria Stein, said that he does not foresee increasing his prices anytime soon, as he does not see the tariff having a tremendous impact on his business.
According to his beer can suppliers, prices will increase approximately one to two cents per can. Right now his business brews approximately 150,000 cans a year, which would increase the costs by $1,500 to $3,000 per year.
Aaron Holtz, a Wapakoneta native and owner of Municipal Brew Works, 20 High St., Hamilton, said that he too does not envision increasing his prices.
He has no intention on raising his prices because his keg supplier indicated it does not plan to raise prices just yet.
“I don’t think they really explained why,” Holtz said. “Either they have a supply of steel that they are sitting on or they are fine with the price increase and are able to absorb it.”
THE ‘MIDWEST PREMIUM’
In addition to the tariffs, there is the Midwest Premium, a shipping and handling fee for producers to get their metal from the shipping facility to the next user, McGreevy said.
There has been a 135 percent increase of the Midwest Premium since January 2018, and there is an estimated 350 estimated tax imposed on American brewers, McGreevy said.
“The Midwest Premium has never really been set in a transparent way over the years,” McGreevy said. “It’s set by one company in secret with a disproportionate impact on aluminum producers and users. The tariffs have exacerbated the pricey regularities of the Midwest Premium.”
McGreevy has reached out to Congress and the Trump administration about the concerns regarding the tariffs and Midwest Premium.
On June 18, 32 members of Congress, including Ohio Representatives Jim Jordan, Bob Gibbs and Joyce Beatty, sent a letter to Attorney General Jeff Sessions about how to set a price regularity for the Midwest Premium.
“I think that people understand that there may be a problem that needs to be addressed, but a lot of members of Congress think that the solution to the 10 percent tax on aluminum was not the right one, and we certainly agree with that,” McGreevy said.
BENEFITS OF EXCISE TAX
Despite the tariff and irregularities associated with the Midwest Premium, McGreevy said the Beer Institute is appreciative of the Alcohol and Tobacco Tax and Trade Bureau’s excise tax that went into affect in December 2017. This $150 million tax savings provided many breweries with the opportunity to expand.
“Brewers were going to add employees and create more innovative products, but a lot of those things were put on hold because of the tariff,” McGreevy said.
There are approximately 6,000 breweries in the United States today, many of whom will have to decide how to deal with the estimated $347 million tariff tax, McGreevy said.
Moeller acknowledged that this is a significant increase, but he is willing and able to absorb the increased costs through things like the excise tax.
He is appreciative of the excise tax, which he said lowered the barrel prices from $7 to $3.50. He now saves $5,000 on his 1,500 barrel production.
“So it’s pretty much a wash for breweries our size when you look at the decrease in the TTB tax and the one to two penny increase in the cans,” Moeller said. “This basically puts us money ahead with the tax break.”
There are approximately 2.2 million Americans who work in the beer industry, with about 80,000 working in Ohio. McGreevy estimates up to 20,000 lost jobs in the beer industry due to the tariff.
“Breweries can eat the cost. They can raise their prices or decrease their number of employees,” McGreevy said. “They have a number of different ways to deal with the tax, and each of business will have to decide what the best route is for them.”
In the future, Moeller said he does not intend to increase the prices of his six-pack cans to retail because it is too difficult for him to raise the prices n a very competitive market.
“The increase on the aluminum can is not enough to justify that increase to the retailers in my opinion,” Moeller said. “We just have to absorb it , and we can absorb it is because of the TTB tax.”
Reinicke does envision the tariff will create an adverse cycle, which will ultimately affect affect wine and craft beer bars like his.
“Microstar Logistics, which is the No. 1 keg leaser to breweries, are going to raise their price. Breweries are going to have to raise their prices, and that will trickle down,” Reinicke said.
If the supplier does decide to raise the price, Holtz said that there may be a subtle price change, as buying kegs is a one-time cost for the company, Holtz said.
“We have to see what the price increase is,” Holtz said. “If we were to raise prices it may be the deposit to cover the cost of the steel if the keg does not make it back, but my guess is that we would have to eat the costs.”
Reinicke acknowledged that money does not seem to be an issue for consumers right now, but that may change once the prices increase.
“Right now, we don’t see people challenged with spending extra money for a little bit more quality, but that can only go but so high,” Reinicke said. “We sell luxury and premium products, and people will eventually have to sit and reevaluate their needs over luxury spending.”
Reach Camri Nelson at 567-242-0456 or on Twitter @CamriNews