Local beer industry reacts to effects of aluminum tariffs

jojacobs@vagazette.com, rarriaza@vagazette.com

Canning beer has gotten more costly for local breweries, which have felt the sting of the Trump administration’s tariffs on aluminum.

The United States implemented a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports in March. The tariffs affect economic rival China along with long-time trade allies Canada, Mexico and the European Union; all have since responded with retaliatory tariffs on U.S. goods. In his proclamation of the tariffs, President Donald Trump argued importing the metals posed a national security risk.

The move was met with criticism from some in the brewing industry.

“The market uncertainty and financial penalties created by these tariffs negatively affect a growing manufacturing sector of the American economy: the craft brewing industry,” Brewers Association President and CEO Bob Pease said in a statement. “They place an unnecessary burden on small, Main Street business owners who are creating thousands of jobs and pouring money back into their local economies.”

Local beer operations have had mixed experiences in the wake of the aluminum tariff, with breweries that depend more on cans over glass bottles taking a bigger hit.

“Our prices have gone up significantly,” Chris Smith, co-founder of Virginia Beer Company, said of buying cans. “We eat the cost ourselves, which isn’t easy. I hope it comes down soon.”

In recent months, the price of aluminum cans has gone up in Smith's experience. He said he thought the tariff may be a factor, but that there may be other reasons for the hardship.

“It’s really hard to say at this point,” Smith said. “I think the tariffs are definitely part of it.”

Another factor is an ongoing aluminum can shortage, which increases prices. Virginia Beer Company buys its cans from a broker, who in turn buys the cans from one of three major aluminum can production companies, Smith said.

For the last couple years, Smith’s aluminum can distributor has sold him cans for 13-and-a-half cents each. In the last couple months, however, the price has increased to 17 cents per can.

Amber Ox Public House co-owner Andrew Voss said he’s seen a rapid drop in can availability, while prices have increased subtly. The restaurant’s on-site brewery packages its beer in 32-ounce aluminum “crowlers,” with plans to begin using 16-ounce and 12-ounce aluminum cans in about a month.

“We were lucky enough to get two pallets from a manufacturer up in Michigan, but we searched around,” Voss said. “A guy had to essentially cancel his order, but had it not been for that, it’s like a month-and-a-half to almost two-month lead time on crowlers of any quantity.”

Another reason for supply challenges could be the rising number of smaller breweries moving into aluminum can packaging over the past five years, he said, with most craft breweries previously using glass bottles.

“This now has become such an industry standard, you can get your beer in farther locations, you’re able to sell packaged products over the bar for people to take with them, and that is such an onset of popularity,” he said. “The demand for it is starting to increase, and the supply is starting to tighten because of the increase in tariff costs.”

There are five craft breweries on the Williamsburg Tasting Trail, which is a curated trail of the area’s craft breweries, wineries and other local alcoholic beverage producers, according to the Williamsburg Tasting Trail website.

Subtle changes

The administration tweaked its steel tariff to exclude brewing equipment in June, but with a tariff still fixed on aluminum, the beer industry remains challenged by the trade sanctions.

In a visit to the Williamsburg Anheuser-Busch brewery last week, Sen. Tim Kaine said he agrees with President Trump’s belief that China poses a threat to American businesses, but the escalating trade war between the two countries is worrying for American jobs.

“The effect on the U.S. is, you create 300,000 jobs in the companies that make steel and aluminum in the United States. So that’s a 300,000 net increase, but you reduce 430,000 jobs in the American companies that make things out of steel and aluminum,” Kaine said.

Representatives from Anheuser-Busch’s Williamsburg brewery could not be reached for comment, but the corporate office took a firm stance against the aluminum tariffs in a statement to the Gazette.

“The tariffs are an additional tax on the U.S. beer industry, and these additional taxes will increase the cost of brewing in the U.S.,” the company said. “As a leading U.S. manufacturer and employer, we are working with administration officials and members of Congress, including Senator Kaine, to try and identify ways to reduce the impact on our operations in Williamsburg and across the country.”

The Beer Institute, a national trade organization representing brewers including Anheuser-Busch, MillerCoors and Heineken, released a statement saying the 10 percent aluminum tariff could result in the loss of more than 20,000 brewing jobs and added costs for the beer industry.

“These tariffs are a new $347 million tax on the U.S. beer industry,” said Jim McGreevy, Beer Institute president CEO, in a release. Over the long run, these tariffs will drive aluminum prices higher globally, increasing the cost of beer production for all brewers.”

If aluminum can prices continue to remain high, the expense could start to cut into Virginia Beer Company’s ability to invest in equipment and expand as it would normally, Smith said.

Kaine said the Senate is considering a bill that would require Congressional approval for additional tariffs, and that a better way to combat the influx of low-cost steel and aluminum entering the market would be to partner with ally countries rather than imposing tariffs on them.

“If we’re not happy, Europe isn’t either, Canada isn’t either, so can we all join together?” he said. “We hurt our ability to put those allies together when we’re using trade sanctions against the allies.”

But not everyone sweats the tariff. When it comes to packaging beer for individual consumption, Alewerks prefers bottles to cans, said Michael Claar of Alewerks.

“We are mainly a glass bottle brewery. We started occasionally using a mobile canning line for special releases just this year, but we've only done that three times,” Claar wrote in an email.

Claar added that in his experience, the price of cans has changed, but it’s only gone up a cent per can.

“It's such a small portion of our business that the effect is negligible,” he wrote.

John Dunham, managing partner of economic research firm John Dunham and Associates, wrote that use of aluminum packaging for beer producers in the U.S. is on the rise in a regulatory economics and taxation analysis published in March.

“American brewers fill and sell about 36 billion aluminum cans and bottles per year. These cans hold 62 percent of the beer volume made and sold in the United States,” he wrote in a Beer Institute blog entry about his report. “That’s up from less than 56 percent just ten years ago, and it’s still climbing.”

About 36 percent of the aluminum used for beer cans is imported, and about 64 percent comes from domestic sources, Dunham wrote.

Jacobs can be reached by phone at 757-298-6007. Arriaza can be reached at 757-790-9313.

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