The Japan Times - 'Impossible': US breweries buffeted by Trump tariffs

From Canadian malted barley to aluminum beer cans, Trump's tariffs have hit multiple products that American craft breweries need, buffeting businesses in the world's biggest economy.

Turbulence in supplies could ultimately translate to higher beer prices for consumers, brewers warn, even as importers and breweries try to absorb additional costs triggered by the levies and their consequent supply shocks.

Similar conditions are playing out in various industries across the country, including construction and appliance production.

In Trump's latest salvo, 25 percent levies on US steel and aluminum imports took effect this week.

"As the aluminum tariffs have kicked in, the major beer suppliers in the country are switching a lot of their production back to bottles," said Butcher, founder of Port City Brewing Company in the state of Virginia.

As a result, his provider can no longer supply bottles to him after shipments through March. Aluminum levies also raise the cost of producing cans, threatening higher prices down the line.

"There's a lot of uncertainty. There's a lot of chaos that's been injected into our supply chain," Butcher told AFP.

He typically goes through 90,000 bottles per month or so -- forming 70 percent of his packaged products -- and the rest goes into cans.

But in the absence of bottle supplies he expects to use more aluminum cans anyway, or sell more beer in kegs.

Atlas Brew Works founder Justin Cox, who packages his beers in aluminum cans, estimates their price form about a third of the total cost for a case of 24 beers.

Aluminum tariffs add to packaging costs "in what's already a small-margin product going into the wholesale market," Cox said.

"All of this ends up with a higher price of our beer on the shelf," added Cox, who has facilities in Washington and Virginia.

"On average, about 10 percent of every can in the US is Canadian aluminum," said Bart Watson, president of the Brewers Association, a trade group.

This piles further cost pressures on American craft brewers, he said.

- 'Impossible' -

For Butcher, uncertainty also lingers over costs of the Canadian pilsner malt that forms the base of his beers -- and the bottle caps he imports from Mexico.

While both products were hit by Trump's blanket tariffs on Canadian and Mexican goods this month, the president's partial rollback of them within days has allowed him temporary relief.

But it remains unclear if duties will return from April 2, when Trump has promised a new wave of "reciprocal tariffs" to tackle trade deemed as unfair. These will be tailored to each country, taking into consideration their tariff levels on US goods and other factors.

Watson estimates the United States imported about $230 million of malt last year, much of it ending up with craft brewers.

"Most of the barley in the US is contracted for by large brewers or for export to Mexico," he said.

Craft brewers therefore end up using malt containing some portion of imports, he added.

Tariffs are paid by US importers of foreign goods, and breweries expect duties would filter to them over time.

Butcher told AFP it has become "impossible for us to plan out our business, our production, if we don't know what the price of our supplies are going to be."

- 'Sit and watch' -

Brendan Chaney, Port City's logistics manager, noted that tariffs can be an economic tool when used in a targeted manner.

But he cautioned that blanket levies create an atmosphere of fear "akin to five years ago, when Covid happened" and threw supply chains into disarray.

Butcher and Cox warned that smaller businesses like theirs have limited capacity for storage -- and less cashflow -- making it harder to stockpile inventory to cushion the blow from tariffs.

"We can only hold so much in our small space, and a minimum order on aluminum cans is a full truckload," Cox of Atlas Brew Works said.

The pricing of cans is also subject to flux, Cox noted. Breweries are billed for the final product after production, which can be weeks after orders are placed.

"We're having to just sit and watch, and hope that things get better before it's time for us to order (more)," he said.

K.Tanaka--JT