President Trump has hit on an idea less appealing than warm beer on a hot day.
On March 1, he announced his intentions to impose tariffs on imported aluminum and steel. That policy went into effect two weeks ago — impacting some of America’s most strategic trading partners, and, yes, the American beer industry.
The measures, which include a 10 percent tariff on aluminum and 25 percent tariff on steel, are an attack on free trade and will impact domestic businesses and their customers. Trump claims that establishing these trade penalties will rejuvenate what have been traditional American industries because erecting barriers to foreign products will force increased use of American made materials. But however hard the president wills it to be, his reasoning flies in the face of basic economics and even common sense.
In effect, these tariffs are an additional tax on U.S. companies that use steel or aluminum in their products. Ultimately, that translates into job loss, anemic business growth, and price increases for consumers. Not to mention the subsequent backlash of other countries, which will make it more difficult to sell U.S. products overseas. So while the policy is designed to help a single sector of the U.S. economy, others will suffer — hardly an economic slam dunk.
Take, for example, the U.S. beer industry, which fills and sells roughly 36 billion aluminum cans and bottles annually. Even the slightest increase in aluminum prices has the potential to tip these businesses’ balance sheets into the red and put the industry’s over 2 million employees and $350 billion in yearly economic activity at risk.
More specifically, this 10 percent trade penalty on aluminum is estimated to cost U.S. beer producers an additional $348 million per year and put roughly 20,000 jobs associated with the beer industry in the crosshairs. As Leslie Henderson, co-founder of a Mississippi-based brewery put it, “anything that impacts the cost of our production equipment and our raw materials is going to be extremely painful.”
But the consequences don’t stop here. The increased production costs will inevitably trickle down to American consumers in the form of higher prices — which will, in turn, dampen off-premise sales of beer as well as impact consumption at bars and restaurants. From here, the domino effect is obvious.
The decision to levy these tariffs is not a recipe for economic success and is uncharacteristic of the current administration’s otherwise pro-business, pro-jobs agenda.
For example, earlier this year, the Tax Cuts and Jobs Act lowered the tax burden for millions of Americans and businesses — resulting in a higher estimated GDP growth, an unemployment rate that has dipped below 4 percent, and soaring business optimism. And as part of that package, brewers, distillers, and winemakers alike received a meaningful tax break.
Administration policy influencers should shift their focus back to similar pursuits that are rooted in sound economics, instead of counteracting recent economic advancements by pitting foolish trade policy against American business. President Trump has shown that he wants to put American jobs and businesses first. But a new policy that financially punishes those who brew and consume beer does not merit that label.
The future of the U.S. economy is looking bright — engaging in unwise trade policy will only impede progress.
Sarah Longwell is the managing director of the American Beverage Institute.