Tariffs on steel, aluminum could impact Texas craft breweries
There could be trouble brewing in the beer industry.
In March, President Donald Trump ordered tariffs on imported steel and aluminum. On April 30, the White House announced they have delayed the tariffs until June.
Still, those cost increases could have major impacts for breweries and beer drinkers everywhere. It's easy to see just how important the steel industry is to the beer business.
“Everything is stainless steel. It has to be,” said Bill Mulroy, president and COO of Celis Brewery.
Tapping into steel products has helped the craft beer business grow by keeping costs down.
In Texas, the number jumped from 20 craft breweries in 2005 to 220 in 2017 and it all started with Celis in 1993.
“We were the very first craft brewery in Texas,” said Christine Celis, founder of Celis Brewery.
Now, the Belgian brewery makes about 100 barrels of beer each day.
“We do bottles, cans and kegs,” Mulroy said.
When President Donald Trump announced a plan to tax steel and aluminum imports from everywhere except Canada and Mexico, it was hard news to swallow for brew masters everywhere.
“It's too soon to see exactly what the full effect is going to be, but, in the end, we know there's a big hurdle that we all have to jump over together and it's coming down,” said J.D. Gins, co-founder of the Texas Beer Company.
The president said steel and aluminum imports "threaten to impair the national security of the United States."
The proposed 25 percent tariff on steel and 10 percent tariff on aluminum may not sound too hefty, but it will force small and independent brewers who package in cans or kegs to get crafty.
“If the steel is really expensive, some breweries that might be able to get off the ground might not be able to, some expansions that should be able to happen won't happen and some breweries won't be able to build what they actually want to build,” Gins said.
The difference in production costs will most likely raise the price of each pint.
“Nobody wants to raise the price on beer,” said Gins.
“We have to see what the impact is going to be and we can absorb some of those costs, but some of those costs will certainly need to be pushed on to the consumer,” Mulroy said.
The tariffs could lead to other problems as well.
“If the value of steel goes up because of the tariff, then people might see their keg shells getting stolen at a higher frequency. So already breweries are in pretty deep with a fleet of kegs and so the cost of keg shells going up will have an effect of the beer also going up,” said Gins.
The Brewers Association said added costs will drive down competition and even cut down on job creation.
“Ten percent of your overall cost is actual jobs that could've been created and, for some breweries, they could have to decide between opening a 15 barrel or 30-barrel brew house,” Gins said.
Breweries that rely solely on canning will be hit the hardest.
“We're already all operating on a very thin margin. We have a high ingredients cost, we have a high labor cost and then the cost of our cans going up, the cost of our keg shells going up, the cost of buying future expansion tanks going up just makes it more difficult,” said Gins.
Gins said steel prices in different countries vary significantly and a 25 percent increase on imported steel won't necessarily even the playing field.
“The cost of American steel is often higher, so that's part of where this tariff really starts making sense to someone like Trump is that he's going to raise the cost so you might be encouraged to go to American steel. Well, the American steel is already substantially higher than that,” Gins said.
However, Texas brew masters said they are preparing for the difference in costs as best they can.
“Having an issue now with the aluminum, this is not going to stop us from producing beer. We're still going to do what we're doing right now, focusing on making the best beer, the most consistent beer, bringing out innovative packaging, so it's not going to stop us. We're just going to drive through it and that's it,” said Celis.
Steel and aluminum tariffs likely won't be felt by companies until June.
The U.S. Department of Commerce has been accepting applications for companies seeking exclusions from the import taxes.
The Brewers Association said because breweries do not meet the guidelines for exemption, their applications would likely be rejected.