On Saturday, February 1, President Trump announced that he would be imposing 25% tariffs on all goods from Mexico and Canada (Canadian energy imports tariffs will be levied at 10%), and an additional 10% on all goods from China, implementing them with the International Economic Emergency Powers Act (IEEPA). Tariffs were a key campaign issue for the president and have been an ongoing topic since he was sworn in.
In the last Trump administration, the president often used tariffs as a negotiating tactic, and it appears to be similar this time around. On Monday, February 3, the administration announced that the U.S. tariffs on Mexican and Canadian imports would be paused for one month.
In exchange for a pause on tariffs, Mexico agreed to send 10,000 troops to the U.S. Mexico border to help stem the flow of illegal drugs and Canada, and the U.S. agreed to continue negotiations on a border deal.
Both countries had swift responses to the threat of tariffs, with some Canadian provinces pulling U.S. alcohol products from shelves and planning targeted retaliatory tariffs on goods from Republican-run states like bourbon from Kentucky and orange juice from Florida. The 10% tariff increase on goods from China is expected to go into effect on February 4. China has mentioned that it plans to challenge the tariff increase through the World Trade Organization but is also expected to have a call with the president in the next 24 hours.
How Could This Impact Small and Independent Breweries?
Though the immediate direct costs are unknown, the Brewers Association (BA) believes that some of the following goods could be impacted if the tariffs go into place:
- Barley
- Aluminum
- Oil/energy costs
- U.S. beer and other alcohol beverages sold in Canada and Mexico
The 301 tariffs on China have been in place for the past two administrations and cover everything from brewhouses to aluminum cans. Breweries can expect to see an additional tariff increase on these goods.
What Is The Brewers Association Doing?
Craft beer manufactured by BA members is made in America, and it can’t be made anywhere else, but that doesn’t insulate the industry from tariffs. Some of the ingredients and materials we use to make beer can only be imported from other countries. The BA has been actively lobbying legislators on both sides of the aisle, sharing economic information with the administration, and connecting with suppliers who would be impacted by tariffs. We also continue advocating for legislation that will benefit small and independent breweries, like extending or making permanent tax cuts that benefit small producers with Section 199A and allowing for research and development depreciation in the year it occurs.
What Can Brewers Do?
Because these tariffs will be put into place with the IEEPA, Congress does not need to vote for them to go into effect. The BA has not implemented a grassroots advocacy campaign at this time but may do so in the future. Right now, we advise brewers to:
- Connect with your suppliers. Information is always helpful in times of uncertainty. The companies who supply you with products imported from the countries where tariffs will be imposed have likely been preparing for this. If you haven’t heard from your suppliers, reach out to them to learn about their strategy for dealing with tariffs.
- Talk with your accountants and attorney. Preparation is always helpful. Talk with your accountants about budgeting and tax breaks that could mitigate the long-term impacts of tariffs and attorneys about applying for tariff exclusions if the opportunity arises.
- Share information with the BA. You can provide us with helpful information about products that you use that are subject to tariffs. Use this form to share information with the BA.
Additional Resources on Tariffs:
- How Tariffs May Impact Your Brewery
- Ten Minutes of Tariffs Webinar
- Two Looks at Craft Prices and Elasticity
- White House Fact Sheet on Tariffs