A Brewing Problem

New tariffs could drive up cost of craft beer

Tanks for the tariffs, Trump.
Tanks for the tariffs, Trump.

The Trump administration's new tariffs on imported steel and aluminum are damaging a local industry near and dear to Tucson: breweries.

"These tariffs have the potential to mitigate a lot of the progress we've made," said Rob Fullmer, executive director for the Arizona Craft Brewers Guild. "We're getting ready to see some real price increases."

All breweries that use cans will face the new 10 percent aluminum tariff. Local breweries will also see 25 percent tariffs on all brewing tanks and stainless steel systems, as well as on their kegs.

This stems from the fact that the U.S. is the world's largest steel importer. Canada is the largest exporter of steel the United States, while Mexico is the fourth-largest exporter of steel to the U.S.

"Some industry guys tell me they haven't seen price increases yet, but delays," Fullmer said. "Everyone's pumping the breaks to see what the bad news is going to be."

Fullmer has served as ACBG executive director for five years, but has been a home brewer since the early '90s. Over the past two decades he's been affected by fluctuations in the brewers' market.

He helped the ACBG successfully argue for an excise tax exemption by taking a trip to Washington D.C. and meeting with legislators. Last month, he traveled to D.C. again to ask for an extension to the tax exemption. But this was also when the tariffs were put into place.

"We weren't asking for anything other than to tell our stories to legislators," Fullmer said. "It was a good meeting, but with unfortunate circumstances."

Fullmer and other members of the ACBG spoke to the offices of many Arizona representatives, including U.S. Reps. Martha McSally (R-AZ02) and Raul Grijalva (D-AZ03). They discussed how the money saved from tax cuts was stimulating the local economy by going to equipment, vehicles and new hires at breweries and bars.

"When the tariffs hit that morning, we were calling brewers we knew and telling them that if they needed to do a shipment, to do it now." Fullmer said.

The new taxes on stainless steel mean an extra $50 dollars on for every $200 local brewers spend on kegs. And when it comes to replacing major operation systems, Fuller says brewers might just wait until a new administration is in office to do so.

"The prices could be difficult to pass on down to the consumer, so brewers might have to take it themselves," Fullmer said. "There are a lot of small businesses that are right at the price margin for operations, and these changes could really limit them. Brewing is a labor of love for many people, and they might not be able to handle these tariffs."

Fullmer says his main concern, along with many other brewers he's spoken to, is the lack of information from the government about the rationale for these tariffs. These issues extend beyond Arizona brewers, even reaching into government personnel.

In a meeting with the press, Rufus Yerxa, the president of the National Foreign Trade Council, said: "For the first time in generations, we've really thrown out the rule book with our best trading partners. We can't expect them to continue business as usual with us if we are throwing out the rules."

The tariffs on North American and European allies may lead to a trade war, further increasing prices for local business owners. But for the time being, brewers are bracing themselves.

"All breweries will be negatively affected." Fullmer said. "For industry, hesitation can be paralyzing."

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