Picking up a cold one could cost a little more cold cash due to steel and aluminum tariffs that took effect on March 23 and included trade allies – Canada, Mexico, and the European Union on May 31.
The global tariff adds 10 percent to imported aluminum and 25 percent to steel in the name of national security, affecting industries from nail makers to motorcycle manufacturers to breweries of all sizes. Over one million cans of beer were packaged in Oregon last year, and places like Backside Brewery in Roseburg are already seeing the impact as they just step into the canning process.
They spent $5,000 on the steel tariff for the canning equipment, and owner KC McKillip said he doesn’t know what the aluminum for the cans is going to cost as prices adjust to the change.
“Anyone who’s doing it right now doesn’t really know what that looks like,” McKillip said. “Profit margin – we’ll be lucky if we can reach 10 percent on cans. We’re still going to do it because everyone is buying it. Nowadays, if you want to do beer, you have to do cans. A lot of stores are taking 22-ounce bottles out and making room for more cans.”
The U.S. imports 90 percent of primary aluminum and produces less than one million tons, according to the Aluminum Association. CEO of the Beer Institute Jim McGreevy said they have seen prices fluctuate in the price indicator, the Midwest Premium, since the Commerce Department started investigating the consequences of a tariff last year.
“The end user, like beer brewers, have come to rely on imported aluminum and we are bearing the cost of trying to bring back this industry,” McGreevy said. “We think that the problem is a good one to focus on and worry about, we just think the solution of the tariffs was a bad solution for our industry and many others.”
McGreevy and McKillip said getting aluminum from within the country instead of importing isn’t an option for a lot of producers because there aren’t enough aluminum smelters. The United States had 23 operational aluminum smelters in 1993 and only has five now, according to the U.S. Geological Survey. Only one of those, the Century Aluminum plant in Hawesville, Kentucky, is equipped to produce aluminum used in military aircraft and they are operating at 40 percent of capacity.
The Commerce Department’s Section 232 investigations under the Trade Expansion Act of 1962 showed it is possible that so many steel and aluminum mills would be forced to shut down that the United States could not supply its own defense needs. The last time the United States restrained imports, in 1983, was because of national defense concerns regarding machine tools.
Century Aluminum CEO Michael Bless promised to bring 300 jobs back to the plant in Kentucky if the tariff passed.
The goal of the tariff is to keep jobs like the 300 aluminum smelting jobs in the United States, but 60 workers at Mid-Continent Nail, America’s largest nail manufacturer lost their jobs on June 15 due to the tariff and the company expects more layoffs soon. The whole company and all 500 employees could be out of business by Labor Day. On Monday, Harley-Davidson announced it would move more of its manufacturing out of the country.
The Beer Institute had a third party analysis done on the effect the tariff would have, and the report estimate as many as 20,000 jobs could be lost in the beer industry alone. Microbreweries like Backside who don’t have room to make job cuts will have to mark up their products and adjust as the market changes.
“Ultimately, it’s for sure going to affect us, because it’s going to be more expensive for us, so that will make the cost on the shelves higher,” McKillip said. “When customers buy, they buy cans because they’re better for the environment and user-friendly.”