Grab your helmet and swagger stick. New fronts on the Trump trade war have opened up. Import taxes on kegs and Mexican products are being considered right now by the administration and U.S. Department of Commerce.
First up, stainless-steel kegs. The Department of Commerce has announced “affirmative preliminary determinations” in its antidumping duty investigations of imports of refillable stainless-steel kegs from China, Germany and Mexico. Dumping is where a company exports a product into a foreign market at a price lower than it normally charges in its home market. The Department of Commerce said that China, Germany and Mexico are dumping hardcore on the United States. They even have rates:
- China — 2.01 to 79.71 percent
- Germany — 8.61 percent
- Mexico — 18.48 percent
80 percent overpricing does seem like a lot, so the Department of Commerce is going to instruct U.S. Customs and Border Protection to collect cash deposits from importers of refillable stainless-steel kegs from those three countries based on the preliminary rates above. Seems like a system that can’t fail. According to this press release, in 2017 imports of refillable stainless-steel kegs from China, Germany and Mexico were valued at an estimated $18.1 million, $11.8 million and $5.7 million, respectively.
The petitioner of the tariff is the American Keg Co. out of Pottstown, Pa, which boasts it’s “the ONLY steel beer keg manufacturer in the United States of America,” which means that all of its steel is domestically sourced 304 stainless steel. American Keg and its CEO Paul Czachor contend that “finished products” like kegs are coming into the United States at a zero percent tariff, even though they are made almost completely of foreign steel that is supposed to be taxed. It’s a loophole hurting his company. From a good interview on Marketplace:
[There’s a big] price difference between a U.S. keg and an import keg. Today you can probably buy an import keg at around $95 and a USA made keg is going to be around $115.
Read that whole interview here. We’re currently reaching out to international keg companies like Microstar and Thielmann to get their takes on the situation.
Also, last week, this presidential Tweet seemed to dictate a fairly sudden and aggressive deadline on Mexican imports.
On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..— Donald J. Trump (@realDonaldTrump) May 30, 2019
While Trump’s threat of a 5 percent tariff on Mexican imports might not seem very important to localized craft brewers, the resulting ripple effects will affect almost everyone in any industry. Everything from furnaces to food could go up in cost. Also consider a lot of barley and hops grown in the United States is exported to Mexico, so those farmers and brokers could likely face retaliation taxes. The Mexico tariff would also be severe news for the growing Mexican imports beer category, which has been hot.
According to research from IWSR Drinks Market Analysis, the leading eight brands of Mexican beer posted a combined CAGR of more than 10 percent over the past five years. Mexican imported beer outperformed all other segments within the beer industry in 2018, and those top eight Mexican beer brands collectively added 11.3 million hectoliters to the beer market last year and are (were?) quickly gaining on domestic competitors.
Some American-based beer companies like Constellation brew in Mexico (brands like Corona and Modelo) and import those products back into America. They will certainly be hit hard, which prompted Jim McGreevy, president and CEO of the Beer Institute (a trade organization for beer makers), to issue the following statement on President Trump’s proposed tariff on Mexican imports — including beer:
“The Beer Institute and its members urge President Trump and his administration to reconsider imposing another tax on the beer industry.
“The beer industry is a thriving economic engine for America. Imposing a tax — and tariffs are taxes — on the largest import country of the beer industry would harm the 2.1 million Americans who owe their livelihoods to beer. Whether it be the truck driver, farmer, distributor, local retailer or favorite tavern, every community in America will be affected by this decision.
“The last thing we need is more hardship imposed on the beer industry and American beer drinkers.”
By the end of the year, America will have imported more than 360 million cases of Mexican beer. Most Mexican beer sold in this country is made from barley and hops grown in the United States. Beer accounted for more than 1 percent of Mexican goods imported into the United States last year — that’s $3.6 billion out of $346.5 billion.
The proposed tariff, which will start at 5 percent of the import value and increase by 5 percent each month until it reaches 25 percent, will constitute a $12.5 million cost increase to beer industry importers during the month of June alone, and that cost will reach $374 million by the end of 2019. If the tariff remains at 25 percent, the cost to the beer industry will be $984 million per year.