Local brewers, consumers to feel impact of new aluminum, steel tariffs

Sweeping new tariffs ordered by President Donald Trump on steel and aluminum have united allies as diverse as China, the European Union and the national Brewers Association around one idea: they’re all opposed to it.

While countries such as China brace for a global trade war, local experts say the tariffs, which were signed by the president on March 8, could impact some Flathead Valley retailers and consumers.

Trump ordered a 10 percent tariff on all imported aluminum, and a 25 percent tariff on imported steel.

The changes would raise costs for manufacturers that distribute products in aluminum cans or steel kegs, and could inadvertently give an advantage to corporations that have long-term supply contracts over local brewers that buy raw materials in small batches.

Brian Clark is the president and chief operating officer for Fun Beverage Inc., a Kalispell-based distributor that supplies local bars and grocery stores with beer and wine. Clark notices when prices go up from the producers, and he sees how those costs are amplified as they move down the line and are finally available for public purchase.

“Rarely do businesses absorb costs. If a manufacturer is getting a 10 percent increase in the cost of aluminum materials they will generally pass it on,” Clark said. “In the beer business, a three-tier system, they are going to pass it on to the distributors, and I’m not going to eat it. They are going to hit consumers.”

He said when the price of materials rise, so does the wholesale price he pays. As the products pass through different hands, that 10 or 25 percent initial increase in materials often multiplies as each vendor rounds up slightly more than what they paid. Nickels and dimes add up, and by the time it hits supermarket shelves or bar taps, the increase can be significant.

It is difficult to know exactly what the impact will be, Clark said, but he has little doubt it would be a noticeable difference that would adversely impact small brewers and local consumers.

Further, lawmakers lauded recent legislation that cut in half an excise tax on small brewers as a boon to small business.

The cost of these tariffs could essentially wipe those gains away, according to the Beer Institute, a Washington D.C.-based trade association representing the beer industry. The group estimates it could cost the industry as much as $340 million a year. American brewers fill 36 billion aluminum cans and bottles each year.

That impact will also fall disproportionately on small brewers, like those that permeate the Flathead Valley.

Large national beverage producers like Anheuser-Busch often have long-term purchase agreements with their suppliers that would likely insulate them from the tariff increases for at least a little while, Clark said. Local brewers, he noted, don’t sell the volume required to make such deals viable. As such, they’ll be more immediately subject to any tariffs.

New brewers that are on the verge of opening but have yet to purchase brewing equipment could also be hit. Brewing equipment is a large investment, usually hundreds of thousands of dollars, and is largely made of steel. There are two new breweries expected to open in Kalispell in 2018.

Clark also noted that in terms of craft beer, which disproportionately comes from smaller, local brewers, bottles were more popular overall but that trend was changing.

“Consumers are really tending toward cans, with our active lifestyle here in Montana they are especially appealing,” Clark said.

The soda aisle will also be affected. Clark said many grocery stores use soda as a loss leader, meaning they sell them at low prices to attract customers that will then buy other things. If the cost of aluminum increases, those costs might not necessarily hit the price tag below the pop but the store will make that up that income by raising prices elsewhere.

Clark did note there was a vocal minority in the industry that thought the tariffs could have a positive impact.

Reporter Peregrine Frissell can be reached at (406) 758-4438 or pfrissell@dailyinterlake.com.