In the 1970s, the federal government legalized home beer brewing and lowered excise taxes on small commercial brewers, helping to spark an American craft beer revolution. In the following decades, entrepreneurs (often homebrewers) blew past traditional brewing boundaries to offer consumers the extraordinary range of styles, flavors, and places (e.g., brewpubs and taprooms) we enjoy today.
When Uncle Sam decided to loosen up, there were only around 100 breweries; today, there are almost 10,000. However, the now mature industry has faced challenges in recent years, including COVID-19, inflation, and competitive pressures (e.g., canned cocktails and seltzers). A lingering and worsening problem is the Trump administration’s tariff-driven centralized planning, which is putting a squeeze on a quintessentially American success story.
Small businesses depend on imports, and the craft brewing industry is no exception. Compared with larger enterprises, small businesses have limited leverage to set prices. Big companies can more easily absorb higher costs and make adjustments, but smaller firms often struggle to pass those costs on and may lose sales. The uncertainty caused by Trump’s incoherent on-again, off-again tariff approach only worsens matters.
Metals
Aluminum and steel are of particular importance to the craft beer industry.
Canned beer accounts for roughly 75 percent of packaged craft beer by volume. Many taprooms also offer aluminum 32-ounce “crowlers” for beer-to-go. In 2018, the first Trump administration placed a 10 percent tariff on most imported aluminum. Tariff exemptions followed, but the typical result was that the thousands of craft brewers were burdened while the privileged few benefited.
A Beer Institute/HARBOR study estimated that between 2018 and early 2022, beverage companies paid $1.4 billion in tariff-inflated aluminum costs, even though most of the metal itself was exempt; only about 8 percent of that money reached the US Treasury, with the rest captured by rolling mills and smelters. That’s a reminder that taxes on imports lead to price increases beyond the specific product being targeted with a tariff.
Upon returning to the White House in January, Trump raised the tariff to 25 percent and applied it to aluminum imports from all countries. The administration then doubled it to 50 percent in early June. In between, imported empty cans got tagged with a 25 percent tariff.
Switching to bottles is not a simple fix for various reasons, including technical, economic, and logistical issues. The big brewers may be able to manage it, but craft brewers are stuck at the back of the line. One craft brewery owner told the Associated Press in late March that it couldn’t get bottles because the big brewers were switching to them because of the tariffs: “Our bottle supplier is cutting us off at the end of the month … That caught us by surprise.”
The Producer Price Index for aluminum cans shows the elevated burden on the industry:
Like aluminum, steel tariffs jumped to 25 percent and are now 50 percent. Not surprisingly, a craft beer trade website recently noted that as a result, “Costs for kegs, brewhouses, tanks, and even building infrastructure are climbing fast.” Indeed, most US brewers depend on imported stainless steel kegs. Like aluminum cans, keg prices have climbed. Punitive import taxes add insult to injury.
Ingredients
Beyond metals, Trump’s trade salvos are also hitting brewing ingredients that craft breweries use to create exciting flavors and aromas for consumers to discover and enjoy. Brewers import specialty hops from Europe, Australia, and New Zealand, specialty malts from Germany and Belgium, specialty sugars from Brazil, cocoa from Ghana and Côte d’Ivoire beans, vanilla beans and extract from Madagascar, coconut from the Philippines and Indonesia, fruit purees from Vietnam and Thailand, and coffee from around the globe.
And, no, sourcing from American producers isn’t a solution. Hops grown in New Zealand’s climate and soil won’t match the corresponding characteristics if grown in the US. The same goes for coffee and cocoa. Even if all these ingredients could be produced in the US, the cost would be prohibitive. And using more land in Hawaii to grow coffee would mean less land available for growing other crops, which would result in higher prices for the crops being substituted. The diverse selection of ingredients available to craft brewers shows global trade, not tariffs, is “beautiful.”
Consequences
While craft brewers fret about pricier imports, many face pain on the export side. American craft beer has gained a global foothold, particularly in Canada, which receives roughly 38 percent of US exports. Trump’s tariff aggression has provoked resentment in some Canadian provinces, with retailers canceling orders or pulling American craft brands off shelves in protest. And there is always the lingering threat that US craft beer will become a target for retaliatory tariffs.
Then there’s the economic cost of craft brewers being forced to forgo the best use of time, money, and resources. When tariffs force a craft brewery to re-engineer recipes, hunt for new suppliers of cans and ingredients, or shrink its flagship IPA from 16oz to 12oz, the loss is the time and capital that could have gone into activities that create customer value: offering new products, opening a taproom, expanding the food menu, or traveling to craft beer festivals to market their brews. The president of the Arizona Craft Brewers Guild said that some brewers in the state are eliminating or shrinking the number of beers they offer in aluminum cans to save money. “This is a blow to Arizona craft. I hate to see less local options on the shelf,” he lamented.
Craft brewers want to be focused on producing beer to satisfy customers. Instead, they’re being diverted to unproductive coping strategies driven by the policy of a single man who delusionally believes that foreign countries pay the tax on US imports. Thus, it will be ironic this 4th of July weekend when Americans down their favorite craft ales and lagers in celebration of the country’s founders telling a king to go away.