Trump's Tariffs: Beer, Cans, and the Aluminum Apocalypse!

Ladies and gentlemen, buckle up! The Trump administration has just dropped a bombshell on the aluminum industry, and it's going to shake things up big time. The 25% tariff on aluminum imports is back, and this time, it's hitting beer cans and other canned goods right in the wallet. Let's dive into this aluminum apocalypse and see how it's going to impact your favorite brews and beyond!



First things first, let's talk about the impact on the beer industry. The Beer Institute, which represents nearly 8,000 brewers in the United States, estimated that the original 10% tariffs in 2018 had already cost the industry an extra $250 million. A report by consultancy Harbor Aluminum found that $50 million had gone to the U.S. Treasury, $27 million to domestic smelters, and $173 million to the fabricators who convert metal to aluminum sheet for beer cans. This cost was passed through to the brewers even though U.S. cansheet typically contains around 70% recycled metal sourced domestically.

Now, with the tariffs doubled to 25%, the cost is going to skyrocket. The Beer Institute's follow-on research in 2022 confirmed that even with exemptions for key suppliers such as Canada, beer makers were still paying the full import tariff for their can metal. The cost at that stage had risen to $1.4 billion. This indicates that the new 25% tariff will likely result in even higher costs for brewers, further straining their profitability. For example, Brooklyn-based brewery Talea's co-founder LeAnn Darland recently told CBS News that the tariffs on aluminum, which the company uses for its beer cans, could lead to higher operating costs. Darland expressed hope to share any increased costs with suppliers, as she is uncertain whether consumers will be willing to absorb any price hikes. Even without the tariffs, Darland mentioned that "Sometimes we get complaints that our beer is too expensive."

The increased costs due to the tariffs will force brewers to reconsider their packaging strategies. Coca-Cola CEO James Quincey mentioned in an earnings call that if tariffs make aluminum cans more expensive, the company could start selling more beverages in plastic bottles. This shift in packaging could be a viable option for brewers as well, but it would require significant changes in their production processes and supply chains.

Now, let's talk about the long-term effects on the U.S. aluminum industry. The tariffs are intended to encourage domestic production by making imported aluminum more expensive. This could lead to an increase in domestic smelting capacity. For instance, Century Aluminum's proposed new smelter, although years away, could potentially boost domestic production. However, the company has not yet found a source of competitively priced power to feed the plant's electrolysis process, indicating significant challenges in ramping up production.

Despite efforts to increase domestic production, the U.S. remains heavily dependent on imports. In 2024, the four operating primary metal smelters produced 670,000 metric tons of metal, compared with U.S. consumption of around 4.9 million tons. Imports of primary metal totaled almost 4.0 million tons, of which 70% came from Canadian smelters. This imbalance suggests that even with increased domestic production, the U.S. will continue to rely on imports, and tariffs will continue to determine the end price for American buyers.

The tariffs have already had a significant impact on downstream industries. For example, the Beer Institute estimated that the 2018 tariffs cost the industry an extra $250 million. A report by consultancy Harbor Aluminum found that $50 million had gone to the U.S. Treasury, $27 million to domestic smelters, and $173 million to the fabricators who convert metal to aluminum sheet for beer cans. This economic burden is likely to continue and may even increase with the higher tariffs, affecting industries that rely on aluminum, such as automotive and construction.

The changeable tariff rhetoric is causing volatility in the CME U.S. premium, which briefly jumped to almost $1,000 per ton over the LME price on the threat of 50% tariffs on Canadian metal before retreating on news of the truce with Ontario Premier Doug Ford. This volatility creates uncertainty for businesses, making it difficult for them to plan and invest in the long term.

The tariffs may also generate a major realignment of global trading patterns. Previous spikes in the U.S. aluminum premium have pulled European premiums high, indicating that the tariffs could have broader global implications. This could lead to shifts in supply chains and trade relationships, as countries and companies seek to mitigate the impact of the tariffs.

In conclusion, while the increased tariffs aim to boost domestic aluminum production, the long-term effects on the U.S. aluminum industry are likely to include continued import dependency, economic impacts on downstream industries, price volatility, and potential realignments in global trading patterns. These factors will shape the industry's future and present significant challenges and opportunities for stakeholders. So, buckle up, folks! The aluminum apocalypse is here, and it's going to be a wild ride!