The U.S. Beer Industry Isn’t Built to Handle Trump’s Tariffs
Unfortunately we must discuss The Tariffs. For those who’ve spent the past seven days in blissful and/or booze-abetted ignorance, the upshot from President Donald Trump’s flurry of saber-rattling executive orders this past Saturday is as follows:
The U.S. levied a 25 percent tariff on all incoming goods from Canada and Mexico, our two largest trading partners;
The U.S. also levied a 10 percent tariff on goods from China, our third-largest trading partner;
As expected, and as they should, those countries responded with retaliatory measures and rhetoric of their own, notably focused on U.S. beverage-alcohol exports;
Within 36 hours, the Trump White House had already suspended the former two citing Canadian and Mexican “concessions” that were already in place;
At publication, the tariff on Chinese goods still stands; the country is challenging their legality with the World Trade Organization.
Even though the Canadian and Mexican tariffs have been stayed for 30 days, it’s worth examining their significance to the anything-but-stable American beer business. (I’m going to focus on these because we trade much more beer and related products with those countries than China.) After all, 30 days isn’t a long time, and there’s no guarantee that the Trump administration won’t unilaterally betray our key partners in continental commerce between now and then. Even if the tariffs stay stayed, the poison they’ve injected into intra-North American trade relations will linger. The timing is bad for American brewing.
First, though, I want to lay out the stakes. The U.S. imports more beer from Mexico than any other country, and it’s not particularly close. Data from the World Bank’s World Integrated Trade Solution (WITS) show that in 2023, Mexican beer outstripped the next-biggest foreign competitor, the Netherlands, by nearly an order of magnitude by volume. The Beer Institute’s just-released 2024 report indicates Mexican imports made up for 82.5 percent of all import volume. Americans love Mexican beer, and intracontinental commercial covenants— first the North American Free Trade Agreement (NAFTA), superseded by the United States-Mexico-Canada Agreement (USMCA) — coupled with contiguous topography and successful “paradise in a bottle” positioning have made it an indomitable fixture of our national beer aisle.
When we talk about Mexican beer, we’re mostly talking about Modelo and Corona, which means we’re talking about Constellation Brands. The wine-and-spirits firm was in the right place at the right time a dozen years ago to land Grupo Modelo’s spun-off U.S. rights from acquirer Anheuser-Busch InBev. Constellation executed well on Modelo, no doubt, but its rocket-ship ride over the past decade is a product of similar happenstance — intergenerational demographic and style shifts, plus ABI’s Bud Light fiasco — breaking its way. But the multi-billion-dollar breweries at which it manufactures Especial et al. are in the wrong place at the wrong time, which is to say, they’re in Mexico during the second Trump presidency.
This has put Constellation in a major jam. It can’t up and move production to the U.S., because it lacks the stateside mega-plant network of ABI or even Molson Coors Beverage Company, and it’s obligated by Department of Justice consent decree to brew the stuff in Mexico. (It’d also sully the brands’ “import” status, though I’m dubious that’d matter much to the American drinking public.) Passing along a 25 percent hike to Modelo drinkers would be begging them to trade over to faux Mexican lagers — outspoken Tilray Brands chief exec Irwin Simon noted that prospect when I spoke with him in late 2024, pointing out that 10 Barrel Brewing Co.’s Pub Cerveza line wouldn’t be subject to any such rake — or away from the style entirely.
Analysts had wishcast that the Trump administration might toss Constellation a carveout, and the way the firm structured its 2024 campaign donations suggested it hoped to bend the ear of MAGA-aligned federal lawmakers on key committees and/or from tariff-sensitive states that might moderate Trump’s dumbest impulses. As Saturday night made obvious, none of that panned out. Even though Mexican President Claudia Sheinbaum threw Trump some pat “concessions” and got him to suspend the tariff roughly 36 hours after it was signed, the market has remained wary, with Constellation’s stock trading a few points down ever since. Heineken NV, with Dos Equis and Tecate in its U.S. portfolio and a whole bunch of exposure to Mexico via its considerable brewery network in the country, has had a similarly bumpy road.
It’s a similar story with different details for our neighbors to the north. Canada is the fourth-largest exporter of beer to the U.S., per WITS; all of it was facing down the same 25 percent hike until outgoing Prime Minister Justin Trudeau offered up some formalities to make Trump feel special and put the tariff on ice earlier this week. While Canadian beer has never quite commanded the market share or cultural cachet of its Mexican counterpart, it produces vital inputs that the U.S. brewing industry relies on.
The biggest one, brewing-wise, is barley. We buy more of the crop from Canada than we do any other country, per WITS, and though some Mountain West states have the climate for it (Montana and Idaho, specifically), domestic growers couldn’t easily replace Canadian barley if it got 25 percent more expensive. As usual, this punishing market shift would be felt less at the top of the U.S. brewing industry than along its long tail. “Small producers tend not to have contracts for their malted barley,” the Brewers Association’s government-affairs lead, Katie Marisic, wrote in a blog post during the 36 hours the tariffs were in effect. “This has worked well for the industry and suppliers but means that a significant amount of barley used by small breweries likely comes from Canada.” Major maltsters and brokers (your Great Westerns and RahrBSGs of the world) will have stores to blunt price spikes in the short term, but smaller maltsters and the breweries they serve may not.
The chief executive of Alcoa Corporation, the country’s largest aluminum smelter, warned investors in mid-January that the levies — then still a figment of Trump’s wokeness-addled brain — could increase the American cost of aluminum by as much as $2 billion annually, according to remarks reported by the Wall Street Journal. Though the firm is based in Pittsburgh, only 13 percent of its actual production happens stateside; 40 percent is in Canada, and 70 percent of the aluminum it produces there is destined for the U.S. That includes can makers. “Most aluminum used to manufacture cans is imported from Canada,” the BA’s Marisic wrote. “Even with the exemption [from Trump’s previous aluminum tariff, levied in 2018], the cost of aluminum cans has risen since the initial tariffs went into place.” Recall the supply-chain disruptions of the early pandemic that left smaller craft brewers scrambling to buy empties at big mark-ups. Trump’s Canadian tariff would likely trigger a redux. If it resumes, Ball Corporation’s chief exec warned investors earlier this week that he’d “be more concerned about the volume” for the can makers’ brewing customers in particular, reported Brewbound. So would I.
I could go on about the specific havocs the tariffs might wreak on American brewers, particularly the small ones. U.S. craft brewers’ have had increasing success in export markets, exposing them to retaliation. Beer’s shelf life is vanishingly short compared to spirits and wine, making it uniquely vulnerable to any sweeping bev-alc actions. We haven’t even talked about knock-on effects on the labor market or consumer spending power, either. But because the Canadian and Mexican tariffs are currently dangling like the sword of Damocles over the brewing industry, rather than slicing through it, I want to make a slightly broader point.
The chaos Trump’s tariffs injected into the market is bad for the American brewing business, full stop. It puts people on both sides of the stick on tilt. Even though they’re technically on pause, the instability remains. This is a problem. It’s a long-held truism that beer is “recession-proof,” and sure, to some extent, it is. But everything has limits. When Trump swats at the big button labeled “TARIFFS” that his handlers got to distract him while Elon Musk loots the federal government, we get a lot closer to finding out what they are on beer’s economic resilience.
How many brewery owners are now more bearish about re-upping on their leases because of this episode? How many more brewery workers decide this sort of on-the-job whiplash isn’t worth it and exit for more insulated sectors? How many more small price hikes will macrobrewers sneak into the market under the guise of offsetting the consequences of tariffs to come? You can’t brew beer based on vibes, and you can’t run an economy on an impulse. The industry just went through four long years; now it’s staring down four more.
🤯 Hop-ocalypse Now
Longtime friend of the column and chief executive officer of Anheuser-Busch North America Brendan Whitworth has been using his noodle to come up with ways to restore some buzz to the American beer business. According to a report earlier this week from Beer Business Daily, his big idea is to force wholesalers, retailers, and the data slicers-and-dicers at analytics firms like Circana and NielsenIQ to stop referring to beer brewed in this country as “domestic,” and start referring to it as “American.” It’s “one of the strongest adjectives available to us,” reasoned Whitworth in a memo to distributors. Go ahead: just try to name a stronger adjective. See? You can’t. That’s why he gets paid the big bucks!
📈 Ups…
Long-time industry vet Bump Williams sounded a these-days-rare note of optimism in his monthly memo, predicting “beer will be the winner” of Super Bowl sales… After mounting tensions through January, Costco and its 18,000 Teamster workers reached a tentative agreement to avert a strike last week… Congrats to former Molson Coors exec Paul Verdu on his new gig at Asahi-owned contract brewhouse Octopi… Guinness was up 17 percent in dollars for the first half of Diageo’s fiscal year compared to the previous year’s frame, wow…
📉 …and downs
The Beer Institute’s review of 2024 tax-paids shows a 1.8 percent volume decline based on a soft summer…
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