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Title: Trump's Tariffs Will Crush the Beer Industry
Source:
Reason
URL Source: http://reason.com/blog/2018/03/02/t ... riffs-will-crush-beer-industry
Published: Mar 2, 2018
Author: Eric Boehm
Post Date: 2018-03-05 05:06:36 by Deckard
Keywords: None
Views: 4924
Comments: 62
Donald Trump's plan to slap a 10 percent tariff on all aluminum imports has beer makers belching their outrage. "President Trump's announcement today that he plans to impose a 10% tariff on aluminum imports will increase the cost of aluminum in the United States and endanger American jobs in the beer industry and throughout the supply chain," says Jim McGreevey, president and CEO of the Beer Institute, a trade association. McGreevy called the proposed aluminum tariff "a new $347.7 million tax on America's beverage industry" and warned that imposing those added costs could trigger more than 20,000 in job losses. "American workers and American consumers will suffer as a result of this misguided tariff," said Molson Coors, the Colorado-based macrobrewery that's one of the biggest beer makers in the world, in a statement. According to the U.S. International Trade Commission's Harmonized Tariff Schedule, most aluminum products currently have tariffs set between 2 percent and 4 percent. Breweries stand to be particularly hard hit by the proposed tariffs, but they are hardly the only losers. Everything produced with aluminum will become more expensive if the White House goes ahead with its protectionist plan. Manufacturers who use steel will be hit even harder if Trump decides to impose the 25 percent tariff on all imported steel that he is reportedly mulling. Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE! — Donald J. Trump (@realDonaldTrump) March 1, 2018 Beyond Trump's nationalist nonsense, the closest thing to an actual rationale for tariffs that the administration has been able to produce is a claim that relying too heavily on imported aluminum and steel is a threat to national security. The United States needs aluminum and steel to make rockets, bombs, and other weapons of war. If the global supply of those commodities were somehow restricted, the argument goes, then it would weaken America's ability to defend itself. That entire line of argument falls apart under even the slightest scrutiny. For example, the largest exporter of aluminum into the United States is Canada, a nation that also happens to be one of America's closest allies. Any scenario where Canada restricts aluminum exports to weaken U.S. national security is a future where Washington has far, far bigger problems than aluminum imports. Meanwhile, the negative consequences of the tariffs are not hypothetical. In January, the Trump administration imposed new tariffs on imported washing machines. (With this, at least, thy spared us the facade of claiming that cheaper, foreign-made washing machines threaten national security.) Prices immediately increased. The same thing will happen with aluminum and steel, except the effects will be felt throughout a much wider swath of the economy. American workers will lose jobs. American consumers will pay higher prices. Beer will become more expensive. But at least we'll be secure against the threat of a war with Canada. And they'll make lots of other things more expensive too.
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Begin Trace Mode for Comment # 47.
#1. To: Deckard (#0)
How to shoot yourself in the foot and he didn't even need a GUN,just his BIG MOUTH
I just read in the New York times that a beer association says it costs about 10 cents per aluminum can. A ten percent tariff would raise the price 1 cent per can. So a twelve pack price would go up 12 cents. We sure shot our self in the foot. Are you Aussies really so poor that 12 cents on a 12 pack would be shooting yourself in the foot?
I am not a beer drinker, I drink Ky Bourbon. I do know a number of people that do drink beer. Believe me, adding 12 cents to a 12 pack, or 24 cents to a case is not going to slow them down. They will be just like cigarette smokers when wholesale / retail prices went up. They will keep buying / consuming. Other products may be different, but in the beer market, it will be a non event.
They may be looking at no price increase in which case sales remain the same but their shareholder profit margin drops by the gross amount of tax (and who wouldn't complain about some $300 million in reduced profits). But while the manufacturing cost increase of a penny a can may not sound like much, that increase gets leveraged up every time that can changes hands on it's way to the consumer. It wouldn't surprise me if it adds a nickle to the final retail price which would be a $1.20 for a case of beer. At that point, consumers start going to the competition.
I read some beer distributor or whatever organization Google gave me said it costs them ten cents a can. So ten percent would be one cent like I mentioned earlier. I was thinking though. It should be less since the aluminum is only part of the price. The production and distribution costs are already in the equation. So it seems it should be less than one cent per can.
One example in this case where costs get leveraged up is that distributors normally do a percentage mark up on the price of the things they deliver. So lets say they do a 30% markup on the price of something they distribute. If the manufacturing cost of something were, say, $100,000 then they apply their 30% markup that means the people they deliver to pay $130,000. So then if the manufacturing costs go up 5% making it $105,000, then the distributor adds in a 30% mark up making it 105k x 1.3 = $136,500, meaning a $5K increase to the manufacturer results in a $6500 increase to the next link in the distribution chain. Remember it is not normal for resellers of goods to simply add a fixed amount of profit to the things the resell. They instead add a percentage. That's not gouging. That's the way it works. Resellers are forced to accept risk with the goods they resell in the event of loss or damage, for example, and only by marking up on a percentage compensates them for that risk. So every time beer changes hands from the manufacturer to the end consumer, there's a markup. That means 1 penny more on the source manufacturing side will get amplified to the end consumer. Maybe it wouldn't make it to a nickel a can as I suggested previously, but it will definitely be more than a penny.
#51. To: Pinguinite (#47)
Yeah I was thinking that too. But I didn't want to type anymore so I left where I did. Anyhow coca cola, anheiser Busch and other are big smart companies. They aren't going to just be suckers when they know that high of a price raise isn't necessarily justified. They can get it from the competition which would like a new contact. Heck the big companies probably make their own cans.
The Can Can estimate: $0.01/can Aluminum soda cans are around $0.05 - $0.10 per can for orders of less than 100,000 units. Prices decrease substantially as quantity increases, so I suspect that Coca-Cola is paying less than $0.01 per can, given that they distribute 1.9 billion servings of coke per day. Granted, some of these "servings" are from soda fountains and glass bottles, etc, but it gives a good picture of the scale at which they are operating. The Sugar Sugar estimate: $0.005/can (Please note that lots of coke use corn syrup instead of cane sugar, but my price estimate is for cane sugar) Sugar runs $200/ton for orders for orders of less than 50 tons. There's roughly 33 grams of sugar in one can of soda. Given the same logic, let's make an educated guess that 1.9 billion servings * 33 grams = ~63 billion grams There are 907,185 grams in a ton, so that's about 72,250 tons of sugar. Let's give them a 30% discount on the cost of sugar, which brings us to $140/ton, or ($140/907,185)*33 = $0.005/can for sugar. Water, CO2, Food Coloring, Flavors Everything else estimate: $0.00075/can mentions that Coke pays "10$ for 100,000 liters of water". There's roughly 34 fl oz in a liter, and 12 fl oz in a can. Given some losses, let's just say that there's 2.5 cans of coke in every liter. That translates to $10 on water for every 40,000 cans of Coke. That's $0.00025 spent on water per can. Let's add $0.0005 for all other things, like food color and flavoring. https://www.quora.com/How-much-does-it-cost-to-manufacture-355-ml-12-fl- ounces-of-Coca-Cola-Do-we-pay-much-more-than-that-What-accounts-for-the- difference-How-do-they-get-so-many-people-to-pay-so-much-more
Top • Page Up • Full Thread • Page Down • Bottom/LatestAmerican workers will lose jobs. American consumers will pay higher prices. Beer will become more expensive. But at least we'll be secure against the threat of a war with Canada.
#4. To: paraclete (#1)
#13. To: A K A Stone (#4)
" A ten percent tariff would raise the price 1 cent per can. So a twelve pack price would go up 12 cents. "
#43. To: Stoner (#13)
Believe me, adding 12 cents to a 12 pack, or 24 cents to a case is not going to slow them down. They will be just like cigarette smokers when wholesale / retail prices went up. They will keep buying / consuming.
#44. To: Pinguinite (#43)
#47. To: A K A Stone (#44)
I was thinking though. It should be less since the aluminum is only part of the price. The production and distribution costs are already in the equation. So it seems it should be less than one cent per can.
Replies to Comment # 47. One example in this case where costs get leveraged up is that distributors normally do a percentage mark up on the price of the things they deliver. So lets say they do a 30% markup on the price of something they distribute. If the manufacturing cost of something were, say, $100,000 then they apply their 30% markup that means the people they deliver to pay $130,000. So then if the manufacturing costs go up 5% making it $105,000, then the distributor adds in a 30% mark up making it 105k x 1.3 = $136,500, meaning a $5K increase to the manufacturer results in a $6500 increase to the next link in the distribution chain.
#52. To: Pinguinite (#47)
End Trace Mode for Comment # 47.
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