The “Big Money Show” panel discusses President Donald Trump's plan to bring manufacturing back to America.
The escalating trade war between the United States and its allies has affected US brewers and distilleries.
While some distilleries have withdrawn from foreign markets due to uncertainty surrounding tariffs, beer makers face imminent taxes on aluminum. This means that the cost of cans could skyrocket.
The Trump administration is trying to restructure global trade in favour of US manufacturing. President Donald Trump on Thursday threatened to impose 200% tariffs on alcoholic products from France and other European countries. The threat comes shortly after the European Union announced it would proceed with planning a 50% tariff on American whiskey. The European Commission's plan to impose counter-offenses on exports of US goods worth 26 billion euros ($28 billion) was in response to a 25% tariff on steel and aluminum imports.
Chris Swanger, CEO of the Distillation Spirits Council, is hoping the president will secure a spiritual agreement with the EU, claiming that the US spirits sector supports more than $200 billion in economic activity. It also provides 1.7 million jobs across production, distribution, hospitality and retail, and according to Swonger, it purchases around 2.8 billion pounds of grain from American farmers.
“We are urging President Trump to secure a spiritual agreement with the EU, returning to zero-to-zero tariffs, creating jobs for the US and increasing the production and exports of the US hospitality sector,” he said in a statement last week. “We want toast, not customs.”
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Distillers like Jeff Quint, the owner of Iowa's Cedar Ridge Distillery, find themselves in the middle. Quint told Fox Business that he understands what the administration is trying to do, but it's pretty difficult to argue that bourbon is not part of the collateral damage from this process.
A shot of a person working at Cedar Ridge Distillery in Iowa. (Cedar Ridge Distillery)
“The secondary damage is a good descriptor of what bourbon looks like in this process,” he said, adding that the industry “there are no tariffs in either direction, this is something that has been around for almost decades and it did very well.”
Quint said the imposition of tariffs forced the distillers to withdraw from foreign markets due to insufficient demand. This will create an excess supply in the US and more competition between stills will be created within the country.
“If you have 300 distilleries that make bourbon and you continue to make the same amount of bourbon while global demand is declining through tariffs on bourbon, you're going to be a massive chunk of bourbon domestically here,” Quint said. “It could help consumers because you can lower prices with bourbon, but it can't help the 300 distilleries that make bourbon.”
Harry Schuhmacher, publisher of Beer Business Daily, told Fox Business that the bourbon and wine business was “too much liquid or we can't get anything.”
Cedar Ridge Barrel, located at a distillery in Swisher, Iowa. (Cedar Ridge Distillery/ Liz Zabel)
“It's always an east feast or hunger,” Schumacher said. “Unfortunately, just like these tariffs are coming to the bourbon industry, this has not only softened demand, but because we bundled it five years ago.”
Schuhmacher also argued that another issue is that unlike beer, unopened bourbon is not prone to perishing and can last on shelves for over 50 years.
“That's why we in the beer industry don't have the huge shaking of gluttony or hunger because if we make too much, the beer gets worse and it's thrown away.
Fox Business Correspondent Max Gorden will take part in the “Big Money Show” to defeat the potential impact of President Donald Trump's proposed tariffs on alcoholic beverages in Europe
However, Schuhmacher pointed out that the beer industry is facing its own challenges due to tariffs.
Budweiser beer in the brewery section of a Heb grocery store in Austin, Texas. (Brandon Bell/Getty Images/Getty Images)
A more serious problem, Schuhmacher said, is the 25% tariff on all steel and aluminum imports that took effect this week.
“We get almost everything about canned aluminum from abroad,” he said. “The administration doesn't want inflation and knows that it's something that will quickly raise the price of beer. The big input cost of beer is aluminum.”
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Schuhmacher added that 75% of the beer is sold in cans and almost all new products are packaged like this. He said this would have a greater impact on beer companies than soft drink companies.
