USA: ‘Buy American, Hire American’ unsettles brewers

US President Donald Trump’s slogan Buy American, Hire American unsettles brewers across the US. As widely communicated, the Trump Administration is committed to a foreign policy focused solely on American interests and American national security, which leads partly to a break in the so far practiced foreign trade and tax policy. Already during his electoral campaign Trump disturbed investors and markets with his intention to cancel existing free trade agreements, especially with Mexico and to impose tariffs on imported goods.

Right after Trumps unexpected election in November stocks of Constellation Brands (CB) plummeted by nearly 10% over fears that the company’s performance could be negatively affected by Trumps intention to impose a 15% tax for outsourcing jobs and a 20% tax for importing goods as part of his so called 5-part tax policy (inside.beer, 11.11.2016).

Since then it could be seen that the Trump-effect in fact reversed for CB, because the stronger dollar made US-imports from CB’s Mexican breweries cheaper and helped to boost company’s earnings.  Since its trough on December 1st, 2016 CB’s stock appreciated already by more than 25%.

Currently, US-brewers fear import duties on primary aluminum, which would make aluminum cans pricier and would in turn also affect beer prices. In April, US- President Trump signed an executive memorandum initiating an investigation into aluminum imports in order to bring back jobs to America’s rust belt.

The import duty would add to the recent price hike of aluminum, which has increased already by 13 percent this year. "If there are duties on aluminum coming to this country, it will obviously get passed on to us and the customer," says Tim Weiner, senior commodity risk manager at Molson Coors Brewing Co. Roughly 60 percent of the beer that’s produced by MillerCoors — the second-largest brewer behind Anheuser-Busch — is packaged in aluminum cans, Weiner said.

In order to avoid negative publicity, every brewery has today also to carefully way its investments. Two weeks ago, steel workers protested against Chinese beer fermentation tanks being delivered on the Erie Canal to Genesee Brewing Company in Rochester, NY. The workers were disappointed that the brewery had chosen to buy the tanks in China instead of sourcing them domestically.

The tanks are part of a $49 million renovation and modernization project at the Genesee brewery. The company bought 12 cylindro-conical beer tanks each capable of holding 2,000 barrels (2,347 hl) of beer.

A spokesman of Genesee responded that over the last three years Genesse purchased seven tanks from a domestic supplier and the company this time again was given the opportunity to bid on these tanks but declined.

 

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