Mexico tariffs: Cost to beer drinkers could be almost $1 billion

Source: https://www.azcentral.com/

Russ Wiles, Arizona Republic 

June 6, 2019

Beer-industry officials are foaming about the possibility of new tariffs on imports of Mexican-made brew that would add another layer of cost to a product that’s already heavily taxed.

Jim McGreevy, president and CEO of the Beer Institute, said the proposed tariffs would hurt the 2.1 million Americans who owe their livelihoods to the beverage.

“Whether it be the truck driver, farmer, distributor, local retailer or favorite tavern, every community in America will be affected by this decision,” he said in a prepared statement.

According to the institute, the U.S. is on pace to import more than 360 million cases of Mexican beer this year – most of it made from American-grown barley and hops. The U.S. buys $3.6 billion worth of Mexican beer annually, or 1 percent of all imports from the country.

Taxes could ratchet higher

The new tariffs are on tap to start at 5% of the value of imported goods June 10 and increase to 25% by October unless Mexico demonstrates significant progress in bottling up the flow of illegal immigrants.

The Beer Institute, a national trade association representing brewers, importers and suppliers, estimates importers will pay an additional $374 million by the end of 2019. That could increase to nearly $1 billion annually if the 25% tariff becomes permanent. Some if not most of that increase could be passed on to consumers.

Beer is already heavily taxed, with various federal and state taxes, including sales tax, accounting for about 40% of the retail price of beer – and more than the cost of ingredients and labor combined, according to the institute.

The federal government and all 50 states and the District of Columbia collect excise taxes on fermented malt beverages, according to the Tax Foundation. State and local governments also collect sales taxes.

Arizona’s excise tax of 16 cents per 12-ounce container is actually on the light side, ranking 36th overall and well below the $1.29 tacked on by top-taxing Tennessee.

Higher six-pack prices

The beer industry earlier objected to tariffs on imported aluminum in early 2018 that raised the cost of canned beer.

“I have heard from brewers large and small from across the country who are seeing their aluminum costs drastically increase, even when they are using American aluminum,” McGreevy said in an earlier statement.

With tariffs slapped on imports, domestic beer producers could keep their own prices stable to grab market share, or they could raise prices to pad their profit margins.