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The Price of Protectionism: More Expensive Beer

The White House will force American can makers to "buy American," driving up prices and costing jobs—without doing anything to help American workers.

RICHARD B. LEVINE/NewscomRICHARD B. LEVINE/NewscomProtectionist trade policies being considered in Washington could increase the cost of aluminum. American breweries say that means you'll end up paying more for a can of beer.

In a letter to the president sent last week, some of the country's most prominent breweries, soda companies, and aluminum can manufacturers said they are worried about new tariffs on aluminum imports reportedly being considered by the White House. "Import restrictions or tariffs" on the types of aluminum alloys used to make cans "will add hundreds of millions in costs for companies in the food and beverage industry and will detrimentally affect over 82,000 American manufacturing jobs in industries that rely on these products," the CEOs wrote.

Beyond the immediate consequences of imposing tariffs on imported aluminum, they warn, any restrictions or tariffs could spur other countries to take retaliatory actions against American products. That would limit opportunities for American businesses to sell goods in other countries. Shortsighted trade policies could end up hurting one industry in an attempt to help another.

The letter is a preemptive strike, since the administration has yet to announce any formal plans to restrict aluminum imports or to slap tariffs on them.

A memorandum signed in April by President Donald Trump instructed the Department of Commerce to investigate "the effects on national security of aluminum imports." The White House said at the time that it was concerned about whether American aluminum manufacturers could supply enough of the stuff in the event of a major war. (Aluminum is used to make shell casings and many other tools of modern war—hence the language about "national security.") But the move corresponds with a White House push to protect American jobs from competition overseas. China is one of the largest exporters of aluminum to the United States, so a move to make aluminum imports more expensive would also strike a blow against a country that Trump often vilifies for its trade policies.

But that sort of protectionism makes everyone less well off in the long run, for little benefit to American workers.

American companies produce more than 96 billion aluminum cans every year in 52 different plants scattered across 23 states, according to the Can Manufacturers Institute (CMI). The type of aluminum they use—called "cansheet" in the industry—is manufactured by combining recycled aluminum and other scrap medals with newly smelted aluminum made from bauxite. Although bauxite is available in the United States, there is nowhere near enough of it to satisfy domestic demand. Even if every available smelter were to run at full capacity, the U.S. would still have to import more than 80 percent of its aluminum supply, the CMI says.

It's cheaper to mine bauxite elsewhere in the world, process it into aluminum, and bring it to the United States to make cans. So that's exactly what happens. Making it more expensive to import aluminum will disrupt that global supply, forcing adjustments that add to the cost of production but don't really do much to protect American jobs. That bauxite-mining and aluminum-smelting work will mostly continue to be done elsewhere, due to the simple fact that American demand for aluminum outpaces domestic supply.

And if it is more expensive to make aluminum cans, then it's more expensive to sell anything that comes in an aluminum can.

"If there are duties on aluminum coming to this country, it will obviously get passed on to us and the customer," Tim Weiner, a senior commodity risk manager at Molson Coors Brewing Company, said at an industry conference in Chicago last week, according to Bloomberg. "Our prices will go up."

The White House was originally expected to release its aluminum trade policy in mid-June, but the report has been delayed. Now, CNN reports, it is expected to be released before the end of the summer.

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  • Citizen X - #6||

    So now we're declaring a trade war on Canada, eh?

  • BestUsedCarSales||

    I hope so. I would go against all of my beliefs to do just that. I wish we had an open southern border and a DMZ to the north.

  • vek||

    Looking at that, I see we only needed to import 11 percent of our aluminum just a few years back in 2012... So maybe not entirely insane if we CAN in fact produce most of our own aluminum at not terribly higher prices? It looks like aluminum prices have dropped by almost 20% since then. I imagine that 20% was the profit margin of domestic manufacturers.

  • Crusty Juggler||

    I just buy bottled beer. Duh.

  • loveconstitution1789||

    Canned beer tastes like metal anyway.

  • A Thinking Mind||

    It's true. The vessel matters when it comes to beer.

  • Wally||

    Paid for by poor people n chirrunz who consume canned beer

  • Wally||

    So good!

  • ||

    A well regulated Beer, being necessary to the happiness of a free Society, the right of the people to keep and bear Aluminum, shall not be infringed.

  • Longtobefree||

    Absolutely not!
    However, there will be reasonable controls (that is taxes, fees, and licenses) placed on assault aluminum, as a safety measure alone. Assault aluminum is any quantity of aluminum in excess of that used in the manufacture of four 16 oz. cans.
    A simple requirement that to buy beverages (but only headline beer) you must have a permit from the local sheriff, pay a $250 fee, attend hours of training on the proper use of aluminum (and pay a fee for the training), and forfeit your fourth and fifth amendment rights. If the sheriff denies your application for the permit, regardless of the reason, or even if there is no reason, there is no appeal, and if you are found in possession of aluminum without a permit, the penalty is 5 to 10 years in prison.
    Fair enough?

  • Rebel Scum||

    More Expensive Beer

    Good thing I've been sticking with boxed wine.

  • BestUsedCarSales||

    But seriously. Lots of goods would likely increase in price. Was beer chosen just because it's attention grabbing?

  • ||

    Right, my first kneejerk when I discovered it was about aluminum was auto-body and engine blocks. Not 100% sure what the source overlap is but aluminum is aluminum, right?

    Also, "the effects on national security of aluminum imports." is exceedingly vague. Not that Trump has been a phenomenal champion of cutting red tape but it could equally well refer to that as it could ramping up domestic production, stockpiling it, or any one of a dozen other policy implementations. I'm fairly certain the aluminum we get from China comes with some political strings attached.

  • Longtobefree||

    "aluminum is aluminum"
    Not exactly. So far, the engine blocks are safe.

  • Crusty Juggler||

    Prediction: After canned beverage prices increase, our nation's capital will burn once again right after the LaCroix side and the Busch side meet up in Washington to march on the White House - they will get one look at each other and the first of many modern American revolutions will commence.

    Only after listening to a cigarette-smoking Willem Dafoe's summation of the events will we begin to understand what really happened that wild afternoon.

  • Headache||

    The White House will force American can makers to "buy American,"

    Force by what method?

    Shortsighted trade policies could end up hurting one industry in an attempt to help another.

    The United States in 2014 produced 1.72 million metric tons of primary aluminum @ 15,000 kW-hr per ton of primary aluminum. Solar panel makers will prosper, as well as wind generator makers to meet the energy demands of Alcoa.

    The US imported nearly all the bauxite (the only commercial aluminum ore) used in producing primary aluminum of which 63% came from Canada. Buffet loves the idea of shipping more ore to meet production.

  • Telcontar the Wanderer||

    "Aluminum shell casings"?

    Well, I guess that means they're planning to keep the A-10 for a good while longer, at least.

    (the 30mm GAU rotary cannon is the only gun I know of that uses aluminum casings. Maybe artillery shells are too...?)

  • Mark P||

    Alexander Hamilton made the argument that--while free trade is generally desirable--there are times when a nation needs to build up its own industries before being subjected to foreign competition. Our founding fathers generally followed the Hamilton doctrine until we built up American industry, and then allowed free trade in their position of strength. Now, our manufacturing is being wiped out, so it may be time for a reenactment of the Hamilton doctrine.

  • john_bunyan||

    Heretic!

  • JFree||

    If aluminum is a strategic material, then we should monetize it and create a strategic stockpile. Announce a price at which the stockpile will buy physical and one at which the stockpile will sell. And between those prices whatever is stockpiled can be turned into a commodity-backed receipt and used as a medium of exchange. No 'protectionism' is necessary.

    Unfortunately the US government long ago decided to outsource its currency to banks making dollar-based loans. And they will brook no competition.

  • Longtobefree||

    All of this on top of sugar taxes! A not so concealed attempt to bring back prohibition.
    Next stop, grapes.

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