Aluminum prices are up 59% from a year ago, and America’s 10% tariffs on the metal are not relieving any headaches at beer and non-alcoholic beverage manufacturers.
The tariffs were originally put in place in 2018, ostensibly to protect domestic aluminum producers. The theory was that China and other foreign producers were “dumping” aluminum into the U.S. at low prices below cost, to capture market share and supposedly drive American producers of aluminum out of business.
In fact, the idea of dumping is one of the great unicorns of trade policy: oft-imagined but rarely seen in reality. Even state-supported Chinese firms cannot sustain such losses, bleeding money with each shipment of aluminum sent across the ocean.
Unfortunately, President Joe Biden has tightened the tariffs since coming into office. One of his first actions as president was to reinstate aluminum tariffs on aluminum exported from the United Arab Emirates that had been previously lifted.
Consequently, aluminum prices are now much higher than they were in 2018, when the 10% tariffs were originally inflicted on American users of the metal. As for China, it is now a net importer of aluminum, and things are getting worse for aluminum users around the world.
A coup in Guinea over the weekend caused prices to jump upward from what was already a 10-year high. Guinea is the world’s largest exporter of bauxite, a key ingredient in aluminum, and the conflict there puts the metal’s supply chain at risk.
Monster Beverage Corp.’s co-CEO has warned that the stratospheric climb in prices has put that company in “uncharted territory,” and Heineken has said that the out-of-control prices will have a “material effect” on the strength of its business.
That translates into higher costs for manufacturers, meaning less resources available to expand, create employment opportunities, and provide new products.
The beverage industry has been especially hard hit. According to the Beer Institute, even before the aluminum tariffs, “aluminum cans [were] already the single largest cost in American beer production. Cans [made] up 11.4% of the cost of manufacturing beer in the U.S.”
Beer, ale, and other malt beverages at home prices rose 2.1% from July 2020 to July 2021, according to the Bureau of Labor Statistics Consumer Price Index released in August.
The aluminum tariff is an unnecessary tax on beverage makers and all users of aluminum and it is made worse by the recent jump in the price of the metal. It is high time to stop taxing Americans for the simple act of having a cola or a beer.
Patrick Tyrrell is a research coordinator in The Heritage Foundation’s Center for International Trade and Economics.
Anthony B. Kim researches international economic issues at The Heritage Foundation, with a focus on economic freedom and free trade.
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