On Friday, President Trump’s tariffs on imported steel and aluminum from the EU, Canada and Mexico officially took effect. Trump’s new law will impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. This means that food and beverage companies that utilize steel and aluminum packaging (for beverage cans and canned foods) from international manufacturers will face a significant increase in costs for their packaging materials. American agricultural groups claim that these tariffs will also affect their relationships with international suppliers and trade partners, which will ultimately result in countermeasures imposed by them.
“Based on information we have heard from our customers and past experience, we have every reason to believe US agriculture, including the products we represent, will be among the first hit by countermeasures from our trading partners,” said Tom Sleight, President and Chief Executive Officer of the US Grains Council. “We had strong hopes this situation would be averted permanently, but it now appears we need to prepare for retaliation and its direct impact US farmers. Our global staff is doing this to the best of their abilities as we continue to follow new developments.”
Sleight is right in his decision to prepare for new trade negotiations as all three affected countries have started to retaliate with countermeasures. Canada plans on imposing a surtax or similar tariffs that are up to C$16.6 billion on steel and aluminum imports as well as products such as yogurts, prepared foods and coffee. Mexico is also planning on initiating tariffs on products such as flat steel, lamps, pork legs and shoulders, sausages, food preparations, certain fruits and various cheeses. In addition, the EU said that it will start to impose import taxes on sensitive items such a bourbon from Kentucky.
This chain of events has left the food industry as the weakest link in this political war. These new taxes will increase costs for both food manufacturers and consumers. Major soda and beer companies such as Dr Pepper Snapple, PepsiCo, Coca-Cola, Constellation Brands, Molson Coors and Heineken have already expressed their concerns over these new taxes and duties. In a letter to the president, 16 major beverage companies reached out to the government in an effort to stop the tariffs from being imposed. According to the letter, a 10 percent tariff on aluminum will cost beer and beverage producers $256.3 million.
“Together, the millions of Americans who are employed by our industries rely on 96 billion cans that are produced each year. As you consider whether to limit aluminum imports, we respectfully request that you refrain from imposing tariffs or import restrictions on can sheet, primary aluminum, and scrap,” wrote the group.
With the US’ new import taxes along with the pending international tariffs from Canada, the EU and Mexico, food companies will have to come up with a plan to prevent them from losing millions of dollars. Canada is currently waiting on consultations for two weeks before imposing their tariffs by July 1. The EU plans on imposing their tariffs on June 20 along with a case against the US with the World Trade Organization.
With this current situation, it seems that the only feasible solution for food manufacturers is to raise the prices of their food and beverage products that utilize aluminum and steel packaging. However, these increased prices are very likely to decrease product sales. These tariffs might also increase the number of plastic packaging, such as plastic bottles, used in the food industry which would have a negative impact on the environment.