When your job is beer it is important to keep perspective on things at times like this. The growing economic storm due to Donald Trump’s maniacal rampaging is serious. It will harm millions of Canadians and Americans. In that context, beer is small change. But just because beer is not an essential good doesn’t mean there won’t be impacts. So it seems fair to lay out a few thoughts to how the trade war may impact the craft beer corner of the economy. There are a lot of moving parts and things change daily, so keep that in mind as you read.

There appear to be three pieces that impact craft beer, all of which are moving at rapid pace. There are the tariffs themselves, most significantly on steel and aluminum for the moment, but could be applied to other products soon. Second, there is the retaliatory ban on American alcohol across the country. And third there is the renewed talk, and some action, at reducing inter-provincial barriers. Let’s take each in turn.

For those interested in listening rather than reading, I did my CBC Radioactive beer column a few weeks back on the impact of tariffs. You can listen to it here.

Trump’s Tariffs

The 25% tariffs and counter-tariffs on steel and aluminum will directly hit Canadian breweries, big and small. While we mine and smelt a lot of aluminum in Canada, we actually have limited can production capacity. Most breweries (and soft drink manufacturers) purchase their cans from the U.S. and, to a lesser extent, China. Much of the aluminum in those cans is smelted in Canada, shipped to the States and then sent back as cans. This means a double whammy – a tariff is applied in each direction. Some smaller breweries are saying it might mean a price bump of between 50 cents and a dollar per four-pack of tall boys. This impact is almost immediate, as most breweries only stockpile a few weeks worth of cans due to space limitations.

I should say here that smaller breweries will be disproportionately impacted by aluminum price increases. Packaging costs are roughly 2.5 to 3 times higher for small breweries than the big multinational breweries (economies of scale, etc.). For some small breweries packaging is the single biggest input cost.

I am told steel is less of a concern, as there are more sources for kegs and other stainless steel equipment in Canada. However, if the steel industry starts cutting back production in response to tariff-induced demand reductions, then we could see price hikes here too as the market tightens.

I also start to wonder what happens if Trump’s tariff mania spreads to other products. One that springs to mind is agricultural products. Dairy is most certainly in his crosshairs, but he has made noises about agriculture more generally. A broad tariff on agriculture could hit U.S.-grown hops. Where do all those lovely, citrus fruit bomb Hazy IPAs get their flavour? U.S. hops. We don’t grow much hops in Canada. In 2020 we exported about 110,000 kg of hops and imported over 2.5 million kg, about 80% of that from the U.S. There are no easy domestic replacements for those hops.

In contrast, breweries could potentially benefit from price reductions on barley and other grain inputs if agricultural tariffs bite hard. If tariffs are applied to grain products, that could potentially lower demand in the U.S. for Canadian wheat and barley (although likely it will just drive prices up rather than reduce demand as the U.S. does not have a fast alternative). Lower demand might force barley farmers and maltsters to lower prices domestically to encourage increased sales. At this point, that is conjecture on my part as no such tariffs have been levied (yet).

And, of course, breweries will feel the indirect effects of tariff-related price increases just like everyone else. Breweries buy a lot of stuff. If prices creep up, they will feel it. It may be less significant than aluminum, but it might still hurt. The indirect effects might extend to wage pressures, as staff facing increased grocery and other costs legitimately look for pay increases to help them pay their bills.

American Alcohol Ban

Every province has enacted a ban on American-produced alcohol, including beer. In some provinces, such as Ontario and Manitoba, the impact was immediate and dramatic. Everyone saw the images of LCBO staff pulling bourbon off of store shelves. In privatized Alberta, the impact is more like a slow drip. The province halted new imports of U.S. products and froze sales to retailers (more on that in a minute). Products already in the hands of liquor stores, bars and restaurants can continue to be sold. What this means is that consumers will still be able to buy American products for weeks or months, until the current stock is depleted. Not quite the punch it sounds like, is it?

While it is clear that U.S. wine, bourbon and other products will eventually disappear, there has been less talk about what it means for beer. It will not be what some people think it is. When one thinks of American beer, brands like Coors, Bud, and Miller immediately spring to mind. Fair enough as they are all iconic American brands. The thing is every one of them is brewed in Canada. The brands might be American, but they are owned by huge multi-nationals with corporate offices in the U.S.

These beer are not affected by bans, and the people making them are Canadian. However, in a time of heightened tensions with the U.S. many are asking why they should support huge corporations with links to the U.S. For example, Molson-Coors is headquartered in Chicago and the namesake Coors family are huge Donald Trump supporters, even donating millions to the infamous Project 2025. While Coors Light might be brewed in Vancouver, Toronto and Montreal, the profits go south. Purchasing choices are individual decisions, but I can understand the rationale for calls to avoid products from the big boys.

Who will be affected by the bans are independent American breweries who import into Canada. This list includes Samuel Adams, Sierra Nevada, The Bruery, Anchorage, Evil Twin and dozens of other brands will be no longer available for the foreseeable future. While the impact of their disappearance will be minimal on most consumers, it is still a shame to see them caught in the cross fire. The good news is there are plenty of local alternatives to your favourite independent American brewery product.

Speaking of cross-fires, one of the unintended consequences of how Alberta rolled out its alcohol ban is the hundreds of thousands of dollars worth of product now stranded in the AGLC warehouse in St. Albert, operated by the private monopoly Connect Logistics. The ban announcement included a freeze on any further distribution of American products from the warehouse. Due to Alberta’s unusual privatized system, import agencies purchase product from the producer and arrange to have it shipped to Alberta, where it is stored at the AGLC warehouse. When a consumer-facing account orders the product, the AGLC “buys” it from the agent, charges the retailer and remits the appropriate amounts back to the agent (it works this way for local producers as well). The key here is that the AGLC does not purchase the product until it is about to leave the warehouse, meaning the agent is sitting on the cost of the product – plus warehouse storage fees – until it is sold by the AGLC. Normally this is a minor irritant – a delay receiving payment. While posing a cash flow issue, it is not dissimilar to issues many other businesses face in every industry.

However, the alcohol ban has thrown a gigantic monkey wrench into that system. That product could conceivably sit in the warehouse for months or (eek!) years waiting for a resolution to this Trump-induced insanity. For beer importers, that could mean the product stale dates and has to be dumped, leading to huge losses.

One can only hope the Alberta government sees this issue and finds a way to resolve it.

Inter-provincial Trade Barriers

A couple weeks ago, the federal government and most provinces signed an agreement pledging to remove barriers to alcohol being sold across provinces. The statement itself was vague, simply saying: “Most First Ministers also committed to allowing direct-to-consumer alcohol sales for Canadian products”. Details are apparently forthcoming in the coming weeks.

This is the kind of statement that says just enough to get headlines but sufficiently vague to allow people to fill in the gaps with their desired interpretation. I have seen some analysts proclaim this as a potential “revolution” in the Canadian alcohol industry, finally freeing alcohol to flow without burden across borders. Others have downplayed it as simply allowing consumers to mail order their favourite out-of-province product. PEI and Newfoundland and Labrador have refused to sign on, the former wanting more time to analyze it and the other expressing concerns about the possible closure of its St. John’s Molson and Labatt breweries.

The statement makes reference to B.C.’s and Manitoba’s rules allowing direct buying, which hints it is about the more narrow rules around direct-to-consumer sales, rather than a more widespread opening of borders. Hopefully we will learn more soon.

For now put me into the I’ll-Believe-It-When-I-See-It camp. The issues of inter-provincial alcohol sales go so much deeper than being able to carry a case of wine home from a vacation, or to ship a few bottles of a one-time Russian Imperial Stout to a consumer in Atlantic Canada. The barriers are extensive – we see hurdles in tax policy, shelf quotas, tasting panels, warehouse and agency rules and more. I highly doubt provinces are going to give up on the myriad ways they control the sale of liquor within their borders.

Some of the reasons for their hesitance are well-intentioned – they want to support and grow their local industry. Others not so much, like maximizing tax revenue and the need to be the arbiter of what their residents drink. There is a deep-seated control reflex in all liquor agencies in this country that won’t soon ebb.

A quick caveat: I am not necessarily an advocate for smashing down all the borders when it comes to the beer industry. I think we need to design an intelligent, nationally coordinated system that balances the freedom to sell anywhere with suitable support for independent, local producers to allow them to thrive.

All I am saying for the moment is that I am skeptical this “big” announcement will lead to much more than playing around the edges.

Undoubtedly Tyrannical Trump will give me more reasons to write about this in the future, so stay tuned.