Industry Braces for Impact from Trump's Tariffs
By FBWorld Team
The costs of manufacturing foods and beverages packaged in cans
made from imported aluminum or steel are projected to increase
after tariffs imposed by the Trump administration kick in June
1. The move placed a 25% tariff on imported steel and 10% on
imported aluminum products from Canada, Mexico and the European
to The Washington Post.
U.S. soda and beer manufacturers using imported aluminum - including
Dr Pepper Snapple, PepsiCo, Coca-Cola, Constellation Brands,
Molson Coors and Heineken - wrote
to President Trump in February to say their manufacturing
costs were likely to dramatically increase if the tariffs were
imposed. They estimated a 20% import duty would cost them $512.5
million and a 30% one would amount to $768.8 million.
The tariffs are also expected to increase the retail price of
American canned food and beverage products for consumers in
Canada, Mexico and the EU, but it isn't clear yet how much.
Canada, Mexico and the EU have already announced
retaliatory tariffs targeted at U.S. corn, bourbon,
maple syrup, pizza, pork, sausages, apples, grapes, cranberries,
various cheeses and other products.
As trade disputes with China,
Mexico, Canada and the EU have ramped up in recent months, manufacturers'
earnings reports and calls with analysts have reflected increasing
concerns about the financial hit that these tariffs could bring.
The problems come at a particularly bad time for Campbell, whose
just abruptly retired amid slumping sales and projected
profit declines for the rest of this year.
issue is primarily one of cost inflation. And we're seeing and
expecting an acceleration on the rate of inflation across a
number of ingredient and packaging items," Chief Financial
Officer Anthony DiSilvestro said
during a May 18 earnings call with analysts. "For
example, we expect double-digit increases on steel and aluminum.
A lot of that [is] driven - or all of it's driven by the impact
of anticipated tariffs."
Soup's shares were already tumbling on Thursday, posting a 2.58%
decline before the tariff even went into effect. Other food
and beverage companies feeling the pain as Thursday's markets
closed were Tyson (-3.92%); Hormel (-3.44%); Molson Coors (-1.12%);
PepsiCo (-0.65%); and Coca-Cola (-0.43%). These companies' reliance
on cans exposes them more to the tariffs, according
to Credit Suisse analysts quoted by CNBC. Other U.S.
firms likely to feel tariff-related pain are Kraft Heinz, General
Mills and Hershey.
internal productivity programs and other cost-cutting initiatives
across the board may help mitigate the expense, food and beverage
manufacturers using imported steel and aluminum may have to
consider consumer price increases or shifting to different types
of packaging. But glass, cardboard, aseptic containers and other
packaging options have their own costs and production considerations,
so a lot of financial analysis is likely going on as companies
try to figure out the best and most cost-effective way to proceed.
manufacturers could be impacted even further by the food and
beverage products on which Mexico, Canada and the EU
intend to slap retaliatory tariffs, which could go
into effect later this month. That will place U.S. bourbon distillers,
pork producers, fresh produce growers and maple syrup farms,
among many others, at a distinct disadvantage. On the plus side,
U.S. consumers may see lower prices for some items if companies
opt to keep more of their products at home rather than pay tariffs