Tensions and concern are shaking the beer industry as there is a possibility of a significant tax increase on beer imported from Mexico. Since these products are already heavily taxed, the beer industry would sustain a massive blow if any additional tax increases take place. Tax increase on Mexican-made beer would cause issues for more than 2 million U.S. residents that owe their income to the beer industry.
This new tax policy would damage all aspects of the beer industry, from the agricultural level to production and transportation. Both workers that participate in beer production and customers that buy the product would all feel the impact of this tax increase. This new policy could cause difficulties at alarming proportions for the U.S. economy, as the U.S. is one of the largest importers of Mexican beer. To put things into perspective, the U.S. annually imports more than $3 billion worth in Mexican beer. These numbers point to the seriousness of the situation and the severity of consequences that these new taxes can inflict. One of the states that will suffer the biggest consequences is Arizona. Due to the state’s geographical position, the entire economy of Arizona relies a lot on trading with Mexico. Now, Arizona’s leading economic experts fear that this state’s local economy is going to experience significant issues, including an increase of prices, reduction of international trading, and loss of jobs.
The Beer Institute states that the U.S. is planning on ordering around 360 million cases of beer from Mexico to the end of the year. All of this beer originates from American hops and barley. By the end of the year, American importers of Mexican beer will have to give $374 million over the current taxes, thanks to the new policy. However, if this policy turns into a permanent solution, the annual increase of taxes would go up to $1 billion. Also, this 25% tax will severely hit the consumers’ pockets. The implementation of this tax policy starts today, on June 10, at 5% of the total value of imported beer. Unfortunately, by fall, the tax can climb up to 25%. The outcome depends solely on Mexico’s efforts to reduce the number of illegal immigrants.
These are hard news for the U.S. beer industry since heavy taxes already accompany the beer industry. The beer industry already deals with federal taxes alongside state taxes. Besides this, the beer industry already had to combat with a tax increase on aluminum last year. This tax influenced the value of canned beer. After all of these difficulties and state regulations, it seems that another extreme tax increase will strike the beer industry.
It is still unpredictable how beer producers from the U.S. are going to react and accommodate to these new tax regulations. One possible reaction of domestic producers could be the maintenance of the current prices. This approach could lead to spreading of domestic producers’ presence on the market. On the other hand, local producers could increase the prices to protect their gross profits. Both outcomes are equally likely since these new tariffs require intelligent and immediate reaction.