Uncertainty for the Craft Beer Industry
In several recent articles, in the aftermath of the recent United States election unfolds, industries both domestically and globally are striving to understand the impact of Donald Trump’s second-term victory on their interests. The U.S. beer industry, particularly the craft brewing sector, is closely monitoring these developments. Both have faced a range of challenges—including competition from imported beers, tariffs, and a decline in consumer consumption—that have contributed to falling sales. While the potential for high tariffs on the booming Mexican beer market and the broader import market could encourage consumers to switch to domestic brews and help reverse the sales downturn, other factors may counteract these gains.
Here are some forward-looking insights from the Brewers Association which is part of a comprehensive post-election roundup which also examines the status of regional races and their potential impact on the Small Brewers Caucus in the Senate.
- Tariffs: President-elect Trump has been vocal about his support to increase the tariffs that went into place under his administration as well as instituting new ones. Breweries can expect the 232 tariffs on aluminum and steel to remain in place with possible increases. This could impact the price of aluminum cans and equipment. Breweries who import goods from China could also see an increase in the 301 tariffs impacting a range of products.
- Taxes: 2025 was already predicted to be a big year for taxes. Congress was already focused on many tax provisions from the Tax Cut and Jobs Act that lapsed or will soon expire. They will also look at new tax proposals and consider how to cover the costs of a new piece of legislation. Potential topics of interest to small and independent breweries are:
- Section 199A which allows eligible small business owners to deduct up to 20% of their qualified business income (QBI) from pass-through entities, such as sole proprietorships, partnerships, and S corporations. This tax provision is set to expire at the end of 2025. More than 70% of breweries are organized as pass through; if they are utilizing it, losing this tax provision could impact them significantly.
- Allowing for the full depreciation of research and development (R&D) investments in the year that they occur. This popular language is bipartisan and was included in the Tax Relief for American Families and Workers Act of 2024. R&D is available to companies investing in product development, formulations, recipes, and techniques.
- No income tax on tips was an issue proposed by Trump and embraced by both campaigns. Multiple pieces of legislation to eliminate income tax paid on tips were introduced by Republicans in the House and Senate. The proposal would benefit front-of-house employees though there are still many questions about how it would be executed. The estimated cost of this proposal ranges from $10-$25 billion a year so it could be hard to pass without a pay-for in place.
- Government Funding: December 20 is the deadline to pass the fiscal year 2024 budget. There is a possibility that there will be another continuing resolution moving it to 2025. Going forward, if Republicans control all branches of the government, there may be funding cuts to agencies across the board. The Alcohol and Tobacco Tax and Trade Bureau, which oversees the industry, the USDA Agricultural Research Service, and others could see budget reductions that could impact everything from working on the executive report on competition to label and formula approval times.
These are just a few of the topics that the Brewers Association is monitoring on behalf of the brewing industry. A lot may happen in the future, and we will work to update you as information becomes available on legislation and regulations that can impact your brewing operations.
Attribution: Article Retrieved from Craft Brewing Business (CBB Editorial Staff) and the Brewers Association (Katie Marisic).
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