Trump's Mexico tariffs could hike beer prices in these states

By Trade WarFOXBusiness

Former US ambassador to Mexico on President Trump’s tariff threat

Antonio Garza, former U.S. ambassador to Mexico, reacts to President Trump’s threat to impose new tariffs on Mexico.

As tensions between the U.S. and Mexico simmer, a number of items – including alcohol – face potential price increases for U.S. consumers if tariffs are imposed on goods imported from Mexico.

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The U.S. imported $3.6 billion worth of wine and beer from Mexico last year, according to government data. The U.S. imported 773 million gallons of beer alone in 2018, an 8.6 percent increase over the year prior and more than it receives from any other country.

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Five percent tariffs are scheduled to go into effect on Monday, but the rate could escalate to 25 percent over the coming months should Mexico fail to satisfy the Trump administration’s requests regarding immigration at the southern border.

When the tariffs were announced, shares of Constellation Brands – which imports Corona, Pacifico and Modelo from Mexico – fell nearly 6 percent. Annheuser Busch brews Corona Premier and Corona Familiar in Mexico, while MillerCoors relaunched Mexican import brand Sol in 2018.

According to the Beer Institute, tariffs on Mexico would constitute a $12.5 million cost increase to importers during the month of June alone – a cost that would reach $374 million by the end of the year. A 25 percent tariff would increase costs by $984 million each year. Those cost increases, like many others, are expected to be passed on to the consumer.

But the pain could be worse for beer drinkers in some states than others. That’s because some states tax the beverage at a higher rate.

Beer excise tax rules differ among different states. Some, for example, use rates based on alcohol content, place of production or container size, according to the Tax Foundation. Sometimes the retailer itself is taxed – those costs are then factored into sales price.

According to the Beer Institute, consumers make about $5.3 billion in hidden excise payments to their state and the U.S. government. The group also says that taxes amount to more than 40 percent of the retail price of beer.

These are the states with the highest excise tax rates in dollars per gallon, as of January (compiled by the Tax Foundation):

1. Tennessee: $1.29 per gallon tax

2. Alaska: $1.07 per gallon tax

3. Hawaii: $0.93 per gallon tax

4. Kentucky: $0.87 per gallon tax

5. South Carolina: $0.77 per gallon tax

6. North Carolina: $0.62 per gallon tax

7. Maryland: $0.54 per gallon tax

8. Alabama: $0.53 per gallon tax

9. Minnesota: $0.49 per gallon tax

10. Georgia, Florida: $0.48 per gallon taxes

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Calculations include statewide local rates, case fees/bottle fees, wholesale rates (where applicable).

At the federal level, beers face different tax rates – based on whether they are small domestic brewers or not.