Proposed tariffs on Mexican beer could negatively impact American jobs by reducing profits in a lucrative market segment, according to a new economic analysis. The report argues that such tariffs, intended to bolster domestic industry, would instead jeopardize thousands of jobs tied to the distribution, wholesaling, and retailing of imported beer.
The analysis, authored by Stephen Moore and David Ozgo of Unleash Prosperity, suggests that beer is not a product with national security implications, making tariffs inappropriate. While Mexican beer is brewed outside the U.S., a significant portion of its economic impact and associated jobs remain domestically.
The U.S. beer industry supports approximately 1.74 million jobs, with only about 5% directly involved in brewing. The majority of these jobs are in sectors like wholesaling, retailing, restaurants, and suppliers that handle imported beer after it reaches the United States. Imposing tariffs could threaten these positions by reducing the profitability of this market segment.
Mexican beers, such as Modelo Especial which surpassed Bud Light in dollar sales in June 2023, often command higher prices than domestic lagers. This price difference translates into greater profits for U.S. distributors and retailers. The report estimates that each gallon of Mexican beer generates about $26.27 in economic value, with approximately 74%, or $19.42, benefiting U.S. businesses and workers through domestic economic activity. In comparison, leading domestic beers generate about $15.76 per gallon.
Economists behind the report indicate that tariffs would force brewers to either absorb the increased costs, decrease investment, or pass the expenses onto consumers through higher prices. Either scenario is viewed as detrimental to the industry and potentially to American jobs.
Furthermore, the report addresses concerns about brand authenticity, citing Anheuser-Busch InBev's experience with Beck's beer. When production of Beck's moved from Germany to Missouri, the company faced consumer backlash for marketing it as German. Similarly, Constellation Brands, which imports Corona, Modelo, and Pacifico, operates under a consent decree requiring these brands to be produced in Mexico. Moving production could undermine consumer perception and brand value.
The Trump administration has broadly advocated for tariffs as a means to encourage domestic manufacturing and strengthen American industry, though specific policies regarding Mexican beer imports have not been finalized. The White House did not immediately respond to requests for comment.