Tariffs and U.S. beer demand: How protectionist policies could impact market shares and consumer welfare

Abstract

Tariffs disrupt global food and beverage trade patterns. This includes the U.S. beer industry, which relies on international trade for agricultural and non-agricultural input exchange, as well as on the global distribution networks of a few multinational beer firms. This study uses a discrete choice experiment, latent class modeling, and market simulations to assess the potential effects of tariffs on beer demand, market shares, and consumer welfare. The results suggest that while tariffs could stimulate domestic production, any gains in domestic market share will most likely be concentrated among multinational firms rather than the nearly 10,000 small, independently-owned craft breweries. In fact, the craft beer industry could lose market share if limited economies of scale, greater reliance on imported materials, and restricted supply chain flexibility lead to higher proportional price increases compared to non-craft domestic beer. This could threaten the long-term financial sustainability of some small businesses and have ripple effects across broader local economies. Recognizing that consumers share the burden imposed by tariffs, the results also indicate that tariffs decrease consumer welfare by $59.1 to $306.4 million, with the magnitude of the estimate depending on the tariff regime and corresponding retail price increases. Taken together, the results provide important context on how tariff policy could impact the investment decisions of multinational firms, affect small businesses, and negatively impact consumer well-being. These insights have implications for policymakers and industry stakeholders navigating the rapidly evolving international trade landscape.