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Tariff impact: Nearly $20 for a 6-pack of beer? (wtop.com)

submitted 4 days ago by btaf45@lemmy.world to c/usa@midwest.social

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[–] rbn@sopuli.xyz 15 points 4 days ago* (last edited 4 days ago) (1 children)

“It’s a very specific strain of high-quality barley that grows in the cold climate of Canada,” [...]

Butcher said a 25% tariff on the key ingredient in his beer would clearly hurt his business, which is already dealing with an uncertain business climate.

“We’re going to have to raise our prices,” he said, noting the increase could be substantial, as he held a six-pack of his beer. “This $12.99 six-pack of beer is going to end up at $18.99.”

Can someone please explain the maths behind that? Going from 12.99 to 18.99 is an increase of ~46%. How is this justified by an additional 25% tariff on one of your ingredients? As much as I dislike all this Trump bullshit, this feels more like price gouging to me, using the new tariffs as an excuse.

Or if it isn't, the article doesn't deliver enough background information for me to understand the causality.

[–] Pofski@lemmy.world 16 points 4 days ago (1 children)

You're correct—at first glance, going from $12.99 to $18.99 (~46%) seems excessive if there’s only a 25% tariff on barley. Let me break down the math realistically:

Suppose barley represents about 10% of the beer’s retail price (roughly $1.30 per six-pack). A 25% tariff directly adds about 33 cents to production costs. When these extra costs pass through brewery markup, distribution markup, and retail markup, the final retail price would rise modestly—around 8% ($12.99 → ~$14.01).

However, in reality, price changes aren't just simple cost-pass-throughs. Tariffs create uncertainty, higher logistics costs, and lower expected sales volume due to consumer price sensitivity. Businesses anticipating reduced sales volume and increased indirect costs often raise prices more substantially. Furthermore, retail prices are strategically set to maintain profitability, market positioning, and account for anticipated risks.

While jumping directly to $18.99 could indeed include an element of margin protection (some might view it as excessive), it's not purely 'price gouging.' It's more realistically a combination of cost management, risk mitigation, and pricing strategy, reflecting broader market uncertainty caused by tariffs.

[–] WhatAmLemmy@lemmy.world 10 points 4 days ago* (last edited 4 days ago)

Yeah, small companies aren't really in a position to "price gouge". Price gouging is for large highly-profitable multinationals that hold a too-big-to-fail market position, like most major corporations in most industries.

The craft brewer is likely just passing on all costs, including incidentals like risk (insurance, higher interest rates on higher debt, etc), and not actually increasing profits at all.