How a brewing trade war with Canada poses challenges to New England’s craft beer industry

Baxter’s order was canceled, and while Trump has now several times suspended aspects of his new tariffs, Lever worries the international ping-pong match may have doomed her market expansion.

“It’s pretty clear that it’s not coming back anytime soon,” Lever said.

Over the last month, the United States’ trade war with Canada has rattled New England’s craft beer industry, which already was struggling with rising costs, market saturation, and declining demand. And the constant sense of uncertainty has only added to the stress.

“There’s still some knives to drop and to catch,” said Matthew Malloy, chief executive of Boston’s Dorchester Brewery. “I just don’t know what they are yet.”

Moreover, as with many other products, it’s not just the beer itself that has been subjected to new taxes, but some of the raw materials used to make it.

One week after New Brunswick halted imports of American booze, Trump announced he would raise tariffs on Canadian steel and aluminum, threatening to increase the cost of canning. Then, on March 4, Trump reimposed the 25 percent tariffs on most Canadian goods, driving up the price of malt imports New England brewers count on to make their product.

Canada responded by imposing its own 25 percent tariffs on about $21 billion in US imports, including dairy products, meat, honey, coffee, chocolate, liquor, wine, and beer. It threatened to extend the tariffs to a total of $108 billion in goods within three weeks if the US did not stand down.

On Thursday, Trump reversed himself again, announcing the US tariffs on many products would be paused for another month. Canada’s finance minister, Dominic LeBlanc, said his country would, in turn, hold off on a second, larger round of tariffs. But two senior Canadian officials told the Associated Press the first round of tariffs on US goods — including those targeting beer — would remain in place.

When the tariffs took effect Tuesday, premiers from Quebec to Ontario to Manitoba ordered their provincial liquor authorities to pull American products from the shelves. Because those liquor authorities typically control distribution to bars, restaurants. and grocery stores in Canada, the edicts amounted to provincewide bans. The Liquor Control Board of Ontario alone sold more than $6.2 million worth of New England beer last year, it told the Globe.

“We need to make sure America feels the pain,” Ontario Premier Doug Ford said at a press conference Tuesday in Toronto as he announced his order. “Stop buying US goods.”

It was not immediately clear if the suspension of some US tariffs would prompt the provincial liquor authorities to resume selling American alcohol, but Ford indicated Thursday that Ontario, at least, would continue to retaliate until the United States dropped all new tariffs.

Though many American craft brewers sell their product close to home, some have breached the export market, said Steve Parr, director of international relations for the Brewers Association, which represents craft brewers. Canada is the largest foreign market, Parr said, accounting for 38 percent of US craft beer exports.

“The Canadian craft beer scene has created a demand for beers from our members,” Parr said.

But he fears that even if the two countries tamp down tensions, it may take time for beer exports to recover.

“The damage has already been done to brand USA,” he said. “We’re going to have to get back out into the market to separate the beer from the politics.”

The hiccup comes during a tough time for the craft beer industry. After years of explosive growth, production peaked in 2019 and has gradually declined in the years since, according to the Brewers Association. The number of brewery closings outpaced openings for the first time last year.

“We’re not in the booming years that we were for so long,” said Bart Watson, the association’s chief executive. “It’s a more static market now, so growth is just challenging.”

Since the onset of the COVID-19 pandemic, inflation and supply chain issues have further challenged an industry already accustomed to tight margins.

“Pretty much everything going into making beer has grown more expensive in recent years,” Watson said.

And, it’s about to get even more expensive: Because of the aluminum tariffs, brewers are already receiving notices from vendors that prices are heading up. Malloy, of Dorchester Brewing, estimates the higher metals price will add about 75 cents to each case of beer, or $112,500 a year at current production levels.

In the highly competitive beer business, “I can’t push that additional 75 cents down the turnpike to the consumer,” said Malloy. “It’s going to be yet another chunk of change that we lose out on.”

Malt prices are another concern. The United States last year imported about $230 million worth of Canadian malt, much of it produced from barley, according to Watson. One of the key ingredients in beer, there isn’t enough barley grown in the US to satisfy the market.

At Baxter Brewing, Lever said her Canadian malt supplier told her it would pass along the 25 percent levy onto its customers. Last year, Baxter bought 26 tanker trucks of malt from the company, at a cost of about $200,000.

“Their hands were tied,” she said.

It was not immediately clear whether Trump’s latest move would exempt malt from the tariffs, though Watson said he believed it would. And Lever still doesn’t know how much her canning costs will rise if the aluminum tariffs take effect, as scheduled, on March 12.

She’s already eyeing yet another threat on the horizon: a potential Canadian boycott of US tourism. Canadians account for about 7 percent of visitors to Maine, a vital part of its tourism business.

Baxter operates a brewpub in a historic Lewiston mill building and sells about 40 percent of its beer at bars and restaurants around the state, according to Lever. If Canadians steer clear of Maine, Lever said, “We’re gonna feel it.”

Sarah Bryan, executive director of the Maine Brewers Guild, said that could complicate matters for breweries around the state.

“Our Canadian neighbors have always been friendly and very dear to us,” she said, noting that many of her members count on “Canadian road trip travelers” to drop by breweries on their way to or from the beach during Maine’s short peak season.

Given how much the state’s brewers rely on Canadian resources and customers, Bryan said, she hopes the freeze in cross-border relations will soon thaw.

“I think it’s tantamount to a breakdown of what has always been a healthy, symbiotic relationship,” she said. “These are our neighbors, our family members, our consumers.”

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Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him @GlobeTechLab.