Making Stagflation Great Again

An Op-Ed piece in the WSJ today by Peter Coors of Molson Brewing points out the input pressure that firms can encounter when tariffs are imposed, even after the tariffs are taken off. Mr. Coors, an extremely large user of aluminum sheet, primarily for beer cans, was complaining not only about the lack of global transparency in aluminum pricing but also about the apparent stickiness of pricing once certain tariffs were removed. In a world where pricing power is almost non-existent, should it surprise us that firms are taking advantage of artificial supply constraints in order to try to gain some upper hand in pricing. Mr. Coors stated that Alcoa had moved production to Saudi Arabia thus avoiding applicable tariffs, but continued to charge the tariff-based price. If someone like Molson has no market power to push back against such practices, what must it be like for the lesser players?. The problem with this type of “inflation” is that what is inflation to one company is margin compression to someone else,  particularly in a sub 2% inflation world. One can assume that we wouldn’t be reading this op-ed at all if Molson had the ability to simply pass through the additional can costs to the consumer.

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