PROTECTIONISM VS. CHEAP BEER.

Author:Boehm, Eric
 
FREE EXCERPT

LOCATED ON THE outskirts of Philadelphia, American Keg is the type of small, blue-collar manufacturing business that might earn praise from President Donald Trump. It's the only remaining American manufacturer of stainless steel beer kegs, and CEO Paul Czachor is proud to use only American-made steel.

But American Keg is in jeopardy of going out of business, and the culprit is none other than Trump himself. The president's 25 percent tariff on steel and 10 percent tariff on aluminum apply only to imported metal, but they will increase the price of domestic products too, because, well, that's what tariffs do.

Although they've been blunted by the White House's decision to exempt imports from Canada, Mexico, and a few other major American trading partners, the tariffs are bad news for beer drinkers, who are likely to pay more for their favorite brew, and for a wide range of companies that touch the beer industry. While the tariffs are meant to boost domestic steel and aluminum production, they will do so at the expense of the much larger set of American businesses that consume those commodities.

That's exactly what's happening at American Keg, where Czachor laid off about a third of his workers and raised the price of each keg by $5 in response to Trump's tariff announcement.

Even that may not be enough to keep the business afloat, however, because the tariffs are a double whammy in Czachor's case. Not only will they increase the cost of the steel needed to make his company's products, they will increase the cost of his company's products relative to foreign-made competitors, since the levy applies only to raw or unfinished steel (sheets or rolls, for example) and not to steel-made products, like kegs, that are imported into the United States. Czachor's business faces a 30 percent increase in costs, yet keg manufacturers in other countries will be able to make and sell their products to American breweries for pretty much the same price as today.

And just as higher prices for steel mean more expensive kegs, higher prices for aluminum mean more expensive cans. Beermakers have to pay for both, and those costs will end up getting passed along to consumers. "American workers and American consumers will suffer as a result of this misguided tariff," said Molson Coors, the Colorado-based brewery that's one of the biggest in the world. Jim McGreevey, president and CEO of the Beer Institute...

To continue reading

FREE SIGN UP