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Tariffs Tapping into US Craft Beer Industry

Tariffs Tapping Into US Craft Beer Industry
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Tariffs Tapping Into US Craft Beer Industry

When Dan Katt opened Good City Brewing in Milwaukee, Wisconsin in 2016 – a presidential election year - a trade war between the Trump administration and China was the furthest thing from his mind.

“I don’t think we even contemplated that that administration would exist,” he told VOA.

He also didn’t consider how one decision in particular – canning his beer for distribution instead of bottling it – would challenge his business growth.

“We always planned to can our products. I don’t think we necessarily expected to have our single biggest expense – packaging materials – to be affected by tariffs.”

Katt’s cans are made of aluminum, and much of his supply comes from China. It’s now subject to a 10 percent tariff.

“The price of aluminum is a concern. When we buy, we buy in lots of about 215,000 cans at a time,” says Katt. “When we go back to market, which we’ll be doing very soon, we expect to see a price increase on cans.”

The Trump administration imposed tariffs on imported steel and aluminum to bolster U.S. producers of those metals and protect U.S. jobs in those industries. The tariffs are starting to impact many other segments of the U.S. economy, including the growing craft beer industry, that need aluminum and steel to make their products.

President Donald Trump says the tariffs are working.

A woman wearing a uniform with the logo of an American produce company helps a customer shop for apples a supermarket in Beijing, China, March 23, 2018.
A woman wearing a uniform with the logo of an American produce company helps a customer shop for apples a supermarket in Beijing, China, March 23, 2018.

“We have taken historic action to bring back American jobs by cracking down on China’s very abusive trade practices, but that’s going to work out, taking in billions and billions of taxes from China – never happened before, but they want to make a deal and that’s good,” he told a large crowd of supporters at one of his final mid-term election rallies in Fort Wayne, Indiana, on November 5.

A U.S. Treasury Department report supports his views, showing government revenues from tariffs are up over 30 percent this year over last.

But Brian Kuehl disagrees with the president.

"Tariffs are taxes on American citizens. When we put tariffs on steel and aluminum, it drives up the cost of steel and aluminum in the United States,” says Kuehl. He is executive director for Farmers for Free Trade, a nonpartisan group chaired by former Republican Senator Richard Lugar and Democratic Senator Max Baucus. Farmers for Free Trade is campaigning against the tariffs.

“Farmers for Free Trade was founded to have a long-term vision about trade and speaking about trade regardless of who is in the White House,” says Kuehl, who argues that the tariffs do more harm than good to the U.S. economy.

For that reason, the group has launched a nationwide “Tariffs Hurt the Heartland” campaign. It includes an $800,000 multimedia advertising blitz as well as hosting public events across the country, profiling the negative impact of tariffs.

During an event in Wisconsin, Dan Katt represented one of several businesses hurt by the trade dispute.

“We don’t think that the current trade war with China is going in the right direction,” says Kuehl. “We think it's increasing costs for U.S. manufacturers, it’s increasing costs for U.S. farmers, and it's decreasing export opportunities. We’re causing long-term damage to American agriculture and our ability to compete in foreign markets.”

A foreign market Dan Katt’s Good City Brewing doesn’t currently export to, but depends on not only for the aluminum to package his product, but also for steel used in the equipment that makes the beer.

“On a more significant level, we expect to see equipment prices – stainless steel – go up significantly,” he explained, standing in front of large shiny vats where the beer is brewed. “We do buy equipment, stainless steel, that comes through China. So that’s a concern for us as we look at continued growth and increased capacity.”

Good City Brewing is one of about 75 such companies now in Wisconsin, a state with a long history of beer production. Katt says his company will continue to grow regardless of the short-term impact of the tariffs, but he hopes the U.S. and China can reach an agreement on trade before he has no choice but to pass on the increased costs to those he needs most for his new and growing business to prosper: his customers.

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    Kane Farabaugh

    Kane Farabaugh is the Midwest Correspondent for Voice of America, where since 2008 he has established Voice of America's presence in the heartland of America.