MENU

Reason.com

Free Minds & Free Markets

Kick the Keg: Trump's Tariffs Might Kill Last American Keg Manufacturer

"Tariffs will inadvertently drive the price of American steel higher," says American Keg CEO Paul Czachor.

FRANCOIS LENOIR/REUTERS/NewscomFRANCOIS LENOIR/REUTERS/NewscomA Pennsylvania-based company that claims to be the last American manufacturer of steel beer kegs might be driven out of business by the tariffs that President Donald Trump imposed last week.

On Thursday, Trump signed an executive order imposing 25 percent tariffs on steel imported into the United States (plus a 10 percent tariff on imported aluminum). The tariff will help steel makers at the expense of steel-consuming businesses like American Keg of Pottstown, Pennsylvania.

"Tariffs will inadvertently drive the price of American steel higher," CEO Paul Czachor tells Philly.com's Sam Wood. "Within a year, we might have to raise our prices so our kegs cost 30 percent more than an import. That puts the whole business in jeopardy."

American Keg is a small, blue-collar business that the Trump administration might otherwise celebrate. Instead, its 20 employees might find themselves out of a job. They won't be alone. For every steel-producing job in the country there are about 46 steel-consuming jobs, and each of the latter will get a little shakier once Trump's tariffs take effect. When George W. Bush imposed a smaller tariff on imported steel in 2002, an estimated 200,000 jobs in downstream industries were lost.

"We don't make things anymore," is a common Trump refrain. His tariffs will make it significantly harder for Americans to keep making steel kegs, among other things.

For American Keg, the tariff is a double whammy. Not only will it increase the cost of the steel needed to make the company's products, but it will increase the cost of the company's products relative to foreign-made competitors. That's because the tariff applies only to raw or unfinished steel (sheets or rolls, for example), and not to steel-made products imported into America.

As Czachor tells Philly.com, "Downstream imported products, made outside of the U.S., that use a lot of steel, will still be priced cheaply." While his business will face a 30 percent increase in costs, foreign keg manufacturers will be able to make and sell their products to American breweries for pretty much the same price as today.

As he signed the tariff declaration, Trump indicated that he was willing to exempt Canada and Mexico from the new import tax. That's good news, since Canada is the source of the largest share of America's steel imports (5.6 million metric tons of the stuff in 2017), but the tariff will whack other major suppliers of steel to U.S. industries, including Japan (1.7 million metric tons in 2017), Brazil (4.6 million metric tons), and South Korea (3.4 million metric tons). Despite all the talk about Chinese steel undercutting American manufacturers, America imported just 740,000 metric tons of steel from China last year, far less than it imported from places like Turkey or Russia.

Trump's tariffs could grow the steel, iron, and aluminum industries by about 33,400 jobs, according to a policy brief released this week by the Trade Partnership, a Washington-based pro-trade think tank. On the flipside, the tariffs are projected to wipe out more than 179,000 other jobs. That's about 146,000 net job losses—five jobs lost for every job gained.

Photo Credit: FRANCOIS LENOIR/REUTERS/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • sarcasmic||

    Slap a tariff on imported kegs. Problem solved.

  • Jerryskids||

    Next after the keg tariff will be the Chinese needle snakes. And then gorillas. The beautiful part about it is that when wintertime rolls around, the gorillas simply freeze to death.

  • Rev. Arthur L. Kirkland||

    Slap a tariff on imported kegs. Problem solved.

    Then double it! Problem solvedier!

    (This is strategery . . . or really smart chess, ostensibly.)

  • Hugh Akston||

    Is the consequence of a policy still inadvertent when it is easily predictable but the policy makers dgaf?

  • Ska||

    Yeah, calling that inadvertent is quite a stretch.

  • Libertarian||

    "We don't make things anymore," is a common Trump refrain.

    Total BS. We make more than we ever did. Manufacturing JOBS are down, not manufacturing. It's called automation.

  • sarcasmic||

    People just don't get this.

  • Eidde||

    I think the displaced workers are aware of it.

  • sarcasmic||

    So were the Luddites.

  • Rev. Arthur L. Kirkland||

    You presume they are sentient?

  • BestUsedCarSales||

    The workers?

  • Weigel's Cock Ring||

    Some libertarians don't get that even today, most working-age people would still rather earn their money by working rather than settling for welfare, or a "universal basic income", or whatever the hell you want to call it.

    Good look selling people on a message of "It's good for you that you're being replaced by a robot. No seriously." And when I say people, I'm not talking about Jeff Bezos and the Koch brothers. I know they don't need convincing.

  • sarcasmic||

    Creative destruction sucks for those who are negatively affected. I get it.

    But what is the alternative? Ban automation?

    Change is hard. Adaptation is hard. I get it. But that's how the world works. Well, a world that moves forward that is.

  • Brett Bellmore||

    Change tax laws so that corporations distribute more of their profits, so that the return on investment is reasonable for people who aren't "qualified investors"?

    Realistically, the wave of automation is eventually going to render almost all of us unemployed. But we can aim for a world where everybody is a capitalist, instead of a world where a fraction of a percent are, and everybody else live as peons.

  • sarcasmic||

    Realistically, the wave of automation is eventually going to render almost all of us unemployed.

    People have been saying that for hundreds of years.

    As long as humans have unfulfilled wants and desires, there will always be employment.

  • Ska||

    That's how Starbucks got into selling handjobs.

  • sharmota4zeb||

    A labor shortage may hamper Germany's economy. That Reuters article explains how there are about 1.6 million unfilled vacancies thanks in part to the improved economies and greater labor demands in other EU countries that traditionally sent workers to Germany. It also says that there are over a million refugees from Iraq and Syria that have trouble finding work and integrating into companies there and about 900,000 longer term unemployed Germans.

    The push for a 28 hour workweek in Germany may seem counter intuitive, but it could be a solution in my opinion. A refugee has many time consuming things to deal with like learning a new language, culture, and government, but he could probably handle a 28 hour per week job if it wasn't a resume stain. Remove the stigma from the 28 hour work week and watch employment rise.

  • sarcasmic||

    I've had two professions in my life. Both of which I chose in part because they are hard to automate. It's hard to automate a cook. You can make a machine that will flip burgers, but you can't replace the human element.

    Currently I work in software. Good luck writing a program that will write programs.

    So I'm not worried. I thought ahead.

    And if anyone negatively affected by progress wants sympathy, I'll refer them to a dictionary and ask them to look between shit and syphilis.

  • Tony||

    Wouldn't softening the blow for victims of the creative destruction of capitalism via a strong safety net make for not only more stable lives for people but for an even more robust capitalism?

  • sarcasmic||

    Incentives. If someone can live comfortably on a "safety net," why bother to find a job?

    Charity is supposed to be uncomfortable. It is supposed to suck. It is supposed to be a way out, not a way of life.

    Government "charity" creates a way of life, because everyone involved has an incentive to keep people on it.

    So yes I agree. As long as the safety net is provided by churches and other charitable organizations funded by people who contribute by choice.

  • Tony||

    Well now you're talking about morality, and if you could be so kind as to keep it off my body, that would be great. I was talking about improving capitalism. And I'm also not talking about charity. Social insurance isn't charity, it's insurance. If capitalism is really the churning sea of creative destruction you describe, that means even successful people could see themselves in the soup line at some point. And creating a permanent plutocratic class that sustains itself via parasitism is hardly the ideal solution.

  • sarcasmic||

    Well now you're talking about morality, and if you could be so kind as to keep it off my body, that would be great.

    You are the one advocating for coercion, not me.

    I was talking about improving capitalism.

    Capitalism is nothing more than people engaging in voluntary interactions. Any "improvement" would necessitate force. As in rules enforced by cops who kill first and don't bother to ask questions.

    Social insurance isn't charity, it's insurance.

    As currently practiced it is a government-run Ponzi scheme.

    If capitalism is really the churning sea of creative destruction you describe, that means even successful people could see themselves in the soup line at some point.

    Happens all the time. Income quintiles are not static groups. People move up and down.

    And creating a permanent plutocratic class that sustains itself via parasitism is hardly the ideal solution.

    Sadly that's what we got. Can't find a job? Apply for disability. I know too many people who have taken that route. They exist. They don't have lives. They exist. It's sad.

  • Zeb||

    Social insurance isn't charity, it's insurance.

    No, it's not. If it were insurance, people more likely to need it would be paying more for it. The reality is exactly the opposite. If people working in fields likely to be put out of work by automation decided to pool some money together so that they would have some cushion if their jobs are eliminated, that would be insurance.

  • sarcasmic||

    No safety net will be perfect. I would rather have one funded by choice rather than by coercion. Neither will fully solve the problem, but at least the former is moral.

  • Rhywun||

    Good luck writing a program that will write programs.

    You're probably better off being a cook. All the eggheads claim that programming will be automated too. I'm skeptical as you are, given the rather poor results we've had so far trying to commoditize it.

  • sarcasmic||

    As someone who writes software for a living, I seriously doubt that programming will ever be automated. It takes a human to interface with the users, figure out what exactly it is that they want, figure out how to provide it for them, write the code, and then test it. I'm not worried.

  • Rhywun||

    Yes, I do all of that too. They're probably focusing on the "writing the code" bit, like many people who seem to think that's all we do, but even that's dubious unless we get real AI and well then it's just a narrow window before Skynet happens so...

  • BestUsedCarSales||

    Look up the 4th Generation Programming Language debacle if you're unfamiliar with it.

  • SQRLSY One||

    Decent AI-written software is a 20-years-from-now kinda thingee...

    ...and always will be!

  • sarcasmic||

    Decent AI-written software is a 20-years-from-now kinda thingee...

    ...and always will be!

    Just like fusion power and a practical electric car.

  • Mithrandir||

    Have you heard of Google's AutoML? It's the first step towards machine learning algorithms that can improve machine learning algorithms. The first step towards "recursive self-improvement".

  • silver.||

    We all knew Google would turn out to be the real Skynet.

  • silver.||

    Like male contraceptives. 5 years away ... for the past 50 years!

  • jelabarre||

    It takes a human to interface with the users, figure out what exactly it is that they want, figure out how to provide it for them, write the code, and then test it. I'm not worried.

    That doesn't explain MS Windows though...

  • Karen24||

    My employer ordered some software from a company that promised to make it cheaply by automating as much of the drafting as possible. Six years and a million dollars later, we had absolutely nothing. Software is definitely something that will not be automated any time soon.

  • sharmota4zeb||

    Wordpress and square space come to mind. New programs let customers design and publish their own websites instead of hiring a web developer. Now if only there was some technology that lets a customer flip his own burger in the privacy of his home in less time than it takes to get to the restaurant where sarcasmic cooked.

  • NoVaNick||

    I thought not having to work was supposed to liberate us so that we could spend our time writing poetry, at least that's what Marx thought...

  • sharmota4zeb||

    When a fixed income covers the cost of housing and food and utilities, working to pay for your trip to Europe (or the luxury of your choice) is much more enjoyable.

    Alternatively, we could end government funding for public schools and put parents in jail for failure to pay tuition (like we do for failure to pay child support) in order to help parents enjoy the satisfaction of working for something instead of getting it for free.

  • sharmota4zeb||

    It is amazing how many young women think that being the mother of elementary school students is a socially acceptable excuse for being unemployed.

  • loveconstitution1789||

    Plus, products partially manufactured in the USA should still count as being made in the USA.

  • vek||

    ACTUALLY, it's a far smaller portion of the economy, and employment. And it depends on when you want to set your starting basis for doing such calculations too. Total dollars are up, but we really don't make nearly as much stuff as a we used to, or likely as we could under different circumstances.

    Did you know that the backwards, stupid, Luddite German economy has double the manufacturing that we do as a percentage of GDP? So backwards! Most other countries in Europe are only slightly behind that. And Japan. And lots of other countries. We and the UK are more or less the only two countries in the industrialized world in that completely opened the floodgates to foreign competition, while not demanding they do the same in return for market access... Even though I'm quite sure they would have done it... And somehow we (and the UK... But correlation isn't causation or something! :/) have far fewer people in manufacturing, and far lower industrial output as a percentage of GDP! It's crazy, it just doesn't even make sense! It's almost as if manufacturing is still an important industry in the 21st century, and somehow we just screwed the pooch and lost half of our manufacturing capacity compared to most other 1st world countries!

    I guess it's all just too complex. I mean it couldn't possibly be because we have 1 way tariff free trade with a bunch of countries or anything? That'd be crazy.

  • vek||

    At the end of the day it comes down to this: There are a lot of people who aren't smart enough to do many of the things we think of as "21st century jobs." They just don't have the brains. So labor mobility has not worked out like it does in free trade theory on paper. So since we're a mildly socialist nation I'm quite sure we've actually come out worse after you account for the loss of tax revenue, while jacking up welfare costs, while lowering wages, while giving foreigners ownership in trillions of dollars of US based assets.

    The real world has STRONGLY deviated from how theory says it is supposed to react... That means the theory was wrong in some of its assumptions. I'm not saying we get no benefits from trade with low wage countries, merely that in the current welfare state system, with a fiat currency, minimum wages, etc the nation as a whole has actually lost more than we've gained. You can still argue the morality of trade, but the practical bits are not black and white like many naive people want to pretend they are.

  • chemjeff||

    There are a lot of people who aren't smart enough to do many of the things we think of as "21st century jobs."

    First, that is an incredibly dim view of Americans. Funny how the America Firsters think so lowly of their compatriots.

    Second, it's not even really true, if you define "21st century job" as "jobs that can't be automated by robots or outsourced to Malaysian 7th graders". Service jobs mostly can't be outsourced. Trades mostly can't be outsourced. Anything that involves creativity can't be outsourced or automated.

    I think the bigger problem isn't that we have a lot of dumb Americans, but instead we have a lot of Americans who did not challenge themselves. They just went into the same jobs and same lifestyles as their parents and grandparents did and are shocked to see the world changing from underneath their feet. Whose responsibility is it for people to have careers with decent long-term earnings potential? The government's? Donald Trump's? The WTO? No, it's the individual's.

  • vek||

    You're partially right, and partially wrong.

    There ARE lots of tradesmen jobs that people can do intellectually speaking. And we HAVE been inventing new service jobs to make work for people who lost other forms of employment. But here are the problems:

    For trade jobs and other stuff that can't be outsourced: There are only so many plumbers, carpenters, etc needed as a percentage of the workforce. It is finite. We ALREADY had all those jobs filled when others were doing millions of manufacturing jobs, soooo no real possibility that we could just magically double the number of plumbers to accommodate all those loses.

    Most of the service jobs don't pay shit, because they aren't worth shit. We have millions more near useless service jobs because there's no longer anything more productive to do with those people, and since wages have bottomed out we can now hire them to make our morning coffee for us instead of doing it at home. I'm not saying some of these services aren't useful or nice, they are... But they're not jobs that bring NEW VALUE into the economy, they merely shuffle existing wealth around more. In short they're garbage jobs. These are different than "service" jobs like high end finance, which is a valuable job. But we're making baristas, not Wall Street types for the most part. It's all in the numbers since 2000.

  • sharmota4zeb||

    I have a feeling you are right. One government paper said a third of New York City's unskilled workers have college degrees.

  • vek||

    I totally am. I have read A LOT about this and related subjects over the years. Giving idiots degrees in useless things, and simply having no productive jobs for people to do explains all the college grads making coffee.

    Our economy is too big to rely solely on fancy 21st century white collar jobs. There is not enough demand in the world to do this, nor are there enough intelligent people in the country to do this.

    This is why losing so much manufacturing has fuckered the economy so bad. We need productive jobs for those people to do, instead of jobs where they just shuffle the money around but don't really produce anything new or valuable, but we shipped them all overseas... Even the ones that barely save us anything by doing so.

    There's nothing wrong with outsourcing something where it saves you 75% on costs, that is great for the economy and consumers. But when you outsource something that only shaves 10% off the cost, it is a huge net loss to the economy overall. We've done too much of that sort of thing.

  • vek||

    And you are simply WRONG in the assumption that your average person can just go run off back to college and become a full stack developer or something. IQ is a real thing. It exists, and it can be measured. There are minimum IQ thresholds for MANY professions. 85 IQ people cannot be doctors, or programmers, or accountants, etc. They just don't have the mental capacity. It's not nice to say out loud, but it is factually correct.

    The US economy has lost competitiveness in many areas where low IQs are fine, and gained in areas where higher IQs are needed... The problem is that the average IQ of Americans has not magically gone up to accommodate our new higher IQ requirements. As a matter of fact it has gone down as the percentage of the population that is white has gone down. You can say IQ scores are heavily environmental (even though they're likely not), but minorities that aren't Asians still score lower, and have lower educational achievements etc that correlate perfectly with their observed IQ scores. The so called falling test scores of American students, for instance, is EXCLUSIVELY because the percentage of non whites has increased, white students still score towards the top of the global rankings. So we're actually LESS well situated than in the past for specifically high IQ work.

  • vek||

    Just because it's not nice to admit some people are dumb, that does not make it true. One of my best friends in HS had been held back 3 times because he had a very low IQ. He was the nicest guy you could ever know, and he has done fine for himself working in a skilled trade job. But the thing people leave out of this equation is that there are only so many such jobs that are possible to have, so not every low IQ guy can get one, because math.

    Even in the case of "fancy" jobs people like to talk up as being the future, like finance, programming etc there are still finite numbers of these jobs needed in the world at any given moment. The number of programmers will continue to go up I'm sure, but it will still be constrained by supply/demand in the market. At present EVEN IF every American were capable of doing such jobs, there is not sufficient global demand for us to create them.

    Think about it this way: Switzerland's whole economy (damn near) is based on banking. That can work for a small place like that. But the entire USA, with its huge population, could NEVER employ such a percentage of our population in banking alone, because there is a limited demand for banking services. This is why large economies have to be somewhat balanced. They need agriculture, banking, manufacturing, service jobs, raw materials, etc. Because you can't support a large country from a single sector like Saudi Arabia or Switzerland does.

  • vek||

    I read an article a year or two back that went through the numbers of people employed in all these talked up 21st century fields... Basically every hot industry COMBINED provided far less employment than just the manufacturing jobs we've lost in the last 15 or so years. Why? Because there isn't enough demand for the high value jobs where we're competitive to offset the losses of these more basic jobs like manufacturing. Again, it's simple math.

    So what's the solution? The only possible thing you can do is create semi-useless service jobs, like baristas out the ass. Which is exactly what we've done if you look at employment statistics. The problem is that these don't pay well, and never will. If we go back to every middle class person having a servant or three like in 1800s England we could soak up a lot of workers, at very low wages... But I don't think people would much like the idea of half the population becoming man servants for the top 20% or whatever.

    Other than that, you need to have a balanced economy. There is no reason third rate European countries should have stronger manufacturing bases than we do in the USA. It's purely been our stupidity in how we've gone about our trade negotiations. If we'd opened up all the countries we do business with we'd be exporting a lot more, but we allowed them access without demanding access in return. Bad move, now that it's entrenched it's harder to fix than if we'd done it right in the first place.

  • vek||

    So individual choices matter, but there are structural limitations on how many people can in fact do decently with the situation as it is. For limited, or even average, intelligence people, it's basically fucked for most of them.

    Accepting that not EVERYBODY is smart enough to be a programmer or doctor should be common sense that is taken into account when making policy decisions... But the PC brigade that likes to pretend all people have the exact same potential doesn't like reality, so ignores it completely. But we have to accept reality for what it is if we want to have decent outcomes.

  • sarcasmic||

    have far fewer people in manufacturing, and far lower industrial output as a percentage of GDP!

    Comparative advantage. Look it up.

  • JFree||

    Comparative advantage has nothing to do with the current mantra of 'free trade'.

    Ricardo proved comparative advantage by demonstrating the advantage of Britain exchanging wine from Portugal for cloth from Britain.

    He would have been correctly laughed at as an idiot if he had demonstrated comparative advantage by talking about Britain buying wine from Portugal in exchange for money thus running a structural deficit.

  • sarcasmic||

    Meanwhile Britain has wine, and Portugal has pretty pieces of paper. Seems like Britain came out on top.

    Same with anyone who runs a trade deficit. The one with the deficit gets the stuff, while the other gets the bill.

  • vek||

    Except pieces of paper have meaning genius! The Portuguese could use those pieces of paper to buy out the entire English cloth industry, or perhaps simply all the London real estate, and kick back skimming off the top of the English economy in perpetuity. Without a hard money system of some sort, you don't hit the natural walls/limits that you had when these theories were created. That changes the outcomes by allowing larger deficits to continue for longer periods of time than would be possible in the world of the 18th/19th century.

    In those days deficits were self correcting because you literally ran out of money (gold/silver), so had to lower wages so the foreigners would buy SOMETHING from you to balance things outs eventually... Or you could have sold assets as we do now. The natural limitations are almost all removed via manipulation now though, which is how it got so out of control.

    Selling off your long term durable assets to buy consumable goods is NOT a recipe for long term success. It's a very short sighted, plebeian mind set that only poor people should have. The middle class and wealthy used to understand the value of investments, the danger of running negative cash flow, etc but most people have become idiots with respect to basic budgeting... Hence the whole society is mostly living beyond its means, and selling out their own future prosperity for short term excess consumption.

  • Earth Skeptic||

    Well, at least we get to buy lots of cheap import crap.

  • cgr2727||

    ...last American manufacturer of steel beer kegs...

    Aren't most kegs made of aluminum? Thicker than the stuff they use for cans, but aluminum nonetheless, I thought. I'm going off 20-year old recollections of shlepping empties down five flights of stairs at my college apartment, but I'm pretty sure if a 15.5 gallon pressure vessel were made of steel, I'd still have the hernia from lifting it.

  • cgr2727||

    Oh yeah, and the point of the article still stands what with the dumbass tariffs hitting steel and aluminum.

  • ||

    No, most are stainless steel. Plastic kegs have been tried and work for the most part but fear mongering has delayed their implementation.

  • vek||

    Most are, but some are still steel. I think the pony kegs and stuff being steel is more common maybe? Probably because of the weight thing, being you can still lift a small steel keg, and steel being cheaper it works overall as a value proposition.

  • ||

    Most are, but some are still steel.

    The other way. Aluminum is more succeptible to various forms of corrosion, easier to (steal and) recycle, and at the required thicknesses and pressures, more brittle making failure more likely and more likely catastrophic when it happens.

    The same reason liquid fertilizers, milk, propane, etc. is still predominantly hauled around in (stainless) steel.

  • sarcasmic||

    Makes sense.

  • vek||

    Learn something new all the time! I'm pretty sure most of the kegs I have come into contact with have been aluminum from the look of them, but that may be an oddity.

  • ||

    Smaller Dewar flasks for liquid nitrogen and other cryonics are aluminum.

    In the picture, the one keg in the lower left-hand corner *appears to be* aluminum.

  • silver.||

    You were apparently a badass. I was slinging 80lb bags of concrete for work in college, and I couldn't solo a keg.

  • creech||

    Just heard Lou Dobbs on a local talk show. I swear, Lou thinks the money we pay for imports is stuffed into mattresses all over the world and that is a bad thing. He said trade is "worse than a zero sum game" for America. He loves Navarro too.

  • sarcasmic||

    You don't like Jane's Addiction?

  • BestUsedCarSales||

    Stop!

  • vek||

    It's not zero sum, but there are upsides and downsides. Once you balance out the equation you can determine cost/benefit analysis... We totally make out like bandits on importing some stuff, but other things the economy does suffer overall. If there is an item that has only a minimal 10-20% cost savings by importing, many companies will still outsource it... But the economic benefits lost from producing it here are not even CLOSE to being made up for by the small savings.

  • I can't even||

    I wonder if the potential tariffs inspire this level of pant-shitting in countries they'll be aimed at?

  • Fist of Etiquette||

    Why are people still buying new kegs? Shouldn't we be reusing our current stock of kegs? For Gaia's sake, that's the real issue here.

  • silver.||

    Have you looked at college enrollment numbers?? We're reusing all our old ones and more!

    Plus, don't pretend like you didn't leave one sitting around for a few weeks after a rager.

  • Jerryskids||

    Of course, some people are speculating that Trump is building up the domestic steel industry in preparation for going to war. And they're applauding.

  • Tony||

    Since he won the war on terror, beer containers was the next logical target.

  • Dan S.||

    American Keg won't face a 30 percent increase in costs, it will be at most 25 percent, probably a bit less.

  • vek||

    Yeah probably. Or perhaps not even that. There are still numerous steel producers in the country who will have to compete with each other on price, and if we exempt Canada and Mexico it might have close to zero effect. Reason does like to over hype the fuck out of things just because it suits their argument or whatever, and there's NO SUCH THING as a minimally important law or whatever. Everything is either perfect or the apocalypse, no in between.

  • Jerryskids||

    Short-term they might, long term I don't see why a tariff on foreign steel wouldn't simply lead to a larger over-supply of steel on the world market and a corresponding drop in foreign steel prices. Since China can subsidize their steel production more than anybody else, they'll become the low-cost producer and we'll see a greater share of Chinese steel sold here than we had pre-tariff.

  • vek||

    That's exactly what I said in other threads. China might gain from this as other marginal producers that are more expensive lose business, so Japan/Germany/whoever might lose to China.

    This is why targeted tariffs are always kind of daft, things just work their way around them in stupid ways. If you're gonna tariff the shit out of people do it "right" and apply broad based tariffs to everything! It really does make more sense if you're trying to be protectionist.

  • MJBinAL||

    Our suppliers are telling us 10% tops for steel.

  • vek||

    I do think this is a fairly bad application of tariffs. I am not entirely opposed to all instances, but I think if we are to have them they should be broad based, and as much just as a revenue generator as anything else. That way you don't get extra bonus level stupidity with distortions like making the imported kegs cost less than the ones produced here.

    I would be totally fine if we slashed income tax rates in half and replaced them with a 10% tariff (or whatever it worked out to, but that's actually ballpark correct) on all imported goods or something. The "it'll cost consumers more!" argument would no longer exist, but it would in fact change the incentive structure for producing more goods here that are only very marginally cheaper to produce abroad. Which are exactly the kind of things that "shouldn't" be outsourced in a way.

    This is not the best though because it's an input, which fucks with manufacturing, when if you wanted to do protectionism right you should fuck with end consumer goods. Meh. It's Trump, whadda you expect?

  • NoVaNick||

    Companies will find a way to get around tariffs if there is demand-case in point, the "chicken law" tariff on foreign-made vans that has been around since the 1960s. LBJ enacted it to retaliate against a German tariff on US chicken and at the time it was applied to VW vans and light trucks imported into the US. Since then, auto makers ship these vehicles partially assembled to the US, and add on the truck beds, or swap out windows on the vans at the port. Ford now ships Transit vans made in Turkey to Baltimore, where workers modify them for commercial use (I know of someone who does this). So I guess this is a case of a tariffs actually creating jobs.

  • vek||

    Well that's the thing, tariffs DO work in that they have effects. They have repercussions, both positive and negative. The tariffs we slapped on Japanese cars are DIRECTLY responsible for why they set up shop in the USA back in the 80s and 90s. If we hadn't done that, they may never have built those factories, or if they did they may have built smaller ones many years later. Those tariffs created jobs, but maybe they also increased the cost of Japanese cars. Was it worth it? I dunno. Maybe, maybe not.

    The big question is are the negative consequences worse than the benefit you get? A lot of the time the answer is probably yes, but I would imagine in many cases the answer is no. Like I said if some product can't compete in the US market anymore because its cost advantage is ONLY 10% lower than making it here, the US would be losing out BIG TIME economically by importing such a product. You lose $90 out of $100 in GDP for a paltry $10 savings. It's impossible to make that up by reinvesting that $10 or whatever.

    That's why I would be totally okay with replacing other taxes with a small across the board tariff. It wouldn't hurt the economy any more than an income tax does! And it may well help the economy by creating more jobs. Doom sayers on reasonable tariffs are just like all other apocalyptic prophets, blowing shit way out of proportion.

  • MJBinAL||

    I agree. I favor a 20% import tax on EVERYTHING and an end to the income tax.

  • vek||

    That was how Thomas Jefferson ran the country! I don't think it would be a horrible way to do it now either. You can certainly no longer use the "consumers are gonna pay more!" excuse, since consumers will in fact have just as much cash in their pockets in either scenario if the math is worked out right.

    I would also be okay with other variations of lowering/eliminating the income tax, like national sales tax+ lower tariff or something to that effect. Income taxes are just bunk, about anything would be an improvement.

  • Scarecrow Repair & Chippering||

    Tariffs will inadvertently drive the price of American steel higher

    I do not think he chose the right word.

  • MJBinAL||

    The reality is that this tariff is going to raise the cost of steel much less than you would believe from all the hooie. The US, Mexico, and Canada all have excess capacity that will come online. US prices will not increase 30% for steel, it will be more like 5 to 10%, even less for aluminum.

    All these jobs lost scenarios are based on US steel prices increases 30% and aluminum prices 10%. In addition, the Chinese will lower prices to compete even with the tariffs. They are heavily subsidized as it is, and the Chinese government is not going to allow significant increases in unemployment.

    Bottom line is that the Feds are going to see some increase in tax revenue due to the tariffs, a little more steel and aluminum is going to be made in the US, Mexico, and Canada, and the Chinese government is going to subsidize metals production even more than they do now.

    What I hear from our suppliers for steel is that prices may rise as much as 10%. Not 30%, but 10%.

  • vek||

    All makes logical sense to me, and it sounds like you're in an industry where you would know.

  • Headache||

    More "free trade" bullshit patter. American Keg more likely than not is using American and Canadian steel. Therefore, no tariffs, no reason for price increase. Also, since world wide supply > demand there should not be an effect on the overall steel market.

  • Kivlor||

    Theoretically speaking, if we cut the supply (or rather inflate the price of foreign supply in the US) then the magic hand of the market will guide US steel prices up.

    This may or may not be true, based on a ton of other factors, because as nice as "ceteris parabis" is on paper, typically it doesn't happen in the real world. There are tons of variables, and shifts in one variable rarely happen.

  • vek||

    Also, there is not a single US steel monopoly. US suppliers still have to compete with each other, and since they all own excess capacity it might not do much at all to pricing.

  • erp||

    I heard it will also adversely affect buggy whips too. :-)

  • Empress Trudy||

    I guess it's the end of the world then. No more kegs. Anywhere. In the country. Ever. All is lost.

  • TomXYZ||

    "Trump's Tariffs Might Kill Last American Keg Manufacturer" - also the sky might fall.

  • MISteve||

    There is no double-whammy. His costs go up as a result of higher-priced steel. Period. A 30% increase in costs? The tariff is 25% of the raw material (steel) portion, alone. The wages and overhead he pays are not affected by the tariff. If his raw material costs represent 60% of his total costs (a pretty high number), then his overall costs (therefore, price) go up 15%. It's a hit, but not as dramatic as suggested. Playing false with the facts makes the argument less persuasive, not more.

  • XM||

    Trump exempted Canada and Mexico (temporary and conditional), so unless you get steel from the EU or something, they should be fine for now.

    I have a gut feeling that the tariffs will be remain on EU and China, and that's really what Trump wanted all along. The tariff threat on Mexico and Canada was leverage for NAFTA negotiations. He'll demand that both countries use 25% more materials from the US, and that number will eventually come down to a more reasonable figure.

    Is there a reason why you can't sell beer inside plastic bottles or paper cartons (like wine)? Does it affect the taste?

  • XM||

    Trump exempted Canada and Mexico (temporary and conditional), so unless you get steel from the EU or something, they should be fine for now.

    I have a gut feeling that the tariffs will be remain on EU and China, and that's really what Trump wanted all along. The tariff threat on Mexico and Canada was leverage for NAFTA negotiations. He'll demand that both countries use 25% more materials from the US, and that number will eventually come down to a more reasonable figure.

    Is there a reason why you can't sell beer inside plastic bottles or paper cartons (like wine)? Does it affect the taste?

  • vek||

    Plastic could be gross if it gets warm, like it is with water that's been in the sun, but I imagine cartons would be okay? I'm a glass bottle kinda guy myself, except when I'm drinking classy stuff like PBR Tall Boys!

  • sharmota4zeb||

    I dislike the higher tariff on general principle, but it will be amusing to watch environmentalists cheer the switch from steel with a growing price tag to wood. Plyscrapers are popular these days. Save the Earth. Cut down trees, but remember to recycle paper.

  • vek||

    I've read several articles about that development in recent years. It does make a fair amount of sense to use wood. Pros and cons to be sure, but wood is an infinitely renewable resource!

  • Kroneborge||

    simple solution of course add tarrif's to imported kegs and other manufactured goods!

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online