When President Donald Trump first proposed import tariffs on aluminum and steel, the American Keg Co. was cautious but hopeful it might benefit. The company, which employed some 30 people at the time, is a domestic manufacturer, making kegs out of American-made steel.
Today, activity at the company’s manufacturing facility has cooled off and it’s staff has been slashed by a third to close to 20 people. Production has slowed from three shifts making about 275 kegs a day to between one-and-a-half and two shifts producing 175 kegs daily. As demand for domestic steel has increased in the wake of the tariffs, so too have prices — and there’s only so much cost the company can pass on to its customer base of small craft brewers and wineries.
“We had high hopes it was going to impact our business in a good way,” says Kellby Ochs, production manager at the Pottstown, Pennsylvania-based company. “That’s not the case. Almost immediately the price of steel shot up through the roof. It had a pretty dramatic effect on our company.”
The other rub — there’s an import duty on steel, but not on imported steel kegs themselves. That means Chinese-made half-kegs shipped into the U.S. are still about $20 a piece cheaper than those American Keg is producing.
“We just slowly saw the price of domestic go up and up, so we had to, in turn, raise our pricing to keep our margins up a little bit. And while this is happening, there’s still zero dollar import tariff on finished import kegs coming into the country. So it was just widening the gap between our price and theirs,” said Brian Luzzi, American Keg’s director of sales and marketing.
Companies like American Keg have been suffering the unintended consequences of Trump’s tariffs, and earlier this week business groups headed to Washington, D.C., to warn the U.S. trade representative that proposed new tariffs on China will further drive up costs on U.S. companies and force Americans to pay more for everything from cradles to coffins.
“USTRs proposed tariffs on an additional $200 billion of Chinese imports dramatically expands the harm to American consumers, workers, businesses, and the economy,” the U.S. Chamber of Commerce said in written testimony.
While most businesses argued that tariffs hurt American businesses and lead to higher costs, a few companies praised the tariffs or asked that they be extended to other products.
American Keg was one of them.
CEO Paul Czachor was in Washington on Wednesday to testify in support of the additional $200 billion being proposed in tariffs on specific goods from China. He said the list of products includes an important item — finished steel kegs — the same ones that are being imported and taking market share from his company.
Czachor said stainless steel prices for the materials he’s using have increased by around 21 percent since the fourth quarter of 2017, when 232 tariffs were being discussed.
“We lost a lot of customers who can’t pay these high prices. We have to try to stay afloat waiting for tariffs,” Czachor said. “Our overall opinion is that the 232 tariffs were probably justified but our position is that the administration has some unfinished business. They should look downstream at companies like ours.”
American Keg changed course several years ago when it decided to stop importing kegs from overseas and start manufacturing them stateside, also changing its name in the process to reflect domestic production. Ochs was the second hire on the production side five years ago, and he said laying off good men and women he helped to bring on the team hit home.
“I hired every single one of our employees and I had to lay off about a third of them off. We used to run three shifts, this place used to be packed all the time. People had decent jobs. People had an income that they could count on,” he said. “One day you’re giving somebody a chance at employment, and the next day you’re telling them they don’t have a job anymore. It is personal.”
Now the company is in wait-and-see mode. Sales and marketing director Luzzi, who supported Trump in the election, said he understands what the president was trying to do with tariffs and American manufacturing and he still supports Trump.
“I have to see how it shakes out. I may change my mind,” he said. “But again, I do understand what he was trying to do. We’re just caught up in the middle of it.”
The White House did not immediately respond to a request for comment.