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America’s last actual steel keg maker (American Keg) lays off a third of its workers, cites Trump tariffs

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Everyone in the beer industry is barking about aluminum tariffs. Yes, they suck most convincingly (agreed), but let’s not forget about the increasing suckdom of all these tariffs — solar panels, washing machines (WTF?) and steel. Both steel and aluminum tariffs go into effect this Friday, March 23, but the ripple effects are already being felt in the American beer sector. America’s last standing stainless steel beer keg maker (American Keg) is laying off about a third of its employees.

In a fun twist, American Keg doesn’t even use foreign steel. It sources domestic steel for its kegs, but American steel makers have raised prices in anticipation of the tariffs — thus fucking over folks like American Keg who run on pretty narrow margins. From the Wall Street Journal:

Since it began manufacturing kegs in 2015, the Pottstown, Pennsylvania-based American Keg has operated on a narrow margin. The 15.5-gallon keg is a staple in bars and fraternities, and the American-made version currently retails for $115 while a German or Chinese keg costs about $95. American Keg has survived by selling to craft breweries that want to support U.S. workers and American steel, even at a small premium. “But there’s a limit to what people would pay to have an American product,” says CEO Paul Czachor.

Tariffs of 25 percent on foreign steel (10 percent on foreign aluminum) are jacking up costs across the board (futures prices for U.S. Midwest domestic hot-rolled coil steel are going for $875 per short ton, up 6 percent so far in March, according to Barron’s; that’s after nearly a 13 percent jump in February). So while Trump and friends attempt to protect American steel jobs, they also put steel-dependent American business sectors in a volatile situation. For American Keg, that means 10 out of its 30 employees have to go find new jobs. Back to the WSJ:

“I had to hold back tears, and it was kind of embarrassing,” Mr. [Mark] Foster [55, among those who lost a job] told us in an interview this week. “I took it hard. I really took it hard. American Keg was my ticket. I was making my own money. It was a place where I could get my independence. Now that’s blown. It’s just a real hardship because where before, the money was coming in, and there was more food in the refrigerator, now my wife and I are trying to get the government to give us food stamps until work picks up. Why would you do that, Mr. President, when we would rather work than be on welfare?”

Brutal.

Reader Interactions

Comments

  1. Todd Brown says

    Mexico and Canada are the largest exporter of both metals to the US and would be exempt from the tariffs.

    So that mean that it should effect them at all. The fact is they ran there business into the ground.

  2. Art Whitaker says

    This makes no economic sense. If tariffs force the price of the imported steel up, it would make this company more competitive, not less. Steel prices have been rising for awhile now, because the price of scrap has risen dramatically due to the strong economic conditions here and increasingly around the globe. Anyone can look at the pricing on the AMM tables to see raw material prices have been increasing. By the way, this is nothing new. Administrations, both Republican and Democrat have imposed tariffs on different types of metal products for years. President Obama’s administration imposed an over 500% tariff on Chinese coil in 2016 and over a 100 % tariff on grating(the product I sell) This company obviously had other problems that led to their situation. I also work at a small brewery in addition to my main job of selling steel(over 30 years) We, like many others have been switching to the disposable kegs. Tariffs on metal products are a common occurrence. This is news because the media wants it to be news. The European Union has imposed tariffs on imported steel and also accesses a VAT(Value Added Tax).

  3. Darths Garden says

    Maybe it has to do with breweries buying the cheapest kegs available i.e. Germany and China, or Canada were they are subsidized or don’t have the same environmental guidelines. Paris treaty act everyone was bent out of shape over because Trump pulled out exempted China. Kinda hard to compete when playing field isn’t even close If brewers cared they would spend the extra $25 a keg to support American jobs. I really blame the keg manufacturing company, there have been well over 2000 brewery openings since the began business, that amounts to 10,000 kegs plus. If the can provide a product, and service to an industry with double digits growth. Then I blame the management of the company. Steel has been subsidized in other countries for years to the detriment of the steel industry here. It’s not tariffs it’s bad business.

  6. JD Yoders says

    Could it be that American manufacturers have gotten too used to sub-cost Chinese-produced steel? Whether you think it’s “getting fucked over” or not that steel prices have gone up, those are, at least, ACTUAL MARKET PRICES that U.S. steelmakers are charging based on what buyers are paying. For decades, U.S. steelmakers have seen their costs of production increase while countries like China SUBSIDIZED their steelmakers so they could overproduce and dump products in this country and others below cost. Boasteel and WISCO’s prices were NEVER market prices but their overproduction and flooding of the U.S. market also brought down prices of the American steelmakers whose products American Keg bought.

    Now, thanks to the tariffs, if China’s central government sets export prices lower than the cost of production the tariffs will still be there to insure that no country can compete unfairly just to achieve the communist ideal of 100% employment. Sorry, American Keg, your free ride is over.

    • Rachel Eastwood says

      Cost of production in the US is higher because of safety and environmental concerns. Which the current administration is okay with stopping, so prices may be lower soon, but we’ll all be dead so we can’t drink

    • JD Yoders says

      So, we should buy Chinese steel because the cost of production is lower and it doesn’t matter if the world’s largest polluter pollutes only ITS air? What was that, again, about us all being dead soon?

    • JD Yoders says

      Oh boy, here comes econ 101. There is no level playing field for a market-based product like U.S. Steel or Nucor’s keg-grade steel when THAT SAME PRODUCT is being produced below cost and whose import into the US market is then also subsidized by that same government. Free markets depend on all producers, you know, playing by the same rules.

      U.S. Steel and Nucor have employees they have to pay and if the break-even price for their steel isn’t enough to cover its cost of production then they can’t sell it any lower. But if WISCO or Baosteel sell their overproduced steel at below cost over here – to the benefit of manufacturers like American Keg – then they don’t go out of business like Nucor or U.S. Steel would, they just get a forgiven government loan or, worse, direct subsidies from Beijing for doing the communist government a solid by not laying off workers. China, in this way, is more of a corporation than a country. There is NO government entity in the U.S. that has that ability to bail out steel companies. It’s why there are about 1/4 of the steel companies in operation in the US today as there were when I was a kid.

      The free market NEEDS prices to actually relate to the cost of production for them to work right. Prices are just information. They tell buyers who else is paying for what and they tell producers what they can realistically get. You destroy the information function of prices when a government, like China’s, is allowed to subsidize products to achieve maximum employment.

      I seriously cannot believe I need to explain shit like this but, well, there you go.

    • Jeff Porn says

      I should also clarify that I’m in no way defending Trump or his tariffs. Just asking if there is more going on here than just that. The one time use kegs make way more sense for breweries financially and logistically.

    • Jeff Porn says

      Bob Sylvester Perfect example of my point right there. It makes so much more sense on all levels. I just started kegging and at first I made the mistake of buying stainless kegs and quickly realized the headache they cause. Now I use the one time use. So much easier and cost effective.

    • Anthony Amsden says

      What happens when a brewery does more than 10 batches of beer? They are not cost effective.

      $14 one use kegs used and throw out over 1 batch = $140.

      $115 stainless keg, even with cleaners, way more cost effective.

      A keg cleaner can be built in a brewery with everyday brewing equipment if cost on a line is a worry.

      Just doesnt make sense to me.

    • Jeff Porn says

      Anthony Amsden $14 is based off a single pallet. The more you buy the cheaper they get. You can get them down under $10 easily. Add in the cost of cleaner, staff, time and cost to go pick up the kegs. It’s easy to justify.

    • JD Yoders says

      What it comes down to is what kind of world do you really want to support and what kind of corporate responsibility example do you want to set? If China, the world’s largest polluter, pumping out more steel below cost to give your company a low-price on reusable kegs is okay with you, then that’s the example you set. You can’t be for modern sanitary and recyclability standards for the U.S. while ignoring the mockery of clean air that is the steel-producing sections of China.

    • Kevin Watkins says

      Anthony Amsden More to keg costs than just purchasing. Maintenance for when a keg gets dropped off the back of a truck, or the college kids screw up the bung. Then there are all those kegs that end up as boil pots in some home brewers basement. Kegs can be costly. Most distributors charge 40-60 bucks for a deposit on a keg, that is an added burden on cash flow for pubs. one time use make great sense once you add all the handling fees that go into kegs.

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