Steel Beer Keg Company Pushes For Tariffs On China: 'We Need A Level Playing Field'
MICHEL MARTIN, HOST:
We have more now from our recent reporting trip to Pennsylvania. Now, Pennsylvania was supposed to have been part of a so-called blue wall in 2016. That was the stretch of mainly Midwestern states like Michigan and Wisconsin the Democrats were counting on to help them keep control of the White House. All of those states, of course, wound up going for President Trump. And a big part of Trump's pitch focused on trade. Then-candidate Trump said he was the one who would fight unfair trade practices, especially by China.
Fast forward two years, and President Trump has imposed a series of tariffs against China and other countries on all sorts of goods. Some analysts are calling it a full-blown trade war. Others are saying it's not quite that yet. Some companies are saying they are benefiting and have been able to ramp up production since tariffs were imposed. And other companies are saying it's just too complicated and unpredictable to tell what effect the tariffs are having yet.
So we decided to visit a couple of businesses in Pennsylvania to see how the tariffs are affecting them in advance of the election. Our first stop was American Keg. They say they are the only company in the U.S. still making stainless steel kegs using only American steel. And even though we got to the factory in Pottstown, Pa., after sundown, the plant was still humming.
(SOUNBITE OF MACHINERY)
MARTIN: There were different machines to straighten, bend, mold and weld the steel into kegs of different sizes. Workers were still on the job at nearly every one with a production manager roaming between them. And when I sat down with CEO Paul Czachor in a conference room just off the factory floor, I reminded him about a conversation we had had just a few months ago.
Initially, when we spoke, it was right after the president's steel and aluminum tariffs were imposed. And then you were, as I recall, all for it.
PAUL CZACHOR: I think the words we probably used at that point was cautiously optimistic.
MARTIN: And then what happened after that? I understand that there were layoffs. Were the two related?
CZACHOR: So when we first spoke, it was right around the time that the administration was looking at tariffs on steel. We weren't sure if that was going to help or hurt and where it was all going. It did turn out to be initially bad for us in the beginning. And we did incur some layoffs in February after the - after those tariffs were in place, primarily because our raw material costs went up. And there was no tariffs on imported kegs. So the price differential between the product we're making and an import keg, which would be our competition from other countries, got to be too large for customers in the U.S. to absorb that.
MARTIN: Let me understand the math here. So the price of your raw materials definitely went up.
MARTIN: And then your customers weren't willing to pay.
CZACHOR: Pay that differential. So we had suffered some sales losses. Basically, less customers willing to buy American-made kegs. So we had to reduce our workforce.
MARTIN: Can I just ask what that was like for you? Did you, like, come in on the breakroom at lunch or something, and what - how did that actually happen?
CZACHOR: No. We actually called our employees in this very same room we're in. And we sat everyone down and told them, unfortunately, we have some bad news. And we laid out all the reasons and explained it to them. So it was difficult, but it wasn't something we were going to send them a letter on. We wanted to talk to them one-on-one.
MARTIN: It's hard.
MARTIN: That's hard.
MARTIN: Well, if you laid off - what? - about a third of your at the time?
CZACHOR: At the time, yes.
MARTIN: And what about since then?
CZACHOR: We have not been able to get back to that initial number of employees, but we have hired a few employees back.
MARTIN: So the situation you described is exactly what economists and some of the other analysts were predicting when these tariffs were imposed. They said it's going to be enormously disruptive. It's going to have consequences that people don't predict, that this just isn't the way to handle it. And what do you say about that now?
CZACHOR: Well, again, I think we'll still use the words cautiously optimistic. We do give credit to the administration for trying to solve this. And as you just stated, sometimes there's unintended consequences. So, again, we feel that if we have tariffs in place on imported kegs - and we're not asking for something that's not fair. We're talking about just level the playing field. We'll put our engineers and production employees against anyone in the world. We just need a level playing field.
MARTIN: Would it be accurate to say that the tariffs on Chinese steel products and aluminum products is something that you lobbied for - that is something you lobbied for?
CZACHOR: We did not lobby for the tariffs on steel and aluminium. We lobbied for the USTR tariffs that they put in place. The first one was a $50 billion round. And we went down, testified for that and were unsuccessful in having stainless steel kegs added to the list. But the second time we went down was when the $200 billion of tariffs were talked about. We went down to lobby to have kegs added - or maintained because it was already on the list. And at this point, it is on the list. It's 10 percent as of now, and it goes to 25 percent as of January 1.
MARTIN: Do you think that will help your business?
MARTIN: Can you help us a little bit with the math?
CZACHOR: Just to begin with, again, we need a level playing field. The 25 percent does not totally level the playing field, but it is a step in the right direction for us. So what that means is if you purchase an import keg, you now pay 25 percent tariff on there. So it will close the gap between what we pay in raw materials and the cost to put a keg together in the United States versus an import keg. So it will definitely lead to additional business for us.
MARTIN: Are you still glad you got into this business?
CZACHOR: Well, I worry. But yes, we're glad. And we want to succeed. I think our community is counting on us, and our employees are counting on us.
MARTIN: That was Paul Czachor, CEO of American Keg in Pottstown, Pa. Transcript provided by NPR, Copyright NPR.