Trump tariffs and keg duties leave Tampa Bay craft brewers in panic

A keg display at the new Cold Storage Craft Brewery. The local micro-brewery has brewed up its first batch of beer on Florida Avenue in an old Kash ‘N Karry grocery store. (Times files)
A keg display at the new Cold Storage Craft Brewery. The local micro-brewery has brewed up its first batch of beer on Florida Avenue in an old Kash ‘N Karry grocery store. (Times files)
Published May 31, 2019

ST. PETERSBURG — By 7 p.m. on Friday night, Tom Williams said there wouldn't be a single beer keg left at his leasing business.

Williams' local rent-to-own keg company services around 400 microbreweries — and they all want kegs now.

That's because the next batch of kegs will be more expensive, but Williams is not sure by how much. A small brewers' decision to hold off on setting up a leasing contract could mean the difference of hundreds of dollars. It's not that Williams is bad at planning, it's that the ongoing U.S. and China trade dispute has made the craft beer industry more volatile than most small-scale brewers ever anticipated.

"There's not enough coffee in the world this week for us to keep up with the kegs that will be leaving the warehouse," said Williams, CEO of St. Pete company KegConnect.

Most craft brewers rely on affordable Chinese kegs, which were already slapped with a 25 percent tariff at the start of May. Brewers knew that tariff was coming — it was a scheduled jump from a 10 percent steel tariff instated by President Donald Trump last year. What they didn't expect was the addition of new duties on kegs that the U.S. Department of Commerce tacked on this week.

"There's been a lot of paranoia in the market," said Williams, who also owns the St. Pete Brewing Company. "It goes: denial, paranoia, and then reality. It's been an absolutely crazy last month. But the last week? Tumultuous."

Trouble brewing? Trump's tariffs worry Florida's craft beer makers

On Wednesday, the Commerce Department announced China was dumping kegs in the market at a margin of 80 percent, undercutting fair prices. Keg orders from China will now face cash duties up to about 67 percent, according to documents from the Department of Commerce.

The sole U.S. company making and selling kegs, Pennsylvania's American Keg, filed a petition with the department to investigate the dumping. American Keg also accused German and Mexican companies of doing the same.

"Antidumping and countervailing duty laws provide American businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of the unfair pricing of imports into the United States," the federal government wrote in a news release.

The Commerce Department says exporters from Germany undercut prices by about 9 percent; a Mexican exporter is accused of undercutting prices by nearly 19 percent. For now the findings are "preliminary" and Commerce officials will come to a "final determination" in a few months.

Metals are already a volatile market without the added duty anxieties, according to University of South Florida economics professor Brad Kamp.

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"The main problem for brewers is the vast majority of their business is done through aluminum cans and kegs," Kamp said. "It's an important cost, and most companies are small ... and they're not going to be able to forecast what the costs are going to be."

The result, according to Big Storm Brewing owner L.J. Govoni, is a "Wild West of pricing."

The addition of the duties caught businesses by surprise, Govoni said. And there are limited options for suppliers outside of China.

European kegs are an option, but they tend to be a top-of-the-line product that's cost-prohibitive for most small companies and microbrewers. Local brewers said they were aware of only one factory in Mexico making kegs. American Keg says on its website it can make only 300 kegs per day and ramps up its inventory with imported kegs. With one American company, there's not enough kegs available to support local craft beer scenes around the country.

"Everybody would prefer to buy American kegs, would prefer to buy European kegs," Govoni said. "Everyone settles for Chinese kegs because it's what they can afford."

By his own calculations, Govoni expects the kegs he purchases to go from $90 per unit to $112 or $120 per unit.

When kegs arrive at ports of entry from China and the other countries, U.S. Customs and Border Protection will collect cash deposits from those importing them.

Williams said he's heard second-hand information on how much that will be: best case, 17 percent and worse case, nearly 70 percent. He won't know for sure until he goes to the Port of Tampa Bay next week to pick up the order he has coming in from China.

The U.S. Department of Commerce did not immediately respond to a reporter's request to explain the type of duty charges importers can expect on Chinese kegs.

If it's on the higher end like Williams fears, he will have to pass the cost down to his clients who will pass it down to their customers. For now, he's doing his best to help small brewers through the panic.

"These guys just want to make beer, pay their bills and raise their kids," he said. "Rinse, and repeat."

Contact Sara DiNatale at Follow @sara_dinatale.