Brewing problem: U.S. beer drinkers pay more as aluminum tariffs hit cans
Wisconsin craft brewer puts off hiring staff as cost of imported goods rise amid trade dispute
When the CEO of Octopi Brewing gazes up at the enormous stack of aluminum beer cans in his Wisconsin brewery, Isaac Showaki sees potential for business growth.
But that stack is rapidly turning into an enormous headache thanks to aluminum tariffs.
"We have all these big plans to invest or hire more people. But when we get these extra costs, we just can't do it," said Showaki.
U.S. President Donald Trump's tariffs on foreign steel and aluminum, intended to protect American producers, are raising prices for a swath of Wisconsin-made goods that use metal for product containers, from beer to green beans.
Octopi Brewing is one example of American manufacturers caught in the squeeze.
The brewery set up shop in Waunakee, Wis., three years ago. Riding the popularity of craft beer, it has grown into one of the largest craft breweries in the state with 32 employees.
But now, Octopi Brewing is struggling to adjust to increased operating costs after its U.S. supplier of aluminum cans hiked prices by 15 per cent, blaming the tariffs.
"It's terrible. It's hitting our bottom-line … we probably could have hired almost two people full-time," Showaki said.
The company was able to absorb some increases, but this month, the brewery opted to pass the extra costs to customers.
That means American beer-drinkers will feel the pinch when they purchase their favourite Wisconsin-brewed six pack, paying 50 cents to a $1 extra, Showaki says.
It will cost people jobs [and] it's going to cost them in their pocketbook.- Wisconsin Sen. Ron Johnson
It makes him question whether aluminum tariffs are, actually making America great again.
"I don't know if there's a ploy to shelter domestic manufacturing and lessen competition from abroad, but what's happening is it's just increasing prices — on a lot of things," Showaki said.
'I don't think anybody wins a trade war'
Global trade politics are hitting home across the United States, not only in the price of beer.
In Wisconsin, farmers and manufacturers are bracing for the impact of Canadian tariffs on cheese, yogurt, pizza and other food products made in the state.
Trump narrowly won Wisconsin in the last presidential election, but his combative rhetoric toward Canada and other countries isn't finding favour with Republican Sen. Ron Johnson.
The Wisconsin senator says there are few Republicans in the U.S. Senate who support Trump's "New York-style" negotiating tactics or his protectionist stance on trade.
"I don't agree with the president. I don't think anybody wins a trade war," Johnson said.
"The administration has talked about some short-term pain for long-term gain … but there's immediate and permanent damage being done right now and the clock is ticking."
'Fancy name for a tax'
Johnson calls Canada a "friend and ally," and for good reason. Canada is the top destination for Wisconsin's international exports and almost 137,000 jobs in Wisconsin depend on trade with Canada, according to government of Canada numbers.
The growing trade dispute puts that relationship in jeopardy, and Johnson acknowledges retaliatory tariffs by Canada on yogurt, for example, are aimed directly at his state.
"Whether it's yogurt, Harley Davidson motorcycles, ginseng, cranberries, Wisconsin industries and culture have been targeted by this, which is why I want this episode to pass as quickly as possible," he said.
Johnson met with Trump this week, and expressed concerns about the impact of tariffs. He says he also met with Canada's Minister of Foreign Affairs Chrystia Freeland.
He suggested U.S. Congress is keen to conclude a NAFTA deal quickly, because tariffs are harming American consumers.
"A tariff is just a fancy name for a tax on the products you consume. It doesn't do anybody any good to have governments raising taxes on products that are coming into their countries," said Johnson.
"It will cost people jobs [and] it's going to cost them in their pocketbook."
Headaches at the border
Back at Octopi Brewing, Showaki says even products not hit by tariffs are being impacted by uncertainties at the border.
Octopi produces beers flavoured with fruit such as plum, raspberry, or peach and buys the fruit concentrate from an Ontario-based supplier.
Two weeks ago, the company told Showaki it was no longer shipping directly to U.S. customers because of the "potential for border issues due to NAFTA negotiations and political arm-twisting from your side and our side."
Showaki is still able to buy the Canadian-made fruit concentrate, but through a U.S. broker at higher cost.
"Right now, it's relatively easy to move product from one place to another. [The Canadian supplier is] asking, 'What happens if it's not? What happens if there's extra customs and costs?' They don't want the extra headache."
In the Octopi taproom, where locals enjoy a pint at the end of a work day, customer David Ley says the modest increase in the cost of beer won't stop him from supporting local breweries.
But Ley believes it will cost Republicans votes in the upcoming U.S. midterm elections.
"I hope other people around me realize they're paying more for beer, paying more for groceries because of the tariffs. And I hope the Republican party will be held responsible."
- This article originally misstated the number of employees at Octopi Brewing. The brewery has 32 employees.Jul 15, 2018 12:43 PM ET