Bottles, cans and beans – hurt by tariffs

CAMBRIDGE – In an event that was broadcast live on Facebook, several business and food products leaders spoke at “Tariffs Hurt the Heartland.” They met at a craft distillery in Cambridge recently, outlining how tariffs from ongoing trade wars are hurting Wisconsin businesses, farmers and consumers.

Their figures show that Wisconsin taxpayers have already paid $828 million in additional tariffs – what they called “taxes” – paid for by Wisconsin families, farmers, businesses, workers and communities. The data they cited showed Wisconsin businesses paid $84 million in October alone and that Wisconsin exports which are subject to retaliatory tariffs dropped 20 percent in 2019, compared to 2017 figures.

New data they released during the Dec. 9 press conference showed that the trade wars and ongoing tariffs could cost 37,300 jobs in Wisconsin.

Since the trade wars began, the group said, Wisconsin exports have faced $312 million in new retaliatory tariffs from our trading partners, including $22 million in October, a situation that makes Wisconsin exports less competitive.

Angela Hofmann, co-executive director of Farmers for Free Trade, said that distillers of spirits have been “at the tip of the spear” in terms of being damaged by ongoing trade wars.

Neither farmers nor distillers do all that well with the added expense of a tariff and sometimes its comes down to things one would never think of like the embossed, specialty glass bottles that craft spirits go into or the lining of the steel cans that vegetables are preserved in.

Tom Maas, a Shawano County native who grew up on a farm near Tilleda, said he learned the distilling business from his dad – who built 11 distilleries in eight different countries. After decades in the business, Tom set about creating his own family distillery with the idea of buying the grain for their products only from Wisconsin farmers. “We want each batch to be the best it can be,” he added.

Four-and-a-half years ago they bought the land on which they built the Dancing Goat Distillery, just west of the Dane County village of Cambridge. The road into it passes through vineyards of a neighboring winery and a rural housing subdivision.

It took about a year to get federal and state permits and set up their new distillery and several family members are involved, including his nephew Jay, who manages the Dancing Goat. He explained that they broke ground for their facility in 2014. When they make their whisky and gin, they use only grain from Wisconsin farmers. “When farmers do well, we do well,” Tom said.

Jay explained that the custom, embossed bottles into which they put their craft products are made abroad. “We can’t find a similar manufacturer here to make them,” he said, adding that their small company has continued to buy them from the overseas maker and just “eat the cost of the tariffs.”

 Lily Cunniff, with the Distilled Spirits Council in Washington, D.C., said the trade disputes with Europe, Turkey and China have all hurt makers of distilled spirits. Wisconsin has roughly 30 craft distillers and those businesses, she said, are experiencing a renaissance as consumers gravitate to drink what is produced in small batches – often from locally sourced grain.

Total U.S. exports of distilled products are down 15 percent since the trade war began, she said, and whiskey is down even more.

Tariffs curtail the supply chain, in the case of Dancing Goat’s bottles and have also impaired sales. They used to sell their gin and whiskey to the United Kingdom and now they cannot, said Jay Maas.

“We don’t know what’s going to happen and we can’t plan,” Maas added.

Cans and Beans

Jason Culotta is president of the Midwest Food Products Association, a group of businesses that produces canned and frozen food – mostly vegetables. It has members in Wisconsin, Minnesota and Illinois. He said that as Americans’ taste for canned vegetables has declined, the export market has become increasingly important to their “high-volume, low-margin” business.

When the steel tariffs were put in place in 2018, it raised the cost of each vegetable can by about two cents. That’s real money when considering there are 27 billion cans used for food preservation in the United States. “It has had a really negative effect on our business,” Culotta said.

The so-called tin-plate coating that is necessary for the inside of food cans is only produced by four U.S. companies and two of them have now dialed back their production. “The U.S. canning industry needs 2.1 million tons of tin plate and those U.S. companies can only produce 1.2 million tons, so we need imported steel.”

Even if all the U.S. producers were cranking out the tin plate at maximum capacity, the industry would still need imported product.

Wisconsin is the nation’s top producer of green (snap) beans and near the top of sweet corn production. The Wisconsin canning industry tallies a $375-million payroll to its employees.

Foods that might go into those cans have also been hit by tariffs, Culotta said. Chippewa Valley Bean in northwest Wisconsin exports the vast majority of its product and 60 percent of that market was in Europe. Now their kidney beans are being hit with 25 percent retaliatory tariffs in the wake of the Airbus-Boeing trade skirmish. “They had expansion plans but they have had to delay them,” Culotta said. “The irony there is that their big bean competitor is China.”

The current trade skirmishes fly in the face of decades of public policy, Culotta said, where there was nearly unanimous agreement that trade was good.

Students at University

Maria Muniagurria, an economist with the University of Wisconsin-Madison, noted that China has become critically important for so many parts of the U.S. economy. Despite the fact that the two largest economies in the world are geopolitical rivals, she doesn’t believe that a trade war is the best way to remedy the differences the two nations have.

The ongoing trade war, she said, is “doing tremendous harm to our economy. There are valid things to change in our relationship with China, but there are better ways to do it.”

She noted another aspect of international trade wars – foreign students who come to the United States for higher education, which helps support U.S. universities. China has 360,000 students who study in the United States and Wisconsin has 10 percent of those, mostly in Madison, the economist said.

“They pay a very large amount of tuition and now the Chinese ministry of education is taking a really hard look at allowing students to come to the United States,” she said. “Some departments in the University derive a lot of income from that.”

Jim Boullion, with Renew Wisconsin, said the tariffs have become very detrimental to ongoing large-scale solar projects in the state. The price of solar panels has gone up 40 percent and the cost of the steel systems to hold them in place has also risen. Jobs are now being affected by large-scale solar projects that don’t go forward.

Preserving markets

Muniagurria said one more problem of trade wars is that there is a short-run effect but also a concern for the long run. Soybean growers, who can’t sell their product to China now, may have a larger concern about “who’s taking our place?” she said.

Once that former trading partner starts building relationships with others “we may never be able to go back to those relationships,” she said.

While she was on sabbatical in Mexico, Muniagurria found that the uncertainty of the trade war had saturated the Mexican economy and introduced a lot of uncertainty. Imposing tariffs on steel from Argentina and Brazil is a completely wrong rationale, she said. “What’s the point of making enemies? I don’t think we import that much steel from Argentina. It adds uncertainty to these countries’ economies without any benefit to us.”

As with the specialty glass bottles and the tin-plate food can coating, supply chains are being disrupted with the current trade wars.