Tariff Uncertainty Challenges Growth at Hawaii's Largest Craft Brewery

May 29, 2019

Stainless steel fermentation tanks outside Maui Brewing Company's production facility in Kihei. Tanks are the company's largest expense and have been hit by a 25% tariff on Chinese steel.
Credit Maui Brewing Company

A 25 percent tariff on Chinese-made steel poses “a tremendous challenge” for Maui Brewing Company, according to co-founder and owner Garrett Marrero. Uncertainty surrounding the tariffs has led Hawaii’s largest craft brewer to postpone major capital purchases needed to continue the company’s growth.

Stainless steel fermentation tanks, previously imported from China, represent Maui Brewing’s largest single expense. The tariffs have also increased construction costs, hampering physical expansion as well.

According to Marrero, his company was able to absorb the cost of the original 10 percent tariff on the vital steel tanks. But the math changed once the import tax was raised to 25 percent earlier this month.

“You’re usually looking at a minimum of two, probably more like four to six months before you receive that equipment. When the tariff is at 10 but could potentially be 25…you just can’t be confident in when that tank will hit the port and under what tariff scheme.”

There is no simple solution for companies whose supply chains are dependent on Chinese imports. Marrero says there are not enough U.S. manufacturers who can meet the existing demand for tanks.

“Now there is this mad dash to suppliers. They’re rushing to get stuff out and the quality suffers. If you don’t get it from China, it’s not reasonable to automatically think ‘Oh I’ll just get it in the U.S.’”

The affordability problem is further compounded for Marrero because U.S. manufacturers have been raising prices in response to increased demand for their products, in line with basic economic theory.

In response, Maui Brewing has put off large purchases and begun exploring alternatives to stainless steel tanks. The company is also pursuing investments that can make its existing brewing equipment more efficient, still allowing production to increase without adding tanks.

Automating some functions is a big part of that, helping to reduce waste and increase labor efficiency. Marrero said that the automation will not threaten any existing jobs and his company remains committed to Hawaii.