Tariffs taking toll on the Taps
Why millennials are not becoming homeowners
by Greg Rodman N ationwide in the U.S. the craft brewing industry continues to explode from about 1,500 craft breweries in 2000 to 7,450 in 2018 and that numbers is growing every day. But independent craft brewers are increasingly concerned about headwinds as President Donald Trump’s tariffs increase prices on everything from aluminum cans to brewing equipment. “There’s really likelihood that fewer brewers can open,” said John Watt, founder of Stout Tanks and Kettles. “These are start-ups that a lot of the time are borrowing money from an uncle or parents. Darn near everything they need to buy is going to be impacted.” The problems started for craft brewers more than a year ago, when Trump imposed a 25 percent tariff on steel and a 10 percent tariff on aluminum in March 2018. Increasing the price, a craft brewer pays for an aluminum can from about 15 to 18 cents to about 19 to 24 depending on how the can is treated. So for a brewery that produces about 7,000 barrels or 800,000 cans of beer a year that can be an increase of canning costs of $16,000 a year, that needs to be passed on to the consumer as prices continue to increase and brewers cannot continue to absorb these costs of doing business. The business environment for craft brewers, particularly those just starting out, is about to get more challenging. The Trump administration is imposing 15 percent tariffs on $112 billion of goods imported from China effective September 1st and that includes brewery equipment.
by Jamie Barrie H omeownershipiseludingmillionsofmillennials for a whole lot of reasons including personal preferences and economic disadvantages, that explain why the homeownership rate for the largest generation in U.S. history is lower than that of their parents and grandparents. Millennials are in less of a rush to get their hands-on house keys, with delayed marriage being one of the major impacts on their low homeownership rate for millennials. Marriage increases one’s likelihood of owning a home by 18 percentage points. Yet millennials are wedding later and less often. In 1960, the average age at which women and men first married was in their early to mid 20s. Today, the median age for a first marriage is closer to 30. To be sure, even without saying, “I do” many young people still want to become homeowners. Unmarried couples accounted for 16 percent of first-time homebuyers in 2017, the highest share on record, according to the National Association of Realtors. Single men and women accounted for a quarter of first-time homebuyers. Today, just 57 percent of first-time homebuyers are married, compared with 75 percent in 1985. Young people are also in no rush to have kids. The share of married households with children, aged 18 to 34, dropped to 25 percent in 2015, from 37 percent in 1990. And having a child increases a person’s chance of owning a house by 6 percentage points, according to researcher at the Urban Institute.
The unprecedented student debt millennials take on also reduces their chances of landing in a home of their own. Researchers at giant mortgage company Freddie Mac recently found that more than half of workers employed in the “essential workforce,” including in fields such as health care, education and law enforcement, have made their housing decisions based on their student debt. If a person’s education debt went from $50,000 to $100,000, their chance of homeownership declined by 15 percentage points, the Urban Institute found. Millennials are also renting for longer in locations that tend to be pricey, making it harder for them to save up for an eventual down payment. Nearly half of households headed by people ages 18 to 34 are rent-burdened, meaning that more than 30 percent of their paycheck goes to their landlord. Althoughindustryexpertspredictthathomeownership rates for millennials to pick up as they get older, the fact that they’re buying homes later than previous generations means, they are building wealth much, much more slowly than previous generations did.
Last year, the U.S. imported $35 million of brewery equipment from China, now that those tariff’s are being passed on to the buyer, in this case craft brewers are spending more and getting less product, or they are having to scale done production. Less production means fewer sales, which means less is spent on products and services that go into making beer which reduces the number of jobs and economic spin off from the industry. Most craft brewing are small operations and unlike the microbrewing counterparts they cannot easily absorb increased costs in production or have the capital to purchase product ahead of the tariff. It is time that the Trump administration looks at who is really being hurt in this trade war with China.
•
•
40
SPOTLIGHT ON BUSINESS MAGAZINE • OCTOBER 2019
41 OCTOBER 2019 • SPOTLIGHT ON BUSINESS MAGAZINE
Made with FlippingBook - professional solution for displaying marketing and sales documents online