Lyra
US Consumers Coming to Canada?

What do Trump's Tariffs Mean for Bike Prices?

Words Cam McRae
Date Sep 26, 2018

If you live south of 49 and you are considering buying a bike, you might want to move your schedule ahead. The Trump administration has added 10% to the price of bikes and associated products imported into the U.S. from China beginning Sept. 24th. That means products in transit, ordered long ago, will face the tariff if they arrive on or after that date. 

Tariffs are sometimes employed to protect a domestic industry, but since over 90% of bikes imported to the U.S. come from China, this is not the case. These tariffs are being used as leverage to combat what the Whitehouse feels are unfair trade practices: in particular what Washington sees as the theft of intellectual property as a condition of doing business in China. Lowering the trade deficit is another goal but since tariffs are being applied indiscriminately, rather than only to markets where U.S. companies could gain an advantage, it seems this is mostly about IP.


After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts. These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy. - From President Trump's statement on the tariffs

The tariff itself sounds simple. It applies to everything bike-related with China as a country of origin, except helmets, complete lights and some other safety equipment. This is where things start to get muddy, but there's a whole lot of mud to come. Light & Motion purchases light components from China and then assembles these parts into complete units in the U.S. The company employs 12 people on the manufacturing side. L&M competitors who purchase completed units from China won't be paying any extra duties but because L&M assembles in the U.S. using tariffed parts they are subject to the 10%. The company is already looking to move production to Malaysia because raising prices is not an option.

But really, we're here to talk about bikes. Consumers and retailers alike would appreciate some clarity, and I got some. Well from one company that is... Some company representatives were happy to speak off the record but most said they are unable to say how the tariffs will affect their pricing. There are too many variables and unknowns at this point. Only Ibis was able to say that, for the near term, pricing wouldn't be affected. A representative from a one company asked that I not mention his firm's name at all in this article. The industry is not quite panicking yet, but there are jitters.

Lyra

The CMA CGM Lyra container ship, pictured here in Vancouver harbour, is one of the largest in the world. It is 363 metres (1190') in length and it has a beam of 45.6 metres (150'). That wee toy to the left in the foreground is larger than a British Columbia ferry. Photo - Cam McRae

The biggest problem is that it's not yet possible to get a straight answer from U.S. Customs representatives on how and when the tariffs will apply. Higher costs are a certainty but how much higher is not, so let's add some market turmoil for good measure. 

A VP from one company, with 30 years in the game, laid out the possible ways the tariffs could be applied. He described three buckets, each of which represents a possible interpretation by U.S. Customs:

Bucket 1: Frame manufactured outside of China and assembled outside of China. This may seem simple but it seems that virtually all bikes have some Chinese-made components. It seems likely that, if these new tariffs apply at all, they will apply only to parts with China as country of origin. 

Bucket 2: Frame manufactured in China but bicycle assembled in Taiwan, Malaysia, Vietnam or even the U.S. It's possible that the COO will be determined by the COO of the frame, despite the value of parts and assembly that originate outside of China. This could be the case even if, for example, the frame is worth $200 and the non-Chinese parts are valued at $700. This has companies who either use or own Chinese factories to build frame scrambling. 

Bucket 3: A Chinese made frame that is assembled in China. It seems likely that these bikes will have tariffs applied to 100% of the value but it could be only that percentage of components that have a Chinese COO.

The VP told me that companies are already moving production out of China and into neighbouring states like Taiwan, Malaysia, Vietnam and even Myanmar. He even told me that factories are being built as we speak. Vietnam is a particularly attractive location because existing treaties with the EU stipulate no tariffs.

 In fact there are currently tariffs in place for most Asian-made bikes heading to the U.S. That's right. Americans are already paying duties on bikes from most countries and have been for some time. It's likely the bike you are currently riding was subject to an 11% duty. If it has fat tires that is. For some reason bikes that are lighter or have skinnier tires are only subject to a 5.5% tariff. The rationale seems to be lost to history but at this point it's clearly arbitrary and ridiculous. 

That's simple

Giving this a read should clear things up for you! The new tariffs are over and above the current numbers pushing duties for bikes entering the U.S. with China as COO to 15.5% for road bikes and 21% for MTBs.*

*TBF that's an oversimplification of the distinction

There was speculation that Chinese bikes shipped to the U.S. would be penalized in the export market as well, but this appears to be a bright spot. I was informed by my friend the VP that duties would be reimbursed for bikes shipped from the U.S. to other nations, meaning French consumers could pay less than their American counterparts for products from American companies.* That'll make some Trump supporters choke on their freedom fries. 

*We Canadians will continue to enjoy American bikes inflated only by our poor U.S. exchange rate

It will likely take a few months for the dust to settle but it's likely, since experts say there are no winners in trade wars, we'll all be paying more to feed our MTB habit. 

Comments

Brigham_Rupp
+7 AJ Barlas Todd Hellinga Mbcracken Carlos Matutes Mammal IslandLife Jerry Willows
Brigham_Rupp  - Sept. 26, 2018, 9:53 a.m.

Thanks for putting this together. I don't have my head fully wrapped around this specific issue, but as a citizen of the USA I'd like to apologize to my MTB brothers and sisters in other nations for whatever negative impact our politics has on your world. Hardly a day goes by that I don't read the news and marvel, how on earth did we put that man in the office of President? It's not a partisan thing for me, I'm actually quite conservative. It's more about just basic moral decency and competency. I've always been proud of my country, but that has become difficult in recent years. Luckily the President only has so much power and hopefully we'll see this nasty real-time experiment end soon. Sorry for getting NBR and political, but had to get that off my chest! We're not all crazy down here. Thanks for letting us come play on your trails, and you're all welcome in Phoenix when it gets too dark, damp, and cold. Hopefully that freedom never changes.

Reply

cam@nsmb.com
+1 AJ Barlas Brigham_Rupp RBWebb
Cam McRae  - Sept. 26, 2018, 4:23 p.m.

Thanks BR. I've been amazed that more folks on your side of the political spectrum don't share your views. The number of evangelical Christians who have no problem with having a President who was getting busy with a porn star while his wife was pregnant is mind blowing.

Reply

Dannylevesque27
-1 The Big Picture Shirtan Pantz sansarret
Dannylevesque27  - Oct. 1, 2018, 8:23 p.m.

Well if your apologizing for your president I'll apologize for my prime minister for being spineless and ridiculous. If he had a back bone or any Canadian interests at heart we would have a fighting chance but until hes gone were doomed as a country.

Reply

shirtan-pantz
0
Shirtan Pantz  - Oct. 22, 2018, 9:51 p.m.

At least he has the b@lls to stand up to that orange, sleazy, lying, narcissist, ignoramus, hypocrite, porn-star banging coward.

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dorse
0
The Big Picture  - Oct. 29, 2018, 12:10 p.m.

you have no idea how corrupt the prime-ministers office has become.

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peterk
0
peterk  - Sept. 26, 2018, 10:44 a.m.

Really think our distributors will pass on the savings of any potential export reimbursements?

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frank-giraffe
+1 Mammal
Frank Giraffe  - Sept. 26, 2018, 11:22 a.m.

Thanks for this article, it explained some things I had not seen elsewhere. The Sept 5 episode of the CyclingTips podcast also had a pretty good discussion on this mess.

But there are still a couple pieces of info I have NOT seen discussed in any of these (bike) tariff articles:

1. Exactly WHICH manufacturers make frames in China? Name names! I feel like bike journalism is afraid to state uncomfortable truths about Asian manufacturing. I hear things tossed out like "all bikes come out of just a handful of factories" and I'd like to know exactly what the facts are. 

2. What (if any) tariffs has the EU been subjecting bikes to? 

While I am opposed to almost every policy of the current US administration, the intellectual property theft situation is ridiculous and will need to be addressed at some point. I do not know if tariffs will fix that however, as it seems deeply ingrained into the culture.

Reply

Curveball
+1 Cam McRae
Curveball  - Sept. 26, 2018, 12:12 p.m.

The country of manufacture used be labeled on bike frames. I don't see that anymore.

Reply

AndrewMajor
+1 AJ Barlas
Andrew Major  - Sept. 26, 2018, 3:06 p.m.

Re. 1

In general terms all the companies I’ve dealt with have been fully open about country of origin for frames.

For example when Niner moved production to Vietnam they were very open about the process/decision.

If country of origin is a big deal to you when purchasing a bike a shop or brand will readily have that info if you ask.

In my experience for the Vast Majority of riders its either ‘Made In North America’ or ‘Made In Asia’ but I’ve certainly worked with customers who drilled down country of origin more specifically for geo-political reasons.

...

Relating to the article, I assume you’re referencing the passage about the company representative requesting to not have their brand named in this specific piece?

I don’t know what brands Cam contacted but I can think of examples that are fully open about the fact their carbon frames are made in China but would not want to be referenced in relation to an article negative about President Trump’s tariffs.

Firstly, it’s a lot of risk to alienate ~50% of your potential American customers (you have employees to support) taking a stand on something you absolutely cannot influence when you already are going to be dealing with higher prices / lower margins.

Secondly, if you’re located in a fully red state (every major federal and state elected position belonging to a Republican) multiply #1 by also potentially toxifying your work place.

Reply

cam@nsmb.com
0
Cam McRae  - Sept. 27, 2018, 8:34 p.m.

Actually the representative from the company didn't even want me to mention the fact that they had no comment to make.

Reply

Curveball
+3 AJ Barlas Andy Eunson Mammal
Curveball  - Sept. 26, 2018, 12:11 p.m.

I heard on the news that in order for the US to levy tariffs on Canadian products, the President had to label Canada a hostile nation. That made me sick. Do you guys have room up there for a fellow mountain biker and his family?

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shrockie
0
Shrockie  - Sept. 26, 2018, 3:44 p.m.

Hey Cam, with  many carbon bikes being made in Taiwan, is there an impact on those? I know China is adamant about Taiwan being China, but are the tariffs the same?

Reply

cam@nsmb.com
0
Cam McRae  - Sept. 26, 2018, 4:26 p.m.

It's my understanding that if the frame is made in TW and it's assembled in TW the only new tariffs applicable should be for parts (if any) manufactured in China.

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yish
0
yish...  - Sept. 27, 2018, 3:39 a.m.

L&M moves production to The Philippines (link to news article) and not Malaysia (as stated on your article)

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cam@nsmb.com
0
Cam McRae  - Sept. 27, 2018, 8:35 p.m.

Thanks!

Reply

dorse
0
The Big Picture  - Oct. 29, 2018, 12:11 p.m.

Has anyone noticed how it is now cheaper to buy from your LOCAL BIKE STORE than the internet.

Reply

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