US Consumers Coming to Canada?
What do Trump's Tariffs Mean for Bike Prices?
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.
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.
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.