FEATURE
‘SHIPPING TO THE USA FROM CHINA JUST GOT MUCH MORE EXPENSIVE — WE’RE NOW LOOKING AT A TOTAL TARIFF BURDEN OF 131.8%.’
above the rate it had in mind when the bikes left the far east. As the tariffs kicked in, they were paused. How can a business plan around this volatility? Few brands or retailers shipping into the USA, at least at the time of writing, will not face cost rises that are beyond absorbable on your typical bike industry margins and this accounts for the, again, at the time of writing, temporary 10% rate. As we all know, bike industry margins are under more pressure than ever and calls for a total rethink of how the supply chain works now even include suggestion that bike brands pay the retailer to sell their bikes. For small businesses, which employ about half of the U.S. workforce, there is little hope of expansion until a resolution that sticks is found, while the larger businesses, disproportionately loaded up with a volume of stock, now have a new and equally severe test of their limited agility to navigate. The UK’s 10% is about as generous as Trump’s tariffs came, yet are hardly a welcome extra. This will still be felt by others who now join us on this rate, even if temporarily. To look at an obvious example, Brompton’s 12-speed standard C line build, using the current exchange rate,
PHOTO BY FRANK O KAY ON UNSPLASH
would have cost around $2,041 pre-tariffs, but will now retail at more like $2,200. This, it should be remembered, is considered to be a favourable outcome in the context of what could come to pass for others. It’s not favourable for anybody; probably not even the US treasury once you account for the revision down of trade volumes, even at this low level. Extrapolate things a bit further around Taiwan’s currently on ice 32% tariff and the island’s average sales value of $1,130.79 per unit. Without a new trade deal, that may soon have a landed cost of around $1,514, with a brand new $384 price increase to be accounted for. Taiwan’s dominant semiconductor industry is in Trump’s sights, apparently, and this will be pivotal in shaping what comes next for trade between these two nations. Needless to say, all of this is going to be inflationary at a time when consumers were already opting to be sparing rather than spending. This, also at a time when the market remains generally overstocked, with heavy discounting persisting. Another profit shock was the last thing any industry needed in such close proximity to the pandemic. Though there has now been a 90-day suspension of the initial tariffs that’s replaced by a 10% rate, here’s the lay of the land on tariffs that could still be imposed on goods entering the USA from key bike industry manufacturing locations: Cambodia – 49%, Vietnam – 46%, Sri Lanka – 44%, Thailand – 36%, Indonesia – 32%, Taiwan – 32%, India – 26%, Japan – 24%. At this stage, it’s anybody’s guess what China’s rate will settle at, but make no mistake, they have the upper hand given that China has more essential materials and goods to offer nowadays.
Can the ultimate goal of delivering a golden era of U.S. manufacturing come to pass? It seems incredibly unlikely, at least in the time frames sitting presidents are supposed to occupy. The USA is heavily reliant on bike imports, with over 40% coming from China, plus a further 30% from Taiwan. Domestic manufacturing so far represents under 1%. The USA is nearly 100% reliant on the import of the rare earth minerals that are a mainstay of electronics, but is dominated by Chinese or Taiwanese supply. It imports 75% of its aluminium and is not a particularly large resource base for the nickel needed to produce steel, so bicycle makers would still be at the mercy of raw material tariffs. Wages would be far higher, too, ramping up pricing further. In short, the only feasible way to reshore production on a massive scale to the USA would be to vastly inflate prices,
26 | May 2025
www.bikebiz.com
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