Bikes in the Age of Tariffs

Summary

Today’s post was going to be about a new product we’re introducing—but we need to hold off while we recalculate our prices. You’ve probably seen the news: Virtually all imports into the United States will be subjected to additional, steep import taxes, also called tariffs. The goal is to radically re-orient how manufacturing is done, and to make things domestically. Tariffs tend to be reciprocal, so most countries will increase their tariffs on American-made goods, too.Our rulers seem to think that the U.S. imports more than it exports, so the net effect will be positive. Whether that is true is open to debate. Look at the graphic above, published in the Wall Street Journal. What strikes me is how large the volume of imports and exports really is. Sure, there is a trade deficit, but the size of the exports (the green part) is far greater than the deficit. And all that will also be affected by the new tariffs in one way or another.The bike industry isn’t even an afterthought in these decisions, and yet it’ll be affected deeply by all of them. Let’s look at how the tariffs will reshape our industry and our sport.What are tariffs?Tariffs are a tax on imported goods. They are assessed when those goods enter the country, and the importer pays them. Usually, they are added to the freight costs. Shipments are released by customs only after any applicable tariffs (and associated fees) are paid.Some have suggested that foreign suppliers will pay at least for part of the tariffs by reducing their prices to remain competitive in the U.S. In our experience, that is unlikely. At least in the bike industry, most suppliers are unaware of the tariffs that their good face after leaving the country. They never see them. They calculate their prices based on their cost structure. Even retail giants like Walmart reportedly have been rebuffed when asking suppliers for price breaks to account for part of the tariffs. The simple reality is that in a free market system, only suppliers with ...