Trump’s tariffs might just tip the bike industry over the edge

Let’s be honest here, the bike industry is in the toilet at the moment and has been for the last few years. 

I was at my friend’s sculpture workshop the other day, and when I asked why he had a Reynolds sticker on a massive lathe machine, he told me it was because he was given it by a well-known frame builder who had gone out of business. 

I also had a New Bike Day last week, which was amazing - but I managed to get the entire bike for the same price as I paid for the groupset alone, because they needed to clear all the unsold stock they hadn't been able to shift last year. This is not some kind of cheapo knock-off from the Far East, this is a bike that scored 9/10 in a recent road.cc review. 

These are anecdotes, but they are being backed up by the data. We covered a few weeks ago that UK bike sales are the lowest they’ve been since the 1970s, and that Giant’s profits are 60% down. It may well be that these are readjustments after the insanity of the pandemic, but it is an indictment of where the industry is and how the country looks at cycling as a whole. 

We have been told to wait until next year and it will all get better, but because of the giant orange elephant in the room (and this is serious I promise, despite our timely April the 1st gag) this may not be the case. 

That is because he is implementing tariffs that make no sense to anybody who has ever worked in supply chains, done more than 15 minutes of research into global economics, or anybody with a basic understanding of taxation. These are due to come in today (2nd April), and will have a wide-ranging impact on the global economy.

If you’ve heard any analysis about this from a non-biased source, you will undoubtedly have heard the car industry being used as an example of why this, in my opinion, is a genuinely stupid policy. Cars are made up of thousands of components which come from across the world, that are put together in a plant. They are quite often moved across the same border multiple times, meaning each time they move across a border an extra tariff is added to them, which then compounds to a massive increase in total price. 

The same is true of bikes. There is no one company that makes its own frames, bolts, groupsets, saddles, bar tape, handlebars etc. There are companies who make many of those things, but not all, and I can’t think of a single company making all of those inside the US. So every bike being sold in the US is likely to be impacted in one way or another.

There are already tariffs on bikes and components depending on where you are and where you import from for a number of different reasons. For instance, the UK controversially removed a 70% tariff on non-folding Chinese bikes in February, and this tariff still exists in the EU to help protect the market from being saturated. 

However, Trump’s use of tariffs is not limited to specific goods and specific industries. He has implemented a flat 25% tariff on any country that imports oil from Venezuela. Countries that buy Venezuelan oil include China, Singapore, Malaysia, and Vietnam. Shimano manufactures its groupsets in China, Singapore, and Malaysia, so every single bike made with a Shimano groupset (around 60-70% of new bikes according to some sources) could cost more in the US market. 

Even famous US brands like Specialized probably won’t be insulated from this, because Taiwan is seen as one of the countries that has the largest trade imbalance with the US. Guess where Spesh makes its frames and components?

That said, the Executive Vice President of Specialized, Bob Margevicius, recently signed a submission calling for more tariffs on foreign sellers, arguing that the USA's free trade agreement "gives international marketplace sellers an unfair edge over American retailers". This is in complete contradiction to an empassioned argument he made against tariffs in 2018, which just about sums up this whole confusing situation and the uncertainty surrounding it. 

There are debates to be had about the state of the market at the moment, because it is undoubtedly bad, but how much that’s adjustment to a post-pandemic world remains to be seen. However, I think it's clear these tariffs are going to add even more pain to an already struggling industry if they're going to be as harsh as we're being led to believe.