So, Trumps putting a 10% import duty on Chinese imports, going up to 25% in January.

For Chinese built frames & components (which will this include?), exported to the USA & then shipped to the UK (how companies many do this?) will we see a 25% increase on UK pricing?

Will it boost USA production?

Is most of the higher end stuff produced in Taiwan? will Taiwan benefit from a shift from China to them for production?

https://www.pinkbike.com/news/tariffs-on-chinese-bicycles-and-parts-begin-next-week.html

It will force manufacturers to make stuff in America

😂😂😂😂 sorry, tried to keep a straight face…

I know some U.S bike brands already ship direct from the manfacturing plant to the market in which they will be sold. My Pivot was shipped in this way, however to minimize the import duty the frame and bulid kit ship separately, as bicycle parts attract a lower import duty than complete bikes.

I would presume if there would be some way of storing the frames/parts in a bonded warehouse then re-exporting them without paying any duty?

25% you say….

In anticipation of the possible tariffs, we spoke with Bicycle Retailer’s Steve Frothingham on the CyclingTips podcast. Frothingham explained that consumers could feel the 25-percent tariff in terms of three-times the dollar amount of the tax that companies will have to pay. He gave the example of a USD$1,000 bike coming in from China would be hit with a USD$250 tax. After that bike makes its way through distributors and into local bike shop, the consumer could see a price increase of USD$750.

Just dont send the bikes via the USA unless they are going to be sold in the US market. I thought most of the manufacturing was done in Taiwan these days so not subject to these tariffs. The cynic in me fears the bike industry using this to increase the prices

He gave the example of a USD$1,000 bike coming in from China would be hit with a USD$250 tax. After that bike makes its way through distributors and into local bike shop, the consumer could see a price increase of USD$750.

Wut?  Is he actually admitting :

– We sell the 1000 USD bike for 3000

– When it costs 1250 we’ll sell it for 3750 because we’ll always sell it for 3 times what it costs us regardless of how much that changes

Ergo 250 dollars cost consumers 750 dollars more because the distributor/retailer will pocket another 500 USD as a result?

I would think you probably will see some increase.

Many carbon bikes come from China, so they will incur higher duty, and also loads of cheap bikes too (although anti-dumping does apply in some cases already). Either way the US manufacturers who have their biggest markets in the US and manufacture in china (manufacturers/companies that are big in the very low end or higher end specialists like Santa Cruz for example) won’t want a massive US price hike as that would mean they’d be disproportionately expensive versus the bikes made elsewhere, so they’ll increase the prices for all countries to compensate for the loss of profitability in the US in the short to mid term I expect.

The whole bike industry – and the outsourcing to Asia – is a bit crazy…

But that’s the way it is.

Trumps import duty: no – these 25 % won’t force the US manufacturers to manufacture frames in the US.

Most likely they will put up some assembly plants in Cambodia (or so) and export directly to Europe and UK.

Some Countrys (and I think it’s also Cambodia) don’t have to face import taxes for complete assembled bikes when shipping to Europe.

Doubt that the mountain bike manufactuers are able to ask for higher prices – the market still grows but not as fast as years ago (e-mountain biking: o.k. – this market is growing like crazy).

Wut?  Is he actually admitting :

– We sell the 1000 USD bike for 3000

– When it costs 1250 we’ll sell it for 3750 because we’ll always sell it for 3 times what it costs us regardless of how much that changes

Ergo 250 dollars cost consumers 750 dollars more because the distributor/retailer will pocket another 500 USD as a result?

Not quite. He’s saying that a bike price is a multiple of its cost, not a fixed margin, i.e. they dont want to make $xxx per unit, but 30% for example.

we’ll always sell it for [X] times what it costs us regardless of how much that changes

You do realise this is exactly how pricing works don’t you? Markup on almost everything is % of cost not a flat rate $ amount.

So yes an extra 250 at source is an extra 250 + [X]% of 250 at point of sale, not 250 +0 because we were happy with $ amount previously.

3 times sounds a lot but really its not very high margin (actual levels will vary obviously but) for example

$250

40% of cost for the manufacturer ($100) to distributor @$350

40% for the distributor ($140) to retailer @$490

40% for the retailer ($196)

7.5% sales tax (CA, which is USA’s highest) ($51) end-user cost $737.45

Wut?  Is he actually admitting :

– We sell the 1000 USD bike for 3000

– When it costs 1250 we’ll sell it for 3750 because we’ll always sell it for 3 times what it costs us regardless of how much that changes

Ergo 250 dollars cost consumers 750 dollars more because the distributor/retailer will pocket another 500 USD as a result?

Can’t speak for him, but that would be logical.

Say you’re a Bike company called All-Awesome-ATB’s (or A for short) and you have a budget of $100k to buy this seasons frames, that doesn’t change with what the frames cost, and your costs don’t change either you need to make a certain profit at the end of the year to pay your salaries, shareholders, etc. So you can only buy 80% of the bikes you could last year (800 at $1250 Vs 1000 at $1000). You’ve now got to sell those for 25% more than last year (say $2500 instead of $2000) to make the same profit.

Year 1 before tarrifs:

Costs:

100 x $1000 bikes = $100,000

$100,000 other costs (R&D, marketing, wages)

Total $200,000.

Income:

100 x $2000 = $200,000

Proffit = $0 

Year 2 after tarrifs :

Costs:

80 x $1250 bikes = $100,000

$100,000 other costs

Total $200,000.

Income:

80 x $2500 = $200,000

Proffit = $0 

And each step in the chain has to do that.

Bobs Bike Bargains distribution has to do exactly the same with his $10,000 annual budget for that brand, so he only buys 4 at $2500 each, and has to sell them on for the same as he did 5 last year.

Then Cris’Cycling* gets a few Surly fatbikes in and everyone on STW goes “How much, you could buy a car for that”.

So yea, the cost of buying the bike directly from china goes up 25%, but then that percentage not the absolute cost is what gets fed down the line, so it’s not $250 on a $3000 bike, it’s $750.

Remember that the tariff is only on the value of the imported goods (i.e what the factory sold you it for), if your R&D is done domestically then that’s still a fixed cost. So it’s likely that brands based in China will be hit much harder than those that just manufacture there.

*other Surly dealers beginning with C are available and sell dam fine bikes.

andreasrhoen

Most likely they will put up some assembly plants in Cambodia (or so) and export directly to Europe and UK.

Not quite that simple to put up a factory. Nobody knows how long this nonsense will last – Trump could be a lame duck by November, there’s plenty of opposition to tarriffs within his own party as it is.Do you gamble on the tarriffs lasating years and spend a fortune on a new assembly and distribution odel, or wit it out and see if it all goes back to norma;?

Very hard for a business to operate on a maybe.

The measure is intended more for big quantities of steel imported for Construction and industrial use, e.g. if you’re building a skyscraper or an oil pipeline, you’ll need lots and lots of steel…

For “US” bike manufacturer’s who have a steel or aluminium model or two in their range, it’s probably worth their while to minimise the amount of those metal products they import directly to the US as a starter, anyone importing steel products and then re-exporting them to say Europe is essentially a maniac, but I’d expect the logistics side of say specialized, Giant, Trek, etc are well used to directly exporting stuff to it’s intended markets and can avoid being hit with unnecessary import taxes.

What you’ll probably see for such internationalised businesses, is that increases in US import costs being shared out across all of their international RRPs. So while a bike imported to Europe hasn’t been subject to the extra tax itself, the parent company might tack 5-10% on to help absorb some of Trump’s tax and keep bikes sold in the US home market more competitively priced…

It will of course hit small US based manufacturers hardest, say a company like Jones? (Unless they can source entirely domestically produced tubesets?), they have no real way to avoid that 25% import tariff and it ends up either being applied as a price increase and/or a margins cut…

Good old Trump, always thinking about the little guy…

always thinking about the little guy…

In the bike industry it’s not likely to hit them too hard, they’re not playing in the price game so much anyway and their volumes should be tiny with purchasing fairly adhoc giving them huge flexibility to buy from Baltimore or Beijing, whichever makes sense today.

For the medium sized business buying in measurable volume, probably months on advance (quite possibly with already purchased product due to land in 2019) it’s going to hurt. Their market is much more price sensitive, they lack the scale and ability of the big manufacturers to alter supply lines to minimise costs in individual markets and they haven’t the reactive flexibility of small manufacturers.

The measure is intended more for big quantities of steel imported for Construction and industrial use, e.g. if you’re building a skyscraper or an oil pipeline, you’ll need lots and lots of steel…

Certainly true of the previous list, i haven’t looked at what’s on this weeks one but the reporting i saw suggested it is very much aimed at consumer goods.

Not quite that simple to put up a factory. Nobody knows how long this nonsense will last – Trump could be a lame duck by November, there’s plenty of opposition to tarriffs within his own party as it is.Do you gamble on the tarriffs lasating years and spend a fortune on a new assembly and distribution odel, or wit it out and see if it all goes back to norma;?

@honourablegeorge:

yes – that’s true.

And you are right – very hard for the companies right now to decide.

Can’t speak for him, but that would be logical.

Say you’re a Bike company called All-Awesome-ATB’s (or A for short) and you have a budget of $100k to buy this seasons frames, that doesn’t change with what the frames cost, and your costs don’t change either you need to make a certain profit at the end of the year to pay your salaries, shareholders, etc. So you can only buy 80% of the bikes you could last year (800 at $1250 Vs 1000 at $1000). You’ve now got to sell those for 25% more than last year (say $2500 instead of $2000) to make the same profit.

Year 1 before tarrifs:

:

:

:

Remember that the tariff is only on the value of the imported goods (i.e what the factory sold you it for), if your R&D is done domestically then that’s still a fixed cost. So it’s likely that brands based in China will be hit much harder than those that just manufacture there.

*other Surly dealers beginning with C are available and sell dam fine bikes.

Thank you for this.  Makes sense.

The majority of US manufacturers who have their frames built in China or Taiwan have them shipped directly to the country they are to be sold in

A friend works for a UK importer for some American brands and all their bikes and parts are shipped direct to them

If for some reason an American frame/parts builder decided that every part they had made in China/Taiwan had to go to them in America first before being shipped out to the final destination country would mean they are paying double for shipping plus would need a much bigger warehouse to store everything which in turn would cost more to run

So the only people who should end up paying more due to Trump’s tariffs will be Americans buying  frames/parts that are made in China/Taiwan that are then shipped to and sold in America

I suspect American people will start ordering from Europe to save money, although this can cause problems when it comes to warranty issues

escrs

So the only people who should end up paying more due to Trump’s tariffs will be Americans buying frames/parts that are made in China/Taiwan that are then shipped to and sold in America

In theory, you’re right. In practice, rather than increase American prices 20%, thsoe companies would probably increase them 10% world wide.

It will just lead to creative accounting/fraud by some sellers / importers.

They will send the frames to a country that doesn’t have import tax to the US. Re package it and then send to the US and get away with it.

Or like Chinese garlic, they will state that it is ginger to avoid the tax. It’s slightly easier to catch the wrong labeled foods as they are stored at different temperatures but bike frames? It will be harder. They will say they are for example wheelchairs (I’m guessing there’s no import tax on these but might be wrong) some will get through, some will get caught. When customs wise up to this they will switch it to another item that has no tax or lower tax.

Prices tripling for bikes between the factory gate and retail is the norm – its the norm for any manufacturing industry if you’re ultimately trying to make a minimum of 10% net profit, otherwise no one will lend you the money as they can get better returns elsewhere.

There’s no way this will result in re-onshoring of US bike frame manufacture, it’ll end up in Vietnam, Cambodia or another country that the Chinese are developing manufacturing.