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Just to comment on the potential for tariffs (leaving all the other political stuff at the door) - its largely bad for those of us in the United States who ride bikes. In fact, considering how many bike brands are based here, its bad for everyone. I wish I could point to some redeeming factor, but I honestly can't think of one. Bikes are incredibly global, and the idea that we'll just onshore everything to reward American labor, ingenuity and manufacturing is not based in any kind of 2024 reality for reasons I'll leave aside for now.
My hope is any tariffs that are imposed do not impact the bike industry (actually, my hope is we don't utilize tariffs at all). Time will tell.
We're not talking politics were talking economics haha. I don't think any policy makers, regardless of political affiliation, consider the impact on specific industries when discussing tarrifs like this. They seem to be only thinking of GDP, which sucks for individual people and niche industries.
Jeff, how liquid should I be for the impending trade war?
I'd also be curious to get folks thoughts on if they'd be more willing to buy bike components that were made domestically. I am not, by any stretch of the imagination, advocating for tariffs. More just curious on if seeing "USA" or "EU" made on particular bike components might sway the needle in terms of which parts/bikes to purchase.
As far as my thoughts on the whole thing. I do feel like the last thing the bike market needs right now is another gut uch to anyone's bottom line, and I think the pain would extend beyond just manufacturers. Biking is fun, but will people still want/have the funds to bike if it costs 10-20% more to do?
Well you ideally wouldn't want to be liquid, you would want to have large amounts on inventory purchased pre tariffs to hedge against the price rises. You don't need liquidity post tariff as everything is now expensive and you won't want to buy it.
I think we've know for a while people like buying higher quality made in USA/EU etc components and bikes. The reality is though is that these are small companies making very small amounts of frames.
USA and the EU will never replace the mass manufactured frames from Asia, nor should they. These aren't nice jobs. Nobody wants to work in a factory for low wages doing carbon layup. Theres a reason most EU carbon is in Romania and the Eastern EU states, and only super high end carbon is in France/Germany/Italy.
We traded shitty hard manufacturing jobs for cushy air-conditioned service jobs. There's no point complaining about it now.
our cranks are backwards, like how the toilet water spins backwards.
Brakes on the correct side too.
I'm not an economics/financial/business guy. In fact, I'd say I'm bad at business though I run my own creative-focused business.
BUT I was starting to type up a post that much less eloquently hit on many of your points:
Ideally a company would already have everything because it'll be more expensive to purchase later (for example, I literally acceleratedly-for-my-comfort-levels purchased a bike recently days before the election to avoid the impending tariff-fueled price spikes). You're not going to want to buy it post-tariffs because it's going to be more expensive so do what you can to get ahead of it if possible. Storage might be cheaper than the ability to buy at a higher price later.
The quest for bigger profit margin and higher top-of-the-food-chain salaries has shipped all of our skills, facilities, workers, and supply chains to other places in the world. We won't get those back any time soon...and not without HUGE investment and an uncomfortable amount of time passing to make it happen.
...then I saw that person was asking for Jeff's opinion and NOT mine (a bad-at-business business owner offering creative services).
So I shortened my long-ass, whimsically-worded post that was based only on a lot of thoughts and ideas I've had about these sorts of topics for a long time to what I typed up above. It's interesting to see that my no-training-but-lots-of-time-spent-thinking thoughts came to similar conclusions as your much-more-knowledge-and-training-and-real world experience-than-I-could-ever-have professional opinion. I very specifically don't mean to devalue your opinion or your skills/training/experience (some of the stuff you said in the podcast made my brain lights go dim), I say this all to pat myself on the back to remind me that I'm not so dumb and I'm not so out-of-touch with the thoughts of the capital "f" Financial world.
Thanks for providing a look into the financial world a lot of us would have never had otherwise (because what VC person is going to want to have a discussion about their billion-dollar-thought-process with a music guy who feels bad charging his clients his full rate because my very unique and honed skills don't guarantee commercial success rather they give an artist an opportunity for commercial success if they follow through after our work is completed - essentially I manufacture the content of the record and the artist still has to market it)!
LMAO!
On the stems topic:
Back in 2010s I worked for German bike brands, high quality, highly engineered, and all built in Tawain. The factory that built said high quality stems/bars/parts asked us to potentially sell a white label stem in the US. This would have been made right next to said German company parts(aka quality was there) and was designed between US and Tawain engineers. If i remember correctly, cost to build was in the $30s USD and then shipped and landed was around $50 USD. The plan was to sell for $90+. The manufacturer was all hot and heavy to make this happen, but didn't understand the costs to get market share in the US and the stems never made it to mass production. They had no brand and no market awareness aka no business.
If you already have the brand, think Title or Trail One; getting the parts sorted isn't that tough. Now can you sell through? Stocking and warehousing? Marketing costs to keep the brand in front of the right people?
I think we have seen it with frames a few times now, especially in the DJ/Freeride world, where cool dude makes brand, and then the brand is gone in 3-4 years. This is very much like T-shirts, and while cool, has shown to not have staying power in this industry.
Had a pal print out a stem I modelled and when we were talking about it he was point blank about how the industry doesn't need another $100+ stem. That stung, but I couldn't fault his reasoning. A stem is a simple junction, it has to hold the bars, the steerer, and not break. You can add features, but that ends up being window dressing for the most part.
Tariff Follow Up
History: Trump did implement tariffs aimed at specific industries and countries during his last administration. In fact, they specifically targeted bicycle and bicycle accessories from China, in addition to steel, aluminum and other Chinese based goods. I can't find an exact amount (I didn't try that hard) but it appears to have impacted our industry 10-25%. I honestly don't remember any part of my bicycle going up in price. More on this in a second.
New Plan: One of the biggest challenges to Trump as a president is distilling what he says from what he does. From what I understand, he's considering a widespread tariff on all imported goods of 10-20% and a tariff of 60% or more on goods specifically from China. I know a number of Trumpers who would suggest I need to somehow abstract policy in a lesser literal way than what he's saying, but I have no idea how I'd even begin to do that. So, for the purpose of this post, I'm going to take what he says at surface value. I do think its worth noting, there is a good chance he alters course here and backs off what he's suggesting now to something less aggressive (we can only hope). Regardless, two points to make here.
One - If he does implement an all encompassing tariff of 10-20% we can expect our bicycle related purchases to go up 1:1 correlated amount, unless the part is fully made in the united states. One of the biggest fallacies consumers make is assuming a company will absorb cost increases, they almost never do. The only case where you'll see margin compression is more due to an over supply, weakening demand, some outliar one time expense and/or increase in competition. We may have those factors in play, too, which will complicate this, but the impact will still be noteworthy.
Two - How much of our stuff is actually made in China these days? I know a lot comes from Taiwan, Vietnam, etc but I'm honestly not sure how much is actually coming from China, specifically. This is really the big question, and those are the goods that'll really feel notably more expensive.
Regardless, this is going to create some real turbulence in an already wounded industry. If I were in management at any of the big bike or component companies, I'd be doing some real head scratching as to how to best navigate this.
EDIT: On that note (how to navigate), it might seem to make sense to move quickly and add a bunch of product to your US warehouse before the tariffs hit but if I were in the driver's seat, I probably wouldn't be doing this. Capital isn't free, nor infinite and longer I tie capital up for the lower my return is on the sale of the product. Put simply, doing this would be to put my proverbial company in the situation its (possibly) already in - excess inventory in a warehouse somewhere that I can't move. I'd probably be looking to tighten up my product offerings, get real specific around what people really want and optimize on the SG&A side to keep my costs around where they are right now. There are other things...but I'll leave it here for my one paragraph answer
There have been some INSANE sales at the local Specialized dealer here in WNC. My understanding is when the shops got bought by a private owner back from Specialized corporate ownership, the warehouses were chock full of bikes and they just need to move them.
There are reports that there were (Still may be? ) a lot of bikes sitting in Taiwan waiting to come over.. One advantage to the company stores, they can frontload the shops with inventory that a regular LBS might pass on..
We're talking Stumpy 15's full Ohlins for 35% off. Brand new stuff that they just need to move asap. It was kind of bizarre to see.
Wonder if they’ll get all Kona and go buy one, get one free?
Most likely still more bikes coming.. Gotta move some bikes to make room...
Here is a timeline of tariff Trump did during his first term:
https://www.bicycleretailer.com/industry-news/2019/05/16/tariff-timeline#.XRfrmy2ZNQI
And the latest data for country or origin of imported bikes I could find on Bicycle Retailer News:
https://www.bicycleretailer.com/industry-news/2023/08/08/bike-imports-plummet-average-value-climbs
Nice! This is awesome. I honestly should be going to bicycleretailer.com everyday. So good!
You don’t?? The best was back in the day and having that big old Bicycle Retailer mag show up at the shop. Now we can cheat and it’s fingertip.
Most major brands have a Canadian warehouse/branch but not all of them get stuff shipped directly from Asia to Canada and instead go through the USA before getting to us so we will likely be impacted indirectly by Trump Tariffs.
Santa Cruz (bikes for the canadian market are assembled in SC,CA) and Shimano (everything goes through Irvine first) are two that I know could be affected.
With GG gone, what companies currently manufacture in the US other than Frameworks and Allied? Is Alchemy still a thing?
In Canada we have a program of duty drawbacks. If you import product to them export it you can claim back your initial duty paid on import.
A quick google says US has a similar program.
AFAIK only the Ti Bikes are welded in the USA for Alchemy, the carbon bikes are made in Taiwan. In terms of batch production, the others would be Reeb and Foes that are made in the USA.
This could be of benefit to Canadian sales. If SC imports components into the US (lower tariffs than complete bikes) and then exports complete bikes to Canada they could apply for Substantial Transformation, Country of Orgin. If successful the complete bike would become made in the US and Canada / US trade agreements would apply.
Reeb, Chumba, Dean, Foes, Moots, Litespeed, Lynskey and a bunch of Ti brands and smaller guys like Stinner, Oddity, Black Sheep and Sycip. Up in Canada you have Devinci.
There are a few on the road side doing carbon such as Parlee.
There is a good number of brands doing US assembly of bikes.
Speculative point to make today, but an important one. With CPI coming in slightly hotter than expected, and inflation being one of the biggest reasons "Trump won", I feel there is a very strong chance the tariff thing is all bark and no bite. He might have floated the idea to get elected, because it sounds good to a certain audience (trying to be nice here), but when push comes to shove, he knows tariffs are likely to be inflationary (or at least people around him do) and that'll prohibit him from actually evoking these policies, especially in the near term.
Put differently, if I were to bet, I'd wager we don't see tariffs at all in 2025, if we do they'll be in 2026 and they'll be a whimper of what he proposed during his campaign.
If I were Cxx at a company, I'd be paying close attention to this, and I'd have a plan, but I wouldn't be acting on anything just yet.
Exactly... There is something I noticed during Trump's first term, it seems like he speaks first, thinks later. It comes across like a salesperson who feels like a moment to contemplate is a bad thing.. Sometimes you gotta take a breath, compose the thoughts and then say it.. Someone close to him should be able to explain the downside of blanket tariffs...
The Smoot-Hawley Tariff Act anyone?
God I love economics. Was on the edge of my seat wondering what Ben Stein would say next. Maybe he'll talk about the gold standard and managed float in currency valuation!
I have to deal with USA tariff often (finished metal). You "Yanks" don't bother to read your own media. To busy making snide comments at each other.
"The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.
The Biden administration has kept most of the Trump administration tariffs in place, and in May 2024, announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles, for an additional tax increase of $3.6 billion."
Source:https://taxfoundation.org/research/all/federal/tariffs/
I know it's taboo, but I buy, use, and enjoy a lot of parts from AliExpress. If you know what you're doing you can get some incredible quality stuff at dollar discount prices. I imagine these tariffs will put a swift end to all that.
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