TARIFFS, TRADE WARS AND SCENARIO PLANNING IN A TIME OF CHANGE

01-06-25: “Logistics middlemen get star role in tariff turmoil.” The Wall Street Journal: “President Trump's rapidly-shifting campaign of tariffs against Canada, Mexico and China are thrusting into the spotlight a corner of logistics that is usually an afterthought in global supply chains. The WSJ Logistics Report’s Paul Berger writes that customs brokers serve as the invisible link between U.S. Customs and Border Protection and importers. Brokers say they are being inundated by calls from panicked clients worried about how much the tariffs will cost and seeking ways to avoid them. The brokers, who handle the paperwork needed to process imports, say they have been working nonstop since Saturday when Trump said he would place tariffs on America's biggest trading partners. One customs broker at the Port of Laredo, Texas, said he’s been getting emails, phone calls and text messages from importers asking how much they will owe and how they can minimize payments. Those questions have been difficult to answer as the Trump administration has changed course several times on the scale and timing of tariffs. The rapid deployment of levies is triggering swift changes in shipping operations. The WSJ’s Esther Fung and Hannah Miao report that the U.S. Postal Service resumed accepting parcels from China and Hong Kong on Wednesday, less than 24 hours after suspending the service. HPS Analysis: When Steve Bina and I worked for the Schwinn Bicycle Company Purchasing Division we had on staff two full time, licensed customs brokers who worked with our logistics department and our sales companies, and who provided advice and guidance to our purchasing agents, our Taipei office, and our suppliers. The larger brands may have full-time customs brokers, but the midsize and small importers rely on customs brokerage firms to provide the required input on what HTS numbers and descriptions to employ on the import paperwork. For decades there was little or no change, and customs brokers know the customs agents at the ports of entry that they regularly use along with the “commodity specialists” that other customs agents rely on for advice on specific import commodities and duty rates. E-bikes changed the status quo and the disruptions during the COVID rocked the boat. However, nothing prepared the customs brokerage world for the changes since the new administration has taken office in January that have totally upended decades of accepted practice and created chaos in the importation of products and commodities into the U.S. HPS advice is find the best possible customs broker your can – and hang-on.  

01-20-25: “NBDA unveils comprehensive 2024 consumer research report.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) is excited to announce the release of its highly anticipated 2024 Consumer Research Report, a detailed resource offering unparalleled insights into consumer behavior, preferences, and trends in the cycling industry. This comprehensive study, which features in-depth data, analysis, charts, and actionable recommendations, is now available to help industry stakeholders make informed decisions and adapt to evolving market dynamics. The final report provides an in-depth look at consumer demographics, the brands they purchase, retail sources, price points, and the accompanying accessories they’ve chosen over the past two years. It also offers projections on future consumer spending within the cycling market. For more information and to purchase the report, visit nbda.com. HPS Analysis: This is an excellent consumer research report, conducted by the National Bicycle Dealers Association (NBDA) focused on customers that buy from bicycle shops. This scope limits it to specialty bicycle retail, but this is the primary consumer research bike shop owners and managers need to guide their strategic and business planning, and that supplier and brands selling to bike shops need to guide their strategic and business planning. Go to the NBDA website and take a close look at this research report and let me know if you would like to discuss its contents or how it can help your business. I highly recommend it.

01-21-25: “Giant Group tempers decline in revenue amidst destocking industry.” BIKE europe: “In an attempt to improve the financial situation, bicycle manufacturers massively tried to lower their inventory levels even when it came with huge discounting. Giant Group managed to mitigate its decline in turnover to 7.4 percent as the company's 2024 monthly revenue report shows. This is compared with a decrease of 16.4 percent in 2023. Giant Group experienced a major shift of its business from Europe and North America to the Chinese market. ‘We even ship bicycles that cannot be sold in Europe and North America to China,’ said Giant Group CEO Young Liu at a press conference during Taipei Cycle Show last March. In 2023 this increase of the business in China was not enough to compensate for the weak demand of entry to mid-level products from both North America and Europe, the company reported. Giant saw its consolidated sales decline in 2023 by 16.4 percent to TWD 76.95 billion (€ 2,23 billion). HPS Analysis: Bike europe has several well researched and well written articles over the past several years about the public financial reports issued by the top three Taiwanese bicycle companies, all of which are public and are required to publish quarterly and annual financial reports. Giant Global Group is the largest, and as such is also the largest of the publicly traded bicycle companies. HPS notes two pieces of information from Giant Group. First, the importance of the Chinese market to the financial health of the Giant Group. Second, the trans-shipping of Giant bicycle and e-bikes between markets. This later activity has, HPS believes, been important in the lobbying initiative to have the European e-bike standard introduced into state legislation and law as equal to the voluntary UL standards. The European, or EN e-bike standards are, in fact, inferior to the UL standards, and lobbying them into American state law is creating both an immediate bike shop OSHA safety hazard, a consumer safety problem and a future litigation issue to which HSP is opposed.

01-22-25: “Commissioner Peter A. Feldman becomes acting chairman of U.S. Consumer Product Safety Commission.” Bicycle Retailer and Industry News: “The U.S. Consumer Product Safety Commission announced today that Commissioner Peter A. Feldman has been named acting chairman of the agency effective immediately. The commission elected Feldman to serve as vice chairman on January 13, 2025, and in accordance with CPSC's statute he assumed the role of acting chairman when Alex Hoehn-Saric stepped down as chair on January 21 … Feldman has served on the commission since October 5, 2018, after being nominated by President Donald J. Trump and confirmed by the United States Senate to complete the remainder of a term expiring in October 2019. He was re-nominated and confirmed to a subsequent seven-year term that will expire in October 2026. During his tenure, Feldman has focused attention on the flood of Chinese consumer goods that violate federal law and has worked to strengthen the agency's ability to address the challenges of the modern marketplace.” HPS Analysis: HPS Partner Mike Fritz has testified before acting CPSC chairman Feldman when he was a commissioner and found him to be very supportive of CPSC adopting UL 2271 and UL 2849 as mandatory federal regulations. The question is whether he will be confirmed as chairman of CPSC by the new Trump administration, and whether the new (and yet to be formed) White House CPSC Liason Office will allow a revision and upgrading of 16 CFR 1512 for pedal-only bicycles and adoption and inclusion of UL 2271 and UL 2849 along with mechanical requirements for e-bikes.

01-23-25: “Store closures hit highest level since pandemic — see who is shutting down the most locations.” CNBC Business: “Store closures in the U.S. last year hit the highest level since the pandemic — and even more locations are expected to shutter this year, as shoppers’ dollars increasingly go to a few industry winners, according to an analysis by Coresight Research. Major retailers, including Party City and Macy’s, closed 7,325 stores in 2024, according to the retail advisory group’s data. That’s the sharpest jump since retailers in the U.S. shuttered almost 10,000 stores in 2020, the year when the COVID pandemic began. So far this year, closures continue to climb. Retailers have already announced 1,925 store closures so far in 2025 — and that was only as of Jan. 10. The five retailers that have announced the most closures this year are Party City, Big Lots, Walgreens Boots Alliance, 7-Eleven and Macy’s, respectively. The retail advisory firm projects that retailers will close about 15,000 stores this year as some legacy brands shrink and file for bankruptcy protection, or liquidating companies shutter locations. The striking numbers reflect the stark divide between retailers that are gaining market share and those that have lost ground. Amazon, Costco and Walmart have gotten bigger as shoppers seek value and convenience. On the other hand, some smaller chains and specialty retailers have struggled to keep doors open or been forced to downsize … Consumer spending has stayed strong — but a larger share of the dollars has gone to fewer retailers … Most companies are not adding a significant number of square footage and even the ones that until recently were adding a lot, like the dollar stores, are rethinking their footprints … [It is expected that] more stores will continue to close than open in the U.S., as retailers’ growth comes from online sales and as larger companies take a bigger share of the market. Some of those, such as Walmart, add a lot more volume with one store than specialty retailers get from the dozens of locations they close.” HPS Analysis: As most of our readers know, there has been a debate within the bicycle business as to whether bike shops have actually gone out of business in anywhere near the numbers over the past several years as conventional wisdom has reported. Wise men have opined on this subject in the trade publications with some saying “yes” and some “no.” This well researched article should be carefully studied by the same wise men, and the rest of our industry. The role of online retailing, the shift in where consumers moved during COVID and now live, and retailers not adding square footage, and in fact downsizing retail stores, should all be taken into account when revisiting the question of how many bike shops have gone out of business over the last year or so, and more importantly, how many will go out of business going forward if the specialty channel doesn’t start listening and learning.   

01-24-25: “Mexico creates nearshoring incentives in push for regional integration.” SUPPLYCHAINDIVE: “The new package is a key part of President Claudia Sheinbaum’s long-term plan to bolster Mexico’s role in North America’s supply chains. Sheinbaum presented her economic vision under Plan México on Jan. 13, 2025. The plan’s goals include bolstering regional integration and promoting nearshoring, among others. Sheinbaum positioned the nearshoring package as part of a multi-pronged plan to grow Mexico’s economy — called Plan México — in part by embracing its role in manufacturing inputs for North America’s supply chains. ‘What we are looking for is for many of the inputs in various economic sectors to be made in Mexico,’ Sheinbaum said in Spanish on Jan. 17, in response to a question about the incentive package. The package’s goals would include strengthening the national economy while increasing regional integration, jobs, pay and overall wellbeing, Sheinbaum said. Furthermore, it would help Mexico substitute imports with domestically produced goods.” HPS Analysis: President Sheinbaum’s predecessor was successful in attracting substantial automotive and Chinese investments in manufacturing, and when the current Trump Administration’s tariff initiatives are more clearly defined as concerns Mexico, Plan Mexico may very well have nearshoring opportunities for the American bicycle business, and should be watched closely in coming months.  

01-25-25: “Americans spend $900 billion a year on goods from Mexico and Canada. Tariffs could affect these prices the most.” Market Watch: “Trump threatens 25 percent tariffs as the U.S. seeks better trade terms with neighbors to the north and south. Americans buy $900 billion a year in food, cars, TVs, toys, appliances and other stuff from Mexico and Canada — and the cost of these products could rise if Trump carries out his threat to apply 25 percent tariffs. Few trade experts and economists believe the president will follow through with such steep tariffs, viewing them as a negotiating tactic to win concessions for the United States. But the stakes are undoubtedly huge. The neighbors to the north and south are the biggest trading partners of the United States, accounting for almost 30 percent of all imported goods.” HPS Analysis: While Canada and Mexico account for almost 30 percent of all U.S. imports, this does not include any appreciable quantity of bicycles, e-bikes or related parts or accessories. U.S. bicycle business exports to Canada, Mexico, Central America and the Caribbean have potential going forward, but only if there is a relatively stable trading platform that may emerge from the current turmoil.  

01-27-25: “EU extends anti-dumping duties on Chinese e-bikes for 5 years^.” BIKE europe: “The European Commission announced this morning to maintain the anti-dumping as well as countervailing duties on e-bikes imported from China for another 5 years. The commission has opted for the imposition of per company targeted dumping duties. The dumping duties vary from 9.9 percent for Giant Electric Vehicle up to 70.1 percent for a group of non-cooperative companies. All other Chinese e-bike exporters are hit by a 62.1 percent anti-dumping duty. The countervailing duties range from 3.9 percent for Giant Electric Vehicle to 17.2 percent for most others. The rates of the definitive anti-dumping duty applicable to the net, free-at-Union-frontier price, before duty.” HPS Analyss: Ever since I got officially involved as a lobbyist for the Schwinn Bicycle Company in the 1970’s, it became very apparent that the nations of Europe and eventually the European Union were much more aggressive enforcers of anti-dumping duties and enforcers of countervailing duties as compared to the U.S. This was by design and the U.S. government, until recently, maintained an open market position that encouraged trade with other countries. This translated to no anti-dumping duties, and until the Section 301 25 percent punitive duties were imposed on bicycle and e-bike imports from China, and last month’s additional 10 percent duty, the U.S. maintained 5.5 or 11 percent import duty on bicycles, no import duty on e-bikes, and an average of 10 percent on components for over three decades. The primary impact was the European anti-dumping duties and countervailing duties over the last three decades resulted in the Japanese and Chinese bicycle, e-bike and component manufacturers investing in Europe and building production facilities inside the EU.

01-27-25 “USTR probes China.” POLITICO Weekly Trade: “USTR on Friday launched two reviews: one focused on unfair trade practices and another to assess whether China has made good on its commitments outlined in its phase-one deal with the U.S. signed under the first Trump administration. Those probes could be the legal basis for new tariffs on China. The first Trump and Biden administration used Section 301 under USTR to hit China with tariffs on billions of dollars worth of imports. Trump on Day One tasked the agency with investigating trade deals under his ‘America First Trade Policy.’ The announcement of the reviews comes as Trump’s pick to lead USTR, Jamieson Greer, awaits his confirmation. Juan Millán is currently serving as acting USTR, according to a posting from the White House.” HPS Analysis: As the administration considers reciprocal tariffs, the office of the United States Trade Representative (USTR) has begun two reviews of trade with China, both of which could play major roles in determining the amount and scope of the import tariffs imposed in early April. Since 10 percent across-the-board punitive tariffs have already been imposed, in addition to already applicable import tariffs, there seems little doubt the USTR investigation will claim unfair trade practices by China. There is also little doubt that the China has not fulfilled its obligations under the trade agreement with the first Trump administration. Since the USTR findings will be employed as justification for tariffs the question becomes the amount of the new reciprocal tariffs and or some combination of Section 301 punitive tariffs. The USTR reviews act as a dark cloud hanging over the already egregious import tariffs imposed on bicycle and e-bike imports from China and creates an added layer of doubt over an American bicycle business that the Section 301 punitive tariffs left without needed protection, care or support.

01-27-25: “U.S. retail sales projected to increase by 4 percent in 2025.” SOURCING JOURNAL: “According to a research report from the retail team at Bain & Co., nominal U.S. retail sales are pegged to see a 4 percent increase, year-over-year, in 2025— ‘barring major macroeconomic or geopolitical shocks,’ the firm noted. The report also included ‘resolutions’ that successful retailers are focusing on this year. ‘That equates to around $5.2 trillion in estimated total sales in 2025,’ the authors of the report said. ‘It’s a strong outlook, given a stagnant consumer outlook, tempering inflation, negative [year-over-year] employment trends, diminishing consumer savings, rising credit card delinquencies, elevated nondiscretionary costs and potential trade disruptions.’ ‘Retailers face a pivotal moment in 2025,’ the report’s authors said. ‘The challenges of shifting consumer behaviors and demands, economic volatility, regulatory changes and trade complexities persist, reshaping the retail game. Successful businesses will go beyond the familiar, tapping into cutting-edge technologies, reimagining loyalty programs and fortifying supply chains against an unpredictable global backdrop.’” HPS Analysis: The American bicycle business, and more importantly the specialty bicycle retail channel of trade that includes bike shops, needs to craft strategic and business plans to be a part of the projected retail sales increase in 2025. The National Bicycle Dealers Association (NBDA) is presenting multiple seminars at the coming CABDA West as part of an education initiative that emphasizes the bike shop as the brand, the Phillips Rule that states that: ”You never sell anything in your bike shop below your cost of doing business,” operating and promoting a profitable service department, embracing the circular economy featuring used bicycles and e-bikes, and the vital importance of a written business plan that is updated and reviewed no less than monthly and is shared with the whole staff. 

01-28-25: “Trump’s Transportation Secretary pick is confirmed by Senate.” Bloomberg: “President Donald Trump’s choice for Transportation Secretary, Sean Duffy, sailed through his confirmation vote on Tuesday, positioning him to carry out Trump’s agenda for the rail, automobile and airline industries. The Senate voted 77 to 22 in favor of confirming the former U.S. congressman and Fox News contributor to lead the department. He had previously received unanimous support from members of the Senate Commerce Committee. Duffy takes over the department as it faces high-profile issues such as increased oversight of Boeing Co. after a midair blowout on one of its jets early last year, and how to integrate new technologies, such as air taxis and self-driving cars, into U.S. transportation infrastructure. He’ll also be responsible for doling out billions of dollars for infrastructure projects.” HPS Analysis: The new Secretary of Transportation, Sean Duffy, is important to the American bicycle business and HPS urges bicycle business suppliers and bike shops support the League of American Bicyclists (LAB) in their lobbying efforts directed toward the Transportation Department (DOT) and the National Highway Transportation Safety Administration (NHTSA), the National Transportation Safety Board (NTSB) and the Congress. The LAB National Bike Summit is March 11-13 in Washington, D.C., and I will be attending and hope to see you there. You can learn more about attending at: www.bikeleague.org.   

01-28-25: “NYC's e-bike and lithium-ion battery trade-in program begins.” Bicycle Retailer and Industry News: “The city's free e-bike and battery trade-in program has started for eligible food delivery workers to exchange uncertified devices to reduce fire hazards. Delivery workers now can receive UL-certified e-bikes and batteries from the city. The trade-in program also allows for exchanges of uncertified e-mopeds and gas-powered mopeds that can't be legally registered with the Department of Motor Vehicles. The limited supply of e-bikes and lithium-ion batteries are eligible to food delivery workers. HPS Analysis: This is an important step in e-bike and mid-size lithium-ion battery safety in the City of New York. While not perfect, this trade-in program is the start of a city-wide e-bike and lithium-ion safety initiative that has broad-based support and has the potential to be expanded to embrace more delivery workers and we urge the bicycle industry and bike shops in large metro markets to work with their local governments to initiate and fund similar trade-in programs. If you want more information contact: Mike Fritz, HPS Chief Technology Officer mike@humanpoweredsolutions.com. 

01-29-25: “Bike Index annual report shows bike thefts increased in 2024.” Bicycle Retailer and Industry News: “Bike Index released its annual 2025 report showing a 15 percent increase in reported thefts of the 1.3 million bikes it registered, and more than two million are stolen annually in the U.S. with a value of more than a billion dollars. According to the report, 18,942 bikes registered with Bike Index were stolen last year. The 2.4 million annual stolen bikes figure with a value of $1.4 billion comes from a survey conducted in 2024 by Bike Index, the Institute of Transportation Studies at University of California Davis, and the Department of Geography at University of California Santa Barbara in partnership with YouGov.” HPS Analysis: Bike theft doesn’t receive the attention it should as one of the reasons American consumers in some markets are reluctant to purchase, own and use a bicycle or e-bike. We tend to focus attention on accidents, injuries and fatalities involving bicycles and e-bikes, and while these tragic events do deserve our attention, we should not overlook the other reasons Americans are pushing away from bicycle and e-bike ownership. The technology available today in theft prevention and recovery has become much more available and at affordable prices. Bike shops can do more to promote theft preventatives, provide theft preventative education and recovery and insurance products to keep bicycle and e-bike owners riding and enjoying the purchases and coming back to make another purchase instead of being discouraged. 

01-29-25:”GM drives to minimize tariff impact.” The Wall Street Journal Logistics Report: “General Motors is taking steps to soften the blow of U.S. tariffs on Mexico and Canada. More than a third of the company’s U.S. sales are estimated to be produced in Mexico and Canada, making GM among the most vulnerable automakers as the Trump administration presses its plans to impose 25 percent tariffs on those countries as soon as Saturday. The WSJ’s Christopher Otts and Mike Colias report that GM is expediting vehicle imports from those countries and strategizing ways to potentially build more pickup trucks domestically. That puts the automaker on the front lines of companies looking hard at their own operations and sales even as they try to discern how the threats of levies will translate into real actions. GM CEO Mary Barra says the automaker has ‘several levers that we can pull,’ but won’t spend significant capital until it has more clarity on policy changes.” HPS Analysis: While the threatened 25 percent tariffs on Mexico and Canada got delayed a month or so, they still loom as a possibility alongside the new potential of reciprocal tariffs. This article highlights the quandary that GM and other U.S. automakers find themselves in 45 days or so after the new administration was sworn into office. More than a third of GM’s car and truck products that are sold in the U.S. have been “near-shored” in Mexico and Canada for decades. Options include investing in U.S. production, and/or importing more from production off-shore. The former is what the administration wants and the later is what it doesn’t want, but must be considered from both an investment standpoint and the practicality of availability of product to serve market demand. As GM CEO Mary Barra says the company has ”several levers that we can pull.” That’s several more levers than the American bicycle business has.

02-01-25: “Trump imposes new tariffs on imports from Mexico, Canada and China in new phase of trade war.” National Public Radio npr: “President Trump is imposing 25 percent tariffs on most imports from Mexico and Canada, as well as 10 percent tariffs on imports from China. Mexico supplies more than a quarter of the fresh fruits and vegetables in the U.S., including avocados popular in Super Bowl guacamole. A new global trade war has begun. President Trump signed executive orders Saturday, imposing 25 percent taxes on most imports from two of the country's biggest trading partners: Canada and Mexico. Goods from China will be charged a 10 percent tax. The tariffs take effect on Tuesday. Trump said in a social media post he's taking the action in an effort to address the illegal flow of drugs and immigrants across the United States' northern and southern borders. Canadian crude oil will be subject to a lower 10 percent tariff, which could mitigate the effect on U.S. gasoline prices. Midwestern oil refineries are heavily dependent on Canadian crude. The import taxes could result in higher prices for a wide range of products, including fruits and vegetables, flat screen TVs, and auto parts. The targeted countries are expected to respond with retaliatory tariffs of their own on U.S. exports. HPS Analysis: HPS is following the rapid sequence of events from January 6 to February 19 and while we have already alluded to the 25 percent tariffs on imports from Mexico and Canada being delayed, this February 1 article represents the shock that the initial announcement had. The 10 percent tariff on imports from China was confirmed and went into full force and effect at 12:01 a.m. Tuesday, February 4. While we will explain that goods in transit from China will not be subject to tariffs if shippers can certify they were sent prior to February 1, this has made little difference to the tariff increases that went into full force and effect February 4. E-bikes had a “0” import tariff. The Section 301 Punitive tariff added 25 percent to the FOB value of e-bikes last year, and the additional 10 percent brought the total U.S. import tariff on e-bikes from China to 35 percent. Pedal-only bicycles had import tariffs of either 5.5 percent or 11 percent depending on wheel size. Section 301 increased this to 30.5 percent or 36 percent. The additional 10 percent resulted in a total import tariff of 40.5 percent or 46 percent on pedal only bicycles originating in China. Parts and accessories had and import tariff from China averaging 10 percent that increased to 35 percent under Section 301 and went up again to an average of 45 percent after February 4. We will need to see how the reciprocal tariffs are adjusted to include things like VAT and what the difference, either positive or negative, is relative to the new import tariffs on bicycle business products originating in China, but any reduction in import tariffs will be welcomed and any increase will make for higher retail prices and a more difficult market.

02-01-25: “Is it for a day or four years? Tariff uncertainty spooks small businesses.” BBC News: “Donald Trump's talk of applying new tariffs to goods from America's biggest trade partners has sparked months of uncertainty for business owners. On Saturday, the president made good on his threats, ordering a new 25 percent tax on shipments from Mexico and Canada and raising existing tariffs on goods from China by 10 percent. But that has not stopped the questions. Is it for a day, is it a political flex, or is it something that will last for four years? asked Nicolas Palazzi, the founder of Brooklyn-based PM Spirits. He runs a 21-person business that imports and sells wine and spirits, about 20 percent of which come from Mexico.” HPS Analysis: HPS urges our readers to take a good look at this article since it begins to bring into perspective the uncertainty the current situation relative to import tariffs has created among small businesses in the U.S., which includes the vast majority of bike shops and some suppliers. Bicycle Retailer and Industry News (BRAIN) has been doing an excellent job of covering the anxiety and uncertainty blanketing the bicycle business, and the National Bicycle Dealers Association (NBDA) in partnership with CABDA, has produced high quality educational seminars to help the bike shop channel of trade understand and manage the current state of uncertainty. Watch for NBDA educational webinars as the year progresses and plan to attend the NBDA Retail Summit West as part of the CABDA West Expo in Las Vegas, March 25-27 and the NBDA Retail Summit Central in Bentonville, Ark., May 20-22. For more information visit www.cabdashow.com and www.nbda.com.

 02-01-25: “How much will the new Trump tariffs on China increase electric bike prices?” electrek: “With the flick of a Sharpie marker, new tariffs on goods imported from Canada, Mexico, and China were imposed this morning and will take effect next week on February 4, 2025. According to President Trump, the tariffs are intended ‘to protect Americans,” though nearly all economists agree that they will result in higher prices for consumer goods and increased inflation, devaluing the U.S. dollar. The Trump Administration’s new 25 percent tariffs on goods from Canada and Mexico are larger than the 10 percent additional tariffs on Chinese goods, but the latter will have the biggest impact on the electric bicycle industry in the U.S.” HPS Analysis: This is a very interesting question. Electrek concludes that e-bike retail prices will increase as the result of increased import tariffs, but doesn’t include a dollar or percentage prediction in its response. HPS has looked at this question long and hard, and we have concluded that the answer will depend on what channel of trade the consumer purchases from. The Direct To Consumer (DTC) channel has gained market share since the COVID epidemic and has both migrated into the specialty retail channel that includes bike shops, and been adopted as an added channel for order fulfillment by the mainstream specialty retail brands and the leading mass merchants. Also, leading bike shops have fielded commerce enabled websites and are offering DTC fulfillment to customers. While HPS predicts the leading specialty channel brands are losing their grip on specialty retailers, we also predict that new, large and well financed Chinese brands have started to penetrate the U.S. market with fully-certified and good quality product that is competitively priced at relatively low buy-in quantities that will provide bike shops with an average 40 percent gross margin of profit. These new brands also pledge not to undercut their dealers with lower DTC pricing. These new Chinese brands have changed the definition of a “dealer,” but they are including traditional bike shops. HPS’s answer to the question? It depends on which channel and brand the consumer shops and buys from. 

02-03-25: “Trump brings Mexico and Canada into his trade war: What will that mean to the bike industry?” Bicycle Retailer and Industry News by Steve Frothingham: “President Donald Trump followed through on recent threats and announced increased tariffs on goods from China, Mexico and Canada on Saturday. The new tariffs — and a closure of the de minimis loophole on the three nations — were to take effect at 12:01 am Tuesday, but on Monday Trump said he had negotiated a 30-day delay with Canada and Mexico. The China changes were still set to take effect Tuesday. The new tariffs are imposed under the authority of a Nixon-reform era law allowing the president to impose sanctions in a time of crisis. Trump cites fentanyl imports and illegal immigration as the crisis justifying the new tariffs, which are:

•  10 percent additional tariffs on Chinese goods (in addition to existing tariffs, bringing the full tariff on Chinese mountain and kids bikes to 46 percent, for example); 
•  25 percent on all goods from Canada and Mexico, except for Canadian energy and oil exports, which will be taxed at 10 percent.

What does it mean? As we’ve reported before, the U.S. gets an estimated 87 percent of its bicycles from China, in a unit count, but less than 50 percent of the dollar value of bikes imported from China. That’s because most Chinese bike imports are very low-cost juvenile bikes bound for the mass market. For complete bikes, the specialty market is much more dependent on Taiwan, and, increasingly, Vietnam and Cambodia.” HPS Analysis: The short answer to bringing Mexico and Canada into the administration’s trade war is that it won’t have much direct impact on the current American bicycle business. Except for the inflationary effect tariffs on the imports from two of the leading trading partners will have on overall consumer prices. However, the impact will affect the future near-shoring to Canada and Mexico. We have already commented on the direct and negative effect the 10 percent additive tariff on bicycles and e-bikes originating in China has and will have on the American bicycle business. The introduction of reciprocal tariffs, including what the administration considers as equivalent tariffs like VAT, have the potential to increase the tariffs on bicycles and e-bikes originating in China and the countries that brands have recently moved some or all of their sourcing to such as Taiwan, Vietnam, and Cambodia,

02-03-25: “Trump sows uncertainty - and Xi Jinping sees an opportunity.” BBC News: “If China is angry at the United States for imposing an extra 10 percent tariff on all Chinese goods, it is doing a good job of hiding it. Both Canada and Mexico vowed to retaliate and Canadian Prime Minister Justin Trudeau said his country ‘will not back dow’ as he announced a 25 percent levy on more than $100bn (£81bn) of American goods. U.S. President Donald Trump then agreed to temporarily pause tariffs on goods imported from both countries after reaching separate agreements with them. The tariff’s on China, however, are slated to go into effect on Tuesday. So far Beijing has held its fire. In 2018, when Trump launched the first of many rounds of tariffs targeting Chinese imports, Beijing declared that it was ‘not afraid of a trade war.’ This time, it urged the U.S. to talk and ‘meet China halfway.’ And reports suggest a call between Trump and Xi Jinping could take place this week. This isn't to say that the announcement will not sting. It will, especially because the 10 percent levy adds to a slew of tariffs he imposed in his first term on tens of billions of dollars of goods. And the Chinese government's muted response is partly because it doesn't want to worry its population, when many are already concerned about the sluggish economy. But that economy is not as reliant on the U.S. as it was back then. Beijing has strengthened its trade agreements across Africa, South America and Southeast Asia. It is now the largest trading partner of more than 120 countries. The additional 10 percent may not offer the leverage that Trump wants, says Chong Ja Ian from Carnegie China. President Xi Jinping may also have another reason: he may see an opportunity here. China will want to appear a calm, stable and perhaps more attractive global trade partner.” HPS Analysis: We recommend articles like this to clients that are actively engaged in strategic analysis and planning. We have recently been advising that China has outflanked the American trade negotiators, including the Biden and the Trump administrations. Our opinion is focused on the American bicycle business and a colleague who lives and works in Europe recently told me in response to this observation that the Chinese: “… will bleed out the American bicycle business.” His rather graphic description is based on years of experience and a study of the Chinese electric car exports and sales into the EU and North America. The mainstream international U.S. brands are, as stated earlier, losing their grip on the specialty channel bike shops as they expand into their own brick-and-mortar stores and the DTC channel, and in the process undercut the gross margin of profit they offer their authorized dealers. A new wave of large, well-financed Chinese bicycle and e-bike manufacturers have recently entered the U.S. market and established warehouses and national distribution starting with exhibits at the CES show and including all three of the CABDA Expos. As this article states, Chinese President Xi Jinping sees an opportunity to employ a strategy that supports the established Chinese economic ecosystems, like the bicycle-e-bike-e-scooter manufacturing industry that produces 140,000,000 units annually with 2,000,000 workers, expanding penetration into markets like the U.S. that has no bicycle/e-bike manufacturing industry of its own. 

02-04-25: “Trump’s tariff orders feature key clause for logistics managers.” SUPPLYCHAINDIVE: “Goods in transit from China will not be subject to tariffs if shippers can certify they were sent prior to Feb. 1. A clause within President Donald Trump’s tariff-issuing executive orders may help shippers who front-loaded cargo prior to Feb. 1. President Donald Trump’s executive orders implementing tariffs on China, Mexico and Canada all share one detail that could help logistics managers save on last-minute costs: shipments in transit may not have to pay the duties. Duties will apply to “goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on February 4, 2025,” according to each order. While tariffs on goods from Mexico and Canada have since been delayed until March, goods shipped from China prior to Feb. 1 can avoid the duty upon arrival in the U.S. if they meet two specific conditions. This also would have been true for shipments from Mexico and Canada prior to the implementation delays. First, the product must have been “loaded onto a vessel at the port of loading” or have been “in transit on the final mode of transportation prior to entry into the United States” before 12:01 EST on Feb. 1. Second, the exception will apply “only if the importer certifies to CBP as specified in the Federal Register notice,” according to the order. HPS Analysis: This article is for our clients and readers, so they are aware of the detail contained in the executive order that specifically stating that “… goods shipped from China prior to February 1 can avoid the duty upon arrival in the U.S. if they meet two specific conditions.” First, must have been loaded onto a vessel at the port, and Second, the exception will only be applicable if the importer certifies to U.S. Customs as specified in the Federal Register notice. This is where Customs Brokers earn their keep.

02-04-25: “LeMonde paints grim picture of bicycle industry in Taiwan.” BIKE europe: “Any frequent visitor of bicycle industry factories in Taiwan, has seen that a lot of the workers come from countries like Philippines, Vietnam, Thailand or Indonesia. Often the signing in the factories is multi-lingual to facilitate the foreign workers. In a recent publication, LeMonde Diplomatique reports that they have found indicators of forced labour according to the International Labour Organisation (ILO), particularly in the Taiwan bicycle industry. According to LeMonde, debt bondage, passport retention, abusive living conditions, withheld wages, threats and intimidation have been common practice. It is certainly not the first time that the bicycle industry in southeast Asia is accused of these practices. The UK newspaper Telegraph uncovered labour abuse allegations at Shimano’s manufacturer Kwang Li in Malaysia in late 2023, prompting the Japanese component manufacturer to instigate an investigation. Over the past years, the Danish investigative journalist Peter Bengtsen and his team conducted over 200 interviews with migrants employed by Taiwanese manufacturers, several dozen of them in the bike industry, for the publication in LeMonde. ‘One thing stands out: risking debt bondage is the rule not the exception. Almost everybody we spoke to said they had to pay recruiters back home to get jobs in Taiwan,’ writes Bengsten. Some companies have admitted to shortcomings and promised improvements” HPS Analysis: LeMonde Diplomatique is an investigative European publication that uncovered and reported the abuse of guest workers employed by Taiwanese manufacturers and assemblers in the bicycle industry. This is a sad reminder that the U.S. companies and brands purchasing in Taiwan and all of Asia need to do their due diligence and arrange for regular audits of their sources to insure applicable labor laws and other applicable national and international regulations are being followed. This also applies to regular audits of quality assurance policies and procedures, including record keeping, reporting and resolution of any quality problems or issues.

02-04-25: “Tariff squeeze: Retailers need a new playbook.” CHAIN STORE AGE CSA: “Tariffs are returning to the forefront of global trade policy, and whether retailers acknowledge it publicly or not, they are already running the numbers behind closed doors. As the new administration settles into office with a clear intent to level trade imbalances, the retail industry faces a familiar but heightened challenge. These tariffs will raise costs at multiple points in the supply chain, adding pressure to an already fragile ecosystem. The retailers that adapt by rethinking sourcing, logistics and operational efficiency will be the ones that remain competitive. Many industry leaders still view tariffs as political bargaining chips rather than long-term economic policy. But what’s clear is that new trade barriers will have a direct and immediate impact on pricing, inflation and consumer behavior. The specifics of the upcoming tariff structure remain uncertain, but one shift is already emerging: duties may no longer be based on where a product is assembled, but where its raw materials originate. That means a retailer that once avoided tariffs by moving final production from China to Vietnam or India may no longer have that option if the fabric, semiconductors, or other key components still originate from China. This change forces companies to rethink their sourcing strategies from the ground up. The retail sector is no stranger to supply chain disruptions — COVID-19 made sure of that — but the scale of adjustment required this time is very different. Moving an assembly line is one thing. Rebuilding an entire supply chain from raw materials onward is a multi-year challenge, one that requires foresight, capital and strategic partnerships. Get Lean or Pass the Cost on to the Consumer.  Retailers face an unenviable set of choices. They can absorb rising costs, cut into already thin margins, and hope competitors do the same. They can pass those costs on to consumers, risking a loss in demand. Or they can overhaul their supply chains, a move that carries immediate risks but could strengthen their long-term resilience. Many companies are now running ‘what-if’ scenarios to gauge their exposure. If tariffs hit all categories equally, apparel brands will face some of the steepest challenges, given China’s dominance in textile production. Electronics, pharmaceuticals, and consumer durables are in a similar position, with critical components still heavily reliant on Chinese supply chains. Unlike discretionary goods, where consumers can delay purchases, essentials like medication or semiconductors leave retailers with fewer levers to pull. HPS Analysis: Bicycles, e-bikes, parts and accessories all fall within this overall scenario and HPS is advising clients to take the tariff probabilities seriously and assemble teams of staff to define and run the ‘what-if’ scenarios to determine potential sourcing, product cost and delivery scenarios. Monitor the proposed changes in U.S. tariffs and plan accordingly. Include marketing and sales and where affordable conduct primary consumer research to get feedback on possible consumer price changes.

02-05-25: “It's time for bike companies to pay you to sell their bikes.” Bicycle Retailer and Industry News: “Why are you inventorying bicycles and going to the bank to borrow money for your bicycle manufacturers? I have been in this business in all forms for over 60 years and things have really changed, and all of us must change. The bicycles you sell today are not Schwinn Stingrays that cost less than $100 each. You are now inventorying bicycles that range in the hundreds or thousands of dollars and can be outdated whenever a new part comes into the supply chain. You must look at the big box retailers like Best Buy, Walmart and Target to see the solution to this terrible financial and inventory problem. They call it slotting, which means the manufacturer pays a fee to put their toaster or flat-screen TV in your store for a monthly or yearly fee. The manufacturer provides point of sales supplies or video displays and pays you a fee for the floor space (slot,) which is deducted from your purchases or paid up front. As an agent for this company you carry a small inventory for people to touch or buy.” (From an Opinion Piece by Bob Lickton, Lickton Supply Corp. and published by BRAIN.) HPS Analysis: Taking merchandise on consignment that only gets paid for after it has been sold to a consumer became more common during COVID, and Bob Lickton is now proposing “slotting” as commonly practiced in the mass merchant and grocery channels of trade. Brands pay the retailer for the shelf or display space to get their merchandise in the retailers stores with the “slot” fee paid upfront or built into the product cost. This may seem radical – but the current economic and market conditions call for changes in inventory turnover and merchandising. 

02-05-25: “Non-electric bike imports increased 17 percent ast year.” Bicycle Retailer and Industry News by Steve Frothingham: “After steep declines in 2022 and 2023, the number of non-electric bikes imported last year increased 16.7 percent to 11.1 million units, according to import statistics released Wednesday. While the number of bikes imported increased, the value of those bikes declined 14 percent as the average imported value per bike declined steeply, from $126 in 2023 to just $93 last year. What about e-bikes? It's difficult to track imports of them because the U.S. does not have single HTS import code for e-bikes. Instead, they share codes with electric motorcycles and other electric cycles. Several independent groups estimate the number of e-bikes imported and sold, sometimes accessing shipping manifests and identifying containers by context, a cumbersome and inexact process. HPS Analysis: Steve Frothingham did his usual great job of reporting the facts that shows non-electric bike imports did increase 17 percent 12 months year-to-date 2024 over the same period in 2023. However, the 10,627,388 total non-electric bike imports in 2024 is still the second lowest year for so called acoustic bike U.S. imports in the last 24 years. The 2000 total was 20,473,848 and 2022 was 12,903,296. I talked to Frothingham at the CABDA Midwest Expo and he pointed out to me that some of the analysts following the import data have been deducting 19-inch wheel and smaller acoustic bikes because these lower value “kids” bicycles have been increasing as a share of total imports. For 2024 BRAIN reports 4,628,647 kids bicycles imported in 2024, or 43 percent of the annual total and an increase over the two previous years. Take a look at your March print issue of BRAIN for three-years comparisons of acoustic bike imports. Also, our March newsletter will cover HPS’s analysis of actual acoustic bike imports for the last 25 years in units and total and average unit FOB value with LEVA estimates for e-bikes and the combined estimated units and FOB value for U.S. imports for each year from 2000 to 2024. 

02-05-25: “Strategies for navigating tariffs.” Chain Store Age CSA: “Navigating the turbulent waters of tariffs can be daunting for retailers, but they can benefit significantly from effective scenario planning and cost management strategies. The key is to be proactive by anticipating various tariff impacts through robust planning and agile responses. Retailers must engage in comprehensive scenario planning to tackle potential tariff challenges head-on. To start, they should identify key uncertainties that could impact their business, like fluctuating tariff rates on product categories, changing trade agreements, and varying levels of consumer demand. For example, tariffs might push companies to reconsider their supply chains, weighing the risks of disruptions against geopolitical and cost factors. Developing plausible scenarios from these uncertainties, such as unchanged tariffs or significant increases across various categories and countries, allows retailers to assess potential business impacts regarding costs, pricing strategies, sales volumes, profit margins, and competitive positioning … Adopting agile inventory management will also be critical in order to avoid high-tariff inventory bottlenecks. Managing costs in a tariff-driven market requires both strategic planning and professional execution. For some retailers, optimizing supply chains manually by diversifying supplier bases or negotiating directly for better terms could be a good start.” HPS Analysis: This is the second article this month intended to provide guidance to retailers in crafting strategies and business plans or navigating tariffs. HPS notes that “scenario planning” or “what-if” planning is prominent in the advice, along with cost management strategies and financial planning. Developing “plausible scenarios” or best guesses are keys and Steve Bina’s article on Key Performance Indicators (KPI’s) provides guidance on the most important financial indicators to monitor frequently from your financial and/or POS system. HPS is advising suppliers and bike shops to be proactive in planning and adjusting and calibrating their businesses to account for tariffs and other potential financial changes impacting consumer buying habits. HPS urges retailers to include the circular economy, or used bicycles in their product assortment, marketing and merchandising.

02-06-25: “velofix expands with new franchise location: introducing velofix South Chicago.” Bicycle Retailer and Industry News: “velofix, North America's largest fleet of mobile bike shops, is excited to announce the grand opening of its new franchise, velofix South Chicago, which will be serving customers across the south and west suburbs of Chicago. This new expansion will provide high-quality, convenient, and personalized bike maintenance and repair services to residents in communities including Aurora, Geneva, Naperville, Bolingbrook, Hinsdale, Wheaton, Downers Grove, Oak Brook, Burr Ridge, and the surrounding areas. The new velofix South Chicago franchise is owned and operated by an experienced team of cycling professionals.  Owner William Edwards is a lifelong cycling enthusiast, a non-profit executive, and a combat veteran of the war in Iraq. Rider Service Technician Keith Heatherly is a native of Naperville, with more than a decade of experience as a bicycle mechanic and shop manager. Their fully-equipped mobile bike shop will travel directly to customers' homes or workplaces, offering a full range of bike services including tune-ups, repairs, custom builds, and more. With velofix’s commitment to convenience, cyclists from Aurora to Burr Ridge can now access expert bike services without ever having to leave their home or office.” HPS Analysis: HPS has monitored chatter about establishing more bike shops in Chicago’s South Side neighborhoods and the Velofix announcement is welcome. It still doesn’t embrace the South Side of the city of Chicago, within the geographic boundaries of the city itself. Bicycling, as a sport, isn’t helping the overall retailing of bicycles, and there are bike shops that can increase their revenue by changing their attitude and opening their minds to bicycles for transportation, recreation, and family activities, and welcome bicyclists of all genders, ages and ethnicities. A good friend of mine who has been in the bicycle business for over 40 years, recently told me that one of the greatest problems our industry has is being unpleasantly proud and behaving as if we know more than other people. If our industry and business is going to rise up and move forward again, it has to drop the attitude and actively reach out to and welcome everyone as a customer or potential customer.

02-07-25: “Trump brings back the de minimis loophole for China shipments, for now.” Bicycle Retailer and Industry News by Steve Frothingham: “President Donald Trump on Friday reversed the step he took on Monday to close the de minimis loophole, which allows packages valued at less than $800 to enter the U.S. duty free. An executive order said the loophole will be closed again when the Secretary of Commerce notifies the president that ‘adequate systems are in place to fully and expediently process and collect tariff revenue applicable pursuant to subsection (a) of this section for covered articles otherwise eligible for de minimis treatment.’ Trump announced the de minimis reform last weekend, to take effect Tuesday morning, along with new tariffs on Chinese, Canadian and Mexican goods entering the U.S. On Monday he delayed the Mexico and Canada actions by 30 days following discussions with the leaders of those countries. Members of the bike industry have long lobbied to close the loophole because it allows overseas e-commerce vendors to undersell domestic retailers whose goods are subject to duties and taxes. In recent years the industry has also opposed de minimis on safety grounds because of unregulated low-cost e-bike batteries that can be shipped from China or elsewhere.” HPS Analysis: We are getting closer to eliminating the de minimis exemption, and for a brief period it was gone, until the administration was informed by Customs and Border Protection (CBP) and the U.S. Postal Service (USPS) that they were totally unprepared to deal with the inspection and collection of applicable duties on the millions of small packages that enter the U.S. on a daily basis. Even though de minimis is back, the most likely scenario is that CBP and USPS will get the inspection and tariff payment issues hammered out within the next four to six months and the ‘de minimis rule’ will be history, eliminating a major source of uncertified, hazardous midsize lithium-ion batteries and low-cost e-bike entering the U.S.

02-07-25: “Trump says he plans reciprocal tariffs, will affect everyone.” Bloomberg: “Trade wars, tariff threats and logistics shocks are upending businesses and spreading volatility. President Donald Trump said he plans to unveil reciprocal tariffs next week in a major escalation of his trade war with U.S. economic partners. Trump made the announcement during a meeting with visiting Japanese Prime Minister Shigeru Ishiba on Friday and said the action would affect ‘everyone,’ without specifying exactly what measures he plans to take. ‘I’ll be announcing that next week — on reciprocal trade — so that we’re treated evenly with other countries. We don’t want any more or any less,’ Trump told reporters in the Oval Office, adding that he planned to hold a press conference on the matter. He said he planned to hold a meeting on the issue Monday or Tuesday. At a White House press conference later on Friday Trump suggested that the reciprocal tariffs could come in lieu of the 10-20 percent universal import duty plan at the center of his economic message during the campaign. He said he was inclined to do ‘mostly’ reciprocal tariffs over global import duties.” HPS Analysis: This is the first of three articles about “reciprocal tariffs.” HPS feels it is important for its readers to understand this change in U.S. policy relative to the imposition of import tariffs. While it is still not clear how reciprocal tariffs may affect or replace the Section 301 tariffs, it does seem probable that reciprocal tariffs will replace the 10 percent additional tariff that has been imposed on U.S. imports from China. As Steve Frothingham explains in the 02-13-25 BRAIN article below, reciprocal tariffs start with the tariff rate another country is imposing on U.S. goods imported into that country. As an example, Vietnam currently has a 55 percent tariff on e-bikes imported from the U.S. The U.S. will now impose a 55 percent import tariff on e-bikes imported into the U.S. from Vietnam. This becomes very problematic. First, there is no e-bike market nor interest on the part of U.S. e-bike brands in selling their products in Vietnam. Second, some U.S. brands have moved their bicycle and e-bike manufacturing to Vietnam to avoid the Section 301 25 percent and additional 10 percent tariff imposed by the U.S. on imports from China. Under the reciprocal tariff scenario the U.S. imports of e-bikes from Vietnam will increase to 55  percent from zero. In addition, the U.S. will take into account “equivalent” financial charges that Vietnam imposes, like Value Added Tax (VAT), and add this to the reciprocal tariff. In theory some countries have zero or low import tariffs on bicycle and e-bikes imported from the U.S. that may result in lower reciprocal tariffs, and we will have to wait to see how the U.S. Special Trade Representatives office and the Commerce Department classify trading partners.  

02-13-25: “Trump could impose reciprocal tariffs as soon as April.” Bicycle Retailer and Industry News by Steve Frothingham: “Presidet Trump on Thursday released an executive memo instructing officials to prepare to impose reciprocal tariffs on a global basis as soon as April 2. Under Trump's plan, the U.S. would adjust its import duties on a product-by-product basis to match every nation’s tariff on the same U.S. products. That would cause significant increases in the tariffs on some bike products because some (but not all) of the largest supplier nations to the U.S. bike industry currently have relatively high tariffs on the books for U.S. bikes, e-bikes, and related products, even if those nations rarely or never import U.S. bike products. Notably Vietnam, where many brands have relocated production in recent years as an alternative to China, has a 45 percent tariff on U.S. bikes and a 55 percent tariff on U.S. e-bikes. If reciprocal tariffs were imposed, the U.S. tariff on Vietnam-made bikes would become almost exactly the same as the current tariffs on Chinese bikes.” HPS Analysis: HPS urges readers to go to the BRAIN website and read and download this article. Check with your customs brokers and make sure your search engines are alerting you to announcements about “reciprocal tariffs.” As we noted above, the U.S. administration is defining “reciprocal tariff” as inclusive of any additional charges, like value added tax (VAT) that the United States Special Trade Representative (USTR) and or the administration considers to be equivalent to reciprocal tariffs. If you have the resources, compile a list of the import tariffs currently imposed by the countries you currently import from on their imports of U.S. bicycles, e-bikes and parts and accessories. Also include any additional fee or charges like VAT that might be considered an “equivalent” to a reciprocal tariff. With such a list you can do scenario planning in preparation for any possible re-sourcing that you will have to make to maintain some stability in product landed cost.

02-14-25: “White House rolls out plan focused on implementing reciprocal tariffs.” Logistics Management: “In its most recent tariff-related action, the White House late yesterday issued a memo to various federal agencies and offices, entitled ‘Reciprocal Trade and Tariffs.’ The memo was sent to the Secretaries of Treasury, Commerce, Homeland Security, the Director of the Office of Management and Budget, the United States Trade Representative, the Assistant to the President for Economic Policy, and the Senior Counselor to the President for Trade and Manufacturing. In the memo, the White House explained that the United States has one of the most open economies and has among the lowest average weighted global tariff rates, coupled with the U.S. imposing fewer barriers to imports than major economies in other nations. It added that the U.S. has been treated unfairly by its trading partners, with the lack of reciprocity contributing to the annual U.S. trade deficit. To that end, President Trump said in the memo that the U.S. will roll out the ‘Fair and Reciprocal Plan,’ in which the White House will: ‘work strenuously to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.’ “ HPS Analysis: While there is an argument that annual trade deficits are not relevant, the fact remains that the current administration is targeting trade partners with which the U.S. has significant trade deficits. At the end of the day HPS believes that reciprocal tariffs and equivalents of a reciprocal tariff will result in further harm to the American bicycle business in the form of increased cost and unfair trade. It will be months before the uncertainty and confusion begin to clear up to the point that plausible probabilities will emerge from the scenario planning, which will need to proceed based on the facts that emerge from the inevitable chaos that will begin in April.

02-18-25: “Uncertainty for U.S. bicycle imports despite 2024 turnaround.” BIKE europe: “As the world awaits a year of tariffs and tussles, there was good news for the bicycle market in the U.S. in 2024. The number of non- electric bicycles imported into the country rose again following sharp declines since 2021, the latest U.S. customs data shows. However, with China as the leading supplier, the market remains uncertain. With over 11 million units imported in 2024, this is a 17 percent year-on-year increase. True to form, the bulk of these imports came from China, with a market share of 85 percent in volume. However, when looking at the value of imports, this dropped 14 percent to a total import value of just over U.S. $1 billion (€950 million). This is compared to a ‘COVID-high’ in 2022 at just over $2 billion (€1.9 billion).” “What lies in store for US imports in 2025? As a result of the new administration’s policies, the international trade landscape has become, and will remain, increasingly turbulent,’ stated the U.S. industry association, PeopleForBikes. ‘We recommend that bicycle manufacturers and importers review their supply chains and assess vulnerability to tariffs on imports from Canada, Mexico, and China. Manufacturers should also consider the likelihood that retaliatory tariffs may impact exports to these countries.’ HPS Analysis: This article was published several days ago, and the administration introducing reciprocal tariffs and equivalent reciprocal tariffs has added another layer of turbulence and uncertainty. HPS opined in our analysis to an earlier article that the Chinese have outflanked the U.S. and we stand by that statement. While the turmoil created by the huge shift to reciprocal tariffs has been caused by the new administration, the fact remains that this change may actually enhance the position of the new Chinese brands in their advance into the American bicycle and e-bike market by making other source counties, like Vietnam, less to much less viable going forward. Tariffs, starting with the Section 301 punitive tariffs, have left the U.S. bicycle business without much-needed protection, care or support that established and new Chinese brands are already taking advantage of. The Chinese standards and regulations affecting the manufacture of e-bikes and mid-format lithium-ion batteries are now superior to American standards and testing and certification is being done by N.R.T.L.’s (Nationally Recognized Testing Labs) where the established American, European and Taiwanese brands are undercutting uniform regulation and compromising the UL standards and following a path of least resistance, claiming they can’t afford N.R.T.L. testing and certification. The bottom line is the new Chinese brands are offering U.S. dealers 40 gross margin points on 50 or less unit commitments. The American bicycle business and market are at an inflection point that will determine market response to the administration’s tariffs, the shifts and changes in channel and brand market share and the whole of the merchandise mix.

02-19-25: “Trump claims expanded power over independent agencies.” National Public Radio npr: “President Trump on Tuesday signed an executive order to give the president greater power over independent regulatory agencies, government entities Congress set up to be shielded from White House control. Well-known independent regulatory agencies include the Consumer Product Safety Commission, which issues recalls and safety warnings; the Securities and Exchange Commission, which oversees markets; and the Federal Deposit Insurance Corporation, which insures bank deposits. Trump's order specifically exempts the Federal Reserve's Board of Governors and Open Market Committee. The Federal Reserve, which sets monetary policy, is intentionally designed to be independent from the whims of electoral politics, a separation considered central to its ability to stabilize the economy. The order calls for the affected agencies to submit any new regulations to the White House, set up White House Liaison offices, and "regularly consult with and coordinate policies and priorities" with the White House. In claiming this new power over agencies, the order also gives the president and attorney general the sole abilities to interpret laws for the executive branch. The order stands as yet another example of Trump's pushes to aggressively expand executive power.” HPS Analysis: The American bicycle business badly needs an updated mandatory bicycle safety regulation that incorporates e-bikes and mid-size lithium-ion batteries. On February 4 the Setting Consumer Standards for Lithium-Ion Batteries Act was introduced by a bipartisan group of senators and representatives. The bill would require the Consumer Product Safety Commission (CPSC) to publish a final consumer product safety standard for rechargeable lithium-ion batteries used in e-bikes and other micromobility devices to protect against the risk of fires caused by such batteries within six months of the legislation being signed into law. The executive order giving the president greater power over independent regulatory agencies, including CPSC, requires setting up a White House Liaison office and regularly consulting and coordinating with the White House. HPS urges the U.S. bicycle business and our readers to actively lobby their senators and representatives for passage of this legislation and the White House for approval for a new, mandatory bicycle, e-bike and lithium-ion safety regulation that will preempt the growing number of municipal and state laws that are creating conflicting, and in some cases, inferior requirements. 

02-19-25: “U.S. Fed warns Trump's tariffs may increase prices.” BBC Business News: “American shoppers may face higher prices if U.S. President Donald Trump goes ahead with some of his proposed tariffs, the U.S. central bank has warned. Minutes from the Federal Reserve's January meeting released on Wednesday revealed members of its committee believe Trump's policies might ‘hinder the disinflation process.’ ‘Business contacts in a number of districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs,’ the minutes said. The release of the comments comes as the Fed faces criticism from Trump for not cutting interest rates sooner after leaving rates unchanged in the January meeting. The Fed minutes also revealed ‘elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies. A couple of participants remarked that, in the period ahead, it might be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of new government policies,’ the minutes added. The Fed minutes also showed the central bank's readiness to hold rates steady amid stubborn inflation and economic-policy uncertainty.” HPS Analysis: From time-to-time HPS has referred to the Federal Reserves (Fed) meeting minutes and press releases about inflation, interest rates and the U.S. economy. Throughout this month’s newsletter there is a constant theme of uncertainty and concern that tariffs will fuel inflation and drive-up prices paid by American consumers. We have also presented the question of whether tariffs will cause bicycle and e-bike prices to increase. HPS feels the Fed represents an objective and fact-based nonpartisan authority that objectively presents its best projection to American business and consumers.

Contact Jay Townley: jay@humanpoweredsolutions.com