TARIFF SWINGS, ECONOMIC LEADERSHIP CRISIS, AND DEATH TO DE MINIMIS

By Jay Townley

05 09 25: “Mark Carney warns the 80-year period of U.S. economic leadership ‘is over’ — says America is no longer the anchor of global trade.” Moneywise: “‘The system of global trade anchored on the United States … is over,’ Carney said during the recent announcement. ‘The 80-year period when the United States embraced the mantle of global economic leadership … is over. While this is a tragedy, it is also the new reality.’ As the former head of both the Bank of Canada and the Bank of England, and an Oxford-Harvard trained economist, Carney certainly has the experience needed to help Canada navigate this new reality. But his stern warning is rippling far beyond Canadian borders. According to the BBC, world leaders, including EU Commission Chief Ursula von der Leyen and Japan’s Prime Minister Shigeru Ishiba, say the ongoing trade war will have dire consequences for millions of people across the world, and undermine the global trading system. “The U.S. isn’t just the largest economy in the world, it’s also the largest consumer of goods and services. In 2023 alone, the U.S. imported goods worth $3.17 trillion in aggregate, according to Visual Capitalist’s coverage of World Trade Organization data. China, the second-largest economy in the world, is a net exporter, according to the Financial Times. As a result, the global economy heavily relies on American consumption, and any trade barriers, such as tariffs or embargoes, could have severe consequences for nearly every country.” HPS ANALYSIS: As serious as the end of U.S. global economic leadership is, it is also thought-provoking from a historical perspective. A few of us have lived through the 80-year period Mark Carney refers to, starting in 1946, and the end of World War II. The European economy was devastated, and the Marshall Plan, formally the European Recovery Program (1948–51), the U.S.-sponsored program to rehabilitate the economies of 17 European nations, set the world stage for not only economic recovery in Europe and Asia but also a global ecosystem and marketplace. Starting with imported componentry (late 1958-1990) the American bicycle industry found higher profitability, dependable quality, and reliable manufacturing in exchange for production know-how, distribution, and marketing in partnering with global OEM sourcing, starting with the bike-boom (1971-74), leading to total outsourcing (1990-2025). U.S. import tariffs have disrupted the economics of globalization of the sourcing and ended the 80-year history of the post-WWII American bicycle business. This new reality will force the American bicycle business in different and challenging directions, some of which haven’t been imagined yet.   

05 12 25: “Giant Group reports significant rebound in OEM orders.” Bike Europe: “Giant Group made a remarkably good start to the year with a year-on-year consolidated revenue increase of 4.9 percent to NT$16.85 billion (€496 million). According to the Giant board of directors, this growth can be attributed to a significant rebound in OEM orders. In terms of its own brand sales, Q1 revenue was relatively moderate due to a high base from China’s domestic market in the previous year. Nonetheless, cycling remains popular in China, and with demand in the Giant Group U.S. and Europe markets gradually recovering, the upcoming peak season is expected to drive stronger sales in Q2 and Q3. Giant Group gave out a positive forecast for 2025 earlier this year, and that turned out to be a pretty accurate prediction. Very strong growth in February: In the first quarter of 2025, gross margin rate stood at 17.8 percent, while operating profit reached NT$0.42 billion (€12.4 million), a decrease of 21.7 percent. Net profit before tax was NT$0.49 billion (€14.1 million), down 40.4 percent compared to the same period last year. Net profit after tax totalled NT$0.37 billion (€10.1 million), reflecting a year-over-year decline of 29.3 percent. The optimistic outcome was already reflected in the monthly development of the revenue. February in particular turned out to be positive with a revenue growth rate of 30.9 percent to NT$5.4 billion, while the results showed a small decline in January (-2.2 percent) and March (-5.3 percent). Ongoing trade war: Despite ongoing uncertainties related to global tariffs, trade tensions and exchange rate fluctuations, Giant Group has responded with caution and resilience. Leveraging its well-established global manufacturing network and strategic flexibility, Giant Group continues to optimise production across regions, mitigate external risks and seize emerging opportunities.” HPS ANALYSIS: Giant Group didn’t exist when I went to work for Arnold, Schwinn & Company in 1966. Six years later, in 1972, during the one and only bike boom (1971-1974), King Liu and Tony Lo put together the financing needed to start Giant Bicycle in Taiwan. Giant’s first U.S. customer for complete bicycles was West Coast Cycle which brought the new OEM to the attention of Schwinn, who had been purchasing accessories from Tony Lo’s trading company, SPEX. Giant Group has grown into a billion-dollar multi-national that recently installed second-generation family management in a publicly-traded manufacturing, distribution, and marketing company that is an OEM for brands worldwide, with manufacturing plants in Asia and Europe in addition to marketing and selling its own brands in 50 markets of the world. Giant Group is an example of the Taiwanese companies that started with American leadership in the bicycle business post-WWII, and over the last 53 years grew into one of the top five global players.

05 12 25: “Temporary tariff truce to trigger import surge of Chinese goods.” Sourcing Journal: “With the U.S. and China agreeing to scale back tariffs imposed on each other for 90 days, expect cargo on the trans-Pacific trade lane to kick back up imminently, facilitating an earlier peak shipping season. While import volumes into the U.S. cratered more than 35 percent at the San Pedro Bay port complex in early May after tariffs on Chinese goods escalated to 145 percent, with retailers cancelling bookings and carriers blanking sailings, the new agreement breathes new life into trade between both countries. Lars Jensen, CEO of container shipping consultancy Vespucci Maritime, expects an immediate surge in containers exiting China, which saw exports to the U.S. decline 21 percent in April due to the tariffs. ‘The 90-day pause expires in the middle of the usual peak season for holiday-related goods going to the U.S,’ said Jensen in a LinkedIn post Monday morning after the announcement was made. 'We should therefore expect a possible pull-forward of cargo, creating a shorter, sharper, peak season from basically right now.’ Jensen noted that there is ‘already a large amount of cargo ready to go’ due to the wait-and-see strategy U.S. importers have adopted over the past month. With that in mind, Chinese exporters and manufacturers have had high levels of finished goods already ready to ship. ‘With the expected surge in cargo, we should also expect that the U.S. ports, which are right now facing a massive drop in cargo volume, will in three to six weeks switch to face a surge of cargo with a substantial risk of bottleneck issues and delays as a consequence,’ Jensen said. According to Jensen, carriers will reinstate many of the blank sailings announced in recent weeks. Across April and May, blank sailings accounted for 19 percent of the total Asia-to-North America West Coast planned capacity, as well as 17 percent of Asia-to-North America East Coast capacity, said maritime advisory firm Sea-Intelligence. ‘The question is how quickly this can be done. That depends in part on where the vessels are physically,’ said Jensen. ‘How quickly this can happen will also determine to which degree there might be a short-term capacity shortage on the Pacific resulting in escalating spot rates.’” HPS ANALYSIS: This article is forecasting a dramatic surge in arrivals of container ships from China and elsewhere in South-East Asia from next week (week of June 16) and going forward for the next four to five weeks, with bottleneck issues and delays, as brands and retailers rush to get merchandise that has been stockpiled in China into the U.S. before the 90-day pause in imposition of tariffs expires, and the tariffs are back in full force and effect. In some cases, as we referenced in last month’s newsletter, the OEMs in China shut down, and some even sent workers home, so starting production from a standstill will not go smoothly, creating delays and shipping problems at the source production facilities. All in all, the rest of June and all of July will be unusually hectic, confusing, and disruptive to bicycle business suppliers,and the delivery of product will be reminiscent of the pandemic. 

05 12 25: “Vosper: Further to Bike 4.0 and dealer closures.” Bicycle Retailer and Industry News, by Rick Vosper: “I first proposed that the U.S. cycling industry had entered a new era — one I call Bike 4.0 — way back in February of 2023, and linked it to three previous eras of the bike business dating back to World War II. These I labeled Bike 1.0, Bike 2.0, and so forth. Then, in September of that year, I wrote a follow-up piece refining the model slightly and summarizing how the Bike 4.0 market is fundamentally different than anything that has gone before. This difference shows up in four different ways: 1. Dilution of the IBD and the proliferation of alternate retailing models; specifically, direct-to-consumer sales by brands like Canyon and many e-bike labels. 2. The traditional sales channel is replaced by an omnichannel sales ‘ecosystem’ where buyers can purchase bikes through any channel they choose. 3. Complementary to the previous two points, we now have direct sales to consumers by traditional bike suppliers (either through D2C or Click & Collect dealer fulfillment), and 4. Vertical integration of suppliers and retailers (bike brands literally buying retail bike shops, as opposed to bike brands merely acting as retail bike shops) by at least some of the largest industry players, as we've seen with Trek, Specialized, and the Pon group. As we come into the spring of 2025, regardless of what your personal politics may be, we are clearly in a national climate of nearly unprecedented economic uncertainty. I say ‘nearly’ because I propose that we had similar levels of turmoil during the global Great Depression of 1929–1939. To be clear, I'm old enough that my parents lived through those years, and I don't mean to suggest that times now are anywhere near as tough as they were then (at least not yet, but who knows), merely that the levels of economic chaos are comparable. As I said at the time, ‘What's different about Bike 4.0 is not the fish in the ocean, but the water in which they swim.’ And now, as the cycling industry struggles to adapt to (nearly) unprecedentedly chaotic economic conditions, one thing is certain: in the emerging market reality, ‘Business as usual’ definitely won't be.” HPS ANALYSIS: Another great article from Rick Vosper. Rick is absolutely right that there will be no such thing as “business as usual,” and you can forget about going back to the way it was. We have been trying to get the point across for months now that there is no going back, because what was doesn’t exist anymore. There is only the reality of today and the probabilities of the future, and the bicycle business and bike shops are going to have to focus on the future they can create with the tools and skills they and their community have and can bring to bear and can create from whole cloth going forward. Remember, the Wright Brothers invented the airplane in a bike shop. I do not care as much about how many bike shops went out of business as I do the question of will there be bike shops in the future to invent the next airplane. 

05 13 25: “First, relief. Then, a scramble to get stuff in after U.S. cuts China tariffs for now.” National Public Radio npr: “For Bonnie Ross, a clothing importer based in New York, news that the U.S. would temporarily cut tariffs on China came as a relief — at least for a short time. It was a great relief for about five minutes, Ross says. Then the scramble began. Ross had pulled two cargo containers off ships in China when the 145 percent tariffs took effect last month. Now she's trying to get as much merchandise to the U.S. as she can while the lower tariffs are in place. Still, she worries that other businesses will be in the same crowded boat. Now it's going to be a rush because everybody wants it out in the next 90 days, Ross says. What is going to happen to the freight rates? For business owners like Ross, a cut in tariffs on China is welcome news, but it also prolongs uncertainty. Although the U.S. and China agreed to slash the crippling tariffs they had imposed on each other, the lower import taxes are set to last for only 90 days — with no certainty of what happens afterward. The tax on Chinese imports to the U.S. will drop from 145 percent to 30 percent, while the tariff China charges on U.S. goods will fall from 125 percent to 10 percent. The remaining tariffs are still significantly higher than the U.S. was charging before President Trump launched his trade war. Getting through the next four to six weeks: Jay Foreman, whose Florida-based company makes Tinkertoys, Lincoln Logs, and other toys in China, got news of the deal at 4:30 a.m. and immediately called associates in Hong Kong to begin scheduling shipments. ‘We've been holding everything at the factories and at the ports, because we didn't want to risk putting anything on containers with a 145 percent tariff,’ Foreman says. He says a 30 percent import tax is more manageable, although at least some of that cost will have to be passed on to consumers in the form of higher prices. ‘It's a complete disruption, but obviously I'm sure everybody in the supply chain would agree it's better than it was,’ Foreman says. ‘Right now, I'm just trying to get through the next four to six weeks,’ he says. Whether I double-shift the factories to try to get more produced and out the door before the end of the 90 days, I'll probably need another three to four weeks to figure that out.’ A temporary deal is still better than none: Jonathan Silva runs a company in Massachusetts that produces high-end board games in China. He has nine containers of merchandise that he has been holding in China that he will now send to the United States. ‘We need to get product back on shelves,’ Silva says. ‘I think that we were really getting close to the tipping point of starting to see some shortages. 30 percent — it's not ideal,’ he adds. ‘I think there will be slight price increases.’ But at least Silva is no longer afraid of going bankrupt. 'Whatever the tariff landscape looks like in 90 days, Silva says he'll be exploring alternatives to manufacturing in China, including other Asian countries and the United States. ‘The past 40 days have been the hardest 40 days in all of our business's life,’ he says. ‘And I'm glad that we're going to be able to come out of it. But we don't know what's going to happen tomorrow. It's very unpredictable.’" HPS ANALYSIS: The 90-day clock is ticking, but for the American bicycle and e-bike importers the 145 percent import tariff on bicycles and e-bikes originating in China did not become 30 percent for 90-days because of the Section 301 punitive tariff of 25 percent imposed on China that wasn’t suspended for 90 days. The 145 percent import tariff dropped for 90 days to: 60.5 percent on road bikes, 66.0 percent on all other bikes, and 55.0 percent on e-bikes. That’s better than 145 percent, but still not 30 percent. The NBDA has repeatedly let members know about this situation and advised them to adjust buying strategies and retail prices accordingly. 

05 13 25: “U.S. cuts tariffs on small parcels from Chinese firms like Shein and Temu.” British Broadcasting Corporation BBC: “President Donald Trump has slashed the tariff on small parcels sent from mainland China and Hong Kong to the U.S., just hours after the world's two biggest economies said they would cut levies on each other's goods for 90 days. The new tariffs on small packages worth up to $800 (£606) have been cut from 120 percent to 54 percent, according to a White House statement. The flat fee per parcel will remain at $100, while a $200 charge due to apply from 1 June has been cancelled. Chinese online retail giants Shein and Temu had previously relied on the so-called ‘de minimis’ exemption to ship low-value items directly to customers in the U.S. without having to pay duties or import taxes. Neither Shein nor Temu immediately responded to BBC requests for comment. The duty-free rule was closed by the Trump administration earlier this month. Some shoppers told the BBC that they rushed through purchases ahead of that deadline. The latest rates came after the U.S. and China released a joint statement announcing they would temporarily reduce their tit-for-tat tariffs and start a new round of trade negotiations. Share markets jumped on Monday after Trump said weekend talks had resulted in a ‘total reset’ in trade terms between the two countries, a move that went some way to ease concerns about a trade war between the two countries.” HPA ANALYSIS: This is about the infamous de minimis exception that so much has been talked and written about. In HPS's opinion, the biggest issue relative to the bicycle and e-bike business has been the importation of low-cost, hazardous lithium-ion replacement batteries valued at $800 or below that bypassed U.S. Customs and Border Protection without paying import duty or any inspection, and were delivered directly to the purchasing consumer. There has been a lot of chatter about complete e-bikes entering the U.S. under the de minimis exception, but HPS believes no appreciable quantity of complete e-bikes entered the U.S. via de minimis. However, it doesn’t matter now, because de minimis is now dead, and this loophole is finally closed.

05 14 25: “Hapag-Lloyd: China-to-U.S. volumes surge 50 percent since tariff rollback.” SOURCING JOURNAL: “Hapag-Lloyd is seeing a surge in container volumes on the China-to-U.S. trade lane after the countries agreed to lower their respective tariffs for 90 days. Bookings from China to the U.S. shot up 50 percent compared to the week prior, according to Rolf Habben Jansen, CEO of Hapag-Lloyd, in an earnings call Wednesday morning. Additionally, import bookings are up ‘in double-digit percentages’ compared to the pre-tariff period, he said. While Hapag-Lloyd doesn’t expect the 50 percent increase to hold up, Habben Jansen said he expects to see ‘a little bit of a surge’ in volume over the next 60 to 90 days. Beyond that period, it would be difficult for the ocean carrier to predict volumes, which will be dependent on trade agreements the U.S. makes with China and other countries. The volume increases represent a clear reversal from before the tariff rollback, when Hapag-Lloyd saw bookings being down on average around 20 percent, with peaks up to 30 percent in recent weeks. Some of that dip was compensated elsewhere by additional volume from Southeast Asia, Habben Jansen said. With the swift return of cargo to the trans-Pacific trade lane, Hapag-Lloyd’s Gemini Cooperation with Maersk is going back on its original vessel swapping plans to further align with the capacity on the route. ‘We deployed some smaller ships on the trans-Pacific instead of doing blanks in order to continue to offer those weekly sailings. Now we will reverse that, and that means that we will, as of next week or the week after next, go and deploy bigger ships again in the positions where we have put smaller ones in over the last couple of weeks,’ Habben Jansen said. I expect that people who have put blanks into their schedules, as the quarter progresses, will continue to put ships and services back in. Blank sailings had been the calling card for many carriers in the wake of the 145 percent tariffs on imported Chinese goods, but Hapag-Lloyd and Maersk opted not to take that approach. In the wake of the change in volume, Habben Jansen said he doesn’t expect congestion to overwhelm the ports, but remained wary about them accepting too many extra ships in the coming weeks. Like other industry experts, the CEO expects at least a brief increase in ocean spot freight rates on the elevated U.S. imports. ‘More than half of the cargo we have is contracted cargo, so we will continue to move that as per contract. But of course, there are also spots that have not yet been booked because they move on short-term rates,’ Habben Jansen said. ‘If, as we see right now, demand is significantly stronger than or more than supply, then it would not be illogical if short-term rates go up.’ Amid the about-face in the trans-Pacific, the container shipping giant affirmed its full-year guidance, with company stock increasing 12 percent Wednesday. The outlook calls for total earnings before interest and taxes (EBIT) to be in the range of $0 to $1.5 billion. Total revenue for the first quarter came in at $5.3 billion, up 15 percent year over year from $4.6 billion last year. Net profit at Hapag-Lloyd increased 45 percent to $469 million.” HPS ANALYSIS: If you are a regular reader you already know HPS has little or no sympathy for the steam ship lines. They have not, in our opinion, hesitated for a nanosecond to jack up container rates at the slightest excuse or opportunity. This is one of those excuses. Container demand is expected to surge 50 percent or more over the next four to six weeks, and the cost of a spot-rate 40-foot box has increased by over 80 percent recently. These ocean freight shipping increases will be passed on to bike shops, who will have to determine how much is passed on to consumers. 

05 14 25: “Tariffs won’t reindustrialize America. Here’s what will.” Bloomberg: “To revive manufacturing, the U.S. needs to borrow from China’s playbook. American industry has certainly seen better days. Manufacturing output has never recovered to the peak recorded on the eve of the 2008 financial crisis, when the sector’s workforce was a million people stronger. The double whammy of Covid-19 and Russia’s invasion of Ukraine laid bare that U.S. factories were unable to quickly scale up production of essential goods, whether masks or munitions. Storied manufacturers such as Boeing Co. and Intel Corp. and Detroit’s automakers are beset by constant crises, while China’s national champions (companies like BYD, CATL and Huawei) have been climbing from strength to strength. Glory Days: For President Donald Trump, tariffs are a cure-all to be levied on friends, foes, and penguins alike. For almost all economists, though, tariffs are quack medicine that might deliver American manufacturers into even worse agony. Building a wall around the world’s largest economy is the wrong approach. Here we present a tariff-free menu of policies that offer a surer path to revitalizing U.S. manufacturing. Study China’s playbook: China grabbed big chunks of manufacturing capacity, Trump has long alleged, by taking advantage of the U.S.. If such tactics are so effective, America should use them against its most important strategic rival. China didn’t deploy tariffs to turn itself into the world’s factory. Since the 1990s, Beijing has lowered barriers to imports while employing a suite of policies to promote manufacturing champions. Some of those measures have produced persistent complaints from its trade partners: keeping the value of the yuan artificially low, compelling foreign companies to exchange technology for market access, and suppressing wage growth in its workforce. Policymakers have also used standard industrial policy tools, such as subsidizing investments in research and development and offering tax breaks and preferential loans for manufacturers in sectors deemed strategic, such as electric vehicles and semiconductors. To industrialize, China deployed two particularly effective measures that the U..S. should copy. First, it invited foreign investment. European carmakers were among the first to troop in during the 1980s. American companies followed through the 1990s, and especially after China’s accession to the World Trade Organization in 2001. More recently, Apple Inc. and Tesla Inc. have made gigantic investments in Shenzhen, Shanghai, and other cities. Today, foreign companies produce almost one-third of China’s exports. In comparison, the U.S. has dedicated less effort to attracting foreign investment, relying on attributes such as its huge market size, strong rule of law, and sound currency as sufficient incentives. The multibillion-dollar chip factories that Taiwan Semiconductor Co. and Samsung Electronics Co. are putting up in the Southwest are a good start, but the U.S. should lay out the welcome mat for Chinese technology leaders, too. Instead, at various levels, the U.S. government has mostly stymied efforts by Chinese companies to produce EVs or their batteries stateside. That’s a mistake. Four decades ago, American automakers benefited from knowledge spillovers from Japanese competitors building auto plants in America. The same could happen again with Chinese companies. Another thing America should copy from China is its network of giant industrial hubs. Shenzhen is the world’s center of electronics production because a tremendous amount of process knowledge is concentrated there. That’s represented by a large and flexible workforce able to make smartphones, drones, robotics, or the next valuable product. The trend in the U.S. has been the opposite, with onetime industrial hubs dissipating across the country. Detroit no longer deserves to be called the Motor City, and Silicon Valley doesn’t turn out many microprocessors these days. American companies have tended to spread out their investments to have a presence in multiple congressional districts. The goal: to expand their influence in Washington and play one locale against another in a competition for investment incentives. Instead, policymakers and businesses need to work together to build concentrated industrial hubs where knowledge can circulate among workers, entrepreneurs, investors, and academics, the way it once did in Detroit and Silicon Valley.” HPS ANALYSIS: This is a very important subject for the American bicycle business and, particularly specialty bicycle retailers to understand. This is the reason it has received so much coverage, and HPS hopes you not only read the excerpt above, but reach out to read the whole article. In addition to Studying China’s Play Book, noted above. Item 2 is “Create new manufacturing paradigms,” and item 3 is “Preserve American strengths.” Bringing bicycle and e-bike manufacturing back to the United States isn’t going to be simple or easy to accomplish, but it can be done. HPS believes Americans will have to partner with Asians, probably Taiwanese and/or Chinese, who are already in the business of manufacturing bicycles and e-bikes, to have any chance of getting it done. If you can’t find the complete article, contact me and I will send it to you: jay@humanpoweredsolutions.com.

05 15 25: “Merida and Ideal report significant Q1 sales growth.” BIKE EUROPE: “The bicycle industry is starting to gain some traction again after two years of standstill. Taiwan's manufacturers are now starting to report increased earnings for the first quarter of this year. Profit margins remain under pressure, suggesting that OEMs are making significant efforts to revive market activity. Mixed voices were already heard about the state of affairs and future of the industry at the 2025 Taipei International Cycle Show. The publication this week by Merida Industry Co., Ltd. and Ideal Bike Corp., and earlier by Giant Group, shows the industry has made a good start to the year 2025. Merida reported that revenue for the first quarter ended March 31, 2025 ended at TWD 7.57 bln (€224 million), up 29 percent compared to TWD 5.85 billion (€173 million) a year ago. Net income for the bicycle manufacturer was TWD 418.53 million (€12.3 million) compared to TWD 415.77 million €12.4 million) in the first quarter of 2024. The diluted earnings per share increased slightly from TWD 1.39 (€0.04) to TWD 1.4 (€0.04) over the past year, indicating a small improvement in profitability from the company’s ongoing operations. Unlike Giant Group, Merida saw a hike in consolidated revenue in all three months. In January, consolidated income was up 59 percent, in February 37.6 percent, and in March 7.3 percent. Ideal revenue: For Ideal, which was still battling last year with the remaining effects of the 2023 insolvencies of two of its major customers, Advanced Sports GmbH and VanMoof, 2025 started particularly good. The company reported sales in the first quarter were TWD 743.88 million (€12.7 million) compared to TWD 627.45 million (€18.5 million) a year ago. Net loss was TWD 70.64 million (€ 2.1 million) compared to TWD 21.36 million (€631,000) a year ago. Over the whole of 2024, Ideal reported a loss of TWD 232.95 million (€6.48 million). For Q1-2025, diluted loss per share from continuing operations was TWD 0.22 compared to TWD 0.07 a year ago.” HPS ANALYSIS: Merida is the number two public company headquartered in Taiwan, and Ideal is number three. Both are multi-nationals with global manufacturing, and both will be influential in determining the future of global bicycle and e-bike manufacturing in the United States going forward. They possess the skill sets, the capital, and access to the capital to firmly establish robust manufacturing presences, along with Giant Global Group, the number one public company also headquartered in Taiwan.

05 16 25: “Moody's downgrades U.S. credit rating citing rising debt.” BRITISH BROADCASTING CORPORATION BBC: “The US has lost its last triple-A credit score from a major ratings firm after being downgraded by Moody's, which cited growing federal debt over the past decade. In lowering the U.S. rating to 'Aa1', Moody's noted that successive U,S, administrations had failed to reverse ballooning deficits and interest costs. A triple-A rating signifies a country's highest possible credit reliability and indicates it is considered to be in very good financial health with a strong capacity to repay its debts. Moody's warned in 2023 that the U.S. triple-A rating was at risk. Fitch Ratings downgraded the U.S. in 2023, and S&P Global Ratings did so in 2011. The downgrade reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns, Moody's said in the statement. A lower credit rating means countries are more likely to default on their sovereign debt, and generally face higher borrowing costs. Moody's maintained that the U.S. ‘retains exceptional credit strengths such as size, resilience, and dynamism, and the continued role of the U.S. dollar as the global reserve currency.’” HPS ANALYSIS: The U.S. losing its triple-A credit score goes hand-in-hand with America no longer maintaining the economic balance to be the anchor of global trade. The lowering by Moody’s, which is one of a number of global entities awarding Sovern credit ratings, won’t make an immediate noticeable difference in global finance or trade, but it is the beginning of America stepping back from its global economic leadership.

05 16 25: “Walmart is raising prices as tariff-hit products reach the retail giant’s shelves.” The Wall Street Journal Logistics Report: “The WSJ’s Sarah Nassauer writes some prices are already higher. Bananas are now 54 cents a pound, up four cents, with more increases to come this month and early this summer. Other retailers will likely follow Walmart, which counts 90 percent of Americans as customers, and is the largest company yet to signal that tariff-related price hikes are coming. Many companies raced Chinese-made products across the Pacific to get ahead of the new duties, which delayed the full effect of the levies on retailers’ pricing. This week’s temporary deal with China brought the base tariff to 30 percent from 145 percent, but this would still lead to meaningful price increases for most consumers, Walmart said. The Commerce Department said consumer spending rose slightly last month, with the pace of growth easing as trade concerns weighed on purchases. Walmart said its customers continued to shop cautiously as they have for the past few years, as groceries and child care grew more expensive. It didn’t share a profit forecast for the current quarter, but, unlike many other companies, Walmart stood pat on its cautious sales and profit forecasts for the full year.” HPS ANALYSIS: Walmart is the largest retail merchant in the United States, and the largest retailer of bicycles. It is also the largest employer. Letting the public and its customers know that it is “…raising prices as tariff-hit products” reach its shelves is honest, and I think Mr. Sam would approve. It also took courage. Why? Just read the next article.

05 17 25: “Trump warns Walmart: Don’t raise prices due to my tariffs, but do eat the costs from those taxes.” ASSOCIATED PRESS AP: “President Donald Trump on Saturday ripped into Walmart, saying on social media that the retail giant should eat the additional costs created by his tariffs. As Trump has jacked up import taxes, he has tried to assure a skeptical public that foreign producers would pay for those taxes and that retailers and automakers would absorb the additional expenses. Most economic analyses are deeply skeptical of those claims and have warned that the trade penalties would worsen inflation. Walmart warned on Thursday that everything from bananas to children’s car seats could increase in price. Trump, in his Truth Social post, lashed out at the retailer, which employs 1.6 million people in the United States. He said the company, based in Bentonville, Arkansas, should sacrifice its profits for the sake of his economic agenda that he says will eventually lead to more domestic jobs in manufacturing. ‘Walmart should STOP trying to blame tariffs as the reason for raising prices throughout the chain,’ Trump posted. ‘Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!’ The posting by the Republican president reflected the increasingly awkward series of choices that many major American companies face as a result of his tariffs, from deteriorating sales to the possibility of incurring Trump’s wrath. Trump has similarly warned domestic automakers to not raise their prices, even though outside analyses say his tariffs would raise production costs. So far, those tariffs have darkened the mood of an otherwise resilient U.S. economy. The preliminary reading of the University of Michigan survey of consumer sentiment on Friday slipped to its second-lowest measure on record, with roughly 75 percent of respondents ‘spontaneously’ mentioning tariffs as they largely expected inflation to accelerate. In April, Walmart CEO Doug McMillon was among the retail executives who met with Trump at the White House to discuss tariffs. But the Trump administration went forward despite warnings and has attacked other companies such as Amazon and Apple that are struggling with the disruptions to their supply chains. Walmart chief financial officer John David Rainey said he thinks $350 car seats made in China will soon cost an additional $100, a 29 percent price increase. ‘We’re wired to keep prices low, but there’s a limit to what we can bear, or any retailer for that matter,’ he told The Associated Press on Thursday after the company reported strong first-quarter sales.” HPS ANALYSIS: A company like Walmart, making a business decision to absorb import tariffs is an internal management decision, just like it is for a bike shop. But being told by the president of the United States to eat the additional cost of import tariffs imposed by the government is an entirely different matter. Walmart making a profit is what being in the retail business is all about. Bike shops following the Phillips Rule – i.e. “Never sell anything in your bike shop below your cost of doing business” is the same thing.

05 21 25: “Mike's Bikes CEO kicks off NBDA Summit” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association Retailer Summit Central that started Monday and ends Thursday led off its first day of educational presentations and panel discussions with a keynote from Whitney Tabaian, newly-appointed president and CEO of Mike's Bikes. Pon.Bike, the 20-brand Netherlands-based bike supplier, purchased Mike's Bikes' 14 California Bay Area locations from founders Ken Martin and Matt Adams in 2021. Adams remains with Pon.Bike as head of portfolio of North America. Pon.Bike also bought Elevations Cycles in 2022, a four-store Denver-area operation. Tabaian was a partner in the Elevations stores and joined the Pon.Bike team in conjunction with the sale. Her previous experience was in the outdoor industry as a sales rep for Icebreaker and as owner of a Colorado-based sales agency that also sold Alite and Boreas. Tabaian's presentation, titled ‘The Future of Retail: Culture, Leadership and Growth,’ focused on each of those three areas, including an action item for each to help retailers turn the concepts into reality in their stores. ‘Culture eats strategy for breakfast,’ Tabaian told the gathering of 130 retailers, suppliers, and industry attendees. ‘Without culture, your strategy will never see the light of day. Culture is all about how your people show up. Inclusive culture leads to diverse customers, which results in a stronger business.’ The action prescribed to improve culture: Listen to your team. Schedule three listening sessions with team members you don't usually engage with. ‘It's my job to listen to team members, make them feel valued and cared for so they treat the customers the same way.’ Tabaian said. Leadership lives at the intersection of empowerment and accountability, we learned from Tabaian's presentation. Trust is the foundation of high-performance culture. The leadership action to take: Empower your team. Give autonomy, set clear expectations, and hold them accountable. We learned from the growth portion of the presentation that sustainable growth comes from culture, empowered teams, and retaining top talent. ‘Good talent creates the foundation for customer service,’ Tabaian said. ‘Strong employees make customers happy and feel seen and heard.’ Action item for growth: Lead with vision and adaptability. Pivot quickly and embrace new opportunities. Tabaian closed her presentation with a summary of the three core topics: ‘What sets us apart as leaders is taking the time to focus and explain our vision. It's not the strongest or most intelligent species that survives; it's the ones that adapt best to change.’" HPS ANALYSIS: Whitney Tabaian is one of the most amazing retail leaders I have ever heard. Her clarity and vision were very well received by all the attendees at the NBDA Retailer Summit, and I look forward to hearing more from her about specialty bicycle retailers adapting ‘best to change.’ My compliments to the NBDA for bringing Whitney Tabaian’s wisdom and leadership to the Retailer Summit.

05 28 25: “NBDA celebrates a powerful gathering at the 2025 Retailer Summit Central.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) is thrilled to announce the successful conclusion of its 2025 NBDA Retailer Summit Central, a landmark event that brought together over 130 passionate retailers, suppliers, and industry professionals for three days of collaboration, connection, and shared purpose. Held May 20-22, in the vibrant cycling hub of Bentonville, Arkansas, the Summit provided a safe, inclusive space for leaders from across the bicycle industry to learn from one another, share challenges and opportunities, and ignite ideas to propel the industry forward. The agenda featured motivational speakers, breakout sessions, and networking events that empowered attendees to return to their businesses with fresh insights and renewed energy. Attendees repeatedly praised the event’s powerful atmosphere of integrity, openness, and empathy. ‘The NBDA Summit provided our small-town shop an opportunity to connect at a national level in a supportive environment with industry leaders across the board,’ said one retailer. ‘It is the beginning of new relationships to move our industry forward that we are extremely honored and excited to be a part of.’ Others echoed the value of stepping away from daily operations to gain a broader perspective. ‘It was great to get away from day-to-day business and get an idea of what's happening and what can happen — and how to make it all happen! I learned a lot more than I thought I would. Thank you for the opportunity.’ From impactful presentations to engaging peer-to-peer exchanges, the summit fostered a true spirit of collaboration. ‘The NBDA Retailer Summit brought the right people together—shops, brands, and industry leaders all focused on strengthening the IBD. I left with actionable takeaways and the fire to make improvements back in my own shop. The location itself added to the magic. Bentonville is a prime location for a cycling industry event. The hosting is amazing, the connection opportunities are powerful, and the riding is world-class. This is an event that leaders and decision-makers in the industry need to attend.’” Registration for the 2026 NBDA Retailer Summit Events will open in the Fall. For more information, visit www.nbda.com. HPS ANALYSIS: It took three years of dedication, leadership, and courage for the NBDA to hit the big time with its 2025 Retailer Summit in Bentonville, Arkansas. There will be three Summits in the U.S. and Canada in 2026. The first will be the day before the CABDA West Trade Show in Las Vegas, the second three-day event will be in Bentonville, and there will be a brand-new Canadian Retailer Summit. I have attended and presented at all of the NBDA Retailer Summits over the last three years, and they have all consistently maintained high-quality sharing of information and stories of success, and have been steadily building a North American community that is welcoming and inclusive during a very turbulent time. HPS looks forward to attending and participating in all three of the 2026 NBDA Retailer Summits.

05 28 25: “Trump tariffs ruled illegal by federal judicial panel.” The New York Times: “The U.S. Court of International Trade said the president had overstepped his authority in imposing his ‘reciprocal’ tariffs globally, as well as levies on Canada and Mexico. A panel of federal judges on Wednesday blocked President Trump from imposing some of his steepest tariffs on China and other U.S. trading partners, finding that federal law did not grant him ‘unbounded authority’ to tax imports from nearly every country around the world. The ruling, by the U.S. Court of International Trade, delivered an early yet significant setback to Mr. Trump, undercutting his primary leverage as he looks to pressure other nations into striking trade deals more beneficial to the United States. Before Mr. Trump took office, no president had sought to invoke the International Emergency Economic Powers Act, a 1977 law, to impose tariffs on other nations. The law, which primarily concerns trade embargoes and sanctions, does not even mention tariffs. But Mr. Trump adopted a novel interpretation of its powers as he announced, and then suspended, high levies on scores of countries in April. He also used the law to impose tariffs on products from Canada and Mexico in return for what he said was their role in sending fentanyl to the United States. On Wednesday, the Court of International Trade, the primary federal legal body overseeing such matters, found that Mr. Trump’s tariffs ‘exceed any authority granted’ to the president by the emergency powers law. Ruling in separate cases brought by states and businesses, a bipartisan panel of three judges essentially declared many, but not all, of Mr. Trump’s tariffs to have been issued illegally. It was not clear precisely when and how the tariff collections would grind to a halt. The ruling gave the executive branch up to 10 days to complete the bureaucratic process of ending them. The Trump administration immediately filed its plans to appeal in the U.S. Court of Appeals for the Federal Circuit.” HPS ANALYSIS: You might recall HPS commenting on Terry Precision, owned by Flagg Cycling, joining with four other small businesses that import goods from China in suing the Trump administration in the U.S. Court of International Trade. It turns out that they won, and the court struck down most, but not all, of the U.S. import tariffs levied against Chinese products. The case that Terry Precision is a part of was consolidated with another very similar case brought by a dozen or so State Attorneys General. On Wednesday, May 28 U.S. Court of International Trade ruled that most, but not all of the tariffs had been issued illegally. The ruling gave the executive branch up to 10 days to complete the bureaucratic process of ending them. However, the administration filed an appeal, and the next day, May 29, the U.S. Court of Appeals for the Federal Circuit granted the Administration’s request to temporarily stay the order and allowed the tariffs to continue, which is the subject of the next article.   

05 29 25: “Tariffs are on for now thanks to appeals court in win for Trump.” The Washington Post: “An appeals court temporarily paused the decision of a lower court to halt Trump’s tariffs. President Donald Trump’s tariffs can continue for now, after an appeals court granted the administration’s request to temporarily stay a lower court order. The Trump Administration said in a court filing earlier in the day that it would ask the Supreme Court for emergency relief if the appeals court didn’t quickly pause the ruling. White House press secretary Karoline Leavitt said at a briefing Thursday that the courts shouldn’t have a role in this issue. ‘The president’s rationale for imposing these powerful tariffs was legally sound and grounded in common sense,’” she said. HPS ANALYSIS: While we will find out in mid-July what the Appeals Court rules, the administration has made it clear that it will appeal any decision against the tariffs to the U.S. Supreme Court.

05 29 25: “The courts are unlikely to end the trade war.” FREIGHTWAVES: “Yesterday, a U.S. court struck down President Trump’s ‘Liberation Day’ tariffs under the International Emergency Economic Powers Act (IEEPA), calling them unconstitutional and stopping 10 percent global tariffs and higher levies on China, Canada, and Mexico. The ruling, citing IEEPA’s misuse for trade imbalances, cut the U.S. tariff rate from 27 percent to 17.8 percent. Trump has two legal, constitutional tools—Section 122 of the Trade Act of 1974 and Section 338 of the Tariff Act of 1930—to push his trade agenda forward without Congress. These laws provide clear limits, removing the subjective nature of Trump’s prior tariffs, which businesses will find reassuring. With upside potential, especially against China’s well-documented trade abuses, these options offer a structured path forward and may help reduce the uncertainty that has been bred by the on-again, off-again policy. Section 122 allows Trump to impose tariffs up to 15 percent on imported goods’ value to address major trade deficits, like the U.S.’s $971 billion gap in 2024, or to prevent dollar devaluation. No congressional approval is needed, and tariffs last 150 days. The May 2025 court ruling endorsed Section 122’s legality, making it a fast, predictable tool to tax imports from countries driving trade imbalances, giving businesses clarity on short-term impacts while Trump plans longer strategies. Section 338 lets Trump tax imports up to 50 percent or ban them from countries that unfairly hurt U.S. businesses, with no time limit or need for Congress. It’s clear that the 50 percent cap eliminates the uncertainty of Trump’s earlier open-ended tariffs, a relief for businesses craving stability. China’s trade abuses make Section 338 a strong fit. An investigation into China’s practices, already well-documented, would justify tariffs or bans, leveraging this constitutional tool to target unfair trade head-on.” HPS ANALYSIS: As long as President Trump wants tariffs, this article makes it clear that there are trade laws already on the books that he can use to impose tariffs. The court cases and appeals, and on-again-off-again future of tariffs, will only add to the uncertainty and confusion, but at the end of the day, there will be import tariffs. The only hope for the American bicycle business is legislation like the U.S. Bicycle Production and Assembly Act that will address the tariffs on the components, including frames and forks, that are required to assemble bicycles and e-bikes in the U.S. The manufacturing of frames and forks in the U.S. also needs to be supported from an investment standpoint, and additive manufacturing and 3D printing invested in and encouraged as an innovation.

05 29 25: “Industry gears up for Digital Product Passport implementation on e-bike batteries.” BIKE EUROPE: “The industry is making preparations for the Digital Product Passport (DPP) as this regulation will apply to the first relevant product category from 18 February 2027. At that time, its application will become mandatory for specific battery types. CONEBI is currently gathering its experts’ views to provide a common response to the European Commission’s public consultation on the development of this Digital Product Passport. The Digital Product Passport (DPP) is a key element of the Ecodesign for Sustainable Products Regulation (ESPR). The new Ecodesign requirements will cover, among others:

• Product durability, reusability, upgradability, and repairability

• Presence of chemical substances that inhibit material reuse and recycling

• Energy and resource efficiency

• Recycled content

• Carbon and environmental footprints

A Digital Product Passport will provide information about products’ environmental sustainability. This initiative forms part of the EU’s broader strategy to improve product sustainability, transparency, and circularity across the single market. CONEBI’s contribution is expected to be submitted by the end of June. Batteries are first, and other product groups will follow. The DPP aims to digitally register, process, and share essential product information throughout the supply chain. By facilitating access to data on sustainability and lifecycle impact, the DPP aims to empower consumers to make well-informed choices and enable businesses and authorities to enhance traceability and compliance. While its first application will become mandatory for specific battery types from 18 February 2027, the passport will gradually expand to other product groups under future delegated acts.” HPS ANLAYSIS: While digital product passports (DPP) are a European thing in 2025, they are going to grow in importance and spread through commerce and standards in the U.S. because of end-of-life recycling and extended producer responsibility (EPR) relative to midsize lithium-ion batteries for e-bikes. While mandatory federal regulation isn’t going to happen for at least the next four years, DPP and EPR legislation has been passed in three states and will be taken up by a growing number of concerned state governments as voluntary industry standards are implemented to improve customer service and tamp down product liability litigation. 

05 29 25: “Sporting Goods Industry calls for urgent action to defuse $300 billion inactivity time bomb.” CYCLING Industry News: “The first ever Sporting Goods Physical Activity Report was released by the World Federation Sporting Goods Industry (WFSGI) at an exclusive World Health Assembly side event in Geneva. The report warns of the increasing rates of global physical inactivity, brandishing it as a ‘crisis’ and calling for urgent help to increase cross-sector collaboration. The report features case studies from the 26 WFSGI member companies around the world to reach its conclusions. Nike’s Dan Burrows, WFSGI CEO Emma Zwiebler, assistant director-general World Health Organization Dr Ailan Li, Sir Gareth Southgate, IOC’s Dr Jane Thornton, Dr Andy Moose of the World Economic Forum, Kamil Shoretire, Permanent secretary Ministry of Health for Nigeria, were present at the event and spoke about the global crisis. Emma Zwiebler said: ‘This is not just a health issue, it’s an economic, social, and environmental imperative.’ Over 1.8 billion people are affected by the crisis, with 81 percent of adolescents worldwide being at risk of physical inactivity, with expectations to rise by 35 percent by 2030. This would have a knock-on economic effect of $300Bn annually. Zwiebler added: ‘As an industry with global reach and cultural influence, we are demonstrating how we’re removing barriers to physical activity and creating scalable, cross-sector solutions. This report highlights the breadth of actions our industry is taking to help empower and inspire people to live more active lives and the power of collaboration over competition amongst our member brands.’ Adidas, ASICS, Decathlon, Nike, On, Puma, Speedo, Specialized, and Shimano joined the World Health Organisation, the International Olympic Committee, the Business at OECD, the World Economic Forum, global health ministers, and others at the event. The WFSGI is one of the bodies regularly highlighting the looming, globally relevant inactivity crisis and its impact.” HPS ANALYSIS: Bob Margevicius, executive vice president of Specialized, attended the recent World Sporting Goods Federation meeting and the World Heath Assembly event in Geneva, and reported on these meetings to the recent NBDA Retailer Summit. Bob made it clear to the attendees that the world, and the U.S. face an immediate “‘nactivity time bomb.’ The American bicycle business has to take immediate action to get more people of all ages, genders, and ethnicities on bikes and e-bikes, and join with the whole of the sporting goods industry to get more Americans outside walking, running, riding a bicycle, and enjoying the outdoors. This goes hand-in-hand with the NBDA promoting its members joining with the League of American Bicyclists (LAB) local clubs and cycling instructors to teach safe riding as a means of getting more people out on bikes.

05 29 25: “Kent tells state it will lay off 64 factory workers next month.” Bicycle Retailer and Industry News: “Kent International will lay off 64 workers at its Bicycle Corporation of America facility here, effective June 25. The company has filed a notice with the state of South Carolina on the layoffs, saying it was due to the ‘permanent closure’ of the facility. Kent Chairman Arnold Kamler told BRAIN the company will stop production at the end of June for a variety of reasons, but said if things change in the future, they are open to restarting. Kamler has said high tariffs on the China-made components and frames used at the facility made it impossible to assemble the bikes profitably in the U.S.” HPS ANALYSIS: Someone who has been involved in the bicycle business asked me recently why Kent was laying off workers and why it was going to permanently close Bicycle Corporation of America (BCA). The answer is tariffs. Kent’s BCA factory assembles bicycles for Walmart, which means they are low-priced mass merchant products. They are safe and well-made, but they also have to meet certain price points. They can’t do that if BCA and Kent have to pay the high import tariffs currently being imposed on components made in China, which are the vast majority of the components required to assemble bicycles in Manning, South Carolina. This is why the U.S. Bicycle Production and Assembly Act is important and has the full support of the NBDA.

06 03 25: “An open call to the cycling industry: join the movement to strengthen the specialty channel.” Bicycle Retailer and Industry News: “Since 1946, the National Bicycle Dealers Association (NBDA) has been a trusted advocate for North America's specialty bicycle retailers. Today, with the industry facing rapid transformation, the NBDA is calling on suppliers, brands, and service providers to consolidate their support under one clear mission: stand with the NBDA and power the future of the specialty bicycle retailer. With over 1,000 retailers across North America as active NBDA members, the association is the largest network of independent bicycle retailers committed to excellence. Brands that align with and support the NBDA are recognized throughout the channel as trusted, credible, and invested in the success of the specialty retailer. ‘We invite every brand that values the strength of local retail to join us,’ said Heather Mason, NBDA executive director. ‘Together, we are building an industry that thrives on shared knowledge, mutual support, and sustained profitability for all.’ The financial support from dues-paying association members is critical to the NBDA's ability to expand its reach and impact. These funds will directly contribute to increased staffing capacity, enabling the organization to respond more swiftly and effectively to the needs of the industry. With this enhanced support, the NBDA will be positioned to develop and launch new, high-impact programs focused on essential industry data, actionable retail insights, and collaborative best practices between suppliers and retailers. This investment in the NBDA is an investment in a more connected, informed, and resilient specialty bicycle channel.” HPS ANALYSIS: NBDA's unwavering commitment to independent retailers, its inclusive community, and its daily efforts to provide education, advocacy, connection, and trusted resources reflect a mission that truly aligns with the needs of the industry today. We encourage brands and industry peers to donate, join, and engage with the NBDA, an organization that is not only listening but actively working to elevate and protect the very foundation of the cycling industry. Learn more and become a member today: www.nbda.com

06 06 25: “Chinese-made helmets and some bike trailers maintain tariff exclusions.” Bicycle Retailer and Industry News: “China-made helmets and bike trailers with aluminum frames will remain exempt from a 7.5 percent Section 301 tariff until at least the end of August. The Section 301 tariffs were imposed during the first Trump administration. Many bike-related products that were subject to the 301 tariffs of 7.5 percent or 25 percent, were excluded by the Trump and Biden administrations until last May, when those exclusions ended. Bike helmets and trailers, however, maintained their exclusions, which were set to expire on May 31 this year. The USTR, however, announced just before that deadline that some products will maintain the exclusion until Sept. 1. The extended exclusions apply to bicycle helmets, specifically, which are a subset of the protective headgear included under the HTUS tariff code of 6506.10.6045; the exclusion does not apply to protective headgear for other sports. The extension also applies specifically to aluminum-framed bike trailers, a subset of products included under HTUS code 8716.40.0000. The exclusions are unrelated to the newer tariffs imposed by the Trump administration this year, most of which are still being collected while the administration appeals a court ruling that found they were illegally applied.” HPS ANALYSIS: This article is encouraging. Chinese made helmets and bike trailers with aluminium frames are currently exempt from the Section 301 punitive tariff until September 1st, and while a small part of the total bicycle and e-bike products import into the U.S. from China, this small exemption by the United States Special Trade Representative (USTR) indicates that exemptions are still possible and the NBDA is going to actively pursue (meaning lobby) the USTR and the Commerce Department to expand the list of complete bicycles, components and accessories exempted from the Section 301 punitive tariffs.  

06 06 25: “New world order: Ocean rates up 88 percent as shippers pounce on lower tariffs.” FREIGHTWAVES: “It took one week for the frenzy to set in on the eastbound trans-Pacific. Mid-high average spot rates paid by shippers in the 75th percentile of the market for transit from the Far East to the U.S. East Coast have surged by an astonishing 88 percent since May 3, according to analyst Xeneta, now standing at $6,100 per forty-foot equivalent unit. This price jump reflects the willingness of shippers to incur higher costs to ensure the movement of goods, driven by the temporary window created by the U.S.-China reciprocal tariff pause. In that time, the Far East to U.S. West Coast average price tracked at $5,082 from $2,615 per FEU. The 90-day respite from higher duties has led liner operators such as Cosco, Evergreen, Hapag-Lloyd, and HMM to amplify their spot rate charges, Xeneta said, pushing for hikes as steep as $3,000 per FEU. Meanwhile, mid-high spot rates have also climbed by 67 percent from the Far East to the U.S. East Coast, reaching $7,180 per FEU by early June, as a significant number of businesses attempt to expedite shipments amid volatile trade conditions. ‘The 88 percent increase in market mid-high spot rates on the trans-Pacific trade shows shippers are so concerned about getting goods moving again during the 90-day window of opportunity of lower tariffs that they are willing to pay more,’ said Xeneta Chief Analyst Peter Sand, in a note. ‘Right now, it seems carriers are telling shippers to jump, and some are replying, ‘How high?’’ This spike in rates, according to Sand, is a temporary phenomenon. With capacity returning to the trans-Pacific route, the frantic rush of shipments is expected to subside. As supply chains gradually recover and inventories grow, the pricing pressures will diminish. Sand anticipates that spot rates will reach their peak in June before descending as capacity constraints ease.” HPS ANALYSIS: There have been several articles this month about the escalating container rates from China to the U.S. Any increase will be passed on from importers of record to retailers. This article cites a current cost of a 40-foot container of $5,082 from $2,615, an increase of $2,467 per container. HPS estimates a 40-foot container holds approximately 330 adult bicycles. On an estimated per imported bike basis, this is an increase from approximately $7.93 per bicycle to $15.40 per bicycle, a per unit increase of $7.47 that will get passed upstream, eventually to retailers. HPS joins the NBDA in urging retailers to be proactive in asking their brands and suppliers to divulge ocean freight container costs and the anticipated increases that will be passed on to retailers. Remember – negotiate everything.

06 09 25: “U.S. and China meet for trade talks in London.” British Broadcasting Corporation BBC: “A new round of talks aimed at resolving the trade war between the U.S. and China have started in central London. A senior U.S. delegation, including Commerce Secretary Howard Lutnick, has met with Chinese representatives such as vice premier He Lifeng at Lancaster House to resolve tensions between the world's two largest economies, which are threatening global growth. Chinese exports of rare earths, which are crucial for modern technology, as well as Beijing's access to U.S. products, including computer chips, are expected to be high on the agenda. Last month, Washington and Beijing agreed to a temporary truce over trade tariffs, but each country has since accused the other of breaching the deal. The new round of negotiations follows a phone call between Donald Trump and China's leader Xi Jinping last week, which the U.S. President described as a ‘very good talk.’ The call, the first between the two leaders since the trade war erupted in February, ‘resulted in a very positive conclusion for both countries,’ Trump said. According to Chinese state news agency Xinhua, Xi told Trump that the U.S. should ‘withdraw the negative measures it has taken against China.’ While last month's talks in Geneva reduced tariffs, they did not resolve a range of other issues, including Chinese exports of rare earth metals and magnets, which are essential for manufacturing everything from smartphones to electric vehicles. Meanwhile, Washington has restricted China's access to U.S. goods such as semiconductors and other related technologies linked to artificial intelligence (AI). The inclusion of Lutnick in this week's meetings with China is ‘a welcome addition,’ according to Swetha Ramachandran, fund manager at Artemis, since he is ‘behind some of the very harsh export controls of technology to China.’ She told the BBC's Today programme: ‘Some of the focus certainly seems to be on rare earths where China, of course, has dominance in terms of producing. They mine 69 percent of the rare earths globally that are quite essential to technology development in the U.S., so I think there are enough chips on the table here that could make it acceptable for both sides to walk away with desired outcomes.’ As well as Lutnick, U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are meeting Chinese officials in London.” HPS ANALYSIS: This article is too kind. The Chinese export licenses that will be issued for the export of so called ‘rare earths’ to U.S. companies will be issued for the next six months. What happens when the six months have expired? It could be extended, or it could force the U.S. and China back to the negotiating table. In any case, there is a heightened risk attached to companies dependent on rare earths imported from China. As more details come out about what actually happened in London, it becomes more apparent that the U.S. didn’t get much and China came away with more. As HPS was told by an experienced trade negotiator at the end of this week, ‘This is what happens when you send a boy to do a man’s job!’ The U.S. bicycle and e-bike business, like many other small to mid-size businesses in the U.S. got nothing. Yes, the U.S. gets to charge a new tariff rate of 55 percent on goods imported from China. However, the current and continuing import tariff on bicycles and e-bikes sourced in China is: 60.5 percent on road bikes, 66.0 percent on all other bikes, and 55.0 percent on e-bikes. Add to this no apparent relief from the courts, and the bicycle business, including bike shops, has no practical choice other than lobbying and lobbying hard for exclusions, exceptions, elimination of the Section 301 punitive tariffs, and passage of the U.S. Bicycle Production and Assembly Act.

06 11 25: Bi-partisan lawmakers introduce bill that would boost U.S. assembly and manufacturing.” Bicycle Retailer and Industry News: “Legislation introduced in Congress this week would eliminate tariffs on components used to assemble complete bikes in the U.S., long a major concern of bike brands looking to add value in the U.S. without making the full step toward frame manufacturing. The U.S. Bicycle Production and Assembly Act was introduced by Representatives Vern Buchanan (R-FL) and Mike Thompson (D-CA), both senior members of the House Ways and Means Committee and co-chairs of the Congressional Bicycle Caucus. Industry members and trade groups applauded the introduction. ‘This legislation supports American jobs, lowers costs for domestic producers, and makes it easier to build and assemble bikes in the U.S.,’ said Jenn Dice, president and CEO of PeopleForBikes. ‘It's a smart, targeted solution to a longstanding problem — how to grow U.S. bicycle manufacturing in the face of rising costs and global trade pressures.’ The bill eliminates tariffs, including Section 301 and other punitive tariffs, on products used for bike assembly. It also mandates that the U.S. International Trade Commission report to Congress within five years on progress toward two primary goals: assembling 2 million bicycles annually in the U.S. within five years and 5 million bicycles annually within ten years. Last year, Rep. Earl Blumenauer introduced the Domestic Bicycle Production Act, which also eliminated tariffs on componentry. Blumenauer's bill also included an e-bike production tax credit and established a low-interest loan program to assist bike makers. The 2024 legislation never received a Republican sponsor, and Blumenauer retired at the end of 2024. In a joint press release, Buchanan and Thompson said the legislation would strengthen U.S. companies and workers. ‘Ninety-seven percent of bikes purchased in the United States are made elsewhere. It’s time we change that,’ said Thompson. ‘The U.S. Bicycle Production and Assembly Act would give bike manufacturers the foothold they need to grow a thriving industry right here in the United States. I am glad to work with Rep. Buchanan to introduce this legislation to bring bicycle manufacturing back to our shores.’ Buchanan said, ‘Our goal is simple: strengthen American manufacturing, support American workers and ensure that U.S. bicycle companies can compete on a level playing field. This bill incentivizes the assembly and production of bicycles here at home, protecting American workers and promoting a widely-enjoyed hobby with countless health benefits. This pro-manufacturing legislation supports domestic production capacity, drives investment, and gives U.S. businesses a competitive edge in global markets.” HPS ANALYSIS: This article provides the details about the U.S. Bicycle Production and Assembly Act that I have been going on about through this issue of the HPS Bicycle Business Reporter. Representative Mike Thompson (D-CA) and his staff are playing this very well, and have attracted bipartisan support and a co-sponsor, Representative Vern Buchanan (R-FL). Thompson is co-chair of the Congressional Bike Caucus, but has made sure that representatives from across the aisle are co-chairs and members of the caucus. In the coming months, this bipartisan bill and its co-sponsors and supporters in the 119th Congress will become very important not only for the U.S. Bicycle Production and Assembly Act, but also for the bicycle businesses’ initiatives for tariff relief and voluntary standards.

06 11 25: “Trump touts higher duty rate for Chinese imports under new trade deal.” SOURCING JOURNAL: “Hours after his cabinet announced that the United States would resume its previously agreed upon trade truce with China, President Donald Trump stoked confusion by revealing a new tariff rate of 55 percent for the sourcing superpower. Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, along with U.S. Trade Representative Ambassador Jamieson Greer, traveled to London this week to sit down with Chinese trade officials following weeks of trade tensions and the crumbling of a provisional agreement solidified in Switzerland in mid-May. At the end of negotiations on Tuesday, Lutnick indicated that both sides had agreed to ‘implement the Geneva consensus’ upon approval from Trump and Chinese President Xi Jinping. That deal centered on the deferral of reciprocal duties, lowered on the U.S. side to 30 percent and China’s side to 10 percent, for three months. But by Wednesday morning, Trump had revealed new information about the deal, saying that China will now pay a 55 percent duty rate, while the U.S. will still be subject to 10 percent tariffs on any goods imported into China. An all-caps missive said the deal with China was done, though subject to final approval by Xi and himself. ‘RELATIONSHIP IS EXCELLENT!’ Trump wrote. The president did not elucidate the reasoning for the 55 percent rate, which appears on its face to be a 25 percent increase from the May agreement. But a White House spokesperson, who spoke to The Guardian anonymously, said the rate includes Trump’s 10 percent universal baseline tariffs, a previous 20 percent punitive duty for fentanyl trafficking, and an existing 25 percent tariff on China-made goods. ‘A reported 55 percent tariff on our largest supplier of American apparel and footwear, stacked on top of already high MFN and Section 301 rates, is not a win for America,’ Steve Lamar, president and CEO of the American Apparel and Footwear Association, said in a statement.” HPS ANALYSIS: I have already explained why the American bicycle business gained nothing from the trade negotiations in London and why our industry, including the NBDA and bike shops, need to rally around and support the U.S. Bicycle Production and Assembly Act. This article does, however, explain the details of what makes up the total 55 percent tariff on Chinese-made goods imported into the U.S. The bicycle business trade associations are smaller than the American Apparel and Footwear Association, but we are in the same boat: “A reported 55 percent tariff on our largest supplier of American apparel and footwear, stacked on top of already high MFN and Section 301 rates, is not a win for America.” For those of you who are wondering if HPS is no longer politically neutral, we remain steadfastly so.  However, HPS is making sure we advocate for what we perceive as the strongest strategic and least risk position in a S**t-Storm of emerging risks, for our clients.

Contact Jay Townley: jay@humanpoweredsolutions.com.