WELCOME TO THE YEAR OF RADICAL UNCERTAINTY

By Jay Townley

12 26 25: “Investors are flying blind into the ‘golden age.’” Bloomberg: [NOTE: Clive Crook is a Bloomberg Opinion columnist and member of the editorial board covering economics. Previously, he was deputy editor of the Economist and chief Washington commentator for the Financial Times.] “A random walk through economic uncertainty.” “Ten years ago I praised a book by Mervyn King, former governor of the Bank of England, on the subject of ‘radical uncertainty.’ Back then, I agreed with King that radical uncertainty – the kind that statistical analysis can’t deal with – was a pressing issue for financial regulators. After the extraordinary year just ending, the challenge is no longer so confined. Over the past 12 months, the U.S. has seen every norm of economic policy – trade policy, fiscal policy, monetary policy – blithely tossed aside. At the same time, the U.S. economy stands at the bleeding edge of what might be as consequential an economic revolution as the transition from farming to manufacturing, or from manufacturing to services – except that the AI revolution could happen much faster. I’ve been writing about economic policy for more decades than I care to remember. Never have I witnessed anything remotely like this past year’s surge of disruption. Where will it lead? Everybody who claims to know is either lying or deluded. That’s the point of radical uncertainty. The models that guide expert predictions rest on data that have never encountered shifts like these – certainly not all at once. Measures of risk based on established patterns are essentially useless. If the economy crashes next year, it will be the most over-determined collapse ever seen, with far too many causes to choose from. (Talk about abundance.) Yet far from crashing, maybe the economy is on the cusp of a productivity revolution, powerful enough to overwhelm every choice, good or bad, that President Donald Trump’s administration and its successors might make. Nobody knows. This is as radical as uncertainty gets.” HPS ANALYSIS: Paul Krugman is my go-to economist, and he makes it clear that he and other economists have not said that tariffs by themselves will cause the U.S. economy to slow and possibly crash. What he and other responsible economists have said is that the uncertainty caused by tariffs is the catalyst that will appreciably slow the U.S. economy. Clive Crook is rightly pointing out that we are now immersed in radical uncertainty – the kind of uncertainty that statistical analysis simply can not deal with. During the 12 months of 2025, the U.S. has seen every norm of economic policy tossed aside, along with every bit of conventional wisdom about international trade. As you progress through this month’s HPS Bicycle Business Reporter, you will get a better sense of what radical uncertainty is doing to cloud the probabilities of the U.S. and the global economies, including the bicycle business ecosystem. 

12 27 25: “Bankruptcies soar as companies grapple with inflation, tariffs.” The Washington Post: “Corporate bankruptcies surged in 2025, rivaling levels not seen since the immediate aftermath of the Great Recession, as import-dependent businesses absorbed the highest tariffs in decades. At least 717 companies filed for bankruptcy through November, according to data from S&P Global Market Intelligence. That’s roughly 14 percent more than the same 11 months of 2024, and the highest tally since 2010. Companies cited inflation and interest rates among the factors contributing to their financial challenges, as well as Trump administration's trade policies that have disrupted supply chains and pushed up costs. But in a shift from previous years, the rise in filings is most apparent among industrials — companies tied to manufacturing, construction, and transportation. The sector has been hit hard by President Donald Trump’s ever-fluid tariff policies — which he’s long insisted would revive American manufacturing. The manufacturing sector lost more than 70,000 jobs in the one-year period ending in November, federal data shows. Consumer-oriented businesses with ‘discretionary’ products or services, such as fashion or home furnishings, represented the second-largest group. This contingent usually tops the list and includes many retailers, and its retrenchment is a signal that inflation-weary consumers are prioritizing essentials. The S&P data reflects both Chapter 11 and Chapter 7 filings. In the former, also known as a reorganization, the business goes through a court-administered process to restructure its debts while it continues to operate. Under Chapter 7, the company closes down, and its assets are sold off. Economists and business experts say the trade wars have pressured import-heavy businesses, which are reluctant to raise prices by too much for fear of alienating consumers.” HPS ANALYSIS: We are in a bifurcated economy, where big companies and businesses are doing better than small companies and businesses, and uncertainty is causing all of them to stutter-step and cease taking action, like deer caught in the headlights of an oncoming truck. While bankruptcies are up and companies and businesses grapple with inflation and tariffs, the stock market keeps setting records, but the stock market and the top six tech companies are not the economy. The NBDA is right to call for a “cultural rest” that focuses the specialty bicycle retail ecosystem on a new revenue and profit-focused culture that emphasizes surviving and thriving in uncertain times, and avoiding Chapter 7 or 11. 

12 28 25: “The year of the tariff.” Supply Chain Management Review: “If 2025 is remembered as the ‘Year of the Tariff,’ it won’t be because tariffs themselves were new. It will be because of how abruptly they forced companies to confront assumptions they’d been carrying for years about cost structures, supplier resilience, and how much liquidity really exists inside their supply chains. Tariffs moved from spreadsheet scenario to operational reality almost overnight. And when they did, they exposed something many organizations weren’t fully prepared for: how thin the margin for error becomes when policy shock collides with already stretched supply networks. As Kiley Kunkler, executive director of global receivables and trade finance at Wells Fargo, put it to me recently, supply chain disruptions themselves weren’t the surprise. Most companies had playbooks. What caught them off guard was the speed and scale at which tariffs forced those playbooks into motion and the financial strain that followed. That strain didn’t show up evenly. In many cases, it surfaced first not at the buying organization, but deep in the supplier base, where working capital is tighter, and shocks are harder to absorb.” “From tariff mitigation to tariff strategy: This is where I think the conversation is starting to shift in an important way. For years, tariffs were treated as a problem to be minimized: engineer around them, absorb them, pass them through, or wait them out. Increasingly, companies are realizing that approach isn’t sufficient. Tariffs are becoming a strategic variable. They are something that actively shapes sourcing decisions, network design, pricing models, and supplier relationships. In other words, tariffs aren’t just a cost to manage; they’re a constraint to design around. That shift is forcing supply chain leaders to collaborate more closely with finance, procurement, and suppliers. And one of the most visible places that collaboration is showing up is in supply chain finance.” “Liquidity for agility: One of the more interesting takeaways from this period is how clearly liquidity has emerged as a prerequisite for agility. We often talk about resilience in terms of dual sourcing, regionalization, or digital visibility. Those are all important. But none of them work without access to capital, especially when change is happening quickly. Supply chain finance, when structured properly, can stabilize relationships rather than strain them. By anchoring financing to the buyer’s creditworthiness rather than the supplier’s balance sheet, these programs can support smaller or more vulnerable suppliers at exactly the moment they’re under the most pressure, as Kunkler explained. That matters. Because resilience isn’t built in isolation. It’s built across the network. We’ve learned that over the past half-decade.” “Looking toward 2026: There’s no indication that tariff volatility is going away. If anything, trade policy uncertainty is becoming a permanent feature of the landscape. What that means for 2026 planning cycles is fairly clear: companies that treat tariffs purely as an external shock will stay in reaction mode. Those that treat tariffs as a strategic input, and design their networks, financing models, and supplier relationships accordingly will be better positioned to adapt. Resilience, it turns out, isn’t just about redundancy or visibility. It’s about liquidity. And liquidity increasingly depends on collaboration. That may be one of the most lasting lessons of the Year of the Tariff.” HPS ANALYSIS: Back in the day, and for 40 years after I first got involved in importing parts and accessories, bicycles, and fitness equipment from Europe and Taiwan into the U.S., tariffs were stable and their cost was baked into the landed cost of goods. Tariffs were included with FOB, insurance, ocean, and domestic shipping – all rolled up in the landed cost of goods that we calculated our gross margin of profit on the wholesale price to retailers. In 2025, the year of the tariff, all of that changed – and worse yet, became uncertain and indeterminable. This article points out the financial impact of tariffs, and the fact that U.S. tariffs have disrupted and upended the liquidity, the amount of finance and money that is now required to pay the uncertain, but higher, and in some cases significantly higher, import duties. Exceptions that were not worth the time and expense of filling out and processing have become important and essential, because the tariffs have shot up in value. FOB price negotiations with foreign OEMs and banks now include a financial component, including interest, that was not considered before, because of the significant financial increase of U.S. import tariffs. For the small businesses involved, capitalization and access to capital have become a major component of the new “liquidity” tariffs have imposed on both the cost of doing business and profitability – all part of the cultural reset of the American bicycle business. 

01 07 26: “How tariff disruption will continue reshaping the global economy in 2026.” British Broadcasting Corporation BBC: “Trade and tariffs will be on the agenda when Trump and China's Xi next meet in April. President Trump's favorite word is tariffs. He reminded the world of that in his pre-Christmas ‘address to the nation.’ With the world still unwrapping the tariffs ‘gift’ from the first year of his second term in office, he said they were bringing jobs, higher wages, and economic growth to the U.S.. That is hotly contested. What is less debatable is that they've refashioned the global economy, and will continue to do so into 2026. The International Monetary Fund (IMF) says that although ‘the tariff shock is smaller than originally announced,’ it is a key reason why it now expects the rate of global economic growth to slow to 3.1 percent in 2026. A year ago, it predicted a 3.3 percent expansion this year. For the head of the IMF, Kristalina Georgieva, things are ‘better than we feared, worse than it needs to be.’ Speaking on a podcast recently, she explained that growth had fallen from a pre-COVID average of 3.7 percent. ‘This growth is too slow to meet the aspirations of people around the world for better lives,’ she said. Other forecasts for 2026 are even more pessimistic than that of the IMF. Yet the impact of the tariffs on the global economy was not as bad as it could have been, notes Maurice Obstfeld of the Peterson Institute for International Economics, who is also a former chief economist at the IMF. He says this is the case because ‘countries didn't retaliate strongly against the U.S.’ Obstfeld adds: ‘And the one country that did forcefully hit back, which is China, induced the U.S. to back down very quickly. So we certainly avoided a trade disaster.’ However, after five rounds of trade talks, the world's two biggest economies still have more tariffs and other trade restrictions in place against each other than when Trump took office for the second time. The tariffs have pushed up costs for many businesses and increased uncertainty, which makes it harder to plan for and invest in the future.” HPS ANALYSIS: After April, and the beginning of the second quarter of 2025, it was clear that tariffs were going to be the primary tool of U.S. trade policy, and that Section 301 tariffs were going to be joined by IEEPA tariffs, all of which would be “stacked” on top of the established Most Favored Nation, or M.F.N. tariffs in rolling out a new trade policy that also tossed aside decades of conventional wisdom on international trade. The IEEPA, or reciprocal tariffs, were found to be illegal by two U.S. courts, and their current and future use was appealed by the administration to the Supreme Court. A ruling is imminent, but the administration has made it clear that it has Plan B, that will quickly replace the IEEPA reciprocal tariffs with tariffs rolled out under other trade laws if it should lose the appeal. This also leaves the question of refunds to be debated and probably litigated. This means tariffs will continue as the foundation of U.S. trade policy going forward. This also means the uncertainty surrounding U.S. tariffs will remain - and be exacerbated – and will be joined by Section 232 aluminum and steel content tariffs of up to 50 percent, applicable to the FOB value of bicycles, frames, frame tubing, forks, and e-bikes with output greater than 250 watts. Disruption and uncertainty will continue reshaping the global and American bicycle industry and business in 2026. Visit HPS at the upcoming NBDA Summits and CABDA Expos to discuss our “survive and thrive” playbook for specialty bicycle retail channel retailers and suppliers.

01 07 26: “U.S. job openings decline to lowest level in more than a year.” Bloomberg: “U.S. job openings fell in November to a more than one-year low and hiring slowed, indicating most employers remain reluctant to make big changes to headcount. The number of available positions decreased to 7.15 million in November from a downwardly revised 7.45 million in the prior month, Bureau of Labor Statistics data showed Wednesday. The figure was below all estimates in a Bloomberg survey of economists. The pullback in openings reflected fewer opportunities in leisure and hospitality, health care and social assistance, as well as transportation and warehousing. The number of hires declined to the lowest since mid-2024, while layoffs also eased. The decline in vacancies, along with a slowdown in hiring, reinforces views that the job market continues to soften, though companies are largely refraining from dismissing workers outright. The number of layoffs in November declined to a six-month low after climbing in the prior month to the highest level since 2023, the JOLTS report showed. At the same time, there was a pickup in the number of Americans who voluntarily left their jobs in industries including accommodation and food services, as well as construction. A report earlier Wednesday showed hiring at U.S. companies rose at a moderate pace in December after firms shed jobs in the prior month, according to ADP Research.” HPS ANALYSIS: As we have already noted, employment, unemployment, and the health of the U.S. economy have not been and are not going to be suddenly affected by tariffs. The net effect, has been, and will continue to be, the negative impact of uncertainty on business and investments in growth and employment. The effective U.S. tariff rate for all imports for consumption in 2020 was 1.52 percent. In 2024, it was 2.5 percent. September Y.T.D. 2025 was 10.65 percent. HPS agrees with the forecast for 2026 of between eight and 14 percent, with the probability closer to 14 percent. The business and consumer environment will continue to bifurcate, with an increase in business and consumer defaults and Chapter 7 and 11 filings through the year, as job openings continue to decline. 

01 08 26: “Beyond the checkout: retail's 2026 legal minefield.” MONDAQ: “2026 will be a significant year for retailers and e-commerce companies, with significant changes on the horizon that will affect the entire industry and ecosystem. United States Consumer Protection: 2026 will be a significant year for retailers and e-commerce companies, with significant changes on the horizon that will affect the entire industry and ecosystem. Potential headwinds and developments in product safety, pricing, artificial intelligence, data privacy, website compliance, and environmental responsibility are expected. But amidst these changes, there are likely significant opportunities that retail and e-commerce businesses can capitalize on. Below are the top issues retailers and e-commerce companies should be aware of and ready to tackle in 2026.

Product Safety: We anticipate substantial regulatory activity and potential litigation in the following areas:

• CPSC enforcement intensifying: The Consumer Product Safety Commission (CPSC) is undergoing leadership changes. This has created uncertainty about the CPSC's future direction. Despite this, the CPSC is intensifying its enforcement actions, pushing recalls, increasing monetary penalties for failure to disclose or late disclosures under Section 15(b) of the Consumer Product Safety Act (CPSA), and using criminal enforcement to make examples of companies. Now is the time to consider your product safety and compliance program.

• E-Mobility and lithium-ion battery safety: The CPSC continues to prioritize safety concerns related to e-mobility devices and lithium-ion batteries. These issues are gaining attention as they intersect with broader health and social concerns. Relatedly, the European Union has begun taking a more aggressive approach, and the U.S may follow. If you use or make such products, you need to ensure your products meet all current regulations and standards.

• State-level consumer product regulations: In the absence of federal enforcement, state attorneys general have picked up the enforcement mantle in areas concerning consumer protection and consumer deception. For example, with respect to issues not addressed by the FDA or CPSC, state attorneys general are focused on consumer product safety; Washington, Minnesota, and California are implementing their own regulations on consumer products. These include restrictions on lead, cadmium, and per-and-polyfluoroalkyl substances (PFAS). Our nationwide state attorneys general practice is tracking the biggest trends and enforcement efforts across these offices. Handling state CIDs, investigations, and litigations presents different issues from those that arise when responding to a federal inquiry.

Tariffs: Tariffs will continue to have a big impact and may be changing significantly in the coming year, affecting importers, exporters, and others in the supply chain.

• International Emergency Economic Powers Act (IEEPA) decision: The Supreme Court's decision on Trump v. V.O.S. Selections, Inc. is still pending. The decision will have a significant effect on the tariff landscape moving forward. The dispute focused on whether IEEPA provides a sufficient basis for imposing tariffs during a declared emergency and, if it does, if that authority is consistent with the nondelegation doctrine. The decision could result in the current tariffs remaining in place, a complete overhaul of the tariffs, or a partial overhaul. If the tariffs are found to be unlawful, importers who paid them may be able to seek a refund.

Pricing: Pricing will continue to be a major area of concern in the coming year, with the FTC and state attorneys general continuing their focus on pricing transparency, dark patterns, and the effects of algorithmic pricing. What may be new and different in the coming year is a movement from analyzing these practices from an anti-competition standpoint to a consumer deception and consumer discrimination standpoint. Retailers should review their pricing strategies to ensure they comply with federal and state laws.” HPS ANALYSIS: While surprised by product safety making the top of the list, HPS is also encouraged that the legal community should find that the current administration is applying resources to consumer safety. HPS partner Mike Fritz is a graduate mechanical engineer with extensive experience in accident investigation, and as an expert witness. HPS partner Jay Townley has extensive experience with tariffs, import sourcing, and logistics. Keeping up with legal developments is essential for businesses to manage risks and run smoothly in an ever-changing and uncertain landscape. HPS recommends reviewing your current practices and reaching out if you have questions or need specific advice on how these changes may affect your operations. Contact HPS to find out more about the anticipated regulatory activity and potential litigation facing both specialty bicycle retailers and suppliers in 2026. www.humanpoweredsolutions.com

01 12 26: “Guest editorial by Pat Cunnane: why New Jersey's e-bike legislation fails the public.” Bicycle Retailer and Industry News BRAIN: “As a lifelong advocate for the bicycle industry, I have seen how legislative ‘quick fixes’ often create lasting damage. In New Jersey, we are currently facing such a moment with Senate Bill 4834 and its companion bill, Assembly Bill 6235. The impetus for this bill is a tragedy we all feel deeply: the death of a 14-year-old boy in Union County, who was struck while riding a vehicle that, to the media and most people, is just an ‘e-bike.’ But the vehicle used here and in most other crashes of this nature was something very different: an electric moped or motorcycle (an ‘e-mot’") that can go well over 30 miles an hour. This crash and others are heartbreaking reminders that road safety is sometimes a matter of life and death. As a father and grandfather, I firmly believe that vehicles that can go as fast as 50 m.p.h. under motor power are clearly motor vehicles and should not be used on public roads by non-drivers, and especially by children. In an earnest attempt to prevent future tragedies, the New Jersey legislature is unfortunately pursuing a bill that is fundamentally flawed because it treats all Class 1 and 2 low-speed electric bicycles (bikes that can only go up to 20 m.p.h. as motor vehicles that require a driver's license, vehicle registration, and no-fault insurance coverage to operate. S4834/A6235 simply misidentifies the problem by focusing on lower-speed electric bicycles that are not creating safety risks and leading to crashes. If it becomes law, this bill will create confusion and financial burdens for consumers and families and will most certainly harm the 300+ bike retailers and rental businesses that form the backbone of New Jersey’s cycling industry and community.” HPS ANALYSIS: This is another example of a state legislature attempting to do the right thing, but by not listening to the affected industry, overregulating and placing small businesses in jeopardy. The NBDA is issuing a Call to Action to New Jersey bike shop and supplier members, and HPS understands that this legislation has been passed by both chambers of the New Jersey Assembly and is headed for signature by the governor. It is essential that the governor understand that unless he vetoes this legislation, he will be harming hundreds of small business owners and their employees in the state of New Jersey.

01 12 26: “Ideal Bikes subsidiary enters U.S. market as distributor for Fuji and SE Bikes.” Bike Europe: “Pacific Glory Worldwide Ltd (PGW), owned by the Taiwan-based manufacturer Ideal Bike Corporation, has opened a new United States distribution channel, PGW USA. It will oversee sales and support for the Fuji, SE, and Tuesday bicycle brands in the U.S. market. It says it will focus on retailer success and long-term sustainability, but open questions remain regarding the current distributor, BikeCo. Until now, BikeCo had been the exclusive distributor for Fuji and SE Bikes in the Americas from its Philadelphia base, handling marketing and sales for these premium brands along with Breezer and Tuesday Cycles. How these two distribution models will coexist in the U.S. market is currently unclear. Ideal Bike is a primary manufacturer of Fuji bicycles with production facilities in Taiwan, China, and Poland. In 2004, Ideal also acquired a 17 percent stake in Advanced Sports International (ASI) Asia, the entity responsible for marketing Fuji bikes in Asia. Retailer-first model: PGW notes that this new distribution approach marks a strategic shift back to a retailer-first model. By overseeing distribution directly, the new entity, PGW USA, aims to “improve product availability, simplify communication and maintain competitive margins that help independent shops stay profitable and successful.” HPS ANALYSIS: Most of the IBD channel of trade is not familiar with Ideal, the number three Taiwanese OEM that got started manufacturing for Trek. The fact that Ideal is expanding into the U.S. market is, HPS believes, an indication of declining revenue and profitability in the Asian and European bicycle markets. The good news, Ideal is expanding in the U.S. with a retailer-first business model that may fit into the NBDA culture reset. 

01 12 26: “In the age of AI, REI is turning to its human employees to win.” RetailDive: “AI is a topic on every retailer’s mind heading into 2026. But REI isn’t shifting focus away from one of its key assets: human employees. Mary Beth Laughton — who stepped into the CEO role nearly a year ago after stints at Athleta, Nike, and Sephora — highlighted the value its ‘green vest’ store associates have for both the retailer and its customers, especially now in the age of AI. ‘In a world where the transaction is just going to be super easy through AI, we’ve got to really lean into the green vests,’ Laughton said at the National Retail Federation’s Big Show on Sunday. ‘The idea that a retailer will have a seamless, highly personalized experience feels like that’s going to be table stakes. But the brands that can make the emotional connection with their customers and really build relationships are the ones that are going to win,” Laughton said. The green vests are more than just in-store associates: They’re ‘trusted guides’ on the outdoors and provide services like backpack fittings. They also resonate with consumers. ‘People really love the green vests,’ Laughton said, adding that the retailer featured them in its most recent holiday campaign, where they recommended what products to buy as gifts. ‘It’s great because it brings that real emotional connection to people.’ The company is looking to extend its green vests beyond stores to the digital experience. In the last six months, the retailer has begun integrating employees into its online product pages through testimonials or videos. It has resulted in a ‘conversion lift’ for the retailer, according to Laughton. The retailer isn’t naive to AI’s growing prominence in retail and beyond, though. The technology will likely touch every aspect of the retail journey, Laughton said. ‘We can’t underestimate it.’ But as more companies integrate AI into their businesses, human connection and the idea of ‘trust’ will become the differentiating factor for businesses that resonate with consumers, according to Laughton.” HPS ANALYSIS: While AI is being embraced by large retailers, it is going to be a much more difficult and expensive transition for small, specialty businesses, like specialty bicycle retailers. It is exciting to see a national outdoor retailer like REI, that is also a significant national retailer and service center for bicycles and e-bikes, making it clear that it is going to turn to its “human” employees to a winning strategy that is based on winning the “trust” of consumers. HPS advises every specialty bicycle retailer to listen and learn from REI.

01 12 26: “Trump administration close to finalizing Taiwan trade pact.” Bloomberg: “The Trump administration is closing in on a tariff agreement with Taiwan, according to a person familiar with the matter, a move toward improving trade terms with a key Asian partner. Washington and Taipei have entered the final stages of negotiations, said the person, who declined to be identified and did not elaborate on the terms of a potential deal. Earlier Monday, the New York Times reported that a deal would see the U.S. lower tariffs on the self-governing island’s exports to 15 percent from 20 percent. Taiwan Semiconductor Manufacturing Co. would, in turn, commit to building five new chip plants in Arizona, roughly doubling its manufacturing presence there. The framework could be announced this month, the paper reported, citing anonymous sources. The White House, Office of the U.S, Trade Representative, and Commerce Department did not immediately respond to requests for comment. The commitments would add to existing plans for as much as $165 billion in U.S. investment by TSMC, the world’s top producer of advanced chips used in artificial intelligence, and an existing promise to open six factories and two packaging facilities in Arizona. A signed deal would bring to an end talks between President Donald Trump’s team and the Taiwanese government that have dragged on for months. Taipei would gain a tariff rate that is in line with the one the U.S. applies to imports from its neighbors, Japan and South Korea. Trump would gain another investment pledge from a major overseas manufacturer, which he could tout as another win for his trade policy.” HPS ANALYSIS: Taiwan is a significant source for the U.S. bicycle, ebike, and PA&R supply chain, and this, if it comes to fruition, is welcome news. Lowering the IEEPA U.S. tariff from 20 percent to 15 percent is very significant, and if this holds in the same basic trade agreement after the U.S. Supreme Court rules, it will have a great impact on strategic planning in the bicycle business.

01 13 26: “Inflation steady as Fed considers rate path.” The New York Times: “Inflation ended the year on a subdued note, as the 2025 tariff barrage worked its way through to sticker prices. Consumer prices were 2.7 percent higher than a year ago, data from the Bureau of Labor Statistics showed on Tuesday, or 2.6 percent when stripping out volatile food and energy prices. That was about in line with the number for November, which was artificially depressed by irregularities arising from a lapse in data collection during the government shutdown. And it was only slightly slower than the pace at the beginning of 2025, before the prices of durable goods like cars and toys began rising as President Trump imposed steep tariffs on most countries. The report is the last of its kind before the Federal Reserve meets again in two weeks. With the employment report for December showing the unemployment rate sinking back to a relatively healthy 4.4 percent, officials are expected to hold interest rates steady after cutting them three times since September. The Consumer Price Index was pulled down by the cost of used cars and trucks, which fell 1.1 percent over the month, and have risen only 1.6 percent over the past year. Yearly growth in that category peaked at 45 percent in June 2021, before turning negative in 2023 and 2024. Airline fares, on the other hand, unexpectedly jumped 5.2 percent, potentially reflecting record travel during the holidays. And the price of groceries also came in hot, at 0.7 percent over the month and 2.4 percent since this time a year ago. That was the fastest one-month gain in grocery prices since 2022, driven by higher prices for items such as meats, dairy, and coffee.” HPS ANALYSIS: Inflation and its effect on the Fed’s interest rate setting every month is a critical factor in consumer demand for bicycles, e-bikes, and related products and services. As HPS has noted throughout this month’s newsletter, the impact, in the form of price increases, of U.S. tariffs is going to be a slow seeping effect into the pricing of goods and services. The impact on inflation will be slow, and in HPS’s opinion, steady increases in cost, will accordingly contribute to increasing inflation. As the overall effect of tariffs seeps into the U.S. economy, the increase in inflation cannot be stopped. The Fed will be under growing pressure as inflation and increasing unemployment grow over the coming year. If the Fed becomes a political animal, the economic situation for small businesses, including specialty bicycle retailers and their suppliers, will also become more difficult, and liquidity and positive cash flow, as part of a revenue and profit growth playbook will become essential.  

01 13 26: “Trump vows 25 percent tariff on countries doing business with Iran.” Bloomberg: “President Donald Trump said he is imposing a 25 percent tariff on goods from countries ‘doing business’ with Iran, ratcheting up pressure on the government in Tehran that has been rocked by widespread protests. Trump posted on social media on Monday that the new duty would be ‘effective immediately,’ without providing details about the scope or implementation of the charges. The action has the potential to disrupt major U.S. trading relationships across the globe. Iran’s partners include not only neighboring states, but large economies, including India, Turkey, and China. ‘Any Country doing business with the Islamic Republic of Iran will pay a tariff of 25 percent on any and all business being done with the United States of America. This order is final and conclusive,’ he said. China and Middle East Would Be Affected by New Tariffs: The U.S. president already imposed levies as high as 50 percent on Indian goods tied to their purchase of Russian oil. The two sides have been working for months to finalize a deal that would provide long-sought tariff relief to New Delhi. The South Asian nation’s commercial ties with Iran are modest, accounting for just 0.15 percent of India’s total trade. Iran was once India’s third-largest crude oil supplier, but New Delhi halted purchases in 2019 after the US reinstated sanctions on Tehran. While the scope of Trump’s latest tariff actions remains unclear, India’s interests in Iran’s Chabahar port could come under scrutiny. The port provides India with a key gateway to Afghanistan and Central Asia via the International North-South Transport Corridor, allowing it to bypass rival Pakistan. India signed a long-term agreement in 2024 to operate the strategic port and expand its regional footprint. An additional 25 percent tariff hitting products from Beijing risks upsetting the trade truce Trump negotiated with Chinese President Xi Jinping late last year. China is the world’s top buyer of Iranian crude, and the nation’s independent refiners were increasing their intake of the oil as of last month. Hanging over the threat is an impending decision by the U.S. Supreme Court on the legality of Trump’s global tariffs. If the justices rule against him, it could hamper his ability to quickly impose duties on Iran’s partners. The court’s next opinion day is Wednesday.’”HPS ANALYSIS: This month’s HPS Bicycle Business Reporter started with radical uncertainty, and will end with radical uncertainty. Whatever the reason, an additional 25 percent U.S. import tariff on goods from China, including bicycles, e-bikes, and PA&R, will not be as devastating as applicability of the Section 232 aluminum and steel content tariff of up to 50 percent, but it will be “devastating” nonetheless when “stacked” on the M.F.N., Section 301 and the IEEPA (or whatever replaces it). While many, if not most, details are lacking, this threat is another example of radical uncertainty in practice.

Jay Townley, jay@humanpoweredsolutions.com