Those pesky tariffs

A bunch of tariffs have already come into play, with a big and significant round to come into effect at the end of this year. 25% in a lot of cases. These apply to substantially everything that's made in China, which is where a whole whole lotta bike stuff is made these days. 

How will these affect you, and how will they affect us? We don't 100% know. For the vast majority of what we use that will be affected by tariffs, we aren't the importer. HED or Boyd or some other US-based importer/distributor is the importer and will pay the tariff. You probably all know that the importer and not the exporter pays the tariff, but it's worth highlighting. The only supplier price increase of which we're aware to date is that White Industries has been charging a relatively small tariff-based fee on all hub orders, which we've been eating for the past few months.  I can't imagine that HED is going to eat a 25% tariff on their alloy rims, but we'll have to see.

Of course, a 25% tariff on rims doesn't mean the retail price goes up by 25%. HED's price, on which the 25% tariff is based, isn't the retail price, it's a fraction of the retail price. If their margins stay the same, the retail price goes up by somewhere around 20% depending on how many links in the supply chain. And rims are a big component of the cost of a built set of wheels, but a 20% increase in the cost of rims wouldn't necessitate a 20% increase in the cost of a set of wheels. Somewhere between 7 and 10% would be more like it, depending on the other components, etc.

How these tariffs affect us is, of course, a tiny part of how they'll affect the bike industry, which in return is a tiny piece of how they'll affect global trade and the economy. There is a massive rush to import stuff before the end of the year and avoid the 25% tariff on as much product as you can bring in. That has tax implications (you'd ideally like to have a whole bunch of stuff somewhere on the Pacific Ocean on 12/31 for tax purposes), and it also strains the production system. And the shipping system. And the financial/credit system because you have to pay for all this stuff you're going to import. And then we have a distortion in Q1 where inventory levels are theoretically high if these hurry up and get stuff here deals all work, and orders are held to see what rollback there is of tariffs, and let the lines of credit breathe for a second as inventory eventually turns into cash flow. And all of that could have a massive effect on us, and you, and the prices you pay, and what's available for you to buy and us to build for you. 

We can't tell you how any of that is even likely to shake out. Buckle your seat belts, we'll have to see. 

This picture has nothing directly to do with bikes or bike wheels. I took it at the 9/11 Memorial in Manhattan. It's the desk top image on my computer. This post isn't intended in any way to be political, or to take a stance on tariffs. Of the general environment, we have to be pragmatic and just respond as best we can to the weather outside. However, since the World Trade Towers used to occupy the site where this pic is from, it's meaningful in context of today's post. And next week is Election Day, when anyone who is eligible to should absolutely please go and vote.