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Trek: proposed tariffs would cost us $30 million a year

Published August 23, 2018
As e-bike tariffs take effect and low-level negotiations resume, more bike industry executives speak in Washington.

WASHINGTON (BRAIN) — On Thursday, U.S. Customs began assessing a 25 percent tariff on e-bikes, e-bike motors and other Chinese imports totaling $16 billion. Also on Thursday, China announced retaliatory tariffs on U.S. exports, and low-level trade negotiations continued between U.S. and Chinese officials. 

And, Thursday afternoon at about 3 p.m. local time, four members of the U.S. bike industry will testify before the multi-agency 301 Committee at the International Trade Commission offices in Washington. The four are expected to testify in opposition to the proposed 25 percent tariffs on a wide range of bicycle goods from China. 

Trek's Bob Burns is expected to testify that the proposed tariffs would result in Trek paying an additional $30 million each year.

"If the price of complete bicycles and related products goes up, we expect to see diminished demand for these downstream goods and services that will risk the profitability of bicycle retailers."—Trek's Roger Gierhart

Burns is stepping in for Trek's Roger Gierhart, who was originally set to speak at the hearing. Gierhart mentioned the $30 million figure in his prepared remarks (pdf attached) submitted to the committee. 

"Trek will be forced to pass these costs on to the consumer, raising prices on adult bicycles, kid's bicycles, components, and key bicycle safety equipment like helmets," Gierhart wrote. 

"The bike industry depends heavily on Chinese manufacturing to supply goods for the global bicycle market. Approximately 93 percent of complete bicycles are sourced from China. At least 40 percent of imported bicycle components are sourced from China. Trek is no different, and our company manufactures significant portions of its products in China. For example, all of our company's helmets, kid's bikes, and our most popular models (Marlins, FX hybrids, Dual Sports, Verves) are exclusively produced in China for the U.S. market," Gierhart wrote. 

"One of our biggest concerns is the effect that these tariffs will have on the small business owners and their employees that sell Trek products. Sales of complete bicycles ultimately drive the purchase of other goods and services from these local bike shops. Tires and tubes wear out and must be replaced. Drivetrains needs adjustment and maintenance. Customers need comfortable and visible apparel while biking. Riders, and particularly children, need helmets to stay safe in the event of an accident. All of these needs drive demand for parts and accessories, as well as for the repair work that shop mechanics provide. If the price of complete bicycles and related products goes up, we expect to see diminished demand for these downstream goods and services that will risk the profitability of bicycle retailers."

Kamler, Seidler and Smith also to speak

Besides Burns, Arnold Kamler of Kent International, Patrick Seidler of Wilderness Trail Bikes and Bill Smith of Huffy Corporation are set to speak as part of a panel with executives from other industries affected by the proposed tariffs. Each will be allowed five minutes to speak and then will accept questions from the committee, which includes representatives from the State Department, Commerce Department, the Department of Homeland Security, the Department of Labor and the ITC.

Kamler planned to speak on behalf of Kent and a new group called the "Reshoring Bicycle Production Team," which he described as "an organization that is devoted to reshoring bicycles to the USA." In an interview with BRAIN last week, Kamler said he planned to tell the committee that the tariffs would be harmful to all parts of the U.S. bike industry and would serve to discourage U.S. brands from manufacturing or assembling bikes in the U.S. (a pdf of Kamler's request to testify is attached).

Seidler also planned to say the tariffs will harm his company and others. Seidler also planned to argue that the proposed tariffs on bike products are not in line with the Trump administration's stated goals. 

In his prepared remarks and in an interview with BRAIN this weekend, Seidler noted that the bike industry, from his perspective, has not suffered from intellectual property theft in China that the USTR has cited as justification for the tariffs.

"We have proprietary tires made in China and we keep them made there for a reason," Seidler told BRAIN. "We have a good relationship with our factory there. We’ve made huge investments overseas because that’s where the business is and we can’t move out of China in the timeframe that we are talking about. And if we don’t move, we will lose market share to competitors, many of them non-U.S. companies, who make tires in Taiwan, Indonesia and other countries other than China. So then we have the U.S. Trade Representative picking winners, and they are picking foreign companies, not U.S. companies."

Seidler also noted that bicycles are not part of China’s “2025 Plan” — China’s strategy to increase production of advanced products, and another source of concern for the Trump administration.

And Seidler said he has seen no evidence China subsidizes its bicycle tire industry, another administration concern.

“WTB has firsthand knowledge that, other than labor rates or dated equipment, there is not a material price difference in tires produced in different countries. Specifically, the prices WTB has seen from Chinese tire and inner tube producers cannot be attributed to any state support,” he wrote in his request to testify (pdf attached).

Huffy's Smith plans to testify that the tariffs will not bring bike production back to the U.S.; Smith argued that the U.S. missed its chance to shut the door to Chinese bikes more than 20 years ago. 

"The proposed tariff will have a devastating impact on bicycle sales as consumer demand will plummet. MORE IMPORTANTLY, it will devastate the American bicycle industry across all segments disproportionately impacting 4,000 independent bicycle dealers whose very livelihood depends on the sale of bicycles," Smith wrote.

Four other bike industry members testified before the 301 Committee on Monday: ASE's Pat Cunnane, QBP's Matt Moore, Jen Harned of Bell Sports, and Bob Margevicius of Specialized. In an interview with BRAIN, Cunnane said he told the committee that lowering the minimum value of imports that triggers duty collection would go far toward curbing unfair Chinese competition.

Topics associated with this article: Tariffs

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