Tariffs And Business Implications

The Trump tariffs were imposed rapidly with little careful, deliberative thought.

I spoke to a friend of mine who is a “CFO-type” and he remarked that many small businesses are going to get killed based on the tariffs. Not a very optimistic point of view but Dennis gets paid for pragmatism and realism, not optimism. I hope he’s wrong but doubt that he is.

I recently contacted the President of Bike Friday, Hanna Sholtz, to ask if they had been impacted by the Trump tariffs. [Note: Bike Friday is a client. It is a small business.] Here’s Hanna’s response:

Yes! The American tubing supplier we try to use for the majority of our tubing has raised their prices 17+% on what we purchase from them. We are proud to be American made but this makes it hard to have to decide between keeping costs stable (Taiwan tubing is better priced) and buying as much material American as we can.

The bike industry moved overseas 20 years ago so almost nothing is manufactured in America anymore. No tires, chains, dérailleurs, cassettes…..We have had to fight against the trend and lots of people advise that Bike Friday keep making our frames and assembling in the US.

So the proposed 25% tariffs on electric bikes and 10% tariffs on many other bike components (along with steel and aluminum tubing) will just raise the price directly for the end users. As you know setting up a new factory from scratch takes a lot of capital and time and special skills and knowledge.

Do you think the Trump administration will give a financial support package to the US bike industry to compensate for the tariffs like it did for the farmers?

Trump will not be motivated to provide a financial support package to Bike Friday for a number of reasons including the fact that Oregon (where Bike Friday is located) is a Blue state.

Bike Friday is a manufacturer of high-performance, highly-customized bicycles that are carefully fitted for each customer that also pack for travel in a large suitcase. There’s a lot of innovation here. They have a cult-like following for their bikes. If you happen to be a bike aficionado and are near Eugene, Oregon, I encourage you to stop by Bike Friday. They are really unique!

These cost increases aren’t something that Bike Friday can simply absorb. Their margins aren’t sufficient to do so. Add to this, the economic headwinds created by the strong U.S. dollar in the export market that further compounds the problems brought on by the Trump tariffs. So, tariffs and the strong dollar are a double-whammy.

Bike Friday’s best hope is that the tariffs wind down quickly.

Harley-Davidson is opening overseas manufacturing to fight the impact of the tariffs. This move has drawn the ire of President Trump who now supports a U.S. boycott of Harley-Davidson. I think it is inappropriate to bet against an American brand. After all, they merely want to be able to compete in a global marketplace, the same as Bike Friday.

Note: Graphic image courtesy of Bike Friday.

Thought for the week:

“Fear kills more dreams than failure ever will.” – Suzy Kassem