Trump forcing Trek to make in US will ramp up bike prices globally

Carlton Reid
Trump forcing Trek to make in US will ramp up bike prices globally

“Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.,” tweeted President-elect Donald Trump yesterday. Unlike China’s president Xi Jinping – who has been championing free-trade and globalization at the World Economic Forum in Davos  – Trump puffs that he’s a proud protectionist. Car makers and tech companies such as Apple are being told they should make their products in America, or face punitive tariffs.

If successful, Trump and his team could lean on other industries. For the most part, iconic American bicycle brands – such as Trek, Cannondale and Specialized – do not manufacture much in the USA; they outsource to the Far East, and have done since the late 1980s. A thumping 98 percent of the bicycles sold in America are not made in America. On-shoring – the repatriation of domestic manufacturing – might be feasible for some American car companies, most of whom have US plants as well as overseas ones, but it would take many years for American bicycle brands to do similar.

And when America sneezes, Britain catches a cold. The UK cycle market is heavily influenced by what happens in the US. Trump’s threats to Ford and Chrysler could have an eventual, albeit indirect, impact on the prices – and ready availability – of mid- to high-end bicycles in the UK. Add in dollar-versus-the-pound volatility due to Brexit, and we could be in for a torrid time. (Naturally, the price of bicycles is rather small beer compared to a Trump-triggered nuclear war, or a Trumpian trashing of the planet.)

Trek Bicycle Corporation president John Burke helpfully wrote a suggested inauguration speech for the president-elect, but Trump is unlikely to ever be as constructive and careful as Burke would like him to be. Burke didn’t mention the bicycle industry in his supposed speech (why not? “Believe it or not, the United States has a lot of issues to deal with!” he told BikeBiz) but with the bicycle industry being such a dominant importer it could be forced to change tack.

Thanks to persistent lobbying from protectionist organisations such as the European Bicycle Manufacturers’ Association more cycle manufacturing takes place in Europe than in America (the EU has long imposed anti-dumping tariffs on Chinese-made bikes; Brexit Britain won’t be able to do that, so get ready for a flood of cheap imports); nevertheless European consumers still mostly ride around on bicycles made elsewhere in the world. 

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America once tried to impose anti-dumping tariffs (via section 301 of the 1974 Trade Act) but did so too late and too meekly. Trump will aim to stiffen the resolve of US brands by beefing up this law, even though it runs counter to American-style capitalism which usually places profits above all else. (Think Trump will create jobs for Americans? Yes, American robots will get plenty of work. Humans? Not so much.)

The Trumpian threat to impose 35 percent tariffs on imports from China looks good on Fox News – and is retweeted to hell via the orange one’s 140-character orifice – but might not work quite so well in the real world. In short, Trump appears to want to start a trade war not just with China, but with American businesses, too. The appointment of anti-China economist Peter Navarro as the head of a new White House National Trade Council is a provocative move, and one which will unsettle US brands which manufacture in China. (Navarro’s incendiary books include “Death by China” and perhaps presciently, “The Coming China Wars”.)

But, as with all things Trump, you can never tell what his fixed position is – he flip-flops, often mid-sentence. So, at the same time as appointing a China-trade-hawk he has nominated China-dove Iowa Governor Terry Branstad to be the US ambassador to China. Is this an indication of how Trump will conduct business, the old good cop/bad cop routine?

“The Trump administration will reverse decades of conciliatory trade policy,” noted a draft memo that CNN said came from the Trump transisition team late last year. “New trade agreements will be negotiated that provide for the interests of US workers and companies first.”

That can only mean tariffs. And, if these insular, Little America, protectionist threats are played out for real, the world is in for a rough ride.

You know that bicycle journalist’s trope that today’s bicycles are better value than bicycles of just five years ago? With Trump at the helm those sort of consumer-friendly concepts will kiss the dirt. Things – and not just high-end composite-framed bicycles made in high-tech Chinese factories by dextrous women – will start to become more and more expensive.

 

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Pic by Gage Skidmore

Tags: Brexit

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