Steven Cedre owns the city’s smallest full-service bicycle shop, and he’s watching the latest Trump tariffs take a huge bite out of his business.
Across the board, the U.S. bicycle industry — which relies on China for more than 90 percent of its bikes and bike parts — is reeling from the tariff hikes, the latest of which kicked in this month.
Last year, the first round of U.S. tariffs upped the cost of Chinese-made bikes by 10 percent.
Then in May, the Trump administration raised tariffs on Chinese imports by an additional 15 percent. Tariffs on most Chinese products went up a further 15 percent on Sept. 1 — and that list included nearly all the bike products that escaped earlier Trump administration tariffs.
Back in May, Morgan Lommele, director of state and local policy for Boulder-based People for Bikes, told NPR the additional costs “will be borne by the consumer whether you’re buying a $100 bike or a $10,000 bike, across the board. There’s no way that the industry can absorb that.”
Cedre says it’s even worse now. He owns The Urban Cyclery, opposite Acacia Park, and he’s one of countless bike retailers and distributors who’ve found themselves forced to pass the price hikes on to their customers.
“It’s already impacting,” he said. “You do the tariffs, it’s going to [cost] the companies more to manufacture, the company’s going to charge the distributor, the distributor’s going to charge the retailer, and we have to charge the consumer more. Good one.
“It doesn’t hurt China at all. … Everything is passed on to the consumer. We’re not going to eat it. If you want to stay in business … there’s no way you can do it. You won’t be able to survive.”
With stiff competition from Amazon and eBay, Cedre said, selling bikes isn’t a great business model to start with.
“My friend told me a long time ago: ‘In order to make a million dollars in the bike business, you have to start with two million.’ Well, that’s fucking horrible. But as funny as it sounds, it’s pretty accurate — it’s hard.
“I have customers like, ‘Hey, last year I bought this bike for $350 and now it’s $400,’” he added.
“They kind of look at me like I’m price gouging, but I’m not. I have nothing to do with that. It costs me more, so I’m passing it on to you because my margins on bicycles are 30 percent.”
As tariffs push up prices, “I get a lot of people walk out,” he said. “A lot.”
More people are holding on to their old bikes and having them repaired, Cedre said, which is not all bad because he makes better money with repairs than through sales.
“There’s one bike that I just sold the other day, retailed for $189. I paid $120 and then I ate the shipping, which is $30. That’s $150,” he said. “I made $30 on that damn bike — and I had to build it. You know what? It wasn’t even worth it. There’s nothing left after that. And I gotta pay [the landlord] regardless if I sell a bike or not.”
Buying in bulk would help with volume discounts and better shipping costs, but it’s not an option for small bicycle businesses like his.
“You get giant breaks when you buy in bulk, but I don’t have the storage, nor the capital to invest in stuff like that. My shop is tiny,” he said. “It’s a struggle. I used to buy a pallet for $2,500-$3,000, on the low end for the college kids. Now I’d pay $3,500. I’m like, ‘Oh, shit. I ain’t got it.’”
With the tariffs cutting into already paltry profits, how long can he keep the doors open?
“I don’t know,” he said. “I’m literally painting a mural right now for Amy’s Donuts. I work three jobs to sustain this.”
Small businesses suffer in a tariff war, Cedre said, and his opinion is that President Trump “puts on this show for the people who elected him. … And they don’t see the bigger picture. It’s like cutting off your nose to spite your face. It makes no sense. So, we’ll see how long I can keep this up for. It’s a kind of hopeless optimism.”
Kelly Brough, president of the Denver Metro Chamber of Commerce, said China is Colorado’s third-largest trading partner, and about 95 percent of Colorado exports to China are affected by the tariffs. She said Colorado’s outdoor industry — including bicycle retail — is being hit hard.
“If you work for one of those companies, you see the immediate impact,” she said. “A lot of these companies in Colorado can be smaller businesses, and so you understand when an important source of revenue for your company is impacted. With your job, you may have fears. But most Coloradans would be like, ‘Well, I don’t work for those companies, why should I care about it?’
“But the truth is, these relationships produce real revenue for Colorado. I think the U.S. Chamber [of Commerce] has estimated the average American household — and we believe these numbers are probably consistent in Colorado — will pay about $500 [more] a year. And that’s under analysis for the current level of tariffs; as the trade war escalates, then it’s four times that in terms of the estimate of what we will pay. So that means the rest of us pay for this lost opportunity in our market.”
It might be worse than that.
J.P. Morgan economists estimate the latest round of tariffs will cost American households up to $1,000 per year, and earlier this month Goldman Sachs economists warned the trade war is damaging U.S. economic growth.
Both assertions are “well founded,” according to Daniel Salvetti, manager of Strategy and Analytics at Colorado’s Office of Economic Development and International Trade.
“Pessimism has been building worldwide since mid-2018 (see, for example, Bloomberg’s Global Purchasing Manager Index Tracker), when trade tensions truly began to escalate,” Salvetti said.
“The uncertainty surrounding trade policy and our relationships with long-time allies is one of the most toxic things to come out of the Administration’s adversarial stance on trade policy. In uncertain times, businesses forego investment, hiring, and other expansionary activities in order to build cash reserves or find some other safety net in case demand dries up.
“It’s like cutting off your nose to spite your face.”
— Steven cedre
“The trade war is not the only issue causing uncertainty globally — Brexit, Hong Kong protests, Iranian threats on the Strait of Hormuz, the destabilizing effect on refugee immigration in the EU, war in Syria, Indian oppression of Kashmir, China’s cooling industrial base are just a few others — but it is a main contributor.”
Salvetti said Colorado consumers will likely see moderate price increases on consumer goods that: have high import penetration; are disproportionately sourced from China; and have not already incurred tariffs.
“The products that best fit into this categorization are consumer electronics, and even more so, outdoor recreational clothing and equipment,” he said.
Colorado’s outdoor industry has a strong trade relationship with China, Brough said, “— think bikes or fishing or hunting. We’ll get parts from China that we will then assemble, and then we’ll export those products. And they’re hugely impacted by these tariffs. …
“I think this is the challenge: We haven’t spent a lot of time talking about how good exports are for our state. You make the product here, you sell it somewhere else, and all that money comes back to Colorado to drive our economy and our families’ economic success, our workforce’s jobs. And I think that’s getting lost in all of this.
“This is a global economy. No matter what industry you’re in, what happens around the globe impacts that industry. More and more, our markets are global, for us to be really competitive.
Our smallest businesses are interacting more and more around the world. And that means trade is critically important to our success, and actually delivers economic benefit to us — not a deficit.”
Manufacturers have warned the new tariffs on Chinese imports would harm the sector, which has already slowed.
In June hearings, representatives from manufacturing companies nationwide addressed U.S. trade officials, telling them the tariffs would increase costs for consumers and put domestic jobs at risk. The long list of companies testifying against the import taxes included Ball Corporation, FX Mineral Inc., the Association of Home Appliance Manufacturers, Plumbing Manufacturers International, Virginia Port Authority, Rheem Manufacturers Company, and Loftex Homes.
Christopher Fagnant, president at Springs-based Qualtek Manufacturing, said the most recent tariff increase would take time to impact his company, which works mostly in the medical device world with 10- and 15-year commitments to product lines.
“For us, the concern is not immediate supply or price,” he said. “With the last month of news coming out around steel producers, the concern is more the health of the steel and aluminum industries as a whole — the mills generally in the United States.
“The concern is that if … we continue in the trade war, we’re more likely to have a large economic slowdown, not just part-by-part customer-by-customer specific issues.”
Fagnant pointed to the share price of U.S. Steel, one of America’s largest metal makers, which hit a record $45 in early March 2018 and now stands at just $15 — a 70 percent drop.
“Nucor [Corp.], which is one of the larger aluminum providers, was up at $70 a share in January and now it’s down to $55,” he added. “So these share prices in these big steel companies and aluminum companies — it’s concerning, because they too are tied to agricultural products and that’s getting hit real hard with these tariffs. And the energy sector is a big buyer of this stuff, so when that fluctuates, it affects it as well.
“There’s just a lot all piling up at the same time, it seems like. And because there’s so much uncertainty, that’s also causing issues because you don’t really know what’s going to happen next with these tariffs being rolled out.”
Fagnant, a third-generation manufacturer, said the industry is seeing the impacts of last year’s tariff battles take hold now.
“[A]cross the board in the [metal] stamping industry, businesses have a pessimistic outlook on what’s coming,” he said. “They’re reporting their current orders … and virtually everybody is suggesting that they anticipate their orders going down through the end of the year. And they do not have as positive an outlook as they did, say, a year ago — or even at the beginning of this year.”
Fagnant wants to see the U.S. abandon tariffs as trade policy.
“We knew this going in,” he said. “Trying to use tariffs as a way to discourage businesses from offshoring and trying to bring work back to the U.S., rather than continuing to constantly look for the lowest-cost foreign source — that tariff strategy just hasn’t worked the last two or three times that it’s been tried over the last 30 years.”
Brough said the trade war “has tremendous negative implications for us in the United States,” adding that the nation has had successful examples of “renegotiating trade agreements — and finding solutions — for decades.”
Everybody recognizes there are things we want to improve in terms of our trade relationship with China, she said, but there’s also agreement that a trade war is not a sustainable way to address the improvements that need to be made.
For most companies, Brough said, the trade war has already stretched past the point where they can absorb the costs, and small businesses are finding it harder to hold on.
“Those smallest of businesses cannot navigate a storm that’s this big, for this long, on the economics of their business model,” she said.
Editor’s note: This is the second in a two-part series on trade tariffs.