Cycling Industry Tariffs Thought Experiment.

It's been a while since I've made it through a whole day without tariffs being brought up in conversation; to say the least, they have been a point of curiosity. There are undeniably some nerves around how the tariffs will impact the bike industry. While the exact effect of these tariffs is unclear, there will almost certainly be impacts on how the bike industry does business.

In the bike industry, we import a lot of things, and when I say a lot, I mean almost 100% of goods. Both bikes and components are primarily made in Asia. If a product is not from Asia, then my next guess for the origin would not be North America, but rather Europe. Domestically made bike products are largely reserved for only the most premium options on the market. This means that many bike products are potential targets for tariffs. If a product is subject to tariffs, it would make it more expensive for bike shops to get the product on the shelves. This, in turn, would leave the shop with a choice: either sell the product at the same price as before and absorb the increased cost, or raise the price of the product, which could decrease demand. Either choice would result in a decrease in profit for the store.

Another two effects that tariffs would likely have on the bike industry are: firstly, they would incentivize domestic manufacturing of goods; and secondly, there would likely be an increase in the cost of various things, including other types of transportation. This could force more people to rely on bikes for transportation, not just recreation. More on both of these points later in the article.

The future of these new tariffs is not clear. The point of the tariffs is to penalize imports, so as a thought experiment, I am going to momentarily imagine that these tariffs will increase rapidly, ultimately making the US a closed economy where it is not possible to import any products from other countries.

Now, let's examine what effects a closed economy would have on the bike industry. To start, the biggest problem would be a very limited supply of new bikes and components in the market. The short-term effects would be that the price of these components would become prohibitively expensive. This would force consumers and shops to focus on bringing new life to used bikes and components. Likewise, shops would have to focus on making their service departments profitable. One thing that would help is that shops could charge more for the services they provide, due to the lack of cheap replacement alternatives.

Over time, domestic manufacturers of bike goods would be highly incentivized to ramp up supply to meet demand. This would lead to an increase in US-based bike manufacturers of all sizes. Additionally, these manufacturers would be asked by the market to produce products that last longer and are more serviceable/repairable than the current products we see today.

At the same time, we would see these effects taking place in the bike industry, but there would be many other things happening throughout the economy. I’m not going to pretend that I know enough economic theory to correctly predict the ripple effects that would occur across the economy. However, one relevant thing that would likely happen is an increase not just in bikes, but in all types of transportation. The resulting effects would likely be that more people would be forced to give up cars and take up cycling as their primary mode of transportation. Right now, this would not be ideal, as our communities are not optimized for cycling. Nonetheless, one could imagine that over time, more bikes and fewer cars could lead to new city infrastructure that is more bike-focused. Better bike infrastructure has been a long-standing battle for cyclists here in the US, and unfortunately, everyday people being priced out of owning cars may be what it takes to see real change in cycling infrastructure.

So, would a closed economy to international trade have a positive impact on the bike industry here in the US? Well, no, it would almost definitely be very destructive to the bike industry, and the economy as a whole would not function as it is currently structured. However, there are some positive concepts I highlighted above that would be nice to see.

It is unlikely that we will see this scenario ever happen. Yet, the future of the current tariffs is unclear, and it would not be unlikely to see a further increase in tariffs. This would continue to penalize imports, practically putting us somewhere between the status quo that we are used to and the extreme reality of being completely closed off to trade. This naturally raises the question of whether the positive effects would slowly emerge from the market by slightly shifting the playing field, allowing the market to evolve and avoid some of the negative effects. In my untrained opinion, I would say that this would not happen by using tariffs. Some of the positive effects may happen through cultural shifts or legislative incentives.

Firstly, the effects of promoting and revamping the use of older bikes could happen if the bike industry shifted from optimizing products for marginal gains to optimizing for fun and joy. This shift is already happening in niche segments of the bike world, and my favorite example of this is the subreddit r/xbiking. On the other hand, the benefits of having more people using bikes as their primary transportation could be realized by incentivizing people to make the switch to cycling through tax credits. I haven’t done the math, but this may be financially sustainable for governments due to the lower burden on infrastructure that cyclists cause.

In conclusion, tampering with the economic forces that underlie the bike industry will cause change. While not all of these changes would be good, it is fun to dream about possible positive impacts and what it would take to actually see these changes.