Thursday, August 02, 2018

Trade Wars

US boutique builders are already feeling the results of tariffs
In case you hadn't heard, a political, potential trade war is already affecting the prices for some boutique bicycle goods and stands to- if enacted- raise prices dramatically on bicycles and parts to maintain them.

Without getting into the nitty-gritty, what is important to know is that these measures can still be headed off as they are under consideration until later this month. If, however, they do get enacted, you will be affected even if you don't buy a new bicycle in the near future.

That's because of two things- Raw materials and supply and demand. First, the raw materials. Steel and aluminum prices are already being affected by this tariff, and those raw materials are part of almost everything on bicycles. Tires, cables, cable housings, and more items that you will need going forward are going up in price. The tariff is possibly going to be 25%, so expect significant rises in prices on these goods. 

Secondly, even if steel and aluminum is produced here, the prices will be higher. Why? Because manufacturers here will raise their prices to be just slightly less than the affected Chinese goods and they will still be competitive in the marketplace. Demand will go for the lesser priced materials and the US suppliers will make more money as a result.

Aluminum prices, already going up, have affected White Industries such that they put out a statement on social media recently saying their US supplier is raising prices in response to the tariffs. This has resulted in a 4% surcharge on all current White industries product orders. You can expect more of that in the future.

No comments: