Interesting piece re tariffs

[in4]

No political view inferred by posting just an interesting piece and what the ‘ripple effects’ are IRL.

https://apple.news/AVkfqCFrsR9ixNTQCGzGksg

[Andre Jute]

Interesting, indeed, especially for how the reporter(s) didn't have the common trade-craft to add that Mr Trump was merely rebalancing the tariffs and other sneaky barriers these other countries (including obviously China but also the entire EU and the UK) raise against American imports. Mr Trump isn't raising tariffs in vacuo, he's hitting back at the mercantilism of other nations.

If I were conducting these interviews, I would ask these bike branders, "How many bikes did you sell in China last year?"

Trivia: The US government into the 20th Century didn't have income taxes, instead financing itself with the protective tariffs it raised in aid of its fledgling industry, against imports from the British and German industrial powerhouses.

Disclaimer: As an economist, I of course want to see free trade, as it is the most efficient internecine settlement of nations ever imagined, short of a war of total annihilation. But that means everyone would have to play the game, and they don't: apparently only the Americans are naive enough to pay for everyone else's tariffs, or were until Trump came along.

Historical trivia of current importance in our own time: Many people with an inadequate education or an inclination to believe what they read in newspapers, believe the Great Depression of the 1930s was caused by the Wall Street Crash of 1929. Not so. The Wall Street crash in the beginning was no larger than the 2002 financial crash in the Argentine, or the more recent difficulties in Greece and Italy, which are all under one form or another of control and besides have left behind shell-shocked pols and eurocrats, also a good thing, as is humbled economists.* What really hindered market recovery after the Great Depression and deepened it was the Smoot-Hawley Act at the beginning of the 1930's, which is a textbook no-no of tariffs.

*Before the next financial crisis in 2008, Olivier Blanchard of MIT complacently announced that “the state of macro is good”; he went from there to being chief economist of the International Monetary Fund, the bank of final resort for nations in trouble. --Quoted in context in
It's the Economy, Stupid, a Rhodes Scholar Education in One Hour by André Jute
If you want a complimentary e-copy, drop me a private message via this forum.

[mickeg]

No political view inferred by posting just an interesting piece and what the ‘ripple effects’ are IRL.

https://apple.news/AVkfqCFrsR9ixNTQCGzGksg

Thanks for posting.

I think posting an article from a bike trade magazine or from other journalistic sources is acceptable.

[Andyb1]

‘Interesting, indeed, especially for how the reporter(s) didn't have the common trade-craft to add that Mr Trump was merely rebalancing the tariffs and other sneaky barriers these other countries (including obviously China but also the entire EU and the UK) raise against American imports. Mr Trump isn't raising tariffs in vacuo, he's hitting back at the mercantilism of other nations.’

Sorry, but the above text is entering the politics we have said we would avoid.   I for one strongly dispute what Andre has written as it seems to justify what Trump is doing.

[PH]

If I were conducting these interviews, I would ask these bike branders, "How many bikes did you sell in China last year?"

Trek sells loads of bikes in China, it's current difficulties are largely a result of the Chinese Consumer downturn.  I don't know what that has to do with tariffs, those bikes don't pass through the US, so are unaffected. For tariffs to be relevant, the question is whether Trek will start manufacturing in the US, the answer to which is likely to be no.   

[Danneaux]

Sorry, but the above text is entering the politics we have said we would avoid.

<nods> Yes, let's try to pull things 'round more to the cycling aspect as otherwise things can degrade quickly so as to become a political rather cycling forum.

For example...: This is bound to have an effect on used-bike prices in affected markets. Something similar happened with used-car prices during Covid. If you're thinking of moving on an older bike, perhaps wait a few months to see if the market elevates?

All the best, Dan.

[Andre Jute]

Andy, you're in effect saying it is all right for Starmer and Macron and Xi to do onto Americans, but wicked for Trump to do the same onto them.

PH, of course the bikes Trek sells in China have to do with tariffs: Trek set up manufacturing in China specifically to beat Chinese tariffs on imported bikes. And because of Trump's tariffs, Trek will also (wise managers don't make strictly binary choices, they cover all bets) be manufacturing in the States within the year, just like Apple and the chip makers who have already earmarked billions for new factories in the States. You want to imagine the Seasoned Dealmaker's three-dimensional chess against a rigid ideologue who thinks that as Heaven's Son, he can get away with anything, forever. Once you disengage your emotions, see, it is free entertainment, but only if you don't let politics interfere with the giggles.

Dan, I don't have any more time to give to correcting the pablum of the approved narrative of Trump Derangement Syndrome, and anyway, the management must manage as best they can. I'm out of this thread, and won't even read anything further in it, so if you want to fire me out of a cannon for this (rare) clumsiness, do it by message. My excuse is that I thought I was writing on the economics of, inter alia, bikes. I was taking bets with myself on who would be first to mention the consequence to pre-loved bike prices.

Ian, apologies for inadvertently ruining your thread. I shoulda listened when you warned me privately that this would happen.

[PH]

PH, of course the bikes Trek sells in China have to do with tariffs: Trek set up manufacturing in China specifically to beat Chinese tariffs on imported bikes. And because of Trump's tariffs, Trek will also (wise managers don't make strictly binary choices, they cover all bets) be manufacturing in the States within the year,

I doubt it was the only reason Trek mainly manufacture in Taiwan, outsourced to part owners Merida, and I've addressed the second part:

For tariffs to be relevant, the question is whether Trek will start manufacturing in the US, the answer to which is likely to be no.

Only time will prove which of us is right and to what degree.  Any discussion is inevitably political, as are the decisions, so I'll leave it at that.

[John Saxby]

...and on the matter of bikes amidst The Situation, this appeared recently on the Rene Herse Cycles website:

https://www.renehersecycles.com/bikes-in-the-age-of-tariffs/

[mickeg]

If I were conducting these interviews, I would ask these bike branders, "How many bikes did you sell in China last year?"

Trek sells loads of bikes in China, it's current difficulties are largely a result of the Chinese Consumer downturn.  I don't know what that has to do with tariffs, those bikes don't pass through the US, so are unaffected. For tariffs to be relevant, the question is whether Trek will start manufacturing in the US, the answer to which is likely to be no.   

I live in Madison, Wisconsin, USA, a few tens of miles from Trek Headquarters.  I am unusual, in that I am one of the few bicyclists in my community that has never owned a Trek.  But, because they are so close and many of my friends own them, I know a lot about the company.  A friend that I have done several bike tours with volunteers time at a bike oriented charity that was started by Trek.  And several years ago I met the Trek CEO at a social event that had nothing to do with cycling.

Trek started out as a company that could do a really good job of soldering high end frames together back when most frames were brazed or soldered together.  And they worked hard to expand, was soon buying bikes made in Asia to sell in USA too.  And as time went on, they started having more of their models that had started out as a model made in USA to being one made in Asia.  Example, a Trek 520 touring bike used to have a frame made in USA, but that shifted to Asia maybe 20 years ago.  In the past decade, Trek stopped making even the highest end carbon frames in USA and shifted that to Asia too.  I do not know any former Trek employees, but friends have friends that used to work for Trek.  From that I know that eventually even the engineering work was offshored to Asia.  So, now, basically Trek is a USA owned company that has a brand and marketing skill but does not make anything any more, instead hires others to design and make everything for them.

If they also sell a lot of bikes in Asia, I am not surprised.