Shopping for a new bike or bicycle gear this holiday season? You’re in for some ups and downs. A national trade policy has American consumers making unusual choices and businesses struggling to adjust.
On one side of that policy, import duties on bicycles, components and gear have increased prices for importers and consumers. On the other side, a higher and more generous threshold for duty-free online purchases directly from foreign retailers can be a way to escape the duties _ but it can be a gamble. Some smart shoppers will probably end up at their local bike shop paying slightly higher prices for gear they can count on.
America’s “Section 301” China tariffs include a 10% tax on nearly all bike-related imports from China. These are on top of the 11% tariff charged on all imported bicycles from certain WTO countries. Even more tariffs were coming, but last week’s U.S.-China deal took those off the table, at least for now. The duties are hard to escape: 94% of bicycles and 97% of children’s bicycles are imported from China.
When U.S. bicycle importers pass higher prices on to consumers, small bike shops lose. A National Bureau of Economic Research analysis of large multinational retailers (think Target and Walmart) found these retailers mostly absorbing the duties and taking lower profits. Small-scale importers and boutique bike shops that sell specialized equipment, however, have little choice but to raise prices. That makes it even harder for them to compete with big box stores.
Shoppers looking for higher-end gear can go online and buy directly from a foreign retailer. Thanks to a 2016 decision by Congress, consumers can buy up to $800 per day of foreign merchandise and avoid paying the duty while enjoying streamlined customs procedures.
There’s just one problem, as some online bargain hunters can tell you: It’s hard to know what you are buying until it shows up at your doorstep. Consumers can end up disappointed that the bike they bought online is of poor quality or even counterfeit. Much worse is finding out that your bike helmet was not made to safety standards.
Bicycle industry executives have urged the U.S. trade representative not to include bicycles and bicycle products on the China tariff list. One, Bob Margevicius, explained that the tariffs would hit primarily mid- to lower-valued bikes (as opposed to the high-end performance-oriented bicycles that are imported from Japan and Europe). But “the majority of important bicycle safety accessories, like helmets, lights, and baby trailers are on the Section 301 tariff list,” he said. There is no significant U.S. production of bicycle safety accessories.
And because consumers are generally price-driven, duties might further encourage American consumers to avoid American sellers by ordering directly from Chinese retailers.
Folks that take that route, however, are not always happy customers. “They often end up in our retail stores (and) are frustrated,” said Patrick Cunnane, a longtime bicycle executive. The products have warranty issues, quality issues, and safety issues. U.S. manufacturers, even if their name is on the bike, may not stand behind it.
“The counterfeits that we see are shipped one at a time from a foreign, mostly Chinese retailer, to a consumer. So, they are under the radar. The sellers of these products are very hard to find and prosecute,” he said. In other words, you are stuck with the merchandise.
So if you’re on the hunt for a new bike or gear this season, keep a few things in mind. Be wary of going online unless you are familiar with the seller and confident they will take returns hassle free. Try to plan ahead and look for sales at your favorite local shops. A 10 or 20% discount could help to offset the extra duties.
It’s much the same in other industries. When governments meddle with the choices customers and businesses make, it can help a select few. But too often, we fail to fully consider the confusion and damage it causes.
Getting that new bike under the tree is still doable, and it’s always fun _ but thanks to a policy that puts American consumers (and some businesses) at a disadvantage, you might need to take a bumpier route.
Christine McDaniel is a senior research fellow with the Mercatus Center at George Mason University.
