Economic Commentary – April 21, 2025

Timing is everything, so the saying goes.  Economists would paraphrase this by saying “time frame is everything;” play around with the time frame enough and one can perhaps prove just about anything, in co-conspiracy with the ability of statistics to do the same.  As world economies march towards May, serious questions about the relevant time frames for the economic impact of various trade actions dominate the discussion: When will prices start rising? When will consumers respond? When will rare earth stockpiles run out? When will businesses be forced to cut labor costs? When will factories re-locate? News headlines (which are all some people read, a dangerous proposition at a time like this) convey the impression that every trade action taken by a government is effective immediately, but that is not always the case, especially when quiet, un-advertised exceptions are being made. The China-US trade fight stands out for its immediacy, and Chinese-US trade (and any transportation hub that serves it) is likely to be the first indicator of probable economic impacts. Thus, Amazon sales are being carefully watched, along with the aforementioned rare earth supplies, and products such as lighting fixtures and high-performance bicycles. Very random evidence suggests that inventories of many imported products and parts were built-up in February and March and will be sufficient to sustain business-as-usual through perhaps mid-May, with businesses hoping to front-load sales for this year in this very short time frame (see included email advertisement below), while trade negotiations equally hopefully bear fruit.  However, few businesses appear comfortable at the moment with the notion that time is on their side, and more than a few seem to be nervously recalling John Maynard Keynes famous aphorism: “In the long run, we are all dead.”

• Our prices increased today. But YOU have a free pass on the tariffs through Saturday 4/19! Every single bike on our floor… you get the pre-tariff price, just because you’re on our email list.
• Major bike lines announced price increases due to the 10% “base” tariffs imposed by the US on pretty much every country in the world. Note this “base” tariff did not get rolled back. This is separate from the crazy-high tariffs that will hopefully not happen.
• The price increases on most bikes are in the range of 5-10%. Bicycling will still be a fantastic value, and as always, any bike you get from us will have value beyond its price as we make sure you get a bike that’s best for how you’d like to ride, properly fit, and we’re dedicated to making sure you enjoy your bike for years to come.
• We cannot predict where things will go in the future. How much is theatrics, how much is a bargaining ploy, how much meant to punish some countries. We do know that the 124% tariff on bike parts made in China did not get rolled back so expect things like bicycle helmets, which nearly every manufacturer still makes in China, to go up steeply.
• Availability of helmets, bike computers, apparel and everything else made in China will be an issue because companies are going to delay bringing product in, hoping that present 124% tariff will be negotiated away. If they bring in product now, they’ll be paying more than double than what it would cost if the tariffs on China get rolled back. Again, the Chinese tariffs aren’t like the rest of the world. The only exemptions for the Chinese tariffs have been some computer products and iPhones.
• Don’t believe the messaging that says the tariffs are a tax on the country where the product is made. It’s clear, in the bicycle business, that retailers like us, and our customers, are bearing the full weight of the tariffs. They are an existential threat to our 45-year-old business, and many others. If you would like to voice your concerns over the tariffs, use this link to send a message to the White House. Or call the switchboard (a real person answers!) at (202) 456-1414.
  

Thank you for the 45 years of support you’ve shown Chain Reaction Bicycles, our family working in the store (Kevin, Karen, Becky, Steve, Lexi & Mike Jacoubowsky) and our “adopted” employees (Sonia, Eduoard, Jose & Fredy).

Data to Watch:

1. S&P Global Purchasing Managers Index for April (preliminary), released Wednesday, April 23
2. US New Home Sales for March, released Wednesday, April 23
3. Federal Reserve “Beige Book” Report on Regional Economic Conditions, released Wednesday, April 23
4. US Durable Goods Orders for March, released Thursday, April 24

Suggested Reading:

1. China has a powerful card to play in its fight against Trump’s trade war
2. Trade War to Weaken Global Growth and Increase Inflation, I.M.F. Warns
3. The Trump Tariffs Are Tilting the Scales in the Coke vs. Pepsi Battle