I normally steer clear of public discussions of politics, since it can be so polarizing that it’s bad for business. Instead of giving people something to think about, political discussions these days tend to just reinforce what “side” someone is on, and there’s not much to be gained from that. Especially when the two “sides” are split so closely, whether it’s 52/48 or 48/52 percent.

But the Tariffs and US manufacturing rhetoric is just nuts and needs to be something more than a political soundbite.

Steep tariffs, by themselves, will not increase domestic manufacturing by any significant amount (if at all, and could even be negative). Steep tariffs will increase pricing for consumer goods, including bicycles. That is inevitable, as there are no competing domestic companies to pick up the slack.

We all want to get back to the heyday of US manufacturing right? But nobody wants to look back at those days and see what was different, what programs and policies favored US corporations building product here instead of over there. Such decisions, at the corporate level, are assuredly not based on a feel-good or America First belief. Simply put, production decisons are based upon bottom line profit and little else.

So what was different back in the 50s/60s/70s? Corporate tax rates were in the 48-52% range. Incredibly high! Presently, they are at 21%. How did businesses survive back then? Why wasn’t manufacturing choked off? Because the higher the tax rate, the greater the incentive to take advantage of the investment tax credit. The “punishment” (higher taxes for earnings) was significantly offset by incentives to reinvest in US equipment and factories. Further decreases in the corporate tax rate from the present 21% to 15% are part of the current administration’s agenda. The lower that absolute maximum amount of tax levied on a corporation, the less likely they are to be swayed by incentives to build product here.

Note that I’m not making an argument here for or against lower corporate tax rates. Just pointing out that, if the desire is to bring manufacturing back to America, the lower corporate taxes (reducing the incentives of “reinvesting in America”) are tying one hand behind your back

Tariffs aren’t new. For the bicycle business, there is no reason to believe tariffs will work any differently than they have in the past, increasing pricing on bicycles (as soon as the present overstock is cleared out of the system), with little, if any, impact on domestic manufacturing. Tariffs will affect which lower-cost country bicycles are built though; we’ve already seen a trend of moving manufacturing away from China and into countries like Cambodia and Vietnam, which have dramatically lower tariffs than China.

One argument frequently made, by those claiming tariffs won’t raise pricing, is that the tariffs will magically be absorbed by businesses, including the manufacturing company in China (or anywhere else), the importer, and even the retailer. Anyone believing that doesn’t understand how thin margins have become in the modern, ultra-competitive world. Trust me, as someone who’s been in the bicycle business for 49 years, the “fat” in the system is gone. Costs can’t be absorbed and stay in business.

I am not against targeting specific countries for dumping and doing things unfavorable for US interests. But we need to be realistic about the effects and recognize that our present tax structure favors businesses making money where they find it, without preference to creating jobs in the US. What I fear most is looking back at Tariff policy in a few years and thinking this is our version of BREXIT. Just didn’t turn out the way people thought it would.