U.S. tariff uncertainty hangs over Taiwan's bicycle industry.
In the aftermath of Donald Trump's global tariff bombardment, Jeff Chen's factory in Taiwan – cranking out premium carbon and alloy wheels for high-end bicycles bound for the U.S. and Europe – continues to hum. However, Chen can't help but question how long this can last. The U.S. president's initial 32% tariff on Taiwan caught the country's bicycle manufacturers off guard, as they scrambled to meet orders before Northern Summer, only to see the initial shock subside when the lofty tariffs on Taiwan and numerous other U.S. trading partners were paused for 90 days.
Some U.S. customers promptly canceled or postponed shipments, only to reverse their decision when the high tariffs were put on hold. With a global 10% levy still in place and no solid answers about what happens after the three months end, Taiwanese bicycle companies and U.S. buyers are stuck in a holding pattern.
"They don't know what to do. There's no time to respond," said Chen, the general manager of Joy Industrial Co, a company that manufactures wheels and hubs in Taichung. Established by Chen's grandfather in 1971, Joy Industrial is one of over 900 companies assembling bicycles or producing components, including pedals, frames, and of course, wheels, primarily in central Taiwan, the nation's manufacturing powerhouse.
Recent orders have surged for some companies, as U.S. customers race to import bicycles and components before the deadline. Others, like Joy Group, have seen little change in demand, which Chen attributes to pandemic-related inventory leftovers, when retailers stocked up to meet soaring demand for bicycles.
Chen maintains that U.S. customers have transferred the 10% tariff to consumers, but a 32% levy could put a damper on future orders, with inevitable consequences for Taiwan.
"If we are getting hit, the company will need to consider ways to cut back... everyone will be in the same boat," said Chen, who also oversees four factories in China.
Decades ago, Taiwan faced an existential crisis when an ascendant China drew many of its manufacturers to its shores. Instead of competing with China's cheaper, mass-produced two-wheelers, Taiwanese companies collaborated to upgrade their manufacturing techniques and produce high-end bicycles and components for discerning European and U.S. markets.
Although Taiwan's export volume has plummeted from around 10 million in the 1990s to 1.3 million last year, largely due to the pandemic, the average export price for Taiwanese bicycles has soared. A traditional bike was valued at US$1,131 last year, while an e-bike fetched US$1,848, according to industry data and analyst reports. In contrast, China, which exported over 44 million bikes last year, had an average price of US$57.
Michelle Hsieh, a bicycle industry expert and sociologist at Academia Sinica, attributes Taiwan's success in the high-end market to "hidden champions" in the supply chain. Small and medium-sized companies – a hallmark of Taiwan's manufacturing sector – are highly specialized and nimble, making them indispensable in the global market, she explains.
"They're crafting things that other people can't, giving them a competitive edge," Hsieh said.
Trump's hopes of coercing firms to move production to the U.S. were dismissed by both Taiwanese and U.S. bicycle manufacturers as wishful thinking. Setting up a factory in the U.S. in the next three to five years would be "nearly impossible" due to higher costs, labor challenges, and the absence of a "bicycle industry cluster," according to Taiwanese bicycle manufacturer Giant Manufacturing Co.
Taichung, with its unrivaled bicycle manufacturing expertise, remains the absolute epicenter of the global bicycle industry. "That's where the world's bicycle expertise lies," said Tim Krueger, an industry veteran and the CEO of U.S.-based Esker Cycles, which imports frames and parts from Taiwan for its mountain bikes.
Some Taiwanese bike makers look poised to benefit from the 145% tariff on Chinese products in the short term, as U.S. customers seek out Taiwanese suppliers. However, Taiwanese industry veteran Tsai Po-ming cautions that there could be negatives. Chinese manufacturers might unload their lower-end bikes in Europe if Trump's tariffs spark inflation, he says.
"Consumers might feel that the prices are too high, and although our products are mid to high-end in quality, they might prefer to buy cheaper models instead," Tsai warns.
At Pacific Cycles Inc's factory near Taipei, workers assemble fold-up bicycles mostly destined for Europe and Asia. Although the company has limited exposure to the U.S. market, Pacific Cycles president Eva Lin says they could face issues if one of their suppliers is hurt by the tariffs.
"The complete bicycle industry is like a big family," she says. "No one can escape from the impact."
- Jeff Chen, the general manager of Joy Industrial Co, voiced concerns about how long his factory can continue producing premium carbon and alloy wheels for high-end bicycles, given the uncertain future of tariffs.
- Michelle Hsieh, a bicycle industry expert and sociologist at Academia Sinica, attributed Taiwan's success in the high-end market to the presence of "hidden champions" in the supply chain, which she described as small and medium-sized, highly specialized, and nimble companies.
- Tsai Po-ming, a Taiwanese industry veteran, cautioned that while some Taiwanese bike makers might benefit from the 145% tariff on Chinese products in the short term, there could be negatives in the long run, such as consumers preferring cheaper models over mid to high-end bicycles due to perceived inflated prices.
