US-China Trade war
The US and China were locked in an escalating trade battle last year. US President Donald Trump had complained about Chinese trading practices before he took office in 2016. In 2017, US started imposing taxes on Chinese imports and this was quickly matched by China by imposing taxes on American imports. Additionally, EU introduced anti-dumping measures by raising tariffs on Chinese imported e-bikes.
Why tariffs?
Tariffs in general make the product expensive since the customer now has to pay additional amounts, thus making the local products cheaper and more economical for the buyer. This increases revenue for the local manufacturers and traders and hurts the foreign companies.
Current and Proposed tariffs
Over the last year, both the US and China have proposed heavy taxes on imported goods. And have been locked in a fuming trade war. China has accused the US of starting the largest trade war economic history.
In the latest move, China said that it would levy new tariffs on more than 5,200 US products if the US goes ahead with its latest threat to impose 25% tariffs on $200bn (£152bn) of Chinese goods.
China has targeted products including chemicals, coal and medical equipment with levies that range from 5% to 25%.
It has strategically targeted products made in Republican districts, and goods that can be purchased elsewhere, like soybeans.
Which industries have taken the impact?
The car industry seems to have been affected the most so far. With sales plummeting, customers are delaying purchases in anticipation of lower tariffs.
In May last year, China announced it would cut tariffs from 25% to 15% to cut tensions in this trade war. However, after US’s move to impose another 34 billion tax on China, tariffs on US made cars was increased to 40%.
E-bike market
The E-bike market was among one of the markets that the US imposed taxes on. It increased the tariffs to 25% on all Chinese imported e-bikes.
Particularly importers of electric bikes made in China such as Trek, Giant, Raleigh Electric, Pedego and other brands would be affected. A 25% import tariff would effectively rise prices by hundreds of dollars, leading to a competitive disadvantage.
EU and the Anti-Dumping laws
The US isn’t alone in waging a trade war with China that affects the price of imported electric bicycles. Not only has the EU also imposed series of duties on imported Chinese e-bikes, but their duties dwarf those imposed by the US. With a new round of duties reaching as high as 79.3%, electric bicycle prices in Europe are expected to increase sharply.
A non-EU country is considered to be ‘dumping’ their products into the EU if they are being offered at a much lower price than locally available manufacturers.
The EU uses trade defence instruments to re-establish a competitive environment for the EU industry when harmed by dumped or subsidized imports. It does this by imposing additional taxes and duties on products that it feels is being ‘dumped’ into the EU market.
The European Commission is responsible for investigating allegations of dumping by exporting producers in non-EU countries. It usually opens an investigation after receiving a complaint from the EU producers concerned, but it can also do so on its own initiative. If the commission feels then it can imposes taxes and duties on specific manufacturers. Not all manufacturers are taxed the same amount.
Most electric bicycle exporters in China will be hit with a 79.3% duty. That’s significantly larger than was expected by many in the industry.
However, a number of specific exporters will receive reduced duties.
Bodo Vehicle Group will be hit with a 73.4% duty.
Yadea Technology group will receive a reduced 62.9% duty.
And Giant, one of the more popular bicycle makers, will receive a significantly lower 24.6% duty.
What this means for E-bike manufacturers?
All e-bikes that are manufactured in China or rather, all e-bikes that are finally assembled in China will get a lot expensive since the customer will have to pay additional taxes. These taxes will be levied even on companies that are not based out of China but have their assembly factories set up in the Red Dragon; this includes many US based companies that have their manufacturing bases setup in China.
Many e-bike manufacturers are now moving their bases to other countries, like Thailand, Vietnam which have cheap labour and are close to China, to counter the loss of business suffered by the taxes.
