My family has been in the bicycle business since 1907, when my grandfather opened a shop on New York's Lower East Side. That tradition continued in 1950, when my father started our company as a bicycles and accessories wholesaler. Today, we are one of the largest suppliers of imported and American-made bicycles in the country. Over the generations, we've weathered all kinds of turns in the industry. But we've never dealt with anything like this: heavy tariffs on key commodities, announced with barely any notice, by a president who may or may not be bluffing.
Though the bulk of my business comes from imported bikes, I also own and operate a bicycle assembly factory in Manning, South Carolina, which produces one of our lines, BCA Bikes. When we opened our doors in 2014, initially hiring 47 employees, we were bucking the overall trend in our industry: More than 95 percent of all bicycles sold in the United States are manufactured in China. With labor costs there rising, and high employee turnover, we decided to make an investment in our long-term growth. Today, our factory is responsible for more than 50 percent of the 625,000 bicycles produced in the United States each year. Before President Trump's trade war, we had plans to grow even further.
Almost all of our parts are made in China: Saving on their manufacture has enabled us to hire American workers and offer them good wages and excellent health benefits. We were already paying duties of 4 to 10 percent when the Trump administration announced in 2018 that it would impose an additional 10 percent tariff on $200 billion of Chinese goods. We couldn't simply pick up and buy from makers in other countries. Though the United States once had a substantial bicycle parts industry, those companies were wiped out in the early 1990s. Our business partners in China have decades of experience making the parts we need. We source very carefully, and we can't afford to gamble on quality or safety.
My company specializes in providing affordable bicycles, retailing for $80 to $200 at places including Walmart, Academy Sporting Goods and Amazon. (Amazon founder and Chief Executive Jeff Bezos owns The Washington Post). The new tariff raised our overall costs by 7.5 percent, which we were forced to pass on to our customers, and ultimately, to American consumers. Because it typically takes several months for large retailers to accept a price increase, we couldn't offset our extra costs for much of our busiest shipping season, in late fall. When the holidays arrived, consumers were put off by the price increases. Sales dropped, ending up 5 percent to 10 percent lower than our projections
The administration's abrupt policy shifts alone have caused damage. When Trump first threatened to increase tariffs to 25 percent, everyone - including our suppliers - wanted to get their products to the United States before they were scheduled to take effect. Ocean freight carriers increased prices dramatically. The administration eventually backed off on the threat and didn't raise those tariffs. But we had more than $1.5 million in additional freight costs, which we couldn't recoup. Running a business requires adapting to adversity; these sudden changes came like a punch to the gut.
Now Trump has renewed his threat to increase tariffs to 25 percent Friday - a ridiculously short time frame that leaves us little time to react. I don't belong to either political party, and I've voted for candidates from both. I understand very well that China has been cheating in all kinds of trade situations, from state subsidies to cybertheft. But - contrary to the president's tweets this weekend - when the government levies tariffs, we Americans are the ones who end up paying. In fact, the U.S. economy suffered a net loss of $7.8 billion a year thanks to the trade war, according to a recent study. Ironically, workers in Republican counties have shouldered most of those costs, mostly in the form of retaliatory tariffs against the agricultural sector.
The volatility caused by the trade war has thrown a wrench in my company's domestic ambitions. Ever since our factory opened, I have planned to bring more phases of the manufacturing process home. We'd start by importing steel tubes, and welding the frames ourselves; from there, we'd buy American steel and make the tubes. Our factory employs 125 people, but that could grow to 300, I thought: Eventually, we could build 1 million bicycles, right here in the United States. But Trump's protectionist measures are getting in our way. We don't plan to lay anyone off, but until the situation stabilizes, and we have some clarity about our future, we'll just continue buying bike frames from China.
These tariffs could go into effect Friday, as threatened, or they could be put off for weeks. They could last for a few months or take hold permanently. Trump could be dead serious, or this could be a heavy-handed negotiating ploy that he will have to back down from. There's no way for us to know - we'll just have to endure the upheaval. My company created hundreds of good, steady jobs in South Carolina and at our headquarters in New Jersey - but despite the president's promises that he would help American companies grow, his sanctions are hurting us badly. These measures punish American businesses that have done nothing wrong. We play by the rules; this administration keeps changing them.
This article was written by Arnold Kamler, chairman and CEO of Kent International, Inc., based in Parsippany, New Jersey.