Trump's tariffs could bring this small business back to the US
In order to dodge the billions dollars in tariffs that have resulted from a more than year-long trade war between the U.S. and China, one small business that manufactures electric bikes is considering shifting the majority of its operations to America.
Based in California, Pedego Electric Bikes – a privately held company worth about $25 million – is the biggest e-bike brand in the U.S., selling around 12,000 bikes last year. As a result of the U.S-China trade war, the company is weighing whether to bring the manufacturing of its e-bikes to the U.S.
“We think it might be the logical thing to do,” CEO Don DiCostanzo, who stressed that he supports free trade, told FOX Business. “It might be smart now. It might give us a competitive advantage. To tell you the truth, I thought that when I started the company. I wanted to make them here in the U.S., but I found that the rules were against it. Today, that’s changed.”
Now, the company is trying to answer two questions: whether it’s possible to manufacture e-bikes in the U.S. and whether it’s practical from a financial standpoint. Labor in the U.S. is more expensive, and before the trade war began, DiCostanzo said the system was designed to favor companies that manufactured their products in China.
“The first one we’ve answered: Is it possible? Absolutely, it’s possible. The other one is still unanswered,” DiCostanzo said.
Relocating to another country is nothing new for Pedego, which used to manufacture most of its products in China and had already moved most of its operations to Taiwan and Vietnam in order to avoid an 83 percent tariff slapped on Chinese imports by the European Union. Pedego was also already building some higher-quality and more-expensive e-bikes in Taiwan.
Pedego’s decision to move out of China was further solidified, DiCostanzo said, when President Trump levied a similar tariff on a slew of Chinese goods, including a 25 percent import tax on e-bikes, at the end of August. Pedego was hit with close to $200,000 in tariffs on its Chinese-made bikes before it began transferring its operations the next month. It completed the move by the end of the year.
“That has been in play ever since that day,” he said. “I don’t see it going away. By shifting our production to Vietnam and Taiwan, we were able to avoid it. We continued selling our bikes, just at a slightly higher price.”
The company -- which once made close to 100 percent of its products within China -- makes almost nothing in Beijing any more thanks to the trade war, besides a few products that go directly to Canada. Pedego sells 17 different e-bikes, prices of which range from anywhere between $2,995 and $5,295.
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Pedego plans to officially make the decision about whether to come back to the U.S. within 90 to 120 days, DiCostanzo said.
"The game changer is our nation,” he said. “And it’s not going to be cheap labor in the future. Everything we’re doing to get skilled jobs with automated factories is going to be the future of labor in the country.”