When President Donald Trump slapped a stiff duty on 279 categories of Chinese goods last month, Don DiCostanzo was ready.

The CEO of Pedego Electric Bikes, based in Fountain Valley, had figured the new 25 percent tariffs on $16 billion worth of Chinese imports would cost him $1 million by the end of the year.

No small sum for a company whose $18.6 million in revenue last year mostly depended on three factories outside Shanghai.

So is DiCostanzo moving his manufacturing to the United States? Is he bringing back jobs and helping to slash the nation’s trade deficit — Trump’s oft-touted goals?

“Absolutely not — there’s no way,” said the effervescent 61-year-old entrepreneur who, as it happens, is a Trump supporter.

Next month Pedego, a leading electric bike seller with 140 branded stores in 33 states and hundreds of independent distributors, plans to open a new factory in tariff-free Vietnam. And it expects to raise the average price of its e-bikes by $300 — about 8 percent — to absorb the cost of adjusting its supply chain.

Pedego Electric Bikes CFO Terry Sherry, left, and his co-founder, CEO Don DiCostanzo, at their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Pedego Electric Bikes assembler John Kilbourn tests a new bike at their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Sound The gallery will resume in seconds

Pure Cycles CEO Michael Fishman, center, with his co-founders Austin Stoffers (left) and Jordan Schau at the company’s Burbank warehouse in May 2017. Pure Cycles raised the price of its electric bikes by $500 in August 2018 after the Trump administration imposed a 25 percent tariff on Chinese goods. (Courtesy of Pure Cycles)

Pedego Electric Bikes assembler Miguel Ortiz tests a new bike at their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Pedego Electric Bikes CEO Don DiCostanzo, near their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)



Javier Zavala packages a new bicycles at Pedego Electric Bikes’ headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Pedego Electric Bikes CFO Terry Sherry, left, and his co-founder, CEO Don DiCostanzo, demonstrate their bicycles near their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Pedego Electric Bikes inventory specialist Adrian Medina keeps track of bicycles at their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

Pedego Electric Bikes CFO Terry Sherry, left, and his co-founder, CEO Don DiCostanzo, demonstrate their bicycles near their headquarters in Fountain Valley, CA, on Monday, August 27, 2018. The company is moving its manufacturing from China to Vietnam and will be impacted by new tariffs. (Photo by Jeff Gritchen, Orange County Register/SCNG)

“Anyone who says they’re making electric bikes in the U.S. is lying,” DiCostanzo asserted. “The reality is not even a spoke is made in this country. … We wouldn’t exist without a global supply chain.”

A booming $17 billion global industry with a growing California presence, e-bikes offer a case study of the fallout from Trump’s tense trade war with China. While high tariffs could help some American factories by making foreign products more expensive, they are already hurting many U.S. companies — from steel pipe manufacturers to solar panel installers, all of which depend on imports to make a profit.

RELATED: A look at U.S. tariffs in the past and where we are headed with China

Electric bikes — basically, bicycles with rechargeable motors attached — are expensive, ranging from about $1,000 for basic models to $10,000 for luxury versions. But they are the fastest growing segment of the U.S. bicycle market, thanks to an aging boomer population with leisure time for recreation and the need for an optional assist up challenging hills.

High tariffs could slow that growth. Ninety percent of the estimated 263,000 electric bicycles sold in the U.S. last year were made in China, with the remainder sourced from Taiwan and Vietnam. From crowd-funded entrepreneurs to established firms, virtually all the nation’s roughly 300 e-bike companies are feeling the pain.

The impact in Southern California, with its balmy weather and fitness ethos, is especially stark. Some 40 e-bike companies are located in the Los Angeles region, the highest concentration in the nation, according to Ed Benjamin, chairman of the Florida-based Light Electric Vehicle Association.

“Bikes are the healthiest, most efficient form of transportation,” said Michael Fishman, president of Pure Cycles, an 8-year old Burbank company that added e-bikes to its 10-model line last year. “And e-bikes are the way to get more people on bikes.”

Sourcing from China, Pure Cycles has been selling 20,000 standard bikes a year, but in just 18 months, its two electric models have come to account for a quarter of its revenues. On Aug. 23, the day Trump’s 25 percent tariff took effect, the company felt obliged to raise its e-bike price to $2,499 from $1,999.

“This is a huge bummer for consumers,” Fishman said. “It will price people out of this great new category. E-bikes are never going to hit the mainstream with this tariff.”

Nor will the tariffs boost American jobs “because no one manufactures bikes in the U.S.,” he added. “We are getting quotes from Vietnam and Taiwan, but a manufacturing relationship is a huge part of business. China makes the highest quality bikes at the best price.”

Benjamin calls electric bikes “the biggest transportation industry you never heard of. Every day, 260 million people ride electric bikes to work — 250 million of them in China,” he said. In Europe, 10 million e-bikes are in operation. Just a million have been sold in the U.S., but he predicts that by 2030, they could account for half the bicycles in the world.

In Fountain Valley, DiCostanzo, dressed in an open-collar shirt, shorts, sneakers and an Apple watch, bounded through Pedego’s warehouse showing off commuter bikes, beach cruisers, mountain bikes, even a tandem. “We came out with purple this year,” he said. “And raspberry. One really hot color is greige — a blend of gray and beige.”

He whipped out his cell phone to show a snapshot of Martha Stewart with the Pedego she just bought in Bar Harbor, Maine. A company catalog features a testimonial from Star Trek actor William Shatner whose extended family owns 16 Pedegos.

When the Trump administration proposed the tariffs in June, DiCostanzo quickly turbo-charged orders from his Chinese factories, doubling his inventory to 4,000 e-bikes, now stacked high to the ceiling in cardboard boxes. That will tide the company over until the Vietnam factory is fully operational.

Only three final containers, arriving from China through the Port of Long Beach in the days after Aug. 23, were slapped with duties: $150,000 worth.

In the warehouse, several assembly workers were busy unpacking the Chinese bikes which arrive with detached handlebars, front wheels and pedals.

“We fully assemble and test ride them after dialing in the brakes, shifters and properly inflating the tires,” said DiCostanzo, who employs 42 at the Fountain Valley facility. “Our customers get choices of seats, tires, hand grips and options like front suspension forks. We make those changes at the time of final assembly.”

The complexity of the supply chain for even a small company such as Pedego illustrates why tariffs aimed at China may fall short of their goal.

After designing and building prototypes of its bikes in Fountain Valley, Pedego tells its factories what kind of attributes it wants for 50-plus parts — rust-resistant chains, for instance. But the origin of those components can be murky.

“When people say ‘manufactured in China, or Vietnam, or Taiwan,’ you have to drill down,” DiCostanzo said.

“Our tires are from Schwalbe, a German company, and they are stamped ‘Made in Indonesia’ but the rubber comes from Malaysia. Our brakes are from a Chicago company called SRAM, but they’re made either in China or Taiwan.

“We can make a bike in Taiwan, and buy a motor from Shimano, a Japanese company. But its cells come from Panasonic, a Korean company, and are made in Singapore for a battery pack processed in China. And the batteries’ lithium may have come from Brazil.”

Given China’s extensive bike parts infrastructure, built up over decades, a factory now exporting “Made in Vietnam” e-bikes to the U.S. could be still be sourcing most components from China.

“The trick is not to assemble in China,” DiCostanzo said.

Still, with 5 percent of its sales in Europe and hopes of growing its European market, Pedego plans to obtain most of its future parts from outside China. That’s because the European Union, which slapped hefty anti-dumping penalties on China this year, sets a 60 percent cap on Chinese parts.

As of now, the U.S. has not adopted a similar rule “but we plan to minimize the parts made in China in case that changes,” DiCostanzo said.

The threat of stiffer European duties was what spurred Pedego to begin looking for a Vietnam factory to handle its European exports even before U.S. tariffs were proposed. “But we weren’t planning to accelerate the process,” DiCostanzo said. “We hoped we could fight it.”

The August duties on Chinese-made e-bikes and 278 other categories of goods from tractors to plastic tubes to speedometers, followed earlier Trump administration tariff rounds on steel and aluminum, and on $34 billion of other Chinese goods, prompting tit-for-tat tariffs by China on U.S. exports.

How were e-bikes chosen for the $16 billion round in August? The U.S. Trade Representative’s office has offered no specifics. Its news release states all the tariffs resulted from an “exhaustive” investigation and a “response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.”

On July 23, DiCostanzo had traveled to Washington, D.C., to testify before a U.S. Trade Representative panel, along with an attorney from Trek Bicycle Corp., a large Wisconsin importer. They each had five minutes to make their case.

DiCostanzo found the agency panelists to be confused. “They asked me, ‘Aren’t you afraid of the Chinese stealing intellectual property?’ My response was: ‘Absolutely not.’ They said ‘Why not?’ I said, ‘Because we don’t have any!’”

“So they turned to the guy next to me, and he said, ‘I’m not aware of a single patent on electric bikes.’ If they were targeting items for intellectual property, they picked the wrong people.’”

Trump vigorously defends the tariff offensive, announcing that the next round of duties will target $200 billion worth of Chinese goods, amounting to about half of Chinese imports. As it happens, those products include standard bicycles, too.

“Tariffs will make our country much richer than it is today,” Trump tweeted Aug. 4. “Only fools would disagree. We are using them to negotiate fair trade deals and, if countries are still unwilling to negotiate, they will pay us vast sums of money in the form of Tariffs.”

The following day he added, “Tariffs are working big time. Every country on earth wants to take wealth out of the U.S., always to our detriment. I say, as they come, Tax them. If they don’t want to be taxed, let them make or build the product in the U.S.”

E-bike companies say they would like nothing better than to manufacture in the U.S. But, said DiCostanzo, “Even if we could make them here, our $3,000 bike would probably cost $10,000.

“For instance,” he added, “we’d have to spend millions of dollars just on a paint booth to absorb contaminants. Why do you think Apple, a U.S. company, makes its phones in China? China doesn’t have the same compliance rules.”

Moreover, DiCostanzo’s Chinese factory workers earn about $3 an hour, he said, and in Vietnam, the wages are even lower.

Wouldn’t consumers be more likely to buy an e-bike labeled “Made in the USA?”

“That’s been tested a gazillion times,” he replied. “In the end, it’s their pocketbook that matters. Go to Costco, Target, Walmart — almost everything they sell, other than food, comes from China.”

DiCostanzo voted for Trump and still supports him. “I’m not saying I like him personally,” he added. “But I’ve always maintained that business people should be in Washington, not career politicians who don’t really understand business.”

And how has that worked out for the e-bike business?

Tariffs are being applied “indiscriminately,” DiCostanzo acknowledged, adding that he worries “if we had an all-out trade war with China right now, almost every retailer in this country would see a lot of their business dry up.

“You would walk down the aisles and everything would cost twice the price as before. People could lose their jobs. It could spiral into a depression.”

Still, he said, “The jury is still out” on the administration’s overall trade policy. “The president’s trade experts want to flush out the inequalities in the tariff system worldwide. So they have drawn a line in the sand. China should honor our laws and our intellectual property.”

Tariffs should be applied gradually, he suggested, adding, “The administration hasn’t tariffed everything.”