145 % tariffs on China damage to the toy industry

145 % tariffs on China damage to the toy industry

toys made in China were freed from Zöllen during the first term of office by President Donald Trump. This regulation now belongs to the past.

increased tariffs on toys from China

Last month Trump increased the customs tariffs on goods from China to 20%, which gave the toy industry a significant blow. But that wasn't all. Just a few weeks later, Trump, an additional so-called "mutual" of customs 34%. In the course of time he added more and more tariffs.

There were currently an impressive customs set of 145%-and this number is expected to continue to increase, as Beijing promises to react to new tariffs while Trump is threatening to do so too.

episodes for American families

For American families, this means that relatively inexpensive toys could become luxury goods. According to the Toy Association, a leading industry organization, almost 80% of all toys sold in the USA are produced in China.

"We have no choice but to increase our prices to double-digit amounts," said Isaac Larian, CEO of MGA Entertainment from California, which among other things Bratz- und L.O.L. Surprise! "The survival of my company, which has existed for 46 years, is on the brink."

workplace losses due to higher tariffs

Trump, as one of his main reasons, led to the increase in tariffs to bring American jobs back to the United States. However, Larian emphasized that China's 125% retaliation duties will force him to relieve American workers in his factory in Hudson, Ohio, with a total of around 700 employees. This is because many of the goods produced there are exported to China.

Although the majority of MGAS production remains in China, the factory in Ohio produces a large part of its Little Tikes products, including toy cars and sand boxes. The facility could make even more toys, but Americans "don't want to work in factories," said Larian.

challenges of domestic production

Even if the recruitment of additional workers were not a problem, it would still be more expensive for the US factory to produce the toys currently produced in China. In addition, it is particularly challenging to procure the raw materials required to produce doll hair in the USA.

"There is no American factory that is able to produce hair for dolls somewhere. What should I do? Naked dolls?" Asked Larian.

reasons for holding on to China

The reasons why Larian and his company hold on to China are not unique. Many industries that were previously freed from Chinese tariffs have shifted a lot of their production, but China still remains the main source for toys produced abroad that is exported to the USA.

of the almost $ 17.7 billion that the United States imported for toys last year, 75% or $ 13.4 billion from China.

"This goes back to the 80s and early 90s," explained Greg Ahearn, President and CEO of the Toy Association. "Back then, companies searched for cheaper production locations."

Receive competitiveness

china has significantly lower wages, which contributes to the reduction of production costs and thus at lower prices for consumers. In addition, toy production, even with technological advances, still requires a lot of manual work, explained Ahearn. For example, the face of dolls and action figures must be painted by hand.

Many toy manufacturers are considered small companies. It is much easier for them to access the existing infrastructure in China than to build on factories from scratch in the United States.

"There is no alternative at short notice. Yes, there is also production in the USA, but these are mainly things that can be heavily automated," said Ahearn, who previously was CMO of Toy "R" US.

The effects of customs measures on the toy industry

Jay Foreman, CEO of Basic Fun!, a toy company that produces Care Bears and Tonka trucks, explained in an interview with CNN in February, shortly after Trump imposed a 20% inch in China that his entire supply chain was anchored in China

"Our tools, our factory base, the production consistency - how can you just get up and switch to another market?" Said Foreman. "There are things that cannot be physically established or produced here (in the USA), and toys are included."

After the 145%tariff came into force, he said: "The situation ... has developed from a problem to a crisis for Basic Fun! And our entire industry. This not only threatens the price and the amount of toys that will be on the market, but also the survival of our industry."

Many toy companies are now facing this challenge, especially at a time when they would otherwise give up orders for the holiday season. The loss of sales could make several companies "not being able to stay in business", warned Ahearn of CNN.

Basic Fun! Has stopped all toy deliveries and thus put itself in a potentially critical situation. "We cannot afford to take the risk, not to know which tariffs are incurred when the goods arrive," said Foreman.

At the same time, he emphasized: "If we don't have a product, we have no cash flow, and that means no money for bills."