Struggling toy industry braces for next round of US-China trade war

The US toy industry is trying to recover from Toys “R” Us goes bankrupt, but toy makers fear they will soon be hit by tariffs that will push up the prices of almost all of their products.
About 85% of toys sold in the United States are made in China, according to the Toy Association, the industry’s trade group. While these products have so far escaped the escalating trade war between China and the Trump administration, the next round of tariffs are expected to broadly include all imports from China that have yet to be taxed. .

If this happens, there is no way the toys will escape.

“This couldn’t have come at a less opportune time for our industry,” said Rebecca Mond, vice president of government affairs for the Toy Association. “We are still in the shock of this bankruptcy.”

She argues that the solution to tariffs – bringing toy manufacturing back to the United States – would make no sense.

“It is a labor intensive industry that cannot be easily automated,” she said. Much of the manufacturing that has been brought back to America in recent years has gone to highly automated factories with high productivity.

It’s also a seasonal industry that needs to increase production as the holiday season approaches, she said. This makes building new US factories impractical, she said.

Hasbro CEO Brian Goldner has spoken to analysts about the removal of production from China, but he’s made it clear that this will shift to other low-wage countries – not the United States. He said it would take years to move even a fraction of his Chinese production elsewhere.

“There is absolutely no way that Hasbro (AT) and Mattel (CARPET) can move from China to another country cheaply overnight, “said Lutz Mueller, CEO of Klosters Trading and industry expert.” They don’t have the infrastructure or the supply chain in place. “

Major toy makers declined to answer questions about the tariff threat. But when some of the items they sell, including high chairs and cribs, were initially placed on earlier tariff lists, they filed comments with US trade officials, saying the tariffs would end up costing. jobs in the United States. Mattel said it employs 5,000 Americans for its toys.

Those arguments have worked and juvenile products have not been included in previous rounds of tariffs – yet.

Lutz said that a number of small toy companies could close if tariffs are imposed. Many are struggling to recover from the Toys “R” bankruptcy.
As for large companies, Mattel was already struggling even before the Toys “R” Us bankruptcy. Its shares have fallen 20% since June. In July, following the closure of Toys “R” Us, she announced that she cut 2,200 jobs in the United States for the sake of cost control.

Lutz says Mattel will not close its doors, but the imposition of tariffs could reignite discussions over its purchase by a rival, namely Hasbro.

“Mattel is already on the brink,” he said. “Hasbro has been trying to buy it for some time. Whether it can survive as an independent business with tariffs is a question mark.”

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