Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – The survivors of the crippled U.S. toy industry are bracing for a New Year’s worth of pain once Trump pushes through with another tariff hike on Chinese imports on Jan. 1, 2019.
This latest round of tariffs to the tune of 25% will hit practically all toys that are made in China and sold in the U.S. by a dwindling number of firms such as Hasbro and Mattel. The shocking bankruptcy of Toys R’ Us, the largest U.S. toy retailer, last March underscores the precarious state of the once mighty toy industry.
The American toy industry is still trying to recover from the Toys “R” Us bankruptcy that closed all 900 of its stores and led to the firing of more than 33,000 employees. This recovery process won’t be helped if the industry is slammed by Trump’s tariffs that will drive up the prices on almost all their products.
More than 85% of the toys sold in the United States are made in China, said the Toy Association, the industry’s trade group. Most toy products have escaped being hit by new Trump tariffs but the next round of tariffs on Jan. 1, 2019 is widely expected to include all imports from China not currently taxed.
Analysts concur there’s no way toys will escape the new taxes this time around. Neither will the Apple iPhone.
“This could not come at a less opportune time for our industry,” said Rebecca Mond, vice president of governmental affairs for the Toy Association. “We’re still reeling from that bankruptcy (of Toys R’ Us0.”
Mond argues that the solution to tariffs — bringing toy manufacturing back to the United States — wouldn’t make sense. She pointed out the toy industry is a labor-intensive industry that can’t be easily automated.
It’s also a seasonal industry that has to to ramp -production closer to the holiday season. She said this fact makes building new American factories impractical.
Hasbro CEO Brian Goldner has made it clear that abandoning China will mean shifting to other low-wage countries and not returning to the United States. He said that it will take years to shift even a fraction of Hasbro’s Chinese production elsewhere.
“There is absolutely no way that Hasbro and Mattel can shift from China to another low cost country overnight,” said Lutz Mueller, CEO of Klosters Trading and an expert on the industry. “They don’t have the infrastructure or supply chain in place.”
Mueller said a number of smaller toy companies will go out of business if tariffs are imposed. Many are still struggling to recover from the Toys “R” bankruptcy.
“Mattel is already teetering on the edge,” said Mueller. “Hasbro has been trying to buy it for a while. Whether it can survive as an independent company with tariffs is a question mark.”
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