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

Tough times for the toy industry could turn downright miserable next year if the trade war keeps escalating....

Posted: Oct 8, 2018 6:19 AM
Updated: Oct 8, 2018 6:19 AM

Tough times for the toy industry could turn downright miserable next year if the trade war keeps escalating.

The American toy industry is trying to recover from Toys "R" Us going out of business, but toymakers are worried that they could soon be hit with tariffs that will drive up the prices on almost all their products.

Asia

Business and industry sectors

Business, economy and trade

China

Companies

Consumer products

Continents and regions

East Asia

Economic policy

Economy and economic indicators

Hasbro Incorporated

International trade

International trade law

Mattel Inc

North America

Tariffs and customs

The Americas

Toys and games

Trade and development

Trade regulation and policy

Trade wars

United States

Toys "R" Us

About 85% of the toys sold in the United States are made in China, according to the Toy Association, the industry's trade group. Although those products have escaped the escalating trade war between China and the Trump administration so far, the next round of tariffs is widely expected to include all imports from China that haven't already been taxed.

If that happens, there's no way toys will escape.

"This could not come at a less opportune time for our industry," said Rebecca Mond the vice president of governmental affairs for the Toy Association. "We're still reeling from that bankruptcy."

She argues that the solution to tariffs -- bringing toy manufacturing back to the United States -- wouldn't make sense.

"It's 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 into very automated plants with high productivity.

It's also a seasonal industry that has to to ramp up production closer to the holiday season, she said. That makes building new American factories impractical, she said.

Hasbro CEO Brian Goldner has spoken to analysts about moving production away from China, but he's made clear that would shift to other low-wage countries -- not back to the United States. He said that it will takes years to shift even a fraction of its Chinese production elsewhere.

"There is absolutely no way that Hasbro (HAS) and Mattel (MAT) can shift from China to another low cost country overnight," said Lutz Mueller, CEO Klosters Trading and an expert on the industry. "They don't have the infrastructure or supply chain in place."

Leading toy manufacturers declined to respond to questions about the threat of tariffs. But when some of the items they sell, including high chairs and cribs, were initially put on earlier tariff lists, they filed comments with US trade officials arguing tariffs would end up costing American jobs. Mattel said it employs 5,000 Americans to its toys.

Those arguments worked, and the juvenile products were not included in earlier rounds of tariffs - for now.

Lutz said a number of smaller toy companies could go out of business if tariffs are imposed. Many are struggling to recover from the Toys "R" bankruptcy.

As for the larger companies, Mattel was already struggling even before the Toys "R" Us bankruptcy. Its shares are down 20% since June. In July in the wake of the closure of Toys "R" Us, it announced it would cut 2,200 US jobs in an effort to control costs.

Lutz says that Mattel wouldn't go out of business, but the imposition of tariffs could revive talks about it being purchased by a rival, namely Hasbro.

"Mattel is already teetering on the edge," he said. "Hasbro has been trying to buy it for a while. Whether it can survive as an independent company with tariffs is a question mark."

Oregon Coronavirus Cases

Data is updated nightly.

Cases: 68503

Reported Deaths: 867
CountyCasesDeaths
Multnomah15561230
Washington940198
Marion8650135
Clackamas568777
Umatilla421248
Lane405040
Jackson357925
Malheur234942
Deschutes207414
Yamhill161516
Linn131019
Polk114015
Douglas88217
Jefferson79811
Union7463
Klamath7454
Benton7447
Morrow6357
Lincoln60014
Wasco49719
Josephine4824
Columbia4573
Coos4061
Hood River3751
Clatsop3450
Baker2703
Crook2086
Grant1301
Curry1202
Tillamook1150
Lake1131
Harney901
Wallowa703
Sherman230
Gilliam210
Wheeler30
Unassigned00
Eugene
Broken Clouds
45° wxIcon
Hi: 51° Lo: 29°
Feels Like: 41°
Corvallis
Broken Clouds
42° wxIcon
Hi: 50° Lo: 31°
Feels Like: 42°
Roseburg
Overcast
44° wxIcon
Hi: 51° Lo: 30°
Feels Like: 44°
North Bend
Clear
45° wxIcon
Hi: 55° Lo: 34°
Feels Like: 43°
KEZI Radar
KEZI Temperatures
KEZI Planner

LATEST FORECAST

Community Events