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

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.

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.

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.

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 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.”