Toy Makers Consider Moving Production to Avoid Tariffs

Toy companies of all sizes are reportedly bracing themselves for the impact of the tariffs that have been imposed on China, Canada and Mexico.

Companies are concerned about where they will source their products, how they will manage higher costs and how consumers will respond to higher prices, The Wall Street Journal (WSJ) reported Wednesday (March 5).

Interviewing toy makers at the Toy Fair event in New York, WSJ found that larger toy companies are renegotiating with vendors and moving production to other countries.

Smaller companies have fewer options and may end up having to absorb the added costs if they cannot pass them along to consumers in the form of higher prices, according to the report.

Eighty percent of toys are made in China — one of the countries targeted by the tariffs — though companies have been working to diversify their production beyond that country for a few years, the report said.

Toy makers are also challenged by the fact that more than half of the industry’s sales come from toys that are priced at $20 or less, per the report.

The Toy Association, the industry trade group that hosts Toy Fair, is lobbying to get the industry an exemption from the tariffs, as it received during President Donald Trump’s first term in office, according to the report.

It was reported Thursday that some cars from Canada and Mexico imported into the United States will be exempted from the new tariffs for one month, and that Trump will consider similar exemptions in other cases in which tariffs cause economic disruptions.

American companies are racing to retool their business playbooks now that the tariffs are in full force, PYMNTS reported Tuesday (March 4). PYMNTS Intelligence found that 8 in 10 executives in the retail and goods segments said that higher costs for supplies and potential shortages of essentials would have an impact on their bottom line.

Consumer electronics retailer Best Buy said Tuesday that tariffs make price increases for American consumers “highly likely” and that the tariffs on China could cut the company’s comparable sales by one point.

Fashion wholesale platform JOOR expects tariffs on China to disrupt the manufacturing and sourcing relationships of brands of all sizes.