Toy manufacturers in the US are preparing for impacts from Trump’s administration, which has promised another round of tariffs against US imports.
Reuters reported that companies like Atlanta’s Kids2 have redesigned their products and re-evaluated supply chains to reduce the costs of possible levies.
Kids2, as an example, is known for its innovative approach to navigating the tariff challenge.
The company added a moving component to an infant rocker to avoid a 25% tax that was only applicable to rockers, but not children’s rockers, during the previous trade war.
As the toys industry prepares to meet new policies, this kind of strategic planning is again at the forefront.
Alternative production hubs
As tensions have increased between China and the US, global supply chains have been radically reshaped.
Major toy makers, among others, have found it easier to reduce their dependence on Chinese manufacturers by moving production overseas to places like Vietnam or Mexico.
Mexico has become a significant player and will be the biggest source of US exports by 2023.
It was the first time since the 1990s that China had been displaced off the number one spot.
Mattel is a good example of this. Mattel makes iconic toys such as Barbie and Hot Wheels.
By next year, the California-based firm will reduce its dependence on China from over 80% to under 40%.
Anthony DiSilvestro is Mattel’s Chief financial officer.
Teams of employees are currently analyzing and planning different scenarios for tariffs. Our actions are dependent on what happens in the real world, and that seems to vary from one day to another.
Diversification of the supply chain is not without its challenges.
Jay Foreman is the CEO of Basic Fun in Boca Raton, which makes K’nex and Tonka building sets. He warns that it’s not always easy to move production from China.
He said: “Nobody is worried about your tennis racket, spatula, or shoe hurting you.”
Everyone is concerned that poor quality toys could harm their children if not tested and made properly.
The Chinese have built up a track record and capability in the field of toys over many decades.
Automation and cost saving innovations
Kids2 has increased its efforts to improve the efficiency of their production lines.
The company invested heavily to automate its Chinese factory, consolidate suppliers and improve its quality.
This helps to cushion the impact of tariffs in future and reduce price increases.
Kids2 is also exploring low-cost opportunities for production in India, Vietnam and other countries.
The company currently makes about 10% of their goods outside China. They are prepared to increase this share, if needed.
Innovation in design is also a priority.
Kids2’s engineers, designers and logistic teams have been working for months on reimagining their products to avoid tariffs.
Sikes stated that while this method is effective in some cases, it’s not an all-encompassing solution.
Sikes says that some things, like potties and baby baths, are just what they are.
It’s impossible to design around some of the products because there is no grey area.
Toys should be exempted from Tariffs
Toys were mostly exempted from the heavy tariffs imposed by Trump during his first term.
Recognizing the possible backlash of parents, politicians were reluctant to introduce levies for products that are associated with children.
The inflation spike between 2021-2023 continued this trend.
Consumer Price Index (CPI) data shows that while the prices of most goods have risen by more than 20% in recent years, toys prices fell by 4.4%.
Toy manufacturers are hoping to get similar exemptions.
Sikes stressed that increasing toy prices may increase inflationary pressures for financially strapped young parents, and could deter them from family planning.
He argued it was important to avoid policies which burdened parents further.
The Daily Hodl published the article How US toymakers prepare for Trump’s tariffs by using innovative strategies.
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