The U.S. toy industry is grappling with challenges due to the recent imposition of tariffs on Chinese imports. The protectionist trade policies have disrupted supply chains, increased costs, and threatened the viability of many businesses within the sector.
While Trump has recently stepped back, agreeing to reduce his original 145% tariffs down to 30%. Still, even at 30%, the tariffs are substantial and burdensome.
Who knows what happens next, as the administration has proven unpredictable (some might say fickle). Trump himself said, it might be kids might simply need to settle for “two dolls instead of 30.”
Glad I’m not a kid (though those aren’t the only goods affected by tariffs).
In any case, here’s how tariffs could impact the toy industry going forward.
Over 75% of U.S. Toy Imports Come from China
China supplies as high as 80% of all toys imported into the United States, according to The Toy Association. That’s far more than any other country. When tariffs on Chinese goods rise, it’s the toy aisle that bears the brunt.
The Toy Industry issued a warning that sustained high tariffs “could cripple small businesses and reduce consumer choice.”
Supply Chains Routed Through Southeast Asia
Faced with what were originally 145% duties, many manufacturers hurriedly redirect production to Vietnam or Indonesia, where tariff rates hover around 10 percent. But shifting factories is neither simple nor swift—and quality and compliance can suffer.
“Cheating to Win” Becomes Common Practice
When tariffs exceed product costs, companies are tempted to under-invoice—declaring a $1 toy as $0.10 on customs forms—slashing the duty bill from $1.45 per unit to just 14 cents. Others simply relabel Chinese-made goods as “Made in Vietnam” by routing containers through third countries.
Skyrocketing Inventory Costs
A $500,000 purchase of toys suddenly balloons to $1.225 million at a 145% tariff. Ouch…Companies either absorb the hit, hike retail prices, or risk going under. This is precisely how tariffs can trigger inflation or, paradoxically, deflation if firms liquidate stock at steep discounts.
Small Businesses Are Out-muscled
Big corporations can lobby for carve-outs or exemptions; small importers cannot. Without dedicated trade-law teams, many mom-and-pop toymakers face crippling penalties or fraud suits if they misdeclare values, creating a two-tiered system favoring the well-connected.
A survey by The Toy Association revealed that nearly half of small and medium-sized toy companies fear going out of business due to these tariffs.
Uncertainty Paralyzes Investment
Factory builds take years. When one day a tariff is 145 percent and the next it’s 30 percent, no investor will commit to a new plant. Unpredictable policy swings freeze decision-making, preventing the very “reshoring” the administration seeks
Challenges in Relocating Production
Moreover, moving manufacturing out of China is not straightforward nor a simple process.. Molson Hart, CEO of VIAHART, shared his experience of attempting to shift production to Mexico, only to face regulatory hurdles and logistical challenges that ultimately made the move unfeasible.
His attempt to shift “skins” for plush toys to Mexico in 2021 collapsed when customs paperwork and licensing delays trapped materials at the border.
Risk of Retail Price Hikes—and Layoffs
If businesses pass on higher costs, families will pay more at checkout. Plain and simple.
If they don’t, margins vanish and layoffs ensue. Some estimates predict thousands of U.S. toy-industry jobs lost if we return 145% duties on these imports.
Strategic vs. Blanket Tariffs
A surgical approach—targeting only high-value “future tech” goods—could shield consumer sectors like toys. Blanket, steep levies, by contrast, punish everything equally, including low-margin industries vital to American childhoods.
Maybe we can have our cake and eat it too—while our children’s toy boxes remained filled.
What Happens If A Trade War Persists?
Three years of sustained tariffs could see dozens of small toymakers shuttered, factory closures in Southeast Asia rebound to U.S. unemployment, and a blackout of stocked shelves—transforming playrooms into warning signs of policy gone awry.
Looking Ahead
While a temporary reduction of tariffs to 30% has been implemented, the future remains uncertain. Businesses are cautious, wary of further policy changes that could impact their operations. The industry continues to seek long-term solutions to stabilize the market and protect both businesses and consumers.
