The current economic environment is chaotic. What we are experiencing is unprecedented with an uncertain time frame and an unknowable outcome that destabilizes governments, institutions, and businesses.
In such an environment, it is not surprising that we are seeing growing acrimony between the U.S. and Chinese governments. There is fingerpointing and threats being issued by both sides.
It is difficult to make any kind of forecast amid this kind of turmoil. Never-the-less I will make this prediction: The U.S. – China toy industry trade relationship will be little affected. Chinese companies will continue to manufacture toys for American companies, and toy trade will stay at close to current levels.
Here is how I come to this conclusion:
Toys are different.
1. Toys are not essential to national security.
2. China is still a low-cost producer of toys. The hourly wage rate for toy manufacturing in China is ten to twelve times lower than in the U.S.
3. Although labor wages in Viet Nam and other Asian alternative countries are, in some cases, lower, those countries simply do not have the population, the manufacturing capacity, nor the transportation infrastructure in place to take on more production, particularly in the near-term.
4. China’s toy manufacturing capacity is the largest in the world by magnitudes.
5. Should a toy company want to return production to the U.S., it would have to build factories. That can take years to move from the germ of the idea to the opening of the doors.
6. There are long-standing supply chain, economic and personal ties between U.S. and Chinese companies and their respective leaderships and have been so for decades. These are hard-wired into how we go about our business.
China has a low cost of goods, an enormous production capacity, a state of the art transportation system, a massive population, long-standing personal and professional relationships. This plus toys not being essential to national security and the lack of a realistic manufacturing alternative to China causes me to believe that the status quo within the current global toy supply chain will stay in place with little change.
