As of this morning, a 10 percent tariff on all goods from China goes into effect. However, the 25 percent tariffs on goods from Canada and Mexico are paused for thirty days. The New York Times has a full description of China’s retaliatory tactics, and many other news reports will give you a full description of all that’s going on.
But what we concern ourselves with here is how events affect the toy industry. There is no easy answer to this question, and it’s particularly tough because the situation is in flux. Who will bear the instant 10 percent increase in the cost of toys coming in from China? How do you plan for the year?
Some optimists told me at shows over the past weeks that consumers won’t “feel” a 10 percent increase in toys. That may be the case, but when combined with the tariffs on all sorts of other goods, it seems as if the discretionary income of the average consumer will be down, and that is what affects toy purchases, particularly in the first three quarters of the year.
And we have to ask: what is the endgame here? When there is no domestic industry to protect, what is the point of a tariff? There is no US-produced option to a foreign-produced toy. A.C. Gilbert, creator of the Erector set and one of the founding members of the Toy Association, fully understood how tariffs could protect a fledging domestic manufacturing industry and supported them. But that was 107 years ago. Today, the toy industry is a globally inter-dependent industry, and the imposition of tariffs undermines and complicates all of that–to say nothing of the destabilization of plans and pricing structures. Consumers lose and companies lose. In today’s world, tariffs add cost for everyone, but they don’t add value, which is, at best, unfortunate.
The addition of cost without value may be felt keenly in the toy industry where the consumer has been more value-conscious in recent years, especially coming out of the pandemic, and we are in the midst of a consumption shift between Gen Z and Gen Alpha. Throw in declining birthrates partially offset by the rise of adult purchasers, and we have one of the most complex toy markets in the modern toy industry.
We have no doubt that the industry will find its way through; it always has. However, the imposition of tariffs seems like an unforced error for the toy business. Assuming that the issues allegedly behind the tariffs are valid–trade imbalances, border issues, the rise of fentanyl crossing the borders and others–it’s hard to see how tariffs solve those…and certainly not in the short-term. There would seem to be other diplomatic, negotiated solutions that would be more effective.
For now, though, this is what the toy industry is faced with.
How have tariffs affected you this time?
