…Just less stuffed than last week…
Tariff watch, day 45: all change (again). Huzzah – the US and China have agreed a temporary deal to ‘roll back tariffs’. But wait, there is a sting in the tail: there is still a 30% tariff on Chinese made goods entering the US market, while the deal is only agreed for 90 days. The art of the deal strikes again!
While this new agreement offers US toy companies temporary respite, it still presents some major hurdles to overcome. 30% is clearly a whole heap better than the totally unworkable 145%, but it is still a very high number in itself. It will surely mean that retailers will need to accept price increases and consumers will ultimately end up paying more for items. Maybe licensors will also have to be part of the equation and make some concessions to help balance the numbers…?
Speaking to a few US toy companies this week, it appears that they have less than one week to persuade retailers to accept higher prices on new production items if they want the goods – a gargantuan task in itself. Even if that can be achieved, the product then has to be made and shipped in 90 days. Our friends at the shipping companies are no doubt rubbing their hands with glee at the prospect of a sudden surge in demand – I am sure they are going to be very fair and even-handed with pricing (not). And that’s even assuming there is sufficient capacity to meet demand, and that ships and containers are in the right places with all the recent blank sailings. With shipping costs likely to rise sharply, presumably that also needs to be factored into pricing conversations with retailers.
Then, what happens after the 90 days is anyone’s guess – companies will find it tricky to plan with confidence when they don’t know whether the tariff figure will reduce further (there’s a good chance it comes down to 10% if China makes headway with the fentanyl issue) or go back up if Trump finds another excuse to ‘punish’ China.
All of which leaves parts of the US toy community in limbo to some extent. There is even talk that due to the uncertainty, some major US retailers are considering scrapping the traditional spring reset next year – rumours suggest they are considering focusing on out of aisle opportunities and big movie launches to drive sales in the early part of the year, while leaving the core offering largely untouched. If that happens, there will definitely be winners and losers.
In a nutshell, most US toy suppliers are in a better place than they were last week, but still not where they want to be in the long term…
Read the rest here.
