By ANNE D’INNOCENZIO, Associated Press Business Writer
NEW YORK (AP) — As toy inventors, toy manufacturers and buyers for stores that sell toys met for a four-day annual trade show in New York last weekend, a topic besides which items were destined for holiday wish lists permeated the displays.
President Donald Trump had announced days before that he planned to increase the extra tariff he put on Chinese imports in February to 20%. Would he? By Tuesday, the last day of the Toy Fair, attendees had their answer, and the talk about how it would affect the prices of playthings grew more urgent.
Nearly 80% of the toys sold in the U.S. are sourced from China, according to The Toy Association, a national industry group that sponsors the show formerly known as the North American International Toy Fair. Many toy makers are now renegotiating prices with retailers and taking a hard look at their products to see if they can cut costs.
Greg Ahearn, president and CEO of The Toy Association, said price increases of 15% to 20% are expected on games, dolls, cars and other toys by the back-to-school shopping season. The price range that U.S. consumers are willing to pay is anywhere from $4.99 to $19.99, leaving little wiggle room to raise prices, he said.
“It’s untenable,” Ahearn said, noting that small businesses make up roughly 96% of the American toy industry.
Trump also moved forward this week with 25% tariffs on products imported from Canada and Mexico. Some companies have moved some of their manufacturing to Mexico to be closer to the U.S. On Wednesday, though, the president granted U.S. automakers a one-month exemption from the tariffs on the neighboring North American nations.
Trump’s changing statements and policies on tariffs have made it challenging for toy companies to plan accordingly.
Basic Fun CEO Jay Foreman said he didn’t rush late last year to get shipments of Tonka trucks, Care Bears and other toys his Boca Raton, Florida-based company produces in China because he wasn’t sure if the 60% tariff on Chinese goods that Trump discussed on the campaign trail would come to pass.
“If you plan in a chaotic environment, you have a much greater chance of being wrong than being right,” Foreman said when interviewed Sunday at his Toy Fair booth. All of Basic Fun’s toy products are made in China except for K’Nex, a construction set made in the U.S., he said.
After Trump instead imposed an additional 10% tariff on Chinese goods last month, Foreman said he worked hard to persuade retailers to share some of the cost so he didn’t have to pass it on to consumers. Now that the import duty has doubled, he said he will have to raise prices for many of his items.
For example, a Tonka Classic Steel Mighty Dump Truck, which now retails for $29.99, will likely go up to $39.99 as early as the fall, Foreman said.
The Toy Association lobbied hard to exempt the toy industry from the 10-25% tariffs Trump levied on Chinese goods during his first term. The group lobbied again this time around, trying to educate members of Congress that toy companies can’t replicate the expertise found in Chinese factories.
Ahearn noted there’s a lot of sophistication of manufacturing and craftsmanship that has been built up over time over generations in China.
he high skilled and lower cost labor force that is available in China is not available currently, and it will take this same amount of time to build that up (00:08:36)(9.8)
Some toy companies are looking at ways to avoid raising prices.
Steve Rad, CEO of toy maker Abacus Brands Inc., said the company based in Austin, Texas, considered switching to factories in countries like Cambodia or Vietnam, but concluded they don’t have the same level of skills.
However, Rad plans to start having one of its China-made products manufactured in the U.S. Abacus Brands found a Texas factory that said it could produce Pixicade, which converts doodles and drawings into playable video games, at no additional cost. The U.S.-made version is expected to be in stores by August, he said.
His other toys are more complex, Rad said, and he doesn’t see making them in the U.S. as feasible. Instead, he’s exploring whether he can lower costs by cutting some product features.
Foreman, of Basic Fun, said he plans to offer new spins on his existing toys to make them look new. Take Mash’ems, which are soft, water-filled collectibles that feature different licensed characters packaged in small cardboard boxes.
“Maybe I’ll change the color of the box,” he said. “Or maybe I’ll put it in a plastic container.”
Some retailers already have received letters from toy suppliers announcing immediate price increases.
Richard Derr is the owner of the Learning Express franchise in Lake Zurich, Illinois, and president of the 85-member Learning Express franchise council. He questions if those suppliers are acting in good faith since many of them had sped up deliveries from China ahead of the tariffs.
He and other Learning Express franchisees are studying alternatives to suppliers that suddenly want to raise prices, Derr said.
He said he isn’t too worried about customers comparing what a toy costs compared with the year before since 65% of his products are new to the market.
“We are in the era of one day, one thing, one day, two things, and it changes ups and down,” Derr said. “So to put out something now, I think, is just preparing the stew when in fact the stew may not even be cooked.”