With the Trump administration promising another wave of tariffs on US imports, American toymakers are bracing for impact.
Companies like Atlanta-based Kids2 are revisiting product designs and supply chain strategies to minimize the cost burden of potential levies, Reuters reports.
Kids2, for instance, has a track record of innovation in navigating tariff challenges.
During the last trade war, the company redesigned an infant chair to convert into a rocker by adding a moving part, avoiding a 25% tariff that applied to children’s chairs but not rockers.
This kind of strategic thinking is once again taking center stage as the toy industry prepares for new trade policies.
Shift to alternative production hubs
Over the years, tensions between the US and China have prompted a significant reshaping of global supply chains.
Many companies, including major toymakers, have reduced their reliance on Chinese manufacturing by shifting production to countries like Vietnam and Mexico.
Mexico, in particular, has emerged as a major player, becoming the largest source of US imports in 2023.
This milestone marked the first time in two decades that China was displaced from the top spot.
Mattel, the maker of iconic toys like Barbie and Hot Wheels, illustrates this shift.
The California-based company is set to reduce its reliance on China to less than 40% of its production by next year, compared to the industry average of over 80%.
Anthony DiSilvestro, Mattel’s Chief Financial Officer, said:
We have teams of people engaged today in analyzing and planning for different tariff scenarios. And obviously, our actions will depend upon what actually happens, which seems to change from day to day and week to week.
However, supply chain diversification comes with its own challenges.
Jay Foreman, CEO of Basic Fun, the Boca Raton-based maker of Tonka trucks and K’nex building sets, cautioned that moving production out of China isn’t always straightforward.
“Nobody’s worried that your spatula or tennis racket or tennis shoe is going to hurt you,” he said.
But everyone worries that toys might hurt their child if they’re not made with good quality and tested properly.
He also noted that China has built up over decades a capability and track record in toys that others lack.
Innovations in cost-saving and automation
Kids2 is doubling down on efforts to make its production lines more efficient.
Despite producing 90% of its goods in China, the company has invested heavily in automating its Chinese factory and consolidating suppliers.
These moves help buffer the impact of future tariffs and minimize price increases for consumers.
In parallel, Kids2 has started shifting portions of its production to Vietnam and is exploring opportunities in India and other low-cost countries.
Currently, about 10% of its goods are made outside China, and the company is ready to expand that share if necessary.
Design innovation also remains a top priority.
Engineers, designers, and logistics teams at Kids2 are dedicating months to reimagining products in ways that could bypass tariffs.
Sikes said that this process, while effective for some items, is not a universal solution.
“There are some things –– like baby tubs and potties –– it is what it is,” says Sikes.
There’s no gray area, so there’s no design workaround for some products.
The case for sparing toys from tariffs
Toys were largely excluded from heavy tariffs during Trump’s first administration.
Political leaders were reluctant to impose levies on products associated with children, recognizing the potential backlash from parents.
This trend continued during the inflation surge between 2021 and 2023.
While prices for most consumer goods rose by over 20%, toy prices actually fell by 4.4% during the same period, according to Consumer Price Index data.
The toy industry is hoping for similar exemptions this time around.
Sikes emphasized that raising toy prices could exacerbate inflationary pressures on financially strained young parents and potentially deter family planning.
With declining birth rates already a growing concern globally, he argued that it’s crucial to avoid policies that further burden parents.
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