China is without question the largest exporter of toys in the world. By some estimates, around 82 percent of all toys sold in the US are produced there. It’s not surprising then, as President Trump flirts with a trade war between the US and China, that American toy companies are freaked out.
“There will be no winners if we [the Toy Association] and the toy community are thrust into a trade war,” Steve Pasierb, president of the lobbying group, told the Financial Times. “Officials need to understand the threat to business and American jobs, while consumers need to understand that tariffs will hit them in their pocketbooks across a range of everyday household products.”
While the increased tariff on steel and aluminum won’t hit most toy manufacturers directly, retaliatory Chinese tariffs risk raising the cost of a wider range of products stateside. An all-out trade war will undoubtedly make certain day-to-day items in the US more expensive for everyday consumers, and toys most certainly will be among them. But there’s a bigger problem with toys that Trump’s tariffs can’t fix ⏤ toys are simply to labor intensive to produce in the United States, at least for companies to be profitable. Not only that says Emily Cheung of Tsuen Lee, a Chinese toymaker, but “the US does not have the skills or the supply chain to make toys. Automation is not practical because of the complicated assembly required for many toys, especially since a growing number contain electronic components.”
Which means even if Trump successfully brought China to its knees over trade, it’s unlikely any toy manufacturing jobs would return to the United States. In fact, Chinese toy companies are even struggling to make money in the current economic climate. While it’s still much cheaper to make toys in China than it is in the US, wages in Guangdong [China’s toy-manufacturing hub] have risen rapidly over the past decade. Throw in an aging, and shrinking, Chinese workforce and some factories are struggling just to find enough workers — at least without breaking the bank.
Ironically, Chinese toy manufacturers have tried to account for this by outsourcing production to Vietnam or India, where the minimum wage is much lower. Both of those countries, however, lack the “same depth of supporting industries, from electronic components to mold-making machines.” Which means Chinese manufacturers are stuck. And the dwindling number of workers has intersected with potential tariffs on imported Chinese goods at the exact same time ⏤ and that’s what really has American toy manufactures so worried.