How Trump's tariffs on China are affecting toy companies

This weekend, at the largest toy industry trade show in the Western Hemisphere, as always, toy makers showed endless rows of stuffed animals, action figures and puzzles, hoping to seduce retailers to choose their products.

But chatting at New York Toy Fair this year is one of the global tactics, not the next Barbie, a bigger game, and has managed to make most of the toys more expensive for our consumers.

Almost 80% of toys sold in the US are made in China. Just as toy vendors and dozens of other countries across the United States began flocking to the Jacob K. Javitz Convention Center for the annual toy fair last week, President Trump announced a 10% tariff on Chinese products, which is already imposed a month ago.

From family-owned brands to well-known names, businesses large and small are trying to find ways to manage new costs associated with tariffs. Linda Colson, vice president of sales at Mary Meyer Corporation, said her Vermont-based company was paralyzed above the price. “We don't know what to do,” she said. “I think a lot of people in this building are just waiting to see what everyone else is doing.”

Jay Foreman, CEO of Basic Fun, a Florida toy maker and distributor, sells to retailers such as Walmart and Target. After Trump ordered 10% tariffs on China in February, Foreman began thinking about ways to avoid passing those costs on to customers. So last Wednesday he met with the company's board of directors and came up with a plan to split the burden. The company, factory in China and retail customers each absorb 3.5% of the additional costs.

But a few hours later, Foreman adjusted to CNBC and heard Trump declare this week that China's new tariffs could jump to a total of 20%. The company said its plan was “outside the window.” Foreman, who employs around 110 people in the US and a total of 165 people worldwide, said.

“Now they cannot be absorbed, and that additional tariffs need to be passed on to consumers,” he added. “I turned the Dominoes over.”

The Tonka Mighty Dump Truck is currently selling its retail business for $29.99, with basic fun under license from Hasbro. That price will likely rise between $5 and $10 for consumers, Foreman said.

Some of the large companies at the tournament expressed confidence that Chinese suppliers would absorb some of the additional costs as the factories didn't want to lose business.

Safari, which sells animal figurines, produces around 90% of its products in China, said Danny Falero, the company's marketing director, and said the manufacturer is willing to make some concessions. He stressed that his company would not raise prices unless Trump's policies were implemented.

“It's a bit of a theatre, so let's see what actually landed, and we'll make adjustments based on that,” Farero said.

The looming tariffs were heavily weighing before Lewis, who owned Meeviatoi, a small company in Corbyn, Kentucky. His three-year-old business designs design sensory toys for children with special needs and are sold to teachers, hospitals and museums.

Prior said he needs to raise prices, regardless of whether China's tariffs remained at 10% or doubled on Tuesday. However, uncertainty has made it impossible to make certain pricing decisions, he said. As he returns home from the convention this week, Mr. Pre-Nori plans to pass through and reevaluate his products, items by item.

“Fatigue,” Praia said. “That's the only way I can explain it.”

Three billion toys are sold in the United States each year, and according to the Toy Association, the leading trading group in the US toy industry, it generates $42 billion in sales and supports approximately 700,000 jobs.

The association is lobbying for Trump's broad tariff exemption, with some pointing to the fact that small businesses make up about 96% of the industry, said Greg Ahern, the group's chief executive. During Trump's first term at the White House, he had imposed a 10-25% tariff on many Chinese products, but he, among other consumer goods, retreated from the tariff on toys.

While most toys are made in China, some manufacturing has moved to Mexico in recent years, Trump also said the 25% tariff he imposed on Mexico and Canada will come into effect Tuesday.

The Toy Association is pushing to visit the Senator's office and send messages to people within the Trump administration, Ahearn said he communicates daily with its members to share the latest tariff updates.

Trump's announcement of additional fees to China coincided with preparations for Ahern's toy fair. “It wasn't good and now it's unbearable for us as an industry,” Ahearn said, adding that a 20% tariff would inevitably be handed over to consumers.

In an interview with CNBC on Monday, White House trade adviser Peter Navarro said that it would double Trump's tariff plans and that the impact on consumer prices would be “secondarily small” when taking into account the administration's simultaneous plans to register industries, reduce the size of the federal government and expand energy production.

“I haven't seen the president shake up any of these,” he said.

Five years ago, Sharon Azura and her husband started a company called the Tooth Brigade, which sells tooth feed. Last summer they reduced the retail price of pillows – a small stuffed animal with a tooth pouch – went from $16 to $14, increasing demand.

Tariffs are likely to force Azura to raise prices again, especially if they reach 20%. When they started the brand, she and her husband wanted to manufacture their products in the US, but that was too expensive, she said.

Now, Azura moves to pillows at a toy fair booth and says he's worried about high prices sinking the business.

“When I'm here, I try not to think about it,” she said. “But when you try to think about what the future holds, I don't know. I don't know.”