In April, US President Donald Trump announced a list of individual tariffs that he said would be levied against goods from almost every country in the world. Shortly thereafter, he hit pause on implementing them—but promised to resume by a deadline of August 1 if the countries did not make individual agreements with the US. That deadline has come and gone, and now Trump has made his next play to secure trade deals, by priming new country-specific levies for nations that the US runs a trade deficit with.
Here are the biggest questions about how all of this could affect manufacturers and retailers in the kids space.
Who is in the crosshairs?
The US has listed more than 20 countries that it’s failed to reach new trade agreements with, including India, Iraq, Thailand, Taiwan and Malaysia. Come August 7, these nations will be hit with a universal 10% tariff, and additional increases ranging between 20% and 40%.
Facing the harshest rates are Brazil (50%), Syria (41%), Laos (40%), Myanmar (40%) and Switzerland (39%).
How does this impact the toy industry?
While trade negotiations with China are still ongoing, the US toy industry is particularly vulnerable to any tariff increases in this market, which handles more than 80% of all manufacturing. Trump has proposed several rate increases since the trade war began in April, from 10% all the way up to 145%.
Several toycos are in the process of rejigging their China-reliant supply chains to other international manufacturing hubs in an effort to mitigate losses from the tariffs, but these latest hikes are poised to hamper that strategy severely.
Two of the major factory alternatives to China that Hasbro, Mattel and Bandai Namco use are India and Vietnam, which are both exposed to steep 20% levies. With these additional costs across the board, The Toy Association forecasts that toy prices could rise as high as 50% throughout the year, depending on where the products are manufactured and how much retailers are willing to absorb the impact.
What is the biggest concern for retailers?
The Brand Liaison’s president and founder Steven Heller warns that any installed tariffs will reverberate throughout the global supply chain, making products exponentially more expensive to produce and sell. Retailers will need to work with wholesalers and manufacturers to distribute these costs, which means lower profit margins across each segment.
“The real loser is the American consumer,” says Heller. “Whatever product is on the shelves will be more expensive, and ultimately, there will be product shortages.”
What’s next for China?
China’s negotiators are working with the US government to extend the country’s 90-day tariff pause, which is set to run out on August 12. Both sides met earlier this week in Sweden to discuss terms, but failed to make any meaningful progress after two days of negotiations. President Trump will have the final say on whether the pause will continue, or if he will impose tariffs of up to 50% against imported Chinese goods.
Are there any other markets exposed to tariffs?
Trump has signed an order to increase levies against Canada from 25% to 35%, starting on August 8. While 90% of Canadian goods are exempt from this increase under the 2020 United States-Mexico-Canada Agreement (USMCA), it’s a tricky situation to navigate for many Canadian companies because a majority of any given product must be sourced from North America or risk becoming non-compliant. Kids product categories that are exposed include toys and electronics, while books and graphic novels printed on Canadian paper look to be safe for now.
Lastly, Trump is suspending the “de minimis” exemption, which international e-commerce retailers such as Temu and Shein have used as a legal loophole to ship parcels costing less than US$800 directly to consumers without facing any tariffs or penalties. That exemption will now end on August 29.