President Trump's Chinese tariffs are threatening Christmas.
Toy manufacturers, children's stores and specialized retailers have suspended winter break orders as import taxes are cascaded through the supply chain. The Chinese factory produces nearly 80% of all toys and 90% of Christmas items sold in the US.
Production of toys, Christmas trees and decorations is usually in full swing. Products to the US take 4-5 months to manufacture, package and ship.
Trump's 145% tariffs have caused dramatic markup on costs for American companies. Most entrepreneurs who share plans with the New York Times have not cancelled their orders yet. They hope that the president will leave the brink of tariffs.
However, the industry alarms are clear, with companies predicting product shortages and higher prices. Some business owners consult with bankruptcy attorneys citing how important holiday sales are to their revenue.
“We have a frozen supply chain that is putting Christmas at risk,” said Greg Ahern, CEO of the Toy Association of the American Industry Group, representing 850 toy manufacturers. “If production is not started immediately, there is a high chance that there will be a shortage of toys this holiday season.”
In the American Christmas industry, Chinese manufacturing is unparalleled in production speeds and capabilities. Toy manufacturers overhaul most of their product lines each year to adapt to changes in children's preferences. From materials to machinery, our Chinese factories are one-stop shops for importers.
Kara Dyer, founder of Storytime Toys, a maker of children's books with playset puzzles, will place a big holiday order at a Chinese factory in the first two weeks of April to have enough stock by mid-April. The Christmas holiday accounts for about two-thirds of her annual revenue.
Mr Dyer ordered a small amount of $30,000 worth of products before the latest tariffs. Its shipment is on the way to the US. Once it arrives, she said she hopes to borrow $45,000 in customs duties. The shipment provided the company with ample inventory for several months, and she said it would probably raise it by at least 20% to cover customs costs. But she is waiting to buy a big holiday.
“I embrace the hope for another two weeks that the tariffs will be removed. I'll be able to place an order,” she said. “But if not, I'll have to suspend my business. If the duties are in effect, I will never order. That wouldn't make sense.. ”
In a Toy Association survey of 410 toy manufacturers with annual sales of less than $100 million, more than 60% said they had cancelled their orders, and about 50% said they would go out of business if tariffs remain within weeks or months.
At Westside Kids in New York City, shop owner Jennifer Bergman, 58, is concerned that there may not be toys to sell for Christmas. And the toys she can get could double what she did last year.
Toy companies have already marked prices of 10-20%, said Bergman, whose mother opened the store 43 years ago. She said she tries to buy as much as she can now, but the shortage has already begun. She ordered a large number of scooters to arrive in the summer. However, importers did not want to pay customs duties, so they routed their cargo to Canada. She was told she only got a portion of her order.
If tariffs remain, Christmas will be like “something we've never experienced before,” Bergman said. She said people are in line to buy things that cost twice or three times before. Her business was already under pressure from Amazon's competition, but she fears that tariffs will take a final blow.
“I don't think I'm going to do business for Christmas,” Bergman said. He added that he is consulting a bankruptcy lawyer.
Nick Mowbray and his brother, Matt, founded the Zuru group in China, creating plastic darts “blasters”, water balloon accessories, and bubble guns, which are sold at Walmart and Target. He said the retailer has not placed holiday orders. Zuru cut his holiday marketing budget by half to $60 million.
Mowble, who is originally from New Zealand, said it was all in a “retention pattern.” If tariffs remain at 145%, he expects consumer prices to rise by around 50-100%.
“That's going to be uncontrollable for many families,” he said.
Trump recently struck a tone of settlements with China and tariffs, promoting hopes among business owners that could exempt industries that do not pose national security threats.
Ahern of the Toys Association said he was in the lobby last week in Washington for a 24-month reprieve.
But even if Trump grants temporary relief to importers, there will be a great deal of confusion as businesses rush to meet the order. Like the frenzy during the COVID pandemic, shipping costs are expected to skyrocket if a shortage of shipping containers has in some cases led to a 10-fold increase in freight prices.
Christmas is the busiest time for Aldik Home, a home goods store in Los Angeles. The last three months of the year produce more than two-thirds of annual sales, selling artificial Christmas trees, wreaths, ornaments, lights and other decorations.
The store owner, Larry Gold, said he had worked at a factory in China for many years to design Christmas trees. He will place a shipping order in January or in July. This year he planned to send seven 40-foot containers from China, loaded with $600,000 worth of wood. The current tariffs would require him to pay nearly $1 million at a time.
“Now we asked them to hold on and wait,” said Gold, 72.
Last year, the store sold seven and a half feet of wood for about $1,000. Gold said he had no choice but to hand over the tariff fees to shoppers. He said the price effectively “kills the product.”
“I can't believe that anyone in this country that buys wood from China will pay a 145% obligation because they will never sell,” Gold said.
At this rate, he didn't bring in the trees and his store, which had been open for decades, would have nothing to sell during the most important period of the year, he said. He said he would likely be forced to sacrifice their work to his 40 employees.
“There's no Christmas industry here,” Gold said. “All products come from China.”
Aaron Chlorik Contributed with a report from New York.
