Trump throws a wrench into US toy industry

US toy-makers anxious that the industry will take a big tariff hit as 85% of toys comes from China, says DM Chan in his article, titled: “Trump throws a wrench into US toy industry”.

Bob Grubba, head of a leading US import firm in the model train industry, is worried about Washington’s threat to slap more tariffs on remaining Chinese imports, saying that it would result in family bread-winners in the industry losing their jobs, Xinhua/Global Times reported.

Usually, the president and CEO of Broadway Limited Imports visits one of his main suppliers in the Chinese port city of Qingdao each June, to discuss the implementation of this year’s working schedule and make plans for the next year, but this year’s talks are heavily clouded by the proposed additional tariffs.

Grubba told Xinhua in a recent interview at his office in Ormond Beach, Florida: “Well, if we woke up one day and all of a sudden there’s a tariff, what would we do? It’s a difficult thing for us.”

The US, in May, raised additional tariffs on $200 billion worth of Chinese imports from 10% to 25%, and threatened to levy extra duties on more Chinese products.

With the threatened tariffs looming on the horizon, toy-makers include Grubba were anxious that the industry would take a big hit as 85% of $US3 billion worth of toys sold in the US each year comes from China.

“If we were to have the 25-percent tariff imposed on this product, if we couldn’t find a way around that, it would probably put us out of business,” said Grubba, who has been working with his partners in Qingdao in China’s Shandong Province for almost 20 years.

He added: “This whole industry, almost everything in the industry is manufactured in China.”

According to Grubba: Most of these companies have a “profit margin in the range of 30 percent,” and if they were to pay a 25% tariff, leaving 5%, that would not be enough for them to pay salaries, rent, insurance and other bills.

“We would have to raise prices. A certain number of people just wouldn’t be able to afford it anymore … That would be a big problem for us,” he said, adding that some of his model trains were already expensive.

Grubba said: The model train industry in the United States is a fairly small business but a lot of companies and people are involved in it.

He added: “Around 500 people work for manufacturers like us, the importers, but that doesn’t include all the hobby stores.”

He further said: “There are probably 1,000 hobby stores in the US that sell this type of product. Each of those … maybe … has five to 10 employees, so that’s another 5,000 people. I think those hobby stores are likely to close.”

The idea to relocate production out of China is also unrealistic, Grubba said, noting that it is hard for toy industry businesses to find another country with comparable infrastructure, skilled workers, as well as the research and development capabilities, the report said.

“It’s difficult to move a factory (out of China) because our product is very specialized. It took us a long time to train the workers at the factories and train the engineers and to get the quality the way it’s supposed to be,” he said.

“And if we try to move to another country, then you have to develop those expertise all over again,” he said. “That takes a long time (and) a lot of money.”

According to Rebecca Mond, vice president of the Federal Government Affairs for the Toy Association: The proposed tariffs on Chinese imports will also seriously disrupt this year’s upcoming holiday season, which accounts for 50% of annual toy sales in the US.

The price of toys could go up by 15% and as many as 68,000 out of the more than 691,000 employees in the industry could lose their jobs, Mond told local media, citing a recent study.

He added: “Most people that I talk to don’t want to go back to that (recession). We want to vave prosperity and stable times and peace and go back to normal trade.”

Toys weren’t the only industry concerned over possible Trump tariffs, as Nike, Adidas and other footwear giants urged President Trump to reconsider his tariffs on shoes made in China, saying the policy would be “catastrophic for our consumers, our companies and the American economy as a whole.”

In all, 173 companies signed an open letter to the president, and posted on the industry trade association’s website. It was also sent to Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and National Economic Council director Larry Kudlow.

The group said: “On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end.”