Trump says American kids will be fine with fewer dolls, but the toy industry is bracing for a 'nuclear bomb'

President Donald Trump's trade policies have upended the global toy industry.Andrew Harnik/Getty ImagesThe toy industry is poised to be hit hard by Trump's heightened levies on Chinese goods.China is the world's toymaking powerhouse, making its relationship with the US all the more crucial.Several experts told BI that the tariffs could have dire consequences for the US economy.The upcoming holiday season could look drastically different for many American families as President Donald Trump's tariffs are on a path to radically alter the toy industry.Trump's 145% levies on Chinese goods have wreaked havoc on supply chains after being imposed in April, with experts warning of surging prices and emptier shelves for an array of products in the coming weeks and months.The US toy industry — which imports about 80% of its products from China, according to data from the Toy Association — will be one of the first areas to see a negative impact, supply chain experts and toy industry insiders predict."This is as close to a nuclear bomb as the toy industry has ever faced," Steve Velte, the president of Global Toy Experts, told Business Insider in an interview. "It doesn't compare to any toy shortages in the past or recessions."Trump thinks US children can cut back on toysTrump has repeatedly downplayed the effects his tariffs might have on the cost and availability of toys for US consumers."Maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls would cost a couple of bucks more than they would normally," he told reporters during a Cabinet meeting in April.Trump repeated the refrain in early May, telling reporters on Air Force One that young girls in the US don't need dozens of dolls."She could be very happy with two or three or four or five," he said.Bob Ferrari, a supply chain executive and managing director of the Ferrari Consulting and Research Group, previously told Business Insider that low-margin products — including toys — that companies don't make a huge profit from could see price increases and low inventory before other products.The political fallout for TrumpThere's a reason US politicians generally don't talk about Americans, especially children, making do with less.Compared to President Franklin D. Roosevelt calling on the American public to make sacrifices during World War II, Trump's call for girls to sacrifice their dolls is "strikingly ill-informed," David Frank, a professor emeritus of rhetoric and political communication at University of Oregon, told BI.Frank noted that The Budget Lab at Yale University estimates that Trump's tariffs will reduce the after-tax income of low-income households by 4%."These are not households with 37 dolls and 250 pencils," he said.This sort of rhetoric of making do with less could hurt the president's standing with some of his supporters, Ethan Porter, an assistant professor of media and public affairs at George Washington University, told BI."Trump is trying to persuade people to accept less, but at the end of the day, people are going to feel deprived, and Americans don't like to feel deprived," he said. "He's sabotaged his own greatest strength, which is his understanding of the American consumer."Empty shelves and a bleak ChristmasUnless Trump reverses the tariffs on Chinese goods — and soon — the levies will have a big impact on American consumers, who will start to see higher prices and a smaller inventory of toys, both online and on the shelves, Velte told BI.Trump-themed stuffed toy ducks could be seen on the campaign trail last year.AP Photo/Susan Walsh"There'll be a shortage of product, number one, because some products just won't come in," he said. "There'll be some products that do come in but will be delayed, and then some products you just won't be able to afford."And for the companies that stocked extra inventory ahead of the tariffs, those products will sell out quickly, resulting in longer lines and emptier shelves, Velte noted."It's going to be a very sad Christmas," he said.Lynn Rosenblum, a consumer products expert, echoed Velte's concern about empty toy shelves ahead of the holiday season."Usually in the toy industry, an empty shelf means that you've sold out, and that's actually a good thing," Rosenblum said. "But I just think that there might be less choices, at least for the short term and maybe the long term."In May, toy behemoth Mattel said it might have to raise its prices in the US to offset the impact of Trump's tariff policies."Given the volatile macroeconomic environment and evolving US tariff situation, it is difficult to predict consumer spending and Mattel's US sales in the remainder of the year and holiday season," the company's most recent earnings report read.Ocean freight bookings of containers shipping from China to the US are down significantly, nosediving 42.7% for the week of April 28 — the sharpest weekly drop so far this year, according to data from the digital logistics company Vizion.Rebuilding toy manufacturing in the US could take yearsEven with massive tariffs on Chinese goods, it's unlikely industries like toy manufacturing will be able to quickly scale up in the US."All the mold-making for plastic products, for example, is something that is highly specialized," Jason Miller, a professor of supply chain management at Michigan State University, told BI. "The ecosystem for toy production — not just for the US, but really for the world — is in China. That ecosystem isn't something that can up and move quickly."Scott Steinberg, a toy expert and the creator of The Modern Parent's Guide book series, echoed those concerns. "To get the kind of manufacturing capabilities to make toys in the US that the administration is hoping for — that's more like a five-to-seven year process of investments," he said.On Tuesday, Mattel CEO Ynon Kreiz said manufacturing for the company wasn't returning stateside anytime soon. "We don't see that happening," Kreiz said on CNBC's Squawk Box.The consequences of tariffs for the industry could be "devastating," Rosenblum said."Everybody thinks of the big toy companies when they think of the industry, but a very large percentage of the industry are entrepreneurs, small toy companies, midsize toy companies, and just like a lot of other businesses, folks that can't keep their doors open, can't keep their employees paid," she said.Read the original article on Business Insider

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