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Trump Delays a Holiday Tax, but Toymakers Are Still Worried


“Obviously, toys are a sympathetic product,” said Matt McAlvanah, a spokesman for the United States trade representative in the Obama administration who is now a policy analyst for Farmers for Free Trade, an anti-tariff advocacy group. “I think it’s an admission that it would be politically unpopular to see price increases during the holiday season.”

Toymakers both large and small say they don’t have the ability to absorb cost increases, and would have to almost immediately raise prices. The typical toy in the United States retails for only $10, and profit margins for some of them may be just pennies on the dollar, according to the Toy Association, an industry group.

Mr. Foreman, who sources 92 percent of his products from China, said that if tariffs had gone into effect as planned, they would have eaten up two-thirds or more of his profit for the year.

But the company must now decide whether to try to speed up product shipments to beat the new tariff date in December. That could save money, but will tie up capital and will crowd distribution warehouses with products. For many companies, the large outlays and disappearing profit margins risk throwing lending covenants with banks out of whack.

“It just causes chaos from the top to the bottom of the whole business model,” Mr. Foreman said.

Moving operations out of China to lower-cost countries without tariffs may not eliminate the issue, either. Mr. Trump has threatened tariffs on Mexico, for example, to try to get the country to do more to restrain migrants. The administration has also weighed tariffs on Vietnam because of that country’s rising exports to the United States.

Hasbro, which is based in Rhode Island and makes Nerf, Transformers, Play-Doh and Disney Princess merchandise, said last month that it would aim to produce just half of the goods it sells in the American market in China by the end of 2020. It currently makes about two-thirds there. Much of that production will go to India and Vietnam.

Hasbro has said that it must make this shift slowly. At a hearing on the tariffs in Washington in June, John Frascotti, Hasbro’s chief operating officer, said that suppliers in China had been trained to meet strict American product safety standards, and that there was no readily available alternate supply chain outside the country.


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