Aug 16, 2019 - Economy

Toymakers say Trump's China tariff delay "saved the holiday season"

Animated illustration of a toy businessman with a briefcase and Santa hat being wound up as if ready to march forward.

Illustration: Aïda Amer/Axios

There was joy in toyland this week — albeit muted — after the Trump administration said it would postpone tariffs on toys made in China until after the holiday rush.

Why it matters: The industry, still recovering from the demise of Toys “R” Us, had feared a 10% tariff would force it to raise prices, hurting consumers and killing profits. But a sudden reprieve will let toy companies focus instead — for now — on big holiday trends, like unicorns, collectible dolls, scented slime and electronic finger-puppets.

The big picture: While toy sales have slumped, the second half of 2019 is expected to bring “a complete reversal of the negative trends,” according to Juli Lennett of the NPD Group, who tracks the sector.

  • Several “license-friendly” movies are being released, most notably “Frozen 2” in November.
  • Popular video games like Fortnite are spinning off toys.
  • Hot products like L.O.L. Surprise! dolls, which children must “unbox” to see what they're getting, are driving sales.
  • Grown-ups are pushing children toward playthings instead of screens. “We have this generation of parents on our side,” Steve Pasierb, head of the Toy Association, a trade group, tells Axios.

Walmart, Amazon and Target have picked up some slack from the liquidation of Toys “R” Us last year, which cost 33,000 retail jobs.

  • Target has expanded floor space for toys and baby goods.
  • Kohl’s, Wegmans, Meijer and other retailers have pitched in, too.
  • Amazon published a big holiday toy catalog last year.

But: While 75% of sales volume from Toys “R” Us has migrated to other channels, 25% “has been lost,” Pasierb says.

  • Sales in the U.S. toy industry dropped 9%, to $7.4 billion, in the first half of 2019 compared with 2018, according to NPD.

What’s next: The Trump administration’s tariff reprieve is set to expire Dec. 15, after which all bets are off.

  • "Toymakers are already looking ahead to next year’s holiday season, and fretting about the crippling uncertainty that the president’s on-again, off-again trade policy has created for them," according to the NYT.
  • The toy industry will keep lobbying against tariffs. "If you're going to buy shoes and clothing and back-to-school stuff for your kids, how much money is left for toys if everything is more expensive?" Pasierb tells Axios. "That collection of toys under the Christmas tree is going to get smaller."
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