ARE WE NEARLY THERE YET? TARIFFS, THEIR IMPACT & TOY INDUSTRY OUTLOOK FOR 2025…
- steve3586
- 5 days ago
- 9 min read
ARE WE NEARLY THERE YET? TARIFFS, THEIR IMPACT & TOY INDUSTRY OUTLOOK FOR 2025…
Do you want to find certified compliant Toy manufacturing in new countries outside China? We can help…we have been guiding major and smaller Toy Cos since 2011 on manufacturing options in alternative geographies. Send me a DM for more information/to get quotes, or check out www.ToyTeamIndia.com
It’s been an ‘interesting’ last couple of months. The Toy trade shows seem like a million years ago already, as all hopes and expectations of a good year were largely dashed by unprecedentedly high tariffs imposed on shipments from China (producer of c. 75-80% of the world’s Toys) to the USA. And it’s not just the completely unviable level of tariffs imposed on China, it’s the unplanned instantaneous imposition and removal of tariffs on China and other countries which has seen the Toy business (as well as other consumer product businesses) scampering around seeking alternatives every time the wind changed.
We don’t need to go into the U.S. domestic political arguments here related to once mighty manufacturing towns which lost their factories and whether tariffs on imports can ever be the right solution to that problem. All that has been done to death across Linked In and other formats. One thing I would just like to highlight though as an international guy focused on the full world of Toys is the impact on the world outside the USA of having sales into the world’s biggest market on pause. The issue is that any non-U.S. business which sells overseas is likely to have an imbalance in terms of the importance of their U.S. revenues to their overall business. And furthermore, you might think that all those factories in China which have been forced to pause production for and shipments to Uncle Sam could instead just push on the rest of the world. But the issue with that is that these factories achieve efficiency and cost effectiveness based on scale of production and consumption. Remove the HUGE market that represents as much as 40% of the global Toy market in some years, and suddenly nearly everything becomes unviable. Suddenly overhead is not justifiable, and salaries need to be cut. Seasonal recruiting won’t happen, or if it does it will be a desperate late rush to find enough bodies to pack the production lines. Many of those factory owners who have been forced to leave the Toy manufacturing sector in China during the last couple of months maybe lost to us forever annoyingly. Believe it or not there are more profitable sectors with better growth prospects versus the world of Toys, and some frustrated factory owners in China have moved on during this period of time.
Which leads me onto a major concern – clearly the world reached peak China Toy production 5-10 years ago. The future of Toy Sourcing will be very much multi-hub i.e. not just China anymore for most companies. As some production ebbs away from China, what happens to all that expertise and knowledge accumulated over the past 40 years in production methodologies across a broad array of specialist components and materials? Much of it is likely to be lost alas. Those Chinese owned manufacturing groups which have or will set up manufacturing facilities in other Asian geographies should hopefully retain some of this ‘intellectual capital’, but it is nevertheless a concern, as much of the practical ‘ready to manufacture’ R&D that once was done by Toy companies at HQ in their home countries has been done at no extra cost by factories in China for decades now. Going forward, the process of producing and sourcing Toys is going to get more arduous, and a lot of things we took completely for granted will no longer be automatically fulfilled by factories who might know less than their customers about Toy supply chains for at least a few years if not a decade or more. Frankly it’s going be a really messy period of time ahead of us now.
Our company has been heavily involved in advising clients how to manage the preposterous tariff situation we have found ourselves in recently. In fact, this has been by far the busiest period in the 15 years or so since I set up the company. One key finding from the frenzy of this period is this: factories are more likely to want to work with Toy companies who don’t just flit in and out again every time the wind changes. They are looking for partners who will stick with them (as long as service is good and costs remain competitive). Factories will not rush to work with people who flip flop every time the situation in the world changes. This is more critical than you might think – here’s why: there are far fewer factories for Toy production outside China than in China. So if you want to be able to diversify, it’s a mistake to burn bridges & annoy factories or waste their time. You may really need them at some point. I was caught in the middle of a major U.S. Toy company running a gigantic benchmarking project with no intention of sending any business to factories. After quoting for 20+ SKUs they didn’t give any business to those factories, and the factory now will never respond to or do any business for that factory. Which is a gigantic shame, as the product area is quite specialist and the Toy Co does not have that many alternative options. Duh!
Based on the hundreds of sourcing projects we have worked on, I would estimate that you can find production for around 80% of products or components you need outside China, but you have a lot less choice, so I would strongly suggest to avoid fouling your own swimming pool by annoying factories you may desperately need at some point!
We should also take a moment to think about the people and businesses engaged in Toy production in China. This has been a terribly stressful time for our long-time partners in ‘The Middle Kingdom’. Many have been forced to dump their production forecasts, and even though we should now be back online with the tariffs reducing down to ‘only’ 30%, there are a lot of good suppliers in China now struggling for no reason of their making. We have tried to support our long-term partners and friends in China with projects from outside the USA, but it has not been easy.
The issue our industry now has in facing the rest of 2025 is that the move down to 30% tariffs (for 90 days at least) is probably enough to trigger an avalanche of orders and demand for container shipping capacity. It’s going to be sheer chaos for the next 2 months from here as everybody involved in the chain moves mountains to try to salvage 2025. It isn’t going to be pretty. I notice that some of the stock market listed companies postponed their full year 2025 guidance, and these are the guys with the most diversified supply chains out there. For those companies who have been 100% reliant on China’s production up until this point in time, it’s hard to see how they won’t lose revenues due to pauses in shipping and revised retailer forecasts, as well as due to price increases which will presumably reduce demand via price elasticity. Margin wise by the way, 30% is still likely to be low enough to make shipments happen, but not to make things profitable. Which is likely to curtail investment in new products and people for 2026.
Total catastrophe has been averted just in time, but this is still going to be a really crappy year for a lot of companies. One indicator that companies are expecting a big hit to revenues and or margins is the number of people seeking new jobs having been let go by their previous employers. Via our recruitment service www.ToyRecruitment.com we have visibility of this, and I can’t remember a time in this business when there have been so many really talented and experienced people seeking new roles. If the really good people are looking for new roles you know things are tough.
Originally, I was optimistic about seeing the global Toy market return to growth in 2025, with strong product development by Toy companies, a strong movie slate and several other positive factors. Unfortunately after this whole tariff snafu, I am no longer optimistic. 2025 has now become a year which is all about damage limitation and mitigation for so many companies.
On the brighter side of things though, kids still love Toys & Games. Great content with clear Toyetic appeal keeps on being released. And I guess above all, Toy & Game companies seem to have finally embraced the message I have been harping on about for years: our biggest challenge with Sourcing is not shaving a few cents from the purchase cost, that’s a secondary factor. The fundamental driving factor is ensuring supply, and after the Covid induced shipping crisis and the tariff debacle, companies are finally understanding that success for the future will necessitate diversified supply chains which are flexible and responsive to crises and dramas. Wish you all the best for the rest of 2025 and in the current scramble for viably priced landed products.
MOJO NATION ARTICLES - https://www.mojo-nation.com/
If you don’t know Mojo Nation, you should! It’s an organisation committed to supporting the Toy & Game Designer community. It’s run by some really good people, and if you want an accessible and friendly way to access the creative community in the world of Toys, this is a good place to start. Mojo Nation recently published a couple of articles in which my thoughts were included, along with a lot cleverer and more sensible industry folks:
“It’s not just a game – it’s a platform for experimentation”: Designers discuss 90 years of Monopoly
This article includes my thoughts on the longevity of the Monopoly game brand. Nearly 25 years ago I was the European Brand Manager - having survived my stewardship, I suspect Monopoly can survive anything. Read the article here:
Inventors wear many hats these days… Is considering aspects like cost a vital part of the inventing process? Or can ‘self-policing’ ideas kill innovation?
Here’s another Mojo Nation article I contributed to. Many of the other comments from various industry luminaries are more incisive than my ruminations, but you can check all that out here:
SPIELWARENMESSE, SPIRIT OF PLAY Blog
India’s Domestic Market Opportunity
This article was published by Spielwarenmesse.de. It looks at India’s domestic market opportunity. It’s currently a relatively small market, with a high degree of complexity, but it’s one of few Toy markets in the world offering large growth potential for the foreseeable future. Read on to find out more!
PRODUCT CATEGORIES OUR FACTORIES CAN SUPPLY FROM INDIA & VIETNAM:
We act as Sourcing agents covering the following product types from India & Vietnam:
Injection, blow & roto moulded plastic.
Games - Cardboard, plastic & wooden
Plush
Electronic Toys inc. RC
Wooden Toys
Children’s furniture – plastic, metal, wood
Please just drop me a direct message for more information, or visit our Sourcing business website: www.ToyTeamAsia.com
TOY & GAME BUSINESS CONSULTANCY
In the nearly 15 years I have been Consulting for, we have advised 1000+ Toy & Game companies, set up distribution into most major markets and helped to accelerate our client’s growth across the world. For more information on how we can help, check out our services here: www.KidsBrandInsight.com/services
GREAT PEOPLE ARE YOUR BIGGEST ADVANTAGE
Toy Recruitment Consultancy has become one our most in demand services. We have a social and own media platform (including this newsletter) which allows us to directly access c. 25k people in the world of Toys & Games from across the planet, aside from which after 25 years of grind, we know a lot of Toy & Game people across the world.
We’ve successfully recruited for roles in the UK, USA, Korea, HK, China and beyond. Our contact network is truly global…(ok we’d struggle to recruit for you in North Korea, but otherwise we’ve got you covered!).
So if you have key senior roles to fill or if you just can’t find someone qualified for a key role you need to fill, just drop me a DM and I’ll explain how we work/the costs involved or check out our Toy Recruitment website here: www.ToyRecruitment.com
Job Seekers Friday – as part of this work in helping to place good people, I’m going to try (as far as time and workload allows) to promote a new jobseeker every Friday going forward. If you are a job seeker with at least 5 years’ experience in The Toy/Game business and you want me to promote you to my audience of c. 25,000 industry people, please send me a DM & I’ll explain how it works (no cost).
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This article is copyright 2025 RG Marketing Ltd, all rights reserved. All contributors to this article contributed under a work for hire basis on behalf of RG Marketing Ltd. Please also note, this article was written and published in the United Kingdom.