World News

Hasbro says tariffs “could not come at a worse time” for US toy industry

Published on: June 26th, 2019

The company has been testifying in Washington this week, along with Mattel and other toy makers.

Hasbro has said new tariffs could drive up the cost of toys, devastate the industry and lead to safety risks.

The toy maker is one of hundreds of companies that has been testifying in Washington over the past week, asking the Trump administration to spare them from the next round of tariffs. Hasbro’s chief operating officer, John Frascotti, is set to testify on Monday.

In comments submitted ahead of the testimony, the company told United States trade representative, Robert Lighthizer, that 85% of all toys sold in the US are imported from China. At the moment, toys and games are on the list of $300b worth of Chinese goods that could face tariffs of up to 25%. The company estimates more tariffs could cut the toy industry’s contribution to the US economy by $10.8b.

Kathrin Belliveau, a senior vice president at Hasbro, commented: “This could not come at a worse time for our industry. We, and the US toy industry overall, are facing serious headwinds from the recent bankruptcies of two major toy retailers, K-Mart and Toys R Us, which have already put an estimated 30,000 US jobs at risk.”

Mattel is also saying the tariffs would put American jobs at risk. Corinne Murat, Mattel’s director of government affairs, said: “Although unskilled production operations typically occur in China, the US toy, game and juvenile products industry maintains major product design, marketing and other key operations in the United States that would be negatively affected by tariffs on these products.”

If the tariffs drive up the price of toys, Hasbro expects consumers will buy fewer of them – or buy cheaper, potentially unsafe toys instead, which could lead to safety risks for kids. Strict US safety standards enforced through their Chinese suppliers are part of the reason why toy makers say they are so dependent on Chinese manufacturers, and why that’s not likely to change anytime soon.

Hasbro says it has been trying to diversify its supply chain since 2012. At that time, it says 80% of the products sold in the US came from China. In 2018, that number dropped to 67% and the company’s goal is to reach 60% by the end of 2020. “In the meantime, Hasbro and other US toy companies will have no choice but to continue importing toys and games from China and passing along the increased cost of the tariffs to American customers,” added Kathrin.

Currently, 20% of Hasbro toys and games sold in the United States are made in the United States. Hasbro said the tariffs would not accomplish the administration’s goal of boosting American manufacturing, but instead would make it harder to move manufacturing outside of China.

Mattel made a similar argument, noting consumers will be hurt no matter how toy companies respond to the tariffs. Corrine added: “It would be difficult to switch sourcing in the near future, meaning the proposed tariffs would result in higher consumer prices and reduced consumer choice. In the event increased tariffs eventually force US toy companies to switch from their established Chinese suppliers, the companies would incur significant initial testing and certification costs associated with their new suppliers, again resulting in higher consumer prices.”

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