Trade war has left toy sector largely unscathed, but Washington extending tariffs to all Chinese-made goods could change that.
Although the existing punitive tariffs only cover some components of toys, the industry is now under greater pressure to relocate their factories to such lower-cost markets as Vietnam, Indonesia and India, according to Lawrence Chan Wing-luen, chairman of the Hong Kong Trade Development Council’s toy advisory committee.
Amid the doom and gloom, Hong Kong’s toy exports are set to grow 1-2% in 2019 after 1.6% growth between January and November 2018, which brought exports to HK$45.2b (US$5.8b), Lawrence said.
“Christmas sales in the US were better than expected despite the trade war,” he added. “This year’s exports don’t look too bad because there are a number of blockbuster movies in the pipeline that will help boost licensed products.”
Washington and Beijing are in the middle of a 90-day truce since 1st December to work out a settlement on punitive tariffs levied on each other’s exports. Talks between US and Chinese officials begin today in Beijing, with a view to resolving the dispute.
So far, toys escaped largely unscathed from the levies but the sector cannot rest on its laurels as US President Donald Trump threatened to extend tariffs to all of the US$505b worth of Chinese-made exports, from half at present, if an agreement cannot be reached.
“The trade war is a catalyst for many Hong Kong toy manufacturers operating in China to consider relocating their factories,” Lawrence said, himself a toy entrepreneur and honourary president of Hong Kong Toys Council.
The migration of toy factories from China started several years ago along with the country’s industrial transformation to higher technology and service-led economy, he said. “Growing costs are eating further into profits and now the trade war brings extra risks,” Lawrence added.
There are about 2,000 factories on mainland China compared with over 3,000 in the sector’s heydays about two decades ago, he added.