Nerf guns. Monopoly board games. G.I. Joes. Some of Hasbro’s bestselling toys are getting pricier as the U.S. implements stiff tariffs on Chinese imports. So Hasbro, and others like Barbie maker Mattel, are negotiating with suppliers and considering design changes. The threat of new taxes on toy imports comes amid a long-term shift in the industry away from China, spurred by rising labor costs in that country. Manufacturers have spent years trying to make fewer toys and games in China by relocating to factories in other countries, including Vietnam and India.
Across industries, U.S. companies have been diversifying their supply chains, prodded in part by tariffs implemented during both the Trump and Biden administrations, writes The Wall Street Journal (Nov. 18, 2024). Makers of everything from steel and semiconductors to auto parts are rejiggering supply lines to source components from other countries. Sharpie and Yankee Candle maker Newell Brands, for example, is moving more factory work to the U.S.—the desired result of the tariffs.
Hasbro’s current target is for roughly 20% of its U.S. sales to come from China-made products within four years, down from about 40% today. The challenges the company has faced in achieving a long-held goal underline the pressure facing toy makers. While lower-cost locations are easy to find, switching to a new factory with similar product-quality and safety standards can be a challenge in the toy industry.
Unlike in some industries, automation has yet to make major strides in parts of the toy-making process. Assembly for many toys still relies on skilled workers to put together the latest action figure or hand-paint details. Shifting to a different country requires training a new generation of craftspeople. Smaller factories in South and Southeast Asian countries also might not produce enough units to easily replace Chinese facilities.
Hasbro’s shift away from China is part of a $750 million cost-cutting push that includes negotiating lower prices from suppliers or changing designs to make them cheaper to build, such as Jenga blocks that now use a single type of wood. The change lowered costs and had the added benefit of making the pieces slide more smoothly out of a Jenga tower. Meanwhile, the Chinese government has been pushing for the country to graduate from being a hub for lower-cost work, such as toy making.
Classroom discussion questions:
- What other products have been moving away from China?
- Have the tariffs been successful?
