About Toy Jobs

Like most of you I’ve been pouring over the news each day only to find out that what I “knew” yesterday is now obsolete.  This means lots of man-hours wasted but you have to do it otherwise you risk blindly stumbling into bear traps.

Last Thursday and Friday were whiplash inducing.  Courts declared that Trump’s tariffs were illegal and must be curtailed within ten days.  Other courts postponed the need to stop tariffs while the legal process plays out (which could mean indefinitely).  I’m a bit ambivalent about the courts getting involved.  While I would certainly like to see this whole mishegoss settled as quickly as possible; the court action could push the process back a few months.  Other countries are less likely to finalize a trade agreement when the tariffs being used for leverage might quickly be declared null and void.  On the other side we certainly could see the Trump Administration focused on fighting court battles rather than doing deals.  The court action hasn’t solved the tariff uncertainty but rather has kicked a three-dimensional chess match up into the 4^th dimension.  Topping it all off, the legal decision isn’t even going to stick as the Trump Administration has several work arounds available just by instituting the tariffs under different statutes.  To quote Bart Simpson “Aye Caramba!”

As if that wasn’t enough – we then got an explosive Trump tweet blaring “CHINA HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.”  Apparently, China has been slow-walking export licenses for rare earth minerals.  This was apparently retaliation for the U.S. warning allies not to engage with Chinese company Huawei.  Just a couple of weeks after the parties agreed in Geneva to de-escalate the trade war, we learn Friday night from Treasury Secretary Scott Bessent that “for now, the process to get high-level trade talks going has stalled.”  Throw your hands up!  I’m writing this Saturday morning.  Who knows what comes next?

Meanwhile, in the backdrop, the Chinese economy is feeling pain.  It was already rocky due to the bursting of an enormous property bubble, but now Chinese export orders have collapsed.  Some Chinese factories are offering super reduced pricing while others are halting production and putting employees on leave.

On this side of the Pacific the U.S. toy industry hiring has all but stopped.  I’ve even written a template for people inquiring about job opportunities:  “Everything is on pause until we gain greater clarity on the tariff situation.”  Toy industry furloughs began two or three weeks ago.  The economy as a whole hasn’t much felt it yet but in the coming weeks retail shelves are going to start getting noticeably lean.

Toy companies are trying to adapt as best they can by:  spreading costs around, tweaking product classifications, consolidating shipping, parking product in bonded warehouses, parking product in Canada and practicing first sale accounting.  I guess that for today at least we’re still at the 30% Geneva tariff rate.  That rate would cause many toy companies to go out of business and leave others losing money in 2025 and limping badly into 2026.  Assuming China can show that they are cracking down on the fentanyl trade, tariffs should end up in the 10 – 15% range.  That’s not “good” but it is manageable.  I hear a lot of “drop dead dates” when the toy industry needs the tariff situation to be solved by in order to make and ship goods in time to land for the holiday sales season.  Most of those dates fall some time during the month of June.  Me, I’m using the 4^th of July for whatever that’s worth.  But hey, that’s today.  Who knows what tomorrow may bring.

In the meantime, if you are a company that IS looking to hire, please reach out.  I am well rested . . . . . if a bit queasy.

PS: Trump and Xi are supposedly having a phone call this week. It’s Wednesday already…..tick, tick, tick, tick……….

All the best,

Tom Keoughan

Let me start by acknowledging the horrible impact from the wildfires that spread across the Los Angeles area. LA is the epicenter of today’s toy industry, and the tragedy has unfortunately impacted the lives of many of our clients, colleagues, and the toy community at large. My thoughts are with them and their loved ones during this challenging time.

Overall holiday spending for November and December was up by 4% over 2023 and handily beat the National Retail Federation’s estimate of 2.5-3.5%. For the toy industry, the inventory glut of 2023 left companies cash poor in early 2024 and many companies struggled through the first two thirds of the year. Fortunately, strong consumer spending carried the day, and most toy companies ended the year “flattish” while some were up considerably. It wasn’t a great year, but it was solid. Hopefully, the strong roster of licensable kid’s films will bolster greater growth in 2025.

The tricky part will be tariffs. Fortunately, most tariffs have been postponed which gives all parties a chance to negotiate through their differences. That said, it’s hard to see how the U.S. and China will be able to reach an agreement by the postponement date. That leaves the toy industry waiting to see if toys will be included and, if so, what the amount of the tariffs will be. In the last Trump administration, we were able to dodge the tariff regime for several years. Fingers crossed.

People in the business of actually selling toys will certainly have a much more valid opinion than I do, but from what I’m hearing, if the toy industry ends up being tariffed and if the tariffs are 10% or less it will be uncomfortable, but the industry can work through it. Toy companies will beat lower prices out of the factories. They will take lower margins themselves (grrr) and they will try to push retailers to accept some price increases. The last leg of that stool will undoubtedly be the most difficult. Companies should keep their quality teams vigilant. Factories already work on tight margins, and it will be important to keep an eye on what goes on there.

As we speak, the toy gypsies are on the road and have been for more than a month. Every week or so there’s a pit stop at home for the emergency laundering of piles of dirty shirts…and sleeeep. I never seem to get enough at trade shows – late to bed and early to rise. Try to keep your Vitamin C levels topped off in the usually vain effort to ward off the ever-present “tradeshow disease.”

Fortunately, the toy industry is resilient and adaptable. It is never smooth sailing and there are always stormy skies. Stay nimble. Focus on pragmatism, not politics. With apologies to FDR: “The only thing that is certain is uncertainty itself.”

I’ll see you all in New York

Tom Keoughan