UPDATE: It been a rough week. I wrote my following comments this past Monday, before two subsequent increases in the tariff rates from goods made in China. While I’ll stand by my advice, and the historic reasoning behind them, I’ll admit that the situation has become much more stressful, and “be concerned” is an understatement. Let’s say, be very concerned.

Many of us attended the Toy Association meeting this past Tuesday. Our trade organization is being proactive, and for a recap of their actions, and recommendations, see this link: https://email.toyassociation.org/q/1tkm1UyDxInSeD4ISWhXLZkZ/wv

At our toy company, we had spent the last few weeks discussing, debating, reviewing, calculating and recalculating in order to determine a strategy for dealing with the 20% tariff that was now being imposed on our toys made in China. Worth noting: ALL of our toys are made in China.

Further, the majority of our product line had been duty-free. So, adding 20% to our landed cost is a pretty significant situation. After speaking with our sales managers, other toy company owners, and even some of our customers, we came up with a strategy that we felt was equitable for us and our customers. I wrote it up, edited and adjusted it, and emailed our policy and effective date to our sales management and sales representative group principals.

The ink wasn’t dry on our electronic memo before our strategy was obsolete. “Liberation Day”  brought the announcement that higher duties were being imposed, and on practically every country in the world, including a few territories that are uninhabited. At first, it seemed that our China duty went from 20% to 34%. Then we realized that the 34% is IN ADDITION to the 20%. 54% duty added to the landed cost of goods. How on Earth are we going to manage our pricing going up so much?? How are our retailers going to be able to increase their pricing this much? How will our consumers, the people that ultimately pay the price, be able to afford this and to afford every other cost increase on every imported product sold in the United States???

Although we manufacture World’s Smallest Magic 8 Ball, I cannot see into the future. I tried – I got “Cannot Predict Now”.

The next day started with an emergency meeting with our CFO, VP of Sales, Director of Sales, and me. My directive was one taken from one of my favorite book series, Douglas Adams’ The Hitchhiker’s Guide to the Galaxy – the words that are prominently featured on the cover of the all-encompassing title device: DON’T PANIC!

So, while I cannot see in the future, I do have experience from the past.

Many of us toy folk were in NYC, participating in the Fall Preview, on September 11, 2001, working out of the Toy Building at 200 Fifth Avenue. We were witnesses to the attack, we could see the buildings burning from the street outside of our building, hear the sirens of emergency responders all day, smell and taste burning, dust filled air. There was confusion, anxiety, fear and much more. Many were stranded in the city for several days, as all flights were cancelled. We didn’t know where we stood as a nation, let alone as a toy industry. But,  as we know, life went on, and we survived it – as a nation and as an industry.

January of 2020, the Hong Kong Toy Show was considerably less attended than prior years. There was a strange new virus coming out of China, I’m not sure we even knew the name at the time. Some of the locals were wearing masks. But that wasn’t really the reason that people were not attending. We had seen this before – Chicken Flu, SARS. Temperature checks were already standard at arrival at the airport and at the border into and out of China. The real issue was civil unrest against the government that had been growing and causing clashes in the streets. So we did our show, went home, and a few weeks later, participated in the last February New York Toy Fair that we'd have for the next four years. It was business as usual at a well-attended show – people shook hands, hugged, kissed hello, stood in crowded coffee lines, and hit the restaurants and bars at night. And only a few weeks later, not only were we all in quarantine, but Jacob Javits Convention Center, home of New York Toy Fair, was converted into a hospital for COVID patients.

Our retail customers were shut down, except for those deemed “essential” businesses. The specialty retailers, the amusement industry, and more were especially hard hit. And still, we learned how to work from home, manage our staffs remotely, evolved a new way of communicating – video calls, and had our meetings wearing sweatpants and t-shirts. The toy industry survived.

Even going back to the early part of the last century, during World War I, President Woodrow Wilson authorized the Council of National Defense. In order to commit all resources to the war effort, the Council determined that  toy manufacturing, at that time a U.S. industry, was not essential. Many manufacturers were fearful that they would be put out of business. It took a prominent toy maker, Mr. A.C. Gilbert, maker of  Erector Sets, chemistry sets, and other science based toys (before there was STEM!) to meet personally with the Secretary of the Navy and the Secretary of Commerce, and convince them that it was toys that stimulated thinking in children, and seeded their interest in science, engineering, and even soldiering. He convinced the US. Government not to shut down the industry – the man literally saved Christmas. The toy industry survived.

Those of you that know me, know that I’m not the guy to turn to for optimism. But I’m also not a pessimist – I’m a realist. History shows that as an industry, we are smart, resourceful and persistent. We are not in this alone – every consumer product not manufactured in the U.S. is facing the same challenges. I propose that we, the toy people, are more adept at adapting than most other industries. Kids are kids – they want and need toys.

We have a dynamic new leader of the Toy Association. Greg Ahearn and his staff, as well as the TA Board of Directors, are proactive. They have hired a lobbyist based in D.C. They have banded with toy associations worldwide to combine resources to challenge all toy tariffs worldwide. There are weekly update meetings that all TA members can attend and participate in to update the Associations advocacy. Tariffs are the top of the agenda.

Look, things look pretty dire right now. But it is early days. We are all in this together, and together, we’ll find a way. Most importantly, be concerned, but DON’T PANIC!