Op-Ed: Save the U.S. Toy Industry — An Open Letter to the White House on Devastating Tariffs

by JONATHAN CATHEY, Founder & CEO, The Loyal Subjects

I am Main Street.

I was born in Laguna Beach, CA, and raised in Laguna Niguel, CA.  My parents are working class, my grandparents, too.  My father was head inspector for the LA County Department of Public Works, and my mother was a real estate agent and a former Gallery Assistant Director. My grandfather was an electrical engineer for the U.S. Navy at Point Hueneme, Oxnard, CA, and my other grandfather was a longshoreman at the Port of Los Angeles, where he served as head foreman. Both grandparents served in WWII, one in the South Pacific under the most dangerous circumstances. Both lived to see their grandchildren.  My father was in the Air Force Reserves.  The Catheys (my namesake) were some of the first settlers of the Tennessee Valley, awarded land grants as payment from General George Washington for our valor and fight in the American Revolutionary War. My Father’s side has been in the U.S. (as in contemporary “territorial USA”) since the 1600s, and my mother’s since the 1500s (I’m a direct descendent of a founder of Santa Fe, New Mexico).  Both sides have a very long history of serving U.S. interests with honor and courage.  We are hard-working, salt-of-the-earth folk.  I’ve been employed since I was a teenager, working odd jobs, hard jobs, and low-paying jobs as I struggled through college and tried out all sorts of different vocations until I landed with a “toy company” — my OWN toy company!  As with all parents, they wish to see their kids do better than they did by believing in the American Dream, providing a good education, and teaching the fundamentals and values of hard work. It paid off; my sister and I have made notable careers in different fields.

Sixteen years ago, I took my last $500 and invested in my toy company, The Loyal Subjects (TLS).  I started it from a two-bedroom, run-down, Spanish flat-roofed bungalow in West Hollywood.  I ran the entire thing out of my living room.  I eventually scored an office.  

I took modest internet sales and turned the company into a multi-million-dollar enterprise, serving the largest retailers on the planet, working with the largest studios on the planet, and building a decent-sized employee force, paying salaries of nearly $100,000 per year with benefits.

My business also adjacently employs hundreds of other workers by supporting business solutions, consultants, professional service providers, shipping/receiving/procurement, artisan services, marketing services, sales, private investment, consumer product groups, retail, retail marketing, legal services, advertising, property rentals, and more; the list is mind-boggling. TLS is my life’s work and is threatened to be destroyed without any replacement because of tariffs on toys manufactured in China.  There are some non-represented “truths” that aren’t as loudly proclaimed through the media as they should be through the punditry, through the quick sound bites, false equivalencies, and general gladiatorial entertainment. I want to share some of those truths, but before I do, please take notice of the sentence below:

Los Angeles is the epicenter of the U.S. toy industry.  California politicians — Republicans, Democrats, and Independents — please take notice and help.  

My small business, call it “Johnny Main Street, USA,” benefits from the advantage of global sourcing and trade to create high-paying jobs/careers with benefits and supports hundreds of high-paying jobs/careers in adjacent industries. All the downhill revenue supports small businesses and the “shop local” movement across restaurants, stores, boutiques, local services, experts and specialists, landlords, investments, banks/loans/mortgages, hospitality, and fuels big purchasing power (cars/houses) — the list is endless.  

Through the advantage of TARIFF-FREE imports, the U.S. toy industry creates HIGH-PAYING, sustainable jobs and careers!  Not only that, we’re supporting and powering small businesses, each of which creates careers and life paths 100x more rich/wealthy, safe, healthy, self-reliant, and less of a burden to Federal and local governments because WE are giving back in the form of opportunity and employment, paying a TON of taxes, and “wealth-insulating” our communities, lessening the burden on our government as a whole.  

China did not come after the toy Industry jobs in the U.S. In fact, China POWERED U.S. JOB CREATION and allowed companies to build, scale, reinvest, hire, and grow. 

Onshoring/repatriating and reindustrializing manufacturing would walk our industry back to the Stone Age for several reasons: 

For one, the notion that our partners in China are labor abusers, cheaters, dishonest, thieves, et al, is a falsehood, and I’m specifically speaking about my own partners.  I’ve spent 16 years going back and forth between the U.S. and China, securing long-term confidence and creating a partnership that has been a mutual, beneficial, and healthy small business builder.  Most of our suppliers in China are small business owners themselves. In some ways, they are seemingly held to a different standard than U.S.-based manufacturers, faced with rigorous compliance certification and intrusive watchdogs, including their own government, which has cracked down on unfair labor practices.  My partners stuck their necks out for us during the COVID-19 pandemic, keeping the presses open even after retailers shut their doors. Without the backing of our suppliers, we would have been TOAST.  They are heroes, not the enemy (at least in my industry and personal experience).  My partners in China care much about the same things as we do: family, friends, success, health, community, and being a contributor. These folks are like my extended family.  They are just hard-working and dedicated and stick their necks out plenty for folks vying for a chance to build something big. They are facilitators. There is zero negative.  U.S.-based companies, hard-working folks, and consumers have disproportionately benefitted from these dynamic relationships. We’re not in a trade deficit (per se) here; we’re WINNING by procuring low-cost goods with the ability to scale, invest, and hire at a 20:1 wealth advantage.  

A 1,000-worker toy factory in the U.S. would cost $500 million or more to build, compared to $30-40 million in China. It would take years to build, untold billions in government assistance (nobody has $500 million lying around to build toy factories; there’s no future in it), and all the machinery to run it would still have to be imported from China (injection mold machines, decorating operations, automation, and machinery, etc.).  It would still take Chinese investment and personnel because the Chinese are the BEST at toy making after spending half a century perfecting it (engineering, precision tools, artisanship, etc.). And “IF” the toy industry could survive a lapse in missing several quarters to re-shore manufacturing (with zero ability to invest because the business was destroyed already), the average worker would make $3 an hour.  And because of all the years of waiting, the investment would have already dried up, and there would be no jobs.  

And in the chance a major company like Mattel survives this with decimated investment/capital and human capital, its factory would probably be automated, employing only robots and artificial intelligence (AI).  ZERO JOBS to be had. And It would still require trading with China because there is no evidence the U.S. will produce “first materials” in the way of raw goods, supplies, etc.  Also, EVERYONE HAS MADE THEIR BETS as of today, as of last year!  The toy industry relies on long lead times — some as long as 24 months for the larger companies. The tooling is already underway, manufacturing processes have begun, and the investment has already been spent. Now, in the middle of billions of dollars in investments placed and parked, the rules have changed?  Must the U.S. toy industry suspend its ability to receive returns on its investments?  A $10 fashion doll is now $40.00?  A $5 ball is now $25.00?  It’s not worth finishing or shipping at this point. NOBODY is going to book sail against 145% tariffs.  Retail prices can’t support it, and barring pharmaceuticals, NOBODY has a 145% margin in their product, Heck, hardly anyone has a 10% EBITDA!  The forces of gravity are way too strong for this math.  Keeping tariffs on toys is like sending our industry straight to the guillotine.

Unemployment is at an all-time low, 4%.  The “Youngstown Ohio” allegory is used as an “all accompanying” excuse for punitive tariffs on China.  There are no “boom-to-bust” towns because of the toy Industry.  There has ONLY been wealth creation and job creation: $200 billion in annual sales, nearly 700,000 U.S. jobs supported with an average salary of $67,000 per year paying more than $12 billion in taxes. 

And look at our adjacent industries: Warehouse worker $40,000/year; forklift operator $75,000+/year; crane operator $75,000+/year, merchant marine $70,000+/year; Walmart sales associate $25/hr; Amazon worker $30/hr; Longshoreman $70,000+/year; truck drivers $50,000+/year; UPS driver $70,000+/year; CPG/entertainment licensing $72,000/year.  Many jobs in adjacent industries are high-paying and do not require a college degree. Many of the “Youngstown” jobs, as the metaphor applies to our industry, evolved into HIGHER PAYING JOBS!  Without the toy industry pumping billions into our economy, hundreds of thousands of jobs can be on the line, and to repatriate manufacturing, only tens of thousands of jobs would exist, with most of them paying no more than $3.30 an hr, without benefits or pensions, and prolonged hrs.  This isn’t an opportunity; it’s suicide!  Private equity will dry up, investment will draw down, jobs will evaporate, wealth will evaporate, and for ZERO GOOD REASON.  We can’t solely depend on the other markets picking up the business either as Europe has just 1/10 the buying power while Australia and New Zealand plus Canada can muster maybe 1/20 of the power. If this is the path forward, we might as well walk the toy industry back to the 1800s.

Consider them ALL GONE!  90% of all Christmas decorations and holiday lighting are produced in China, alongside 80% of all toys.  Not only is a safe, low-cost toy one of the greatest joys you can receive, give, and/or buy, but it’s also tethered to our customs, traditions, and invaluably our greatest memories. In Citizen Kane, the titular media baron resolves the story by crying out to his beloved childhood sled, “ROSEBUD!” on his deathbed! Toys MEAN A LOT to the global consciousness, to the American consciousness, to child development, to learning, and to basic happiness. It’s all a plus, not a minus, and our unique trade relationship with China has made this possible. “A TOY” is a general symbol of childhood!  You see it in every advertisement for child development — a plush bunny, a toy robot, etc.  Toys conjure the most basic of joyful innocence and discovery in ALL OF US!  They are nearly a 1:1 symbol for “happiness and childhood”.

Tariffs will pause Christmas this year. This is the MOST GRINCH thing anyone could ever concoct.  Dr. Theodor Seuss Geisel couldn’t articulate the whole allegory of “The Grinch” better than what’s happening now.  

Toy jobs are already here. 

We do not need to repatriate manufacturing to the U.S. for the toy industry as it will have the EXACT OPPOSITE effect as certain folks are musing and/or desiring from the levers of power.  

In California, the Port of LA  is already estimating 10% layoffs. That will negatively impact warehouses, drivers, retailers, and small businesses and create a potential supply chain crisis all over again. There are ZERO good tea leaves here. This isn’t a little pain for long-term gain; this is the nonsensical destruction of an entire industry built on joy and happiness. In what world does this make sense?

It’s an unforced error that can be righted.  Please, help make it right.  ZERO TARIFFS ON TOYS coming from China. Industries and high-paying jobs everywhere are counting on this!

Jonathan Cathey

SMALL BUSINESS OWNER/MAINSTREET USA!

P.S. —

Dear friends, hard-working everyday folks, and patriots,

Please help spread the word before our industry, and many more are irreparably damaged and destroyed.

We need YOU to collectively amplify our voice. Pass my story along, make it your anthem for our plight, or use it as inspiration to write your own story! #KeepToysTariffFree