by Stephanie Pottick, Esq., Pottick Law PC & Protect for Success
Let’s face it: Manufacturing in the U.S. is usually more costly than manufacturing products overseas and importing those items. When I worked at Sky Kids, we tried to manufacture baby doll clothing domestically, but costs were much higher than they were overseas, and retailers wouldn’t pay extra for the difference.
That’s why most toys are made overseas, with more than 75% coming from China. Overseas factories have produced toys for decades and have become very skilled at it, making it much more challenging to move production anywhere else on a short timeline.
Whether you’re big or small, your business matters! And remember: The toy industry has endured challenges in the past; while tariffs currently may put undue stress on businesses, this won’t last forever.
But what are tariffs, and what does it mean for you as a toy company? In simple terms, a tariff is a tax on imported products. The recent tariffs, especially those imposed on imports from China, will disproportionately affect the toy industry because many toys have low price points and tight margins. When I started drafting this article, tariffs on products from China were at 145%, which meant import costs would’ve been more than double the product’s cost — and that doesn’t include other expenses like shipping. But thankfully, for now, the rate will drop to 30%.
If these tariffs remain our reality (even at 30%), toy companies must deal with them or risk going out of business. Larger toy companies will have an advantage because they likely have the financial flexibility and supply chain diversity to weather the storm, but small- to mid-size toy companies may struggle more because many lack the ability to pivot quickly and shift manufacturers or function without sufficient cash flow.
Industry trade organizations, like The Toy Association, are working diligently to get an exemption for toys, and hopefully, by the time this article is published, that’s exactly what happened! [Ed. Note: Not yet.] In any event, this is still a good reminder to have a plan B and be prepared for ways to deal with business hardships.
Here are some ways to potentially help lessen the effects of tariffs:
- Explore tariff classification options to reduce duty rates.
- Import and assemble the products’ components in the U.S. or a country with lower tariffs.
- Spread any cost increases across products, if possible.
- Shift and diversify production to other countries.
- Try to renegotiate supplier contracts.
- Bring in products before tariffs become applicable, and warehouse them in the U.S.
You may also want to look for professionals — like customs attorneys and brokers — who can help you find other ways to minimize and avoid tariffs. They have experience dealing with applicable laws and regulations and can help assess your overall situation, make sure your goods are classified properly under the Harmonized Tariff Schedule (HTS), and can strategize with you to come up with ways to hopefully lessen the impact of the current tariffs on your business.
Whether you’re big or small, your business matters! And remember: The toy industry has endured challenges in the past; while tariffs currently may put undue stress on businesses, this won’t last forever, so hang in there!
*Disclaimer: This article is for informational purposes and not intended as legal advice. Don’t rely on anything without doing your due diligence first.
Stay on the Pulse of Play!
A version of this feature first appeared in The Toy Book‘s 2025 Specialty Toys & Gifts Issue. Click here to read the full issue!
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