JANUARY 10, 2019
The ongoing trade war between Washington and Beijing is weighing on China toy exporters.
Even though their products have yet to take a direct tariff hit, exhibitors at the Hong Kong Toys & Games Fair said the tariff battle and heightened tensions are still impacting their business.
They cited uncertainty, the impact of tariffs already placed on some electronics that go into increasingly sophisticated toys and supply chain headaches as U.S. and Chinese negotiators work to forge a deal before a mutually-agreed-upon reprieve on new levies ends in March.
The two countries are racing to reach an agreement and avert U.S. President Donald Trump threat to increase the amount of existing tariffs and even expand them to virtually all of China’s exports.
China dominates global toy manufacturing and some companies are Hong Kong-owned, a remnant of the days in decades past when the city was a thriving toy making center, though now most manufacture is on the mainland.
Johnny Sze, director and vice general manager at Hong Kong-based educational toy producer Eastcolight, said that buyers from the United States are increasingly eager to lock in orders ahead of time in case toys end up on the tariff list.
“This year we noticed that we actually have a lot more U.S. customers coming here, which is quite unexpected,” Sze said Wednesday on CNBC’s “Squawk Box,” referring to the fair, which was slated to end Thursday.
Some at the event, which brought together more than 2,100 exhibitors from 42 countries and regions and is sponsored by the Hong Kong Trade Development Council, said the clash between the world’s two largest economies has clearly hurt industry sentiment.
According to Joe Yao, whose China-based Shantou Subotech Toys employs 500 people and makes precision remote control vehicles, business has declined as the trading companies that buy his wares for export worry about possible future tariffs.
“Hell” is how Yao described the situation Wednesday at his booth at the fair, citing the unease and declining sales as problems. The U.S. market, he said, has been his biggest.
‘Deal with it’
Stanley Lo, marketing director at Shenzhen Cowins Intelligent Development, which helps toy makers incorporate artificial intelligence and other technology and also manufactures its own products, said his company is even considering moving manufacturing out of China.
“I think about Vietnam,” Lo said, adding that he plans to visit the country later this year to assess the situation.
Eastcolight’s Sze said tariffs on some toy components, such as circuit boards, are already threatening key Chinese suppliers, and he fears they could go under or move overseas.
“We are worried that they will close down and our supply chain will have some problems,” said Sze, whose company manufactures in China.
Yao and others said the trade conflict has come on top of an already challenging environment with concerns including rising wages, difficulty finding workers and increasing costs due to stricter Chinese environmental rules.
Still, exporters expressed optimism that Washington and Beijing can seal a deal, saying it is against the nations’ interests to keep fighting over trade.
“It’s no use,” Yao said. “It harms each other.”
Some, however, said they will manage to survive even if the trade war worsens.
“You have to deal with it,” said Ben Yam, owner of Hong Kong-based Dynamic Scientific, which makes interactive globes and other educational toys at a factory in China.
“We cannot change our industries,” he said