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So ci ‘d ead atio n set against’ se-made toys ifs on Chine rais­ing tar

Global Times US Edition - - BIZIN -

next year, but this year’s re heav­ily clouded by the sed ad­di­tional tar­iffs. ell, if we woke up one day l of a sud­den there’s a what would we do? It’s a lt thing for us,” Grubba nhua in a re­cent in­ter­view of­fice in Or­mond Beach, a.

makes most goods

e US, in May, raised adal tar­iffs on $200 bil­lion of Chi­nese im­ports from cent to 25 per­cent, and ened to levy ex­tra du­ties on Chi­nese prod­ucts. h the threat­ened tar­iffs ng on the hori­zon, toys in­clude Grubba were us that the industry would big hit as 85 per­cent of out 3 bil­lion dol­lars’ worth sold in the US each year from China. we were to have the cent tar­iff im­posed on this ct, if we couldn’t find a way d that, it would prob­a­bly us out of busi­ness,” said Grubba, who has been work­ing with his partners in Qing­dao in China’s Shan­dong Prov­ince for al­most 20 years.

“This whole industry, al­most ev­ery­thing in the industry is man­u­fac­tured in China,” he said.

Most of th­ese com­pa­nies have a “profit mar­gin in the range of 30 per­cent,” and if they were to pay a 25-per­cent tar­iff, the left 5 per­cent would not be enough for them to pay salaries, rent, in­sur­ance and other bills, ac­cord­ing to Grubba.

“We would have to raise prices. A cer­tain num­ber of peo­ple just wouldn’t be able to af­ford it any­more ... That would be a big prob­lem for us,” he said, adding that some of his model trains were al­ready ex­pen­sive.

The model train industry in the United States is a fairly small busi­ness but a lot of com­pa­nies and peo­ple are in­volved in it, Grubba said.

“Around 500 peo­ple work for man­u­fac­tur­ers like us, the im­porters, but that doesn’t in­clude all the hobby stores,” he said.

“There are prob­a­bly 1,000 hobby stores in the US that sell this type of prod­uct. Each of those ... maybe ... has five to 10 em­ploy­ees, so that’s an­other 5,000 peo­ple. I think those hobby stores are likely to close,” he added.

The idea to re­lo­cate pro­duc­tion out of China is also un­re­al­is­tic, Grubba said, not­ing that it is hard for toy industry busi­nesses to find an­other coun­try with comparable in­fra­struc­ture, skilled work­ers, as well as the re­search and devel­op­ment ca­pa­bil­i­ties.

“It’s dif­fi­cult to move a fac­tory (out of China) be­cause our prod­uct is very spe­cial­ized. It took us a long time to train the work­ers at the fac­to­ries and train the en­gi­neers and to get the qual­ity the way it’s sup­posed to be,” he said.

“And if we try to move to an­other coun­try, then you have to de­velop those ex­per­tise all over again,” he said. “That takes a long time (and) a lot of money.”

A 25-per­cent in­crease in prices as a result of tar­iffs or taxes, on those toys will put 300 of 1,100 mem­bers of the Toy As­so­ci­a­tion “po­ten­tially out of busi­ness,” Steve Pasierb, pres­i­dent and CEO of the Trade As­so­ci­a­tion, told lo­cal me­dia when the industry held its an­nual busi­ness con­fer­ence in Min­neapo­lis, Min­nesota, last week.

The trade group also added its name to a “Tar­iffs Hurt the Heart­land” coali­tion let­ter sent to Pres­i­dent Don­ald Trump and signed by more than 660 com­pa­nies and trade as­so­ci­a­tions, urg­ing an end to ad­di­tional tar­iffs on Chi­nese im­ports.

Ac­cord­ing to The Trade Part­ner­ship, a Wash­ing­ton-based trade re­search and con­sult­ing firm, 25-per­cent tar­iffs on the re­main­ing Chi­nese im­ports would result in the loss of more than 2 mil­lion US jobs, add 2,300 dol­lars in costs for the av­er­age Amer­i­can fam­ily of four, and re­duce the value of US GDP by 1.0 per­cent, said the let­ter.

Un­af­ford­able hol­i­day sea­son

Many toy com­pa­nies started plan­ning for the up­com­ing hol­i­day sea­son last fall, said Grubba, and ev­ery­thing from prod­uct lines to pric­ing is al­ready set.

“We have prod­ucts that presold. We’ve al­ready set­tled the amount of money. And they are to be de­liv­ered in the sec­ond half of this year,” he said, lament­ing the un­cer­tainty em­a­nat­ing from the tar­iffs say­ing it has “thrown ev­ery­thing up in the air.”

The pro­posed tar­iffs on Chi­nese im­ports will also se­ri­ously dis­rupt this year’s up­com­ing hol­i­day sea­son, which ac­counts for 50 per­cent of an­nual toy sales in the US, ac­cord­ing to Rebecca Mond, vice pres­i­dent of the Fed­eral Gov­ern­ment Af­fairs for the Toy As­so­ci­a­tion.

The price of toys could go up by 15 per­cent and as many as 68,000 out of the more than 691,000 em­ploy­ees in the industry could lose their jobs, Mond told lo­cal me­dia, cit­ing a re­cent study.

“Most peo­ple that I talk to don’t want to go back to that (re­ces­sion). We want to have pros­per­ity and sta­ble times and peace and go back to nor­mal trade,” he said.

US re­tail­ers also sounded the alarm, say­ing that the up­com­ing hol­i­day sea­son cel­e­bra­tions would be “less af­ford­able” for Amer­i­cans should the new tar­iffs on Chi­nese goods be put into place.

The tar­iffs will even­tu­ally in­crease the cost of cel­e­brat­ing Christ­mas and “dis­pro­por­tion­ally im­pact” Amer­i­can fam­i­lies, Douglas Lauer, pres­i­dent and CEO of San Fran­cisco-based or­na­ment store Old World Christ­mas, said at the public hear­ings while tes­ti­fy­ing be­fore the Sec­tion 301 Com­mit­tee un­der the Of­fice of the US Trade Representa­tive on Fri­day.

The week-long hear­ings, which will end June 25, have wit­nessed hun­dreds of industry lead­ers op­pos­ing the pro­posed ad­di­tional tar­iffs on Chi­nese im­ports.

The av­er­age US fam­ily spends un­der 60 dol­lars per con­sumer on hol­i­day dec­o­ra­tions an­nu­ally, said a sur­vey from the Na­tional Re­tail Fed­er­a­tion.

For Thomas Har­man, founder and CEO of pri­vately-held Bal­sam Brands, the com­pany’s prod­ucts of con­cern are pre-lit ar­ti­fi­cial Christ­mas trees, which re­quire la­bor-in­ten­sive pro­duc­tion and are “al­most ex­clu­sively made in China.”

More than 95 mil­lion US house­holds dis­play a Christ­mas tree, and four out of five do so with an ar­ti­fi­cial Christ­mas tree, ac­cord­ing to Har­man.

“We con­sis­tently hear from our cus­tomers that hol­i­day bud­gets are tight, and we ex­pect that trend to con­tinue in 2019,” Heather Shep­ard­son, CEO of Sea­sonal and Hol­i­day Com­pany Rauch In­dus­tries Inc, said in her tes­ti­mony.

About three quar­ters of im­ported glass Christ­mas or­na­ments come from China, Shep­ard­son said. “No other coun­try has the ca­pac­ity to man­u­fac­ture the broad ar­ray of or­na­ments cur­rently made in China and cer­tainly not at the price points that most Amer­i­cans can and are willing to ac­cept.”

A tar­iff up to 25 per­cent is “un­fath­omable to me and my col­leagues in our industry,” Shep­ard­son added.

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