Trump’s trade war is already throwing a wrench into holiday planning
Manufacturers, importers and retailers are beginning to formulate plans for the first holiday season under President Trump’s 145% tariff on China and varied rates on other countries. But, doing so feels like one giant guessing game. Maybe there will be lower tariffs by then. Or maybe, there won’t be any tariffs at that point.
The only thing that is certain about the holidays is that things are uncertain. Retail executives and analysts warn the country is barreling toward a Christmas with potentially fewer products, higher prices and empty shelves.
President Trump himself told reporters after a cabinet meeting April 30 that his trade war with China could result in empty shelves at toy stores. “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.”
Greg Ahearn, chief executive of the Toy Association, a U.S. industry group representing 850 toy manufacturers, told The New York Times that there is now a frozen supply chain that is putting Christmas at risk. “If we don’t start production soon,” Ahearn said to the paper, “there’s a high probability of a toy shortage this holiday season.”
Even if the tariffs were lifted immediately, experts say it wouldn’t undo the disruption. “The supply damage has already been done,” according to James Zahn, editor-in-chief of trade publication The Toy Book. “You’re going to start seeing bizarre supply chain hiccups.”
Holiday orders aren’t happening as usual
The holiday planning calendar has been obliterated as retailers wait and see how the tariff situation plays out.
The effects on retail inventory will likely become evident in the next few months as shipments subject to the higher tariffs begin to arrive, National Retail Federation’s vp of supply chain and customs policy, Jonathan Gold, said in a statement. “The uncertainty around the tariffs is challenging for businesses, especially for small businesses that are currently preparing for critical winter holiday orders.”
For companies especially reliant on the holiday season, like toy makers, the tariffs could prove catastrophic for the rest of the year. For example, the holiday season usually accounts for 25-30% of Mattel’s and Hasbro’s annual sales, according to Bloomberg.
Typically, holiday toy shipments begin leaving China by June and arrive by August or early September for the critical fall reset at major retailers, according to Zahn. But he said production lines have been paused, orders have been placed on hold, and ripple effects are building.
“Every day that there is an interruption or a pause in production or shipping, that one day creates a multi-day ripple, and it’s just getting bigger and bigger until it’s going to come crashing down on everyone at the end of the year,” Zahn said. “What should be happening right now is that the holiday toys should be in production so they can start shipping by the beginning of June.”
Owen Carr, chief merchandising officer for e-commerce accelerator Spreetail, agreed that any ordering from China is pretty much on ice. “If you think the tariffs are going to go from 145% to 50%, you don’t want to be the idiot that imported at 145%, because you’ll never get that money back,” he said.
Chinese factories that normally would be producing products for the U.S. have turned to new markets since the 145% tariffs set in, CNBC reported. “I’ve heard it repeatedly; they already had stuff containerized, ready to go,” Carr said. “They’re now ripping up packaging, adjusting the parts, getting it ready for Europe, getting it ready for Canada.”
Sari Wiaz, owner of baby toy brand Baby Paper, placed a recent order that’s now subject to the 54% tariff Trump announced in early April — just before the rate jumped to 145%. That tariff alone is adding an extra $10,000 in shipping costs that she’s struggling to absorb. Now, she’s holding off on placing any new inventory orders to avoid the steeper 145% duty. “If we were to fully restock, the number would be completely out of reach for us,” she said.
Wiaz said she’s also delaying planned marketing investments and turning away new wholesale orders. “I’ve got a stack of orders that I have to tell people I can’t fill,” she said. “We’re rapidly running out of goods.”
Richard X. Zawitz, founder and CEO of fidget toy maker Tangle Creations, said he’s paused all orders of one of his major product lines. Even though the “Nightball” toy was selling well on e-commerce sites like Amazon, ballooning costs due to tariffs mean the product no longer makes financial sense.
While Tangle is large enough to absorb some of the costs, Zawitz warned that most smaller companies cannot. “This is very, very bad for our industry,” he said. “There will be no Christmas this year. The shelves are going to be relatively empty.”
Reconsidering promotions from Prime Day to Black Friday
Right now, brand executives see their inventory currently on hand as highly valuable, Spreetail’s Carr said. Therefore, he doesn’t expect many promotions in the coming months and potentially later in the year, depending on how things shake out.
Carr expects brands to begin raising prices on products that originate from China by 10-40% by around May 15 — that’s when he expects them to run out of their pre-tariff stock or be very lean in inventory.
“The biggest stress that everyone feels is everyone’s going to be raising prices dramatically here in May, and no one knows how the consumer is going to respond,” Carr said. “Will they buy nothing? Will they buy half of what they buy? That’s probably the biggest question mark at this point.”
Some brands have already pulled out of Prime Day, Reuters reported. “One of the most unique elements of this year of tariffs is [going to be] how brands rethink the use of promotions,” from Prime Day to Black Friday, said Brett Banner, svp of strategy for e-commerce analytics firm PriceSpider, which works on marketing strategies with more than 2,000 brands. “It’s unprecedented, as far as the different factors that they have to take in to make sure they have the right strategy this year.”
For the holidays, there’s still time, Carr believes — if there’s a tariff resolution down to 10-30% by mid-July, then “Christmas will be saved.” A resolution to 50% by that time would be tough, he said. If there’s no resolution at all, he agrees with Trump’s assessment: Kids may only get a few toys this year instead of, say, 20. “They will be expensive.”
There is also a counter fear: that brands may stockpile too much inventory now and be forced to lean heavily into promotions when the holidays come along, Banner said.
“There’s a lot more planning going on right now than we’ve seen in the past,” according to Banner. “Some of that readiness is SKU rationalization, it’s learning where they should have their own inventory on hand versus buy-online, pick-up in-store. But it’s also working more exclusively with the retailers that can help them weather the storm, as far as bundling and as far as exclusive packs, and just really being creative about how they’re going to be passing on different pricing increases versus commanding value at the same time.”