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One of the world’s biggest toymakers, which supplies retailers including Walmart and Target, plans to move all US-bound production away from China and warned that tariffs meant American consumers would “inevitably” end up paying more for toys.
Allan Wong, chair and chief executive of Hong Kong-based VTech, said on Wednesday that the toy maker was “aiming to complete the transfer of its production of US-bound products away from China” before the end of next year.
VTech, which specialises in educational toys, plans to shift production to its factories in Malaysia, Mexico and Germany, Wong said at a press conference.
The toy maker is pressing ahead with plans to re-engineer its supply chain despite a truce between Washington and Beijing, which has resulted in the US cutting tariffs on Chinese goods from 145 per cent down to 30 per cent for 90 days.
US President Donald Trump said this month that 80 per cent tariffs on Chinese goods “seems right”. Trade talks are continuing between the two countries.
VTech, which also makes baby monitors, smartphones and headsets, said prices of imported goods for American consumers will rise.
“Unfortunately [the] tariffs [translate] to higher prices for some of the products going to the US,” Wong said. “[That] will inevitably affect some of the purchasing power of the consumer.”
The warnings echo those made this month by Mattel, the toy maker behind Barbie dolls. The US-based company warned prices would rise and said it was accelerating efforts to shift production out of China.
By 2027, China will account for less than 10 per cent of Mattel’s US imports, chief executive Ynon Kreiz said last week. This year the company will move 500 product lines out of China, up from 280 last year as it diversifies its supply chain.
VTech has been negotiating with US retailers on price increases but decisions have not been made yet. “It [the price increase] will be lower than 30 per cent . . . [But by] how much, we don’t know, it depends on ultimately what the tariffs look like,” Wong added.
VTech’s chief executive said that selling into the US was not possible at a 145 per cent tariff, but 30 per cent tariffs meant the situation was “manageable”.
Some Chinese exporters are considering leaving the US market if tariffs remain at high levels. Wong said, however, that VTech has no plans to exit the US market.
“The US currently is still a major market for us . . . we will not give up the US market,” he said.
VTech reported annual revenues of $2.2bn, a 1.5 per cent increase on last year. Profits attributable to shareholders fell 5.9 per cent to $156.8mn due to a rise in operating expenses. The company forecast a decline in revenue for the coming year, as US consumers rein in spending.
Additional reporting by Gregory Meyer in New York and Gloria Li in Hong Kong
