Retailers fear disruptions from tariffs may cause toy shortages

U.S. retailers and manufacturers are bracing for widespread product shortages and price increases this holiday season as President Donald Trump's 145% tariffs on Chinese imports disrupt supply chains. While toys are the most immediate concern, industry experts warn the impact will likely extend to beauty products, clothing, and other consumer goods.

China produces nearly 80% of all toys and 90% of Christmas goods sold in the U.S. The new tariffs have led to a significant slowdown in orders, with many companies freezing their holiday inventory plans. The Toy Association, representing 850 manufacturers, reports over 60% of its members have canceled orders, and around 50% have a fear of going out of business if the tariffs remain in place.

"We have a frozen supply chain that is putting Christmas at risk," Greg Ahearn, CEO of the Toy Association, said. "If we don't start production soon, there's a high probability of a toy shortage this holiday season."

Retailers, like West Side Kids in New York City, are already experiencing shortages. Owner Jennifer Bergman noted toy companies are marking up prices by 10% to 20%, and some shipments are being rerouted to avoid tariffs, leaving U.S. stores with limited stock. 

"I don't think I will be in business for Christmas," she said, adding she was consulting a bankruptcy lawyer.

Many beauty brands rely on imports from countries – like China, South Korea, and France – now subject to higher tariffs. The tariffs on imports from China affect beauty products and packaging materials, forcing brands to reconsider their sourcing strategies and pricing models. 

Estée Lauder has reported that tariffs negatively impact consumer confidence in China, contributing to softer sales. The company is taking measures to streamline operations and has established a task force to identify alternative supply chains in countries less burdened by tariffs. 

Additionally, the beauty industry faces challenges due to the closure of the "de minimis" loophole, which previously allowed duty-free imports of goods valued under $800. With this exemption gone, previously duty-free imports now face tariffs of up to 145%, leading to higher prices and potentially longer shipping times for consumers. 

Shein has increased the pricing of various items in anticipation of the new tariffs, including kitchenware and clothes. As of Friday, the average cost of the top 100 beauty and wellness goods rose by 51%, with some items seeing price increases of over double that amount. Temu also seems to be tripling the price of some products by passing all taxes on to customers.

The removal of the de minimis exemption under Trump's tariff strategy has forced these companies to either absorb higher costs or pass them on to consumers. "For companies like Temu and Shein, this is obviously a very big deal because de minimis was one of the levers they used to be able to offer these low prices as well as ensure speed of products entering the country once they were shipped," Juozas Kaziukenas, CEO of e-commerce data firm Marketplace Pulse, said.

Fast-fashion retailers – which sources 35% to 40% of their garments from China – are considering price hikes and supply chain adjustments to cope with the increased costs. The U.S. Commerce Department reported a 0.3% GDP decline in the year's first quarter, raising concerns about a potential recession.

Trump has acknowledged tariffs may lead to fewer toy options for children but has argued that higher-quality, American-made products are preferable. He has also emphasized tax cuts and reduced regulations to make domestic manufacturing more viable. 

"You know, somebody said, 'Oh, the shelves are going to be empty.' Well, maybe the children will have two dolls instead of 30, and maybe the two dolls will cost a couple of bucks more than they would normally," he said.

However, industry leaders express skepticism about the feasibility of shifting production domestically. Jay Foreman, CEO of toy company Basic Fun!, highlighted the challenges of moving manufacturing out of China, citing higher costs and potential quality issues.

"We've all worked for more than 20 years to get the manufacturing safety standards to the highest levels ever from vendors from China," he said. 

Cecile Shea of the Chicago Council on Global Affairs summarized the limited options facing businesses impacted by tariffs. 

"You have three choices," she said. "You can raise your prices by 25%, you can cut your expenses by 25%, or you can pay yourself less. The reality is a lot of merchants are going to do a combination of those."