A MARTÍNEZ, HOST:
President Trump has once again delayed implementing new tariffs on toy imports, pushing the date to August 1. Many in the industry, though, say the damage is already being done. The uncertainty alone makes it difficult to plan for the all-important holiday season. Now, Jay Foreman is the CEO of Basic Fun! That's the company behind Tonka, Lite Brite and the Care Bears. He joins us now to talk about what this tariff decision means for the toy business. So, Jay, I mean, President Trump was set to impose tariffs of, what, up to 30% or 40% on some toy imports this month. Now that's being delayed until August. Where's your head at? Is it a relief? Are - is your head spinning because of this roller coaster ride? What's going on with you?
JAY FOREMAN: Basically, across the board in most of the countries outside of the U.S. that are manufacturing toys, there's a tariff somewhere between 20% and 46% right now. What's been happening, though, is we've all been waiting to see what they are to decide whether it's still viable to stay in places like China or Vietnam, or we have to move our production out of those territories. And with the regiment of tariffs that have just been instituted, the playing field is sort of level at this point between all non-U.S. manufacturing points. So it seems to me that most people end up keeping their production where it is, and this will basically turn into, in a sense, a consumption tax and an import tax. And that's really what this is turning into across the board.
MARTÍNEZ: So a couple of months ago, Jay, when you spoke to my colleague Michel Martin on the show, she had a website in front of her where she was looking to see what the price was for a classic dump truck, the Tonka classic dump truck. And she said it was around $25. And I've also tried to look it up, and now I see that it's out of stock. From May until July, what has happened in between that has led that item to be out of stock? Did just people rush to buy it, or maybe you worried about maybe not ordering any trucks from overseas?
FOREMAN: So when the first tariffs were announced, it went up to 145% in early April. When it went up to 145%, in particular for China, which is where we manufacture the Tonka trucks and many of our other toys, including about 75% of the toys that are sold in America, that put a de facto embargo on the production and importation of toys because nobody could absorb that. So there was a period of about six to eight weeks where nothing was really shipping out of China, and that's why you're seeing sold-out Tonka trucks and many other toys. Those will start to come back in stock in the next month or two, but they'll likely - you'll see the price be $29.99, $34.99 and even $39.99 because those tariffs will start to affect the price of goods. Once you get above 10%, that's going to be a pass-along. There's nobody that has profit margins that could absorb 30% or 46% tariffs.
MARTÍNEZ: And, Jay, just explain this to us. What point exactly are the tariffs expected to be paid? So is it when you place the order or is it when the item shows up at a port? I mean, when exactly is the tariff due for payment?
FOREMAN: That tariff is collected when the goods arrive at the port in the U.S. The problem is you're expected to pay that tariff almost immediately. So if you're importing $1 million worth of goods, you have to be ready with an extra $300,000. And so on top of the cost to buy the goods from the subcontractor in the foreign country, to transport the goods, you have to have another 20% to 46% of cash on hand, ready to pay the tariff when those goods arrive. So I would suggest to consumers that for now, you're probably going to see the lowest prices you're going to experience for toys and things like back-to-school and Halloween. So if you've got the budget now and the time and want to save some money, now would be the time to buy these kind of holiday products. If you wait until September, October, November, the prices are definitely going to go up on anything that's imported, for sure.
MARTÍNEZ: So if this indeed is the new system that we're under, are you exploring any longer-term alternatives - like, say, maybe shifting your supply chain to other regions?
FOREMAN: Well, the way the tariffs are rolling out now, it doesn't seem like there's much of advantage to move from where you are. If you're in a place where you're comfortable with the manufacturing process and the cost of goods, you're probably going to stay there. And you're just going to have to figure out how to absorb a little bit of this and pass a certain amount of it along.
MARTÍNEZ: Can Santa just handle the tariffs on his own?
FOREMAN: Santa, unfortunately...
MARTÍNEZ: (Laughter).
FOREMAN: ...There's not a pile of gold up in the North Pole.
MARTÍNEZ: Oh, OK.
FOREMAN: It's still a lot of snowballs and ice cubes, so he's going to need a lot of help to handle the tariffs from everybody else.
MARTÍNEZ: Jay Foreman is the CEO of Basic Fun! - a toy company that makes Tonka trucks, Lite Brite and other popular toys. Jay, thanks.
FOREMAN: You're welcome. Transcript provided by NPR, Copyright NPR.
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