US Tariffs Disrupt Toy, Apparel Supply Chains; Eased Rules Help

Amid escalating trade tensions, US tariffs on Chinese imports have disrupted supply chains for toy and apparel manufacturers, leading to production cuts, layoffs, and a shift toward alternative sourcing hubs in Southeast Asia and India.

On Apr. 9, the United States imposed a 145% tariff on Chinese imports, severely impacting companies like Huntar Company, a US-based educational toy manufacturer operating in Shaoguan, China. CEO Jason Cheung responded by halting production at its 600,000-square-foot facility, reducing output by 60%-70%, and laying off a third of the factory's 400 workers.

“I needed to start saving money as soon as possible,” Cheung told Reuters. He is now seeking to relocate operations to Vietnam, estimating he has about a month of cash reserves remaining.

Huntar, which supplies major US retailers like Walmart and Target through partners such as Learning Resources Inc., is one of many American businesses caught in the trade war. According to The Toy Association, 80% of toys sold in the United States are made in China.

On May 12, the United States and China agreed to temporarily ease trade restrictions. The United States reduced tariffs on Chinese goods to 30% from 145%, while China lowered duties on US imports to 10% from 125%. However, Cheung says any rate above 50% is unsustainable. “Our manufacturing business essentially halted overnight,” he said.

Cheung’s case underscores the challenges of reshoring or relocating manufacturing. Toy production requires specialized labor, expensive, immovable equipment, and custom-built facilities. Replicating Huntar’s solar-powered plant—equipped with HVAC, wastewater systems, and 30 injection machines—would cost over US$1 million. Meanwhile, unsold shipments worth US$750,000 and potential shipping backlogs threaten to exacerbate financial pressures.

Clients like Learning Resources are also taking drastic measures. CEO Rick Woldenberg says tariffs would increase their annual costs from US$2 million to US$100 million. The company, which manufactures 60% of its products in China and employs 500 people in the United States, has canceled future orders from China and filed a lawsuit against the US government to block the tariffs. “If nothing changes, we will be crippled,” Woldenberg said.

An April survey by The Toy Association found that over 45% of small and mid-sized US toy companies believe tariffs could drive them out of business within months.

The global apparel sector is also feeling the impact. In Tiruppur, India—a city responsible for nearly one-third of the country’s US$16 billion apparel exports—factories are seeing renewed interest from US buyers avoiding tariffs on Chinese and Bangladeshi goods. However, labor shortages are hindering their ability to scale.

“Even if orders come, we need labour. We don't have sufficient labour,” said R.K. Sivasubramaniam, managing director, Raft Garments, which supplies low-cost underwear and t-shirts to US retailers like Walmart and Costco.

India, the world’s sixth-largest textile and apparel exporter, is also bracing for a proposed 26% US tariff starting in July. The largely SME-driven textile industry is seeking to capture a larger share of US demand while navigating operational challenges.