The 145% tariff on Chinese imports, previously imposed by President Donald Trump, has reportedly put Walmart and Target supplier’s Huntar Company Inc.’s factory in China at risk of shutting down.
What Happened: The tariff, which was effective from April 9, has caused a significant decline in orders for toys from the Huntar factory in Guangdong Province, China. The factory, a supplier of educational toys for Walmart Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT), has already reduced production by 60% to 70% and downsized a third of its 400 Chinese workers, reported Reuters.
Huntar CEO Jason Cheung is now attempting to move his operations to Vietnam before the company’s funds are exhausted. The factory’s situation reflects the crisis faced by many factories in China, where approximately 80% of toys sold in the U.S. are manufactured.
The U.S.-China trade war poses risks to the sector in both countries, and Huntar, though based in the U.S., is uniquely impacted due to its operations in both markets.
Fearing factory shutdowns and unable to replace U.S. demand for key exports like toys and textiles, China returned to trade talks in Geneva, sources told Reuters.
Rick Woldenberg, CEO of toy company Learning Resources, stated “If nothing changes, we’ll be crippled.”
Why It Matters: Trump’s tariffs were designed to encourage companies to move manufacturing back to the U.S. However, Huntar’s situation illustrates why this is unlikely. Key obstacles include the shortage of facilities and skilled toy-making workers in other countries, the high cost and complexity of relocating heavy equipment, and limited time to address these challenges before funding runs out.
An April survey by the Toy Association found that over 45% of small and mid-sized U.S. toy companies believe China tariffs could force them out of business within weeks or months.
Major U.S. retailers, including Walmart and Target, have reportedly asked Chinese suppliers to resume shipments, with tariffs to be absorbed by the American retailers. However, the impact of the tariffs is already being felt by toy companies. Mattel Inc (NASDAQ:MAT) announced plans to raise prices ahead of Christmas due to the tariffs.
On May 12, the U.S. and China agreed to a temporary reduction in most tariffs, marking a significant easing of trade tensions. However, the overall tariff level on China remains at 30%.
Over the past month, Walmart stock gained 2.10%, while Target Corporations rose 1.85%.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.