Toys, Tariffs, and Tribulations: Why Christmas is on track to be more expensive this year

COLORADO SPRINGS, Colo. (KOAA) — Parents might want to consider Christmas shopping sooner rather than later this year due to tariffs possibly leading to emptier shelves and higher prices.

Little Richard’s Toy Store in downtown Colorado Springs said they purchased six to nine months worth of inventory in January so they could get ahead of President Trump’s tariffs on China.

“A lot of the toys were going up 30% and as far as retail goes, that's unsustainable. And that meant a product that typically cost five dollars was going to go up to about eight, nine, ten dollars for the customer,” said Jennifer Goodman, the toy buyer for Little Richard’s.

“That's not okay, at least not to me. I want people to be able to come into the toy store, find something they like, and leave happy with a toy in their hand,” she said.

Goodman said they were in a position where they could front the money for that amount of inventory, but finding the space to store it all was another challenge. The entire basement is now overflowing with toy merchandise.

She hoped the inventory could hold out through Christmas, but sales have remained competitive as they’ve been able to keep prices low with their pre-tariff goods. That means toy stores like Little Richard’s might have to place another large order before the end of the year.

Come the holiday season, Goodman said she’s worried tariffs on Chinese imports could remain elevated and they won’t be able to pay the higher costs.

According to the Toy Association, 77% of toys in the United States are imported from China.

Goodman described it as eight of every ten toys in her store simply disappearing off her shelves. She could raise prices on customers to cover the cost of the tariffs, but that’s not an option she wants to consider.

Until now, her supply chain vendors have been good about absorbing the cost of tariffs, but she said they’ve indicated they can’t do that much longer.

“It's been a little bit like the Hokey Pokey. You know, you put the tariffs in, you take the tariffs out, and it's just really stressful to not know exactly the right move to make,” said Goodman. “For example, do I make a $20,000 order that could be $40,000 in the next two months? Or they could take the tariffs away completely, and it could be cheaper.”

Tariffs on Chinese imports have been a roller coaster this year as a trade war briefly erupted between the US and China in April. Escalating retaliatory tariffs reached as high as 145% at one point.

“There was a decision to back down, to back off a little bit, to have a truce, to back down to more on the order of 30%,” said economist Bill Craighead, director of the UCCS Economic Forum. “There are some negotiations going on as we speak to try to possibly extend that truce.”

There’s a current Aug. 12 trade deadline with China, but as President Trump has done numerous times this year already, there could be an extension on that deadline.

Craighead said China has plenty of leverage in trade negotiations since so many U.S. businesses rely on the country’s exports, and China has rare earth minerals used in magnets and all manner of national security applications.

Meanwhile, the toy industry has been pushing for some type of carve-out or reprieve from Chinese tariffs, or at least through the end of the year, so that manufacturers and toy stores like Little Richard’s can make it through the holiday season. But Craighead doesn’t foresee that as a likely outcome.

“It's hard to say, but it doesn't seem likely that that's one that would get an exemption, and that's one that's probably hard to come up with a national security rationale,” he said.

Craighead said the latest Consumer Price Index data from April to June showed a 3 ½% inflationary rise. He noted that it doesn’t sound like much, but that could translate to an annual rate of 14%.

Vietnam, a distant second for toy imports to the U.S., did increase its exports so far this year while China’s have dropped, Craighead said, but Trump’s trade deal with Vietnam amounted to a 20% tariff. That would still mean higher prices on toys.

Greg Ahearn, president and CEO of the Toy Association, said manufacturing toys in the U.S. isn’t a simple, quick, or feasible solution.

He said that’s due to a number of factors, including the labor rate, the number of people required for handmade toys, and the manufacturing knowledge base that’s been built up over 40 years.

Ahearn said toys are a $42 billion industry, and he represents over 750 American manufacturers from a government policy perspective; 96% of the companies he works with are considered small or medium-sized businesses.

“We're a hyper seasonal, low price point, very low margin business that does a predominant amount of our imports from China,” Ahearn said. “Many are having pretty tough economic troubles, and some–almost 20%--have indicated they may be out of business by the end of the year.”

He said many toy stores are approaching the difficult year like Little Richard’s, purchasing as much inventory as they could, but those with children know that might be a fickle endeavor.

“The challenge is kids want what they want, and many of the hot toys, and for some of the hot movies that have come out or still will come out, as we head into the holiday season, those toys aren't even on the shelf yet,” Ahearn said.

He said parents, especially those with holiday budget concerns, should reach out to their representatives in Congress and urge them to find a solution.

As for what parents should consider or expect as the year progresses, Jennifer Goodman with Little Richard’s said it’s better to get ahead of the price increases.

“I'd say buy early. Buy now, if you can,” she said. “Just start slowly building up that Christmas stock.”

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