How Tariff Tensions Transformed China’s Toy Factories | WSJ

How Tariff Tensions Transformed China’s Toy Factories | WSJ

– [Narrator] There are
millions of toy microscopes like this one in the US. They’re made in this factory in China. – Here’s our flagship
product’s assembly line. We produce more than 30 million pieces. – [Narrator] This microscope
is part of a list of goods that were spared from new
tariffs this Christmas as China and the US have
agreed to a limited trade deal. But months of trade war
have already transformed the way Johnny Sze’s company operates. – When the tariff kicks in, the whole cost of the product will be much higher than before. – [Narrator] For months, Johnny worried that the retail price for one
of the higher-end microscopes could go up from 70 to $90. So to keep the price down, he took action to cut production costs. The microscope lens is
now made with plastic instead of glass. what used to be a painted metal
base is now white plastic, and the toy has fewer screws. In other words, American
consumers may now buy a lower-quality product
for the same price. – The trade war push us
to be more efficient. If the tariff kicks in, we can still maintain a certain profit. And if the tariff doesn’t kick in, we will have more margins. – [Narrator] Johnny’s
company is one of thousands of factories in Southern China manufacturing toys that
are exported to the US. We traveled to China’s toy capital just days before the
US and China announced a limited trade deal to understand the impact of a trade war on local manufacturers. American toy makers
and retailers come here to either buy ready-made toys in bulk or get custom-design toys
produced then shipped to the US. – This is baby toys. It’s animal toys. Truck toys. Barbie toys. This is bubble soap. We have many, many kind of toys. – [Narrator] Tony Chen
connects American toy companies to Chinese manufacturers. – My favorite toys is the electronic toys like drones with camera. Anything has more electronics,
make it cool, I like it. (Tony laughs) – [Narrator] He says some
of his biggest customers are US-based Amazon toy sellers. He says business has been
strong in the past few years. – I get my money from everything. – [Narrator] But when trade tensions rose, the mood amongst Chinese
manufacturers shifted. – When the news come, they’re not sure what would come to us. So most of them is watching,
is waiting and waiting to see their customer reaction. – [Narrator] Hasbro
said retailers canceled direct orders of toys from China, so the company had to import and pay for shipping and
warehousing the toys, while Mattel’s CEO said
during an earnings call that the company could raise prices to minimize the impact of tariffs. (Tony speaking in foreign language) – [Narrator] Tony said some of his clients increased their orders and
have been stockpiling toys in advance of any tariff increases. This particular strategy
kept manufactures in toy city very busy ahead of the Christmas season. – October is pretty busy. One people need to do three people’s work. – [Narrator] These
strategies aren’t fool-proof. For instance, Hasbro pointed
to trade tensions with China for its tumbling share price. We reached out to Hasbro and Mattel but they didn’t respond to
our questions for this story. – The US final consumer, they hope to get a good
quality and a good price. The trade war will stop them to get that. – [Narrator] With Chinese manufacturers supplying about 85% of
all toys sold in the US, some US retailers say they
expect their suppliers to find ways to keep
prices as low as possible, so pressure’s on
manufacturers like Johnny. – We definitely do not
want to raise the prices. We design and produce the
whole microscope ourselves. We can make some minor adjustment and make it more efficient. – [Narrator] Besides
using cheaper components to build each microscope. – In case a tariff kicks in. – [Narrator] The company reduced
the number of accessories and the size of the packaging. The result: Eastcolight now has a wider range of microscopes than before. Small and big, orange and blue, ones that look very futuristic, some with a lot of functions and others with just the bare minimum. The idea is that in the
event of future tariff hikes, Johnny can now sell different models depending on the amount of any new tax so that the price would
always stay the same. – If the tariff kicks in,
we’re ready for the changes. We can reduce the price
around five to 10%. – [Narrator] As trade
tensions are running high, Johnny also took another extreme measure. He invested hundreds
of thousands of dollars to install 90 robots and
automate the factory. – We used to have 1,000 employees, and right now we only need 300 because we use robotic arms to replace more than
half of the employees. – [Narrator] Johnny’s strategy is also to seek new customers. His company is now planning to sell toys once created for American
kids to Chinese children, a brand new market for his company with potentially millions of customers. – They used to have a one-child policy and now they can have two kids, so we’re expecting the market will be a lot greater than before. – [Narrator] It’s still early to know if the US and China will
reach a comprehensive deal that will put an end
to their trade dispute. For now, their limited trade deal rolls back existing tariffs
and cancels new ones that would have directly
hit China’s toy-making hub. It’s good news for Chinese manufacturers who say their exports to
the US had taken a hit, all while the economy at home cools. For some, the trade war
has turned out to be a motivation to innovate. In the US, the price of these toys likely won’t change too much, but the way they look and feel when kids take them out of the box just won’t be the same. – I believe the tariff is an opportunity. There are always improvement we can make. (gentle music)

100 Replies to “How Tariff Tensions Transformed China’s Toy Factories | WSJ”

  1. Can’t wait to see tariffs going higher after this stupid season of consumerism. They don’t know they r able to stay in for now only because US is letting them.

  2. actually the truth is if the US government <white house> want to kill us importers and chinese factories they can hike the tariffs to whatever percentage they want. 50%, 100%, you name it. will it kill whole industries yes. 25% is rather lenient for tariffs for a trade war.

  3. China can make anything to spec. If you order low quality you get low quality.
    If you order high quality, you can get that too.

  4. This is a cherrypicked case and the same thing would apply in regulating the us economy and raising taxes.
    America can do better if they abolish the income tax, corporate tax, the minimum wage, deregulate the economy and exchange taxes with a GST.

  5. Love the support for the Chinese regime, WSJ! Good thing those silly Uighurs can enjoy all these profit margins from the trade deal! Lol!

  6. So in other words when American companies reduce quality or cut corners to keep costs low but stock holders, board members and executives don't take pay cuts liberals call it corporate greed BUT when the same thing happens in a foreign country, that's Trump's fault.

    FYI, that "business owner" doesn't OWN that business – the communist Chinese government does. He's owns a small percentage and runs the day to day operations. If WSJ didn't hate American economic strength so much, they might be able to produce an impartial and informative story ….

  7. The automation of production started off years before the war on China's unfair trade practices. Robots are more efficient than poorly paid workers, they work 24/7, don't fall sick and deliver higher and constant productivity. Labour intensive production (clothing, footwear) were relocated a decade ago to Chinese-funded FTZ in Africa, Cambodia, Viet Nam, Bangladesh & India.

  8. The Chinese (and the media) still don't get it. China sells more products to the US than the other way around. The IMPORTING NATION always wins the tariff war. It's really that simple. Because either Chinese manufaturers will retreat from American markets so that American production increases or they will stay but the US cashes in hundreds of billions of dollars in tariffs. Either way America wins. At the same time Hong Kong protesters are trying to trigger China into a behaviour that for the first time in history may cause them to be sanctioned. We'll see what happens. It will be exciting to watch.

  9. Why doesn't China get sued for producing fake brands like Nike, Apple, Kenwood, Braun, Oral b, Bosch, etc &all sorts ordered by Iranian merchants in China?! He admitted it himself in a clip to Iranian people that why don't Iranian merchants follow the law & order faking brands to Chinese factories? What about u? Why do u let them, knowing it happening?!

  10. big deal it is time to put americans to work. china products never last. your grandma's blender lasted a lifetime. why do we have to trade with a communist tyrant country. they steal secrets from companies.

  11. New bicycles when I was a child in the 1970's were $60 -$80… A drill bought by my grandfather in the early 1950's cost 59.99… it still run and is used multiple times a week… what has actually been gained through the systemic destruction of AMERICAN MANUFACTURING? Nothing more than a rise in the transportation (millions of tons of CO2) of these items from one place to another.

  12. Smart Chinese will find way to adapt the new changes. They are flexible and hard working, its their big advantage. Should be "Win-Win". But on end, seems like it will be only one "Win".

  13. In other news American based toy companies are ending strong this year with low cost to operate, automation, and plenty of people to work. Let’s go back to the way it used to be. Built to last.

  14. Hey Johnny, why don't you tell the American people how much you pay your employee's per hour pal? Yea that's what I thought. Kick rocks.

  15. Do you really wanna know what will fix this kind of a problem make the toys in their perspective countries for their perspective countries that means China should make toys in China for China United States should make toys in the US for the US then you don’t have to worry about tariffs problem solved

  16. Hey anybody wondering where are all of the AMERICAN jobs went?
    look at all of those jobs and that's just for a toy company .Our Gov't sold out AMERICAN jobs.

  17. Many people don't realize that trade deficit is a good thing, it means you take in more than what you have to give out. The biggest issue is who is footing the payment? If the deficit comes from foreign investment then it should be welcomed, but if it comes from the importer going to debt to get it then it's bad. The US's budget deficit is the issue, not the trade imbalance.

  18. ⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻⸻ says:

    Quasi-Communists selling toys to Quasi-Capitalists!! What a time to be alive!!!

  19. The issue of tariffs placed on china by america is huge and to look at two toy manufacturers and how they are bring affected by them without mentioning how americans are affected by chinese archaic trade policies is shortsighted.

  20. Pay peanuts, get monkey. If you want a $300 LED TV, you get a $300 LED TV. If you pay for a $2,000 TV, you get a $2000 TV. It's not whether it's Made in China or not. You decide. Don't expect to get a Rolex for $100. $100 get you a good Casio. That's all.

  21. The tariffs is expediting the Chinese economy evolution, and once the US realizes that it can't really have a "fair" deal and subsequently yield, the hidden profit margin increased on the Chinese front would soon to draw in more western money, and build China into what most western countries fear…way to go #dotard #smh

  22. When you export the work the wages goes with it. Child labor and Cheep price worth Jobs? China pollutes the world but, at least we didn't have a hand in it. Wink wink

  23. Johnny, if your product sucks, then I will stop buying it. You cut corners, I cut you. I want cheap and good quality, and your neighbour will do it eating into their profits to take business from you.

  24. I like the fact that in face of American economic aggression, China just becomes more China. Americans will always keep buying lol.

  25. We need a separate product line called "China Premier." We give people the false sense they have a choice. Later we can switch back to a single platform to be more efficient. We need to not only market this new product line globally, but also internally to attract the best talent.

  26. This man was given a factory that was stolen from American interests by illegal trade activity before most of the consumers were even born.

  27. Think about this. The microscope being produced is now at a reduced production costs and selling at or near the same price. Thus, the tariff helped him (and many other Chinese businessmen) increase profits while providing an inferior product to the United States.

    Moreover, even if one would point to the reduction in staff (because of automation), China has plenty of other factory type jobs that require actual people.

    In short, the tariff threat (in my view) only helped China continue to excel in its GDP and although American production may have ramped up, it certainly is not on the scale of the Chinese by any stretch of the imagination….

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