US Imposes 50% Tariff, Major Toy Manufacturer in India Faces Crisis!

Toy exports plummet.

According to Bloomberg, three years ago, Vijendra Babu, Managing Director of Micro Plastics Pvt, invested $30 million to create India's largest toy factory and established a full industrial chain model of "design, molding, and production." In the past two years, Babu's business has nearly doubled, but now he is beginning to question whether his decision to invest heavily in expansion was wise.

The turning point came on August 6 this year, when the United States imposed a 50% tariff on India due to its continued purchasing of Russian oil. Prior to this, Babu's business was thriving, securing orders from global toy giants like Hasbro, Mattel, and Spin Master, with dozens of trucks loaded with Christmas toys being dispatched daily. Now, due to the tariff barriers, his warehouse is desolate, with towering shelves filled with unfinished products and piled-up goods that are packaged but cannot be shipped on time.

According to reports, after the tariff policy was introduced, many customers immediately suspended or directly canceled their orders. Babu told Bloomberg that the factory currently has $20 million worth of goods awaiting shipment, and about $15 million in new orders are on hold. Previously, he had optimistically expected business to grow by 40% this year, but now not only has that expectation fallen through, but sales are also facing a severe challenge of a 15% decline.

Possible causes for permanent supply chain shifts

Babu's predicament is not an isolated case, but a microcosm of the setbacks faced by the entire Indian toy industry in realizing its "national dream." In recent years, India has attempted to reshape the global toy supply chain with a series of domestic protection and support policies, and at one point achieved remarkable progress.

According to the report by India Brand Equity Foundation, the toy industry in India was long dominated by imports, with Chinese supplies accounting for approximately 70%. With the Indian government's "Make in India" initiative and the increase in toy import taxes, this market structure has been rapidly changed.

In 2020, the Modi government launched the "National Toy Action Plan" to support the domestic toy industry, increasing the import duty on toys from 20% to 70%, while also introducing safety certifications and quality standards to enhance export prospects.

Under the support of multiple government policies, India's toy import volume has sharply declined, and local manufacturers are filling the gap, leading to an increase in overseas sales. Data shows that since the announcement of the action plan, India's toy and sports goods exports have grown by 42%, reaching $570 million.

However, the sudden changes in the external macro environment have cast a shadow over the expansion of India's toy industry. According to the Economic Times of India, with the United States imposing a 50% tariff on Indian toys, buyers have turned to other markets, leading to a continued decline in orders for Indian toy exporters.

Amitabh Kabanda, a director of the Indian Toy Association, told the Economic Times: "The orders for toys for the U.S. holiday season usually received in October and November have decreased by 50% this year." As the U.S. is a core pillar market for Indian toy exports, this steep decline in demand is triggering a chain reaction. Industry analysts point out that Indian suppliers are not only facing a sharp drop in current performance, but a deeper risk lies in the potential breakdown of long-term business relationships and supply chain collaboration.

To remain competitive, exporters are adjusting by lowering prices and simplifying designs. Kabanda stated that toy manufacturers have started to shift towards streamlined packaging, functionality, and reducing product sizes to absorb the cost increases brought about by tariffs. A toy exporter in Delhi added, "Due to customer demands for additional discounts, we have had to make adjustments to product designs. If we cannot meet this demand, business will likely flow to countries like Vietnam."

The road to the rise of Indian toys is fraught with challenges.

However, Indian media analysis suggests that these temporary measures have limitations. The key to the Indian toy industry's recovery lies in whether it can successfully shift goods transportation to other markets and how it can adjust product design, cost structure, and supply chain to remain competitive under high tariffs.

According to Bloomberg, after several years of development, India has transformed from a toy importing country to a net exporting country. However, in the global core market—especially in the world's largest toy market, the United States—its market share still pales in comparison to China and Vietnam. Bloomberg cites relevant data showing that last year, India's toy exports to the U.S. were only $100 million, far lower than China's $11 billion and Vietnam's $3 billion.

Despite India's abundant and cheap labor resources, local industries still face constraints such as a lack of core technology and fragmented supply chains in the process of manufacturing transformation. A notable contradiction is that although the number of finished toys imported from China has decreased, key components needed for toy production, such as specialized synthetic plush fabrics, electronic components, and even the eyes of dolls and teddy bears, largely rely on imports, often from China.

According to an industry report cited by the Economic Times, the price of indigenous polymers (various plastic raw materials needed for toy production) in India is still about 10% higher than in China, which directly weakens the competitiveness of local manufacturing.

In addition, the Indian Brand Equity Foundation points out that despite the substantial growth potential of India's toy industry, it still faces significant underlying structural challenges. Firstly, the toy industry in India is highly fragmented, consisting mainly of small and medium-sized enterprises and workshop-based businesses, which affects standardization, quality control, and brand recognition. Furthermore, traditional manufacturers in India have limited infrastructure and technological capabilities. Most local toy manufacturers still rely on outdated production methods, which not only result in low production efficiency but also severely restrict the ability of businesses to achieve scalable expansion. Indian media analysis indicates that toy exports from countries like Bangladesh and Argentina are steadily expanding at double-digit annual growth rates. In the face of strong competitive pressure, India must accelerate the upgrading process of its manufacturing industry.