How Will Trump’s Tariffs Impact the Pet Toy Business in China?

The 10% increase in US tariffs on China is one of the hottest topics in the business sector right now. People left and right are trying to come up with a solution that will help their business's continued growth but also protect the customers. When a trade war happens, customers are often most impacted by it. Let’s talk about how the new 10% tariffs impact the pet toy industry in China.

The $800 Duty Free Remains, For Now

On February 1st, Trump signed an executive order imposing an additional 10% tariff on most goods from China. He also included a provision eliminating the “de minimis” exception for Chinese imports. The rule has been in the crosshairs of many people in Washington for a while. According to the rule, packages shipped directly to buyers in the US with a value below $800 are not subject to import taxes.

Right after Trump signed the order, the postal service temporarily stopped accepting packages from China as a result. A day later, Trump reversed course, and allowed packages below $800. His revision stated, “it will remain in place until adequate systems are in place to fully and expediently process and collect tariff revenue”.

For now, companies on both side are left in a limbo. The chaos has left many wondering about the fate of packages ordered from companies that are below the $800 threshold.

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Is Trump Targeting E-commerce Websites?

Companies like Shein and Temu have used the $800 exception for low-value packages to expand rapidly in the US. Chinese e-commerce websites have built their business model around the “de minimis” exception. While Trump wants to impose tariff system on these companies, the reality is that he cannot.

Trump’s policies have met reality once again. According to a report by CNN, more than 80% of total US e-commerce shipments in 2022 were de minimis imports.

Clark Packard, a researcher speaking to CNN, said,

“You would have to have a lot more people on the ground. The reality is that right now, Customs and Border Protection is just not qualified or capable of handling this because of the volume of packages.”

Trump has yet to say how long the delay would last. Logistically, it would take at least one year to set up a fully functional system. Others, however, believe that the delay is a trade negotiation tactic for Trump to get a better trade deal with China.

How Companies Can Get Around the Tariff?

In the same article by CNN, Christopher Tang, a professor of global supply chain management, said there is a way for companies to get around the exemption’s disappearance. To do that, companies can expand their warehouses in the United States and ship bulk amounts through customs and then reship products across the United States.

Of course, customers will still have to pay the import tax, but it gives companies a bit more options.

Can Chinese Companies Expand in Europe Rather Than the US?

While the European market has its perks, we cannot compare it to the US market for pet toys and accessories. The US’s pet toys market accounted for a revenue share of 31.86% of the global industry in 2023. The market for pet toys in the US is increasing due to high pet ownership rates and strong consumer spending. The culture has changed, with more owners viewing pets as family members.

Pet spending among Americans is on the rise, with the total expenditure reaching $102.71 billion in 2022. Of course, that is not all on pet toys. That is the total expenditure on pets.

The global pet toys number was $8.8 billion in 2023. Of that, the Europe pet toy market?generated a revenue of $3.18 billion in 2023. Europe is a huge market as well, but there is a huge difference between Europe and the US. According to the United Nations, there are 44 countries in Europe, and almost as many languages. In the US, people speak mainly the English language, with some Latinos in between.

We can also compare it to the United Kingdom, a popular pet country. Owners in the UK?spent only $556 million on toys in 2023. While that is a huge number, it doesn’t compare to the US market by any case. We also have to mention that while Britain is considered a popular pet country, Germany?led the way in the pet toys market in Europe in 2023.

The Chinese Market Is Growing, but the US Remains King

In China, the growing number of millennials opting to delay traditional life in favor of pet ownership?has resulted in a surge. Urban areas in China alone housed more than 100 million pet dogs and cats in 2020, a 10% increase compared to 2018.

China will grow as a pet market in the following years, but for global companies, the US market remains the top target.

Impact on Prices

If we look at some of the best-selling products by pet toy manufacturers, we can notice a clear difference in price between American companies and Chinese companies. For example, PetopiaToys’ signature pineapple dog chew toy?has a $15.19 price tag on Amazon. On the other hand, West Paw’s chew toy has a price tag of $19.95, while Kong’s toy for aggressive chewers has a price tag of $22.99.

The expected 10% tariff will raise PetopiaToys’ price of the chew toy up to $17.2. It will still be cheaper than the ones sold by Kong, West Paw, and similar American companies. But at that point, it cracks the threshold of $15.

All other toys sold on Amazon, Chewy, and similar websites by Chinese companies will take a hit. Companies will have to calculate the 10% tariff and include it in the price.

What is Next in the Trump-China Trade War?

According to a British group of business experts, Trump is not done with China. They assume that the tariffs will remain in place, and we can expect additional tariffs in the months ahead.

The new tariffs will probably focus on non-consumer products, since Trump doesn’t want to put more stress on the US households. For example, he can target products by strategic economic or security aims, including critical imports such as semiconductors, pharmaceuticals, industrial metals, and oil and gas.

The most extreme scenario?is a 60% tariff against China, but achieving that would take extending the measures to a wide range of consumer goods. That would put even more strain on the US economy and households.

Nobody Wants a Trade War

China has found a way to make Trump reconsider his tariff system. As a direct response, China imposed export controls on 25 rare metals. Some of them are key components for electrical products and military equipment.

China has mastered the ability to refine such metals and produces around 90% of global refined output. While pet companies do not directly benefit from the control on rare metals, they can hope that the trade war between China and the US will not escalate further.

History Repeats Itself

The last time Trump was president of the United States of America, he started the trade war with China. He also began his presidency with tariffs on China, but customers fell victim to it.

Back then, companies had to pass some of the new costs to customers. In an article published by the Washington Post?in 2019, owners of pet companies in the US talked about the issue. In the article, Pennye Jones-Napier, a co-owner of a pet store in Washington, said,

“We’re not happy about it, but we’re going to have to raise prices.”

Many products selling in the pet stores in the US have to be imports. Many items in the pet store require handmade components that make it almost impossible to find qualified US workers to do the same type of work at similar prices. Instead, companies rely on a network of factories in China to make pet clothing, accessories, and toys.

The saying goes, “those who do not study history, are bound to repeat it.” Will Trump come to his senses, or customers will feel the bulk of the new tariff system? Let’s wait and see.