Yiwu businesses are turning to South American and Middle Eastern markets: The US-China trade war has severely damaged the US toy supply chain

Amid the US-China trade war and tariff pressures, exporters in Yiwu in Zhejiang, China, have shifted their focus away from the US towards South American and Middle Eastern markets, which has impacted the US toy supply chain. Exports from Yiwu to the US have significantly decreased, and merchants such as Hu Tianqiang and Lin Xiupeng have adjusted their strategies. The US toy industry faces supply disruptions and rising costs as companies like Hasbro and Spin Master seek to diversify their supply chains, though challenges persist.

Yiwu Merchants 'Unfazed by the US' Turn to Emerging Markets

Yiwu, known as the "world's supermarket," boasts over 75,000 shops and more than 30 ports, with exports to the US accounting for 17% of China's total exports in 2024. However, with the US imposing punitive tariffs of up to 245% on Chinese goods and removing tax exemptions for packages under $800, Yiwu's e-commerce exports to the US plummeted by 65% in the first quarter of 2024. Facing this "tariff tsunami," local merchants quickly adjusted their strategies.

Toy merchant Hu Tianqiang (phonetic) stated that 20% to 30% of his business used to come from American buyers, but he has now shifted his focus to South American and Middle Eastern markets. He candidly said, "We're not short on cash; we're quite wealthy." At his stall, buyers from Colombia, Dubai, Nigeria, and other places have become the new main clientele.

Another toy merchant, Lin Xiupeng (phonetic), noted that the proportion of American buyers has gradually decreased over the past decade. He mentioned that a neighboring store received a US order worth over a million yuan but chose to cancel due to high tariffs. He said, "They definitely need China; China supplies most of the toys to the US."

Yiwu Market Language Transformation Reflects Shift in Export Focus

Yiwu merchants are not only shifting in export markets but also adapting in language and culture. Many shops have started adding Spanish and Arabic phrases to their signs, reflecting their emphasis on South American and Middle Eastern buyers. These details show that Yiwu merchants are actively embracing diverse markets to reduce reliance on the US.

Oscar, a buyer from Colombia, stated that the US-China trade war has created more opportunities for non-US buyers like them to cooperate with China. He said, "Doing business with China is crucial; these days, dealing with the US isn't as vital."

US Toy Industry Faces Substantial Supply Chain Challenges

Yiwu's shift has directly impacted the US toy industry. According to a survey by the Toy Association of over 400 companies, nearly half of the respondents said they would face bankruptcy within months if tariffs continue. About 80% of toys in the US market come from China, with the supply chain heavily reliant on manufacturing and export capabilities in places like Yiwu.

Jonathan Cathey, who runs a toy company in Los Angeles, pointed out, "The whole toy industry might collapse. We're staring at a total supply chain meltdown." He emphasized that changing suppliers is a massive undertaking, "Making a toy requires a lot of local resources, and many Chinese companies have spent 40 years perfecting their techniques."

Large US retailers like Walmart and Target have also warned the government that if supply disruptions continue, consumers will face empty shelves and rising prices, with impacts potentially extending to Christmas.

US Companies Seek Supply Chain Diversification but Face Challenges

Facing tariff pressures, US toy companies are attempting to diversify their supply chains. Hasbro announced plans to shift some production for the US market from China to India and Vietnam, aiming to reduce China's supply share to below 40% by 2026. Canadian toy company Spin Master also plans to move 70% of its US market production outside of China within two years.

However, these shifts are not immediate. Hasbro's COO Gina Goetter admitted that China will remain a key manufacturing hub because of its specialized production skills that are tough to replicate elsewhere. Spin Master noted that despite actively adjusting its supply chain, 27.5% of production costs are still subject to Chinese tariffs.

Yiwu Logistics and E-commerce Operators Hit, but Some Show Resilience

While some Yiwu merchants have successfully shifted to new markets, the overall logistics and e-commerce operators still face pressure. A logistics company reported a 70% drop in shipments to the US, with weekly container shipments dropping from 80 to under 40. Some small and medium-sized freight forwarding companies have closed due to cost pressures.

However, for businesses that have long diversified their markets, this trade war has become an opportunity for transformation. A sock merchant noted that the US market only accounts for 10% of their business, and losses can be offset by other markets. The experience of such companies shows that market diversification and flexible operations are key to coping with global trade uncertainties.

Yiwu businesses are turning to South American and Middle Eastern markets: The US-China trade war has severely damaged the US toy supply chain

Key Updates

The American Footwear Association warns Trump about the threat of tariffs, as 76 brands, including Nike, request exemptions to avoid inventory shortages and price increases.

Apple, Samsung, and Microsoft adjust supply chain and pricing strategies in response to U.S. tariffs and global inflation pressures.

The White House says tariffs will not increase car prices, while automakers such as GM and Ford have expressed concerns.

American Companies Face Tariff Strain: Apple's Costs Skyrocket, McDonald's Sales Decline, The Business Community Urges Policy Changes

U.S. Tariff Policies Impact SHEIN and Temu Severely: Rising Prices, Supply Chain Restructuring, and Drop in App Rankings