By Nicholas P. Brown
()- The flood of emails began on April 9th when President Donald Trump announced his 145% tariff increase on goods imported from China. Customers promptly canceled their toy orders placed with Huntar Company Inc.’s manufacturing facility located in Guangdong province, China.
However, Jason Cheung, the 45-year-old CEO of Huntar, had previously stopped production at their 600,000-square-foot plant in Shaoguan. To him, the tariff represented nothing less than an existential threat to his business, one that produces educational toys destined for retailers such as Walmart and Target, including brands similar to Learning Resources Inc’s Numberblocks—products designed to assist children with learning mathematics.
“I had to begin saving money right away,” Cheung stated. Over the past four weeks, he has decreased production by 60% to 70%, terminated one-third of the factory’s 400 Chinese employees, and slashed working hours and salaries for those who remain employed.
Currently, he’s urgently trying to relocate his business to Vietnam before the company started by his father 42 years ago exhausts its funds.
He estimates he has roughly four weeks left.
Hunter’s situation exemplifies a critical issue affecting numerous factories in China, which produces approximately 80% of the toys sold in the U.S., as reported by The Toy Association. Recently, new orders have plummeted due to an intense trade conflict between China and the United States, posing a significant threat to severely impact this industry across both nations.
Huntar stands out uniquely due to one significant aspect: operating from the U.S., it navigates both ends of the trade conflict.
In theory, Cheung appears as Trump’s nemesis: the Chinese entrepreneur seizing American employment opportunities. However, he’s simultaneously the kind of U.S. small-business proprietor that tariffs aimed to shield. As an American whose father emigrated from China, Cheung runs a company owned for two generations within his family, providing job opportunities to 15 individuals in the United States—individuals who could face unemployment should Huntar falter.
Trump has said tariffs will incentivize companies to reshore manufacturing, or, at least, drive it out of China.
Huntar explains why economists believe this scenario is improbable due to the scarcity of infrastructure and skilled labor for toy manufacturing abroad; complex machinery that is difficult to relocate and would require millions of dollars to replace; and, more critically, insufficient time to overcome these challenges before financial resources deplete.
It’s more probable that factories such as Cheung’s might just close down. This possibility pushed Beijing into negotiations at the weekend with US officials in Geneva, according to three insiders knowledgeable about China’s stance.
In reality, China can’t substitute the U.S. market demand for products such as toys, furniture, and textiles, areas that have already been affected by tariffs, according to an official. During the commencement of the trade discussions, President Trump indicated his willingness to reduce Chinese tariffs down to 20%.
Cheung points out that this won’t aid Huntar, as tariffs above roughly 50% could make sustaining operations challenging. In reality, there isn’t much of a distinction between the current 145% duty rates and an 80% tariff from a pragmatic standpoint.
Cheung mentions that crises have affected Huntar previously, though none were quite like this one. While the economic downturn in 2008 caused a gradual deceleration, which he managed to anticipate and adapt to, the impact of the COVID-19 pandemic was different—it certainly struck hard. However, despite the setback, his output levels stayed robust enough to sustain him during the short-term decline.
This time, he states, “Our manufacturing operations came to an abrupt stop.” Cheung is beginning to believe that his sole source of optimism lies in hoping for the best.
“I update my ‘rate’ Google search five or six times daily, hoping for some changes,” he mentions.
A HOPEFUL VISION AND A FORTUNATE WORKSTATION
Huntar produces toys for distributors in the United States, Canada, and Europe, such as Learning Resources Inc and Play-a-Maze, who then supply these items to retail stores or sell them directly to customers.
It also produces its own educational toys through its Popular Playthings line, but they have halted shipments to the U.S., resulting in losses for the firm amounting to hundreds of thousands of dollars, as per Cheung’s estimation.
Factories owned by Americans in China are rare due to local laws that make such ownership challenging and expensive, according to Dan Harris, a partner at Harris Sliwoski specializing in international manufacturing law.
However, Huntar traces back to a company established by Mr. Cheung’s father in 1983, several years following their escape from communist China and resettlement in the San Francisco Bay Area of California.
Cheung grew up in San Francisco’s Inner Richmond district, he says, in a small house whose broken door you could simply kick open. His father would sell clothes and furniture at a flea market to augment his janitor’s wages, with Cheung tagging along, bored to tears.
As operations progressed, Cheung’s father established a factory in China to maintain better quality control. Despite joining the firm in 2004, Cheung continues to use the same desk his father originally placed in their living room many years back.
“We believe it might be fortunate or something like that,” he states.
In recent weeks, things haven’t exactly gone well for them. There’s currently $750,000 worth of orders that were cancelled — an amount too large for Cheung to recoup entirely, even if the trade dispute came to a halt, since transportation expenses would likely soar once factories hurried to address their backlog issues. This was similar to what occurred post-COVID; at that time, transport fees skyrocketed from around $2,000 per container up to over $20,000.
“They do not merit such treatment,” stated Rick Woldenberg, CEO of the toy firm Learning Resources, who has been a customer of Cheung’s ever since his father was in charge over two decades ago.
Woldenberg has decided against further production in China, stating that their yearly tariffs would increase from $2 million to $100 million. “This isn’t what we aspire to,” Woldenberg explained, “yet they understand we have no alternative.”
Based on a survey conducted in April by the Toy Association, over 45% of small and medium-sized toy firms in the United States claim that the Chinese tariffs could force them out of business within just weeks or months.
Learning Resources, a company with 500 employees in the U.S. that produces 60% of its goods in China, has filed a lawsuit against the U.S. government, requesting a federal judge to prevent new tariffs from being implemented.
“If things stay the same, we’ll be paralyzed,” Woldenberg stated.
‘CANNIBALIZE MYSELF’
Cheung has been going through his contacts, reaching out to factories in Vietnam in an effort to find a new location for Huntar.
Emigrating to the U.S. isn’t an option. According to Cheung, wages there are extremely high, making domestic production more costly than continuing operations in China and bearing the tariffs.
Even in Vietnam, financial and logistical obstacles are turning out to be too significant.
Only a few factories provide sufficient space for this kind of operation, and many competitors are also seeking relocation spots. If Cheung managed to secure an appropriate location, he would still face the challenge of training new employees and conducting thorough safety and quality assurance tests, which might consume several months.
Additionally, there’s the issue of infrastructure. Cheung’s factory runs on solar power, aiding profitability in an industry with tight margins. The facility features specialized heating, ventilation, air conditioning (HVAC), and wastewater management systems tailored to mitigate the ecological hazards associated with using spray paints and chemicals for toy decoration. Moreover, it houses over 30 massive injection molding machines, each tipping the scales at multiple tons, responsible for shaping toys by injecting molten plastic into metal molds. Moving these machines seems improbable, and Cheung admits uncertainty about sourcing funds—well above $1 million—to acquire replacements.
It would make more sense to outsource specific processes and close down some operations. Cheung might reduce losses by having a Vietnamese factory handle Huntar’s Popular Playthings exclusive range, while discontinuing the production of toys for external clients.
Putting everything on the line – specifically, maintaining his factory as it is in China with the hope that the trade dispute will be settled soon – represents a strategy with both high risk and potential reward. Should the tariffs decrease rapidly, his business could endure; however, should this not happen, he stands to lose everything. According to him, sustaining a sizable facility’s operations along with compensating staff members when production levels plummet drastically would financially ruin him in mere weeks.
“I’m reaching a point where I essentially have to consume myself,” he explains.
It’s challenging to scale back a business that was once emblematic of the American Dream. Cheung’s father arrived in the United States in 1978, having fled China by crossing the Shenzhen River into Hong Kong — all for a chance at liberty. His wish was “to have this enterprise endure through me and possibly my grandchildren,” according to Cheung.
He mentions that his father is currently experiencing feelings of hopelessness lately. Despite being thankful for the life they’ve established in this country, the allure of America as a place with boundless opportunities has faded. “His perception of the United States has certainly shifted,” according to Cheung.
(Reported by Nicholas P. Brown. Edited by Vanessa O’Connell and Michael Learmonth)