According to Nicholas P. Brown of Reuters, the surge of emails began on April 9th when President Donald Trump’s 145% tariff on Chinese imports went into effect, causing clients to cancel orders for toys from Huntar Company Inc.’s factory in Guangdong Province, China. However, Huntar CEO Jason Cheung, aged 45, had already stopped production at the 600,000-square-foot facility in Shaoguan, recognizing the tariff as a serious threat to his company’s existence. The company produces educational toys for retail giants like Walmart and Target, including Learning Resources Inc’s Numberblocks used for teaching math.
Cheung stated, “I needed to start saving money as soon as possible,” and within four weeks, he had reduced production by 60-70%, laid off a third of the factory’s 400 Chinese employees, and cut hours and wages for those remaining. He is currently racing against time to relocate the operation to Vietnam before the company, founded by his father 42 years ago, goes bankrupt.
Huntar’s situation reflects the crisis many factories in China are facing due to the ongoing trade war with the United States, which is threatening the toy manufacturing sector in both countries. Despite being based in the U.S., Huntar finds itself caught in the crossfire of the trade war. While Cheung could be seen as the Chinese factory owner taking American jobs, he also represents the American small business owner that tariffs were designed to protect. As the son of a Chinese immigrant, he runs a second-generation family business that employs 15 people in the U.S., who would be at risk of losing their jobs if Huntar fails.
Although President Trump believes tariffs will encourage companies to bring manufacturing back to the U.S. or relocate it from China, Huntar’s predicament demonstrates the challenges of such a move. The lack of infrastructure and skilled workers in other countries, the high costs of moving heavy equipment, and the limited time to address these issues before running out of funds make reshoring unlikely for many companies like Cheung’s.
In the face of imminent closure, Cheung remains hopeful but realistic, acknowledging that the current tariff rates are already making survival difficult. While there are talks of reducing tariffs, it may not be enough to save Huntar from potential shutdown. Cheung admits to anxiously checking for any updates on tariff changes multiple times a day, clinging to the hope that relief may come.
Huntar, known for producing toys for various markets, including the U.S., Canada, and Europe, is now at a critical juncture as it navigates the challenges brought on by the trade war and the impact of tariffs on its operations.
The company distributes its products through sources Inc and Play-a-Maze, either to retailers or directly to consumers. It also produces educational toys under its Popular Playthings brand, but has had to halt shipments to the U.S., resulting in significant financial losses, according to Cheung. It is rare for American-owned factories to operate in China due to legal restrictions and associated costs, as noted by attorney Dan Harris of Harris Sliwoski. The business has its origins in a venture established by Cheung’s father in 1983 after fleeing communist China and settling in California. Growing up in San Francisco, Cheung assisted his father in selling clothes and furniture at flea markets. Over time, his father established a factory in China to enhance quality control. Cheung, who joined the company in 2004, still uses the same desk set up by his father at their home many years ago. Recent challenges have impacted the company financially, with canceled shipments amounting to $750,000. The uncertainty surrounding the trade war and escalating shipping costs have added to the company’s woes. The situation has also affected other businesses, such as Learning Resources, which has decided to halt production in China due to the increased tariffs. Many small and mid-sized toy companies in the U.S. are facing the risk of closure due to these tariffs. Learning Resources has taken legal action against the U.S. government to prevent the implementation of these tariffs. Cheung has been exploring options to relocate the company to Vietnam but has encountered obstacles such as limited factory space, high competition, and infrastructure challenges. The current factory in China is equipped with specialized systems and machinery that may not be easily transferable. Cheung is determined to find a solution to safeguard the future of the company.
The challenge for Cheung lies in finding the necessary funds – well exceeding $1 million – to purchase new inventory. A more practical approach would involve outsourcing certain operations and closing others. By seeking a Vietnamese factory to acquire Huntar’s Popular Playthings proprietary line and discontinuing toy manufacturing for third-party clients, Cheung could minimize losses.
Opting to maintain his current factory in China, hoping for a resolution to the trade war, presents a riskier but potentially more rewarding strategy. Should tariffs decrease swiftly, his company would persevere; however, failure to do so would result in significant losses. The financial burden of operating a sizable factory at reduced capacity, along with employee salaries, would lead to financial ruin in a matter of weeks, according to Cheung.
“I am reaching a critical juncture where I must decide to essentially dismantle my own business,” he reflects. It is a difficult process to downsize a venture that once symbolized the American dream. Cheung’s father arrived in the U.S. in 1978, having escaped China by swimming across the Shenzhen River into Hong Kong, all in pursuit of freedom. “He wanted to see this business thrive through me and hopefully his grandchildren,” Cheung shares.
These days, his father feels despondent, despite appreciating the life he has built in America. The idealized image of the U.S. as a land of opportunity has faded. “His perception of America has certainly evolved,” Cheung notes.
