Entertainment

How fear of Trump's China tariffs will cushion a toy company from coronavirus outbreak supply issues

Key Points
  • Many toy companies brought extra product to the U.S. at the end of 2019 in order to get "under the wire" of future tariffs.
  • Chinese factories typically close during the Lunar New Year and were not expected to be up and running until this week or next.
  • Some 90% of Basic Fun's production is in China.
Jay Foreman, president and CEO of Basic Fun, Florida-based toy business, speaks during an interview in Boca Raton, Florida, the United States, on Dec. 10, 2019.
Sun Ding | Xinhua | Getty Images

Fear of impending China tariffs may have actually given some toymakers a cushion against the early impacts from the recent coronavirus outbreak.

Jay Foreman, CEO of Basic Fun, which makes K'nex and Lincoln Logs, said his company as well as others in the toy industry brought extra product to the U.S. at the end of 2019 in order to get "under the wire" of future tariffs that were expected to be imposed by President Donald Trump.

"We're heavy on inventory right now, which is great," he said during CNBC's "Squawk on the Street." "If there's a delay of two, four, six weeks in getting the flow going again, we should be able to cover that. The real challenge is if this starts to creep into April, May and June. Then it's going to really be a disruption."

Chinese factories typically close during the Lunar New Year and were not expected to be up and running until this week or next, Foreman noted.

About 90% of Basic Fun's production is in China, but none of the factories are in or near Wuhan, the capital of China's Hubei province, the epicenter of the epidemic. Still, Foreman said workers at the company's factories live throughout China, so many need to travel from central and northern China to the southern provinces where the factories are located.

"Right now what we're doing, the biggest thing I'm doing everyday, is trying to chase down these things, trying to get masks," he said holding up a mask. "We're searching all over to get masks to send over to China because the people can't return to work and really can't even leave their homes without the masks."

Foreman said his company has been exporting masks made in the U.S. to China.

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A delay to Chinese factory openings could have a knock-on effect: Basic Fun CEO