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New Trump Tariffs will Sound Death Knell for Battered U.S. Toy Industry

The survivors of the crippled U.S. toy industry are bracing for a New Year’s worth of pain once Trump pushes through with another tariff hike on Chinese imports on Jan. 1, 2019.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – The survivors of the crippled U.S. toy industry are bracing for a New Year’s worth of pain once Trump pushes through with another tariff hike on Chinese imports on Jan. 1, 2019.

This latest round of tariffs to the tune of 25% will hit practically all toys that are made in China and sold in the U.S. by a dwindling number of firms such as Hasbro and Mattel. The shocking bankruptcy of Toys R’ Us, the largest U.S. toy retailer, last March underscores the precarious state of the once mighty toy industry.

The American toy industry is still trying to recover from the Toys “R” Us bankruptcy that closed all 900 of its stores and led to the firing of more than 33,000 employees. This recovery process won’t be helped if the industry is slammed by Trump’s tariffs that will drive up the prices on almost all their products.

More than 85% of the toys sold in the United States are made in China, said the Toy Association, the industry’s trade group. Most toy products have escaped being hit by new Trump tariffs but the next round of tariffs on Jan. 1, 2019 is widely expected to include all imports from China not currently taxed.

Analysts concur there’s no way toys will escape the new taxes this time around. Neither will the Apple iPhone.

“This could not come at a less opportune time for our industry,” said Rebecca Mond, vice president of governmental affairs for the Toy Association. “We’re still reeling from that bankruptcy (of Toys R’ Us0.”

Mond argues that the solution to tariffs — bringing toy manufacturing back to the United States — wouldn’t make sense. She pointed out the toy industry is a labor-intensive industry that can’t be easily automated.

It’s also a seasonal industry that has to to ramp -production closer to the holiday season. She said this fact makes building new American factories impractical.

Hasbro CEO Brian Goldner has made it clear that abandoning China will mean shifting to other low-wage countries and not returning to the United States. He said that it will take years to shift even a fraction of Hasbro’s Chinese production elsewhere.

“There is absolutely no way that Hasbro and Mattel can shift from China to another low cost country overnight,” said Lutz Mueller, CEO of Klosters Trading and an expert on the industry. “They don’t have the infrastructure or supply chain in place.”

Mueller said a number of smaller toy companies will go out of business if tariffs are imposed. Many are still struggling to recover from the Toys “R” bankruptcy.

“Mattel is already teetering on the edge,” said Mueller. “Hasbro has been trying to buy it for a while. Whether it can survive as an independent company with tariffs is a question mark.”

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Politics

US Budget Deficit Hits Record $204.9B for November

The federal budget deficit surged to a record for the month of November of $204.9 billion, but a big part of the increase reflected a calendar quirk.

In its monthly budget report, the Treasury Department said Thursday that the deficit for November was $66.4 billion higher than the imbalance in November 2017.

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Washington, DC, United States (VOA) – The federal budget deficit surged to a record for the month of November of $204.9 billion, but a big part of the increase reflected a calendar quirk.

In its monthly budget report, the Treasury Department said Thursday that the deficit for November was $66.4 billion higher than the imbalance in November 2017.

But $44 billion of that figure reflected the fact that December benefits in many government entitlement programs were paid in November this year because Dec. 1 fell on a Saturday.

For the first two months of this budget year, the deficit totals $305.4 billion, up 51.4 percent from the same period last year. The Trump administration is projecting that this year’s deficit will top $1 trillion, reflecting increased government spending and the loss of revenue from a big tax cut.

The new report showed that the higher tariffs from President Donald Trump’s get-tough trade policies are showing up in the budget totals. Customs duties totaled $6 billion in November, up 99 percent from November 2017.

Trump has imposed penalty tariffs on steel and aluminum imports froma number ofcountries and on $250billionof Chinese imports as the administration seeks to apply pressure to other countries to reduce their barriers to American exports. However, China and other nations have retaliated by imposing penalty tariffs on U.S. exports, sparking a tit-for-tat trade war.

The administration still believes it will prevail and is currently in talks with China over trade practices the administration feels are unfair to American companies and workers.

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Criminal Probe Launched into Trump’s Inaugural Spending

Federal prosecutors based in Manhattan have launched a criminal probe to determine if $107 million in donations to then President-elect Donald Trump’s inaugural committee were illegally spent.

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Arthur J. Villasanta – Fourth Estate Contributor

Manhattan, NY, United States (4E) – Federal prosecutors based in Manhattan have launched a criminal probe to determine if $107 million in donations to then President-elect Donald Trump’s inaugural committee were illegally spent.

Investigators are also looking into whether some of the committee’s top spenders traded money for access to the incoming Trump administration. They also want to know if Trump’s people sought money in exchange for “policy concessions or to influence official administration positions.”

Giving money in exchange for political favors can run afoul of federal corruption laws. Diverting funds from Trump’s inaugural committee, which is a registered nonprofit, also violates federal law.

More specifically, Trump’s inaugural committee is being probed for accepting cash-for-access from Middle Eastern nations like Qatar, Saudi Arabia and the UAE. Secret recordings made by Trump’s personal lawyer Michael Cohen revealed these cash-for-access transactions.

Investigators are focusing on Middle Eastern donors like Qatar, Saudi Arabia and the United Arab Emirates. They’re trying to determine if these nations used straw donors to disguise their donations to Trump’s inaugural committee and the pro-Trump super PAC, Rebuilding America Now, in hopes of buying influence.

Foreign nations are banned from contributing to federal campaigns, PACs and inaugural funds by law.

Federal prosecutors have questioned Richard Gates, ex-partner of former Trump campaign chairman Paul Manafort. In February, Manafort pleaded guilty to conspiracy and lying charges lodged by special counsel Robert Mueller.

Gates served as deputy chairman of Trump’s inaugural committee. He’s cooperated with investigators in Mueller’s probe of Russian interference during the 2016 U.S. presidential election.

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China Beginning to Feel the Pain from Trump’s Trade War

China said its retail sales and industrial output growth for November badly missed their targets, confirming that China’s economy continues to slow down amid Trump’s trade war.

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Arthur J. Villasanta – Fourth Estate Contributor

Beijing, China (4E) – China said its retail sales and industrial output growth for November badly missed their targets, confirming that China’s economy continues to slow down amid Trump’s trade war.

China’s National Bureau of Statistics (NBS) reported that industrial output grew 5.4 percent year-on-year, the slowest pace in almost three years. This growth was also lower than the 5.9 percent analysts had predicted.

On the other hand, retail sales rose 8.1 percent, which is the weakest pace since 2003. This pace is also lower than the 8.8 percent analysts expected. November retail sales growth was down from 8.6 percent in October.

Fixed asset investment rose 5.9 percent from January to November, marginally higher than the 5.8 percent forecast by economists. FAI rose 5.7 percent from January to October.

Despite Trump’s trade war, data from China unexpectedly shows its economy on the upside for much of 2018. Manufacturing benefited from front-loading, or rushing to ship as much goods as possible, before tariff deadlines hit on Jan. 1, 2019.

The weaker Chinese data in November shows the positive impact of front-loading is beginning to vanish and that downward pressure on the Chinese economy is increasing, said RBC Capital Markets in Hong Kong. Industrial output and retail sales data released on Friday were ugly, said the firm.

NBS said after the release of the data that the impact from bilateral trade tensions with the U.S. was not yet obvious. So, the worst is yet to come and policymakers will be very worried, particularly with consumption growth falling off a cliff.

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