Nick Mowbray has criticised the US Administration for 'irrational' and inconsistent decision-making on tariffs. Photo: Supplied / Zuru
Zuru Toys co-founder Nick Mowbray describes the United States import taxes as '"irrational policy" and says President Donald Trump needs more adults in the decision-making room.
The US trade tariffs are costing the New Zealand toy company $3 billion a year.
Zuru Toys' main export market was the US, selling through retail giants like Walmart and Target.
However, products are mainly manufactured out of China, which means they are facing a 145 percent import tax.
President Trump is considering tariff exemptions for the auto industry. It follows a U-turn on import taxes on some electronic goods, including iPhones.
Mowbray told Checkpoint Zuru was working on a number of options to mitigate some of the costs.
"If we maintain current prices at retail and shipping as it is without going onto a first sale type agreement, it would cost us about $3 billion in tariffs as it stands, obviously that's unfeasible.
"We ship about two $200 billion worth of product to the US this year."
He said Zuru was in a more fortunate position compared to smaller manufacturers, suppliers and retailers in the US.
"We're working with EY with what's called a first sale process, which helps mitigate some of the tariff.
"We're lifting our retail prices, so we'll probably see a significant drop off in volume in the US as well."
Many of Zuru's retailers had pushed pause, he said.
"We're in this almost holding pattern if you will. We're trying to continue to trade through it, but obviously that's significantly difficult when everything changes every 24 hours as it seems.
"They paused tariffs on auto parts. Last week it was electronics and they're saying two days later the tariffs are going to be back on electronics in 30 days.
"It's a bit of a chaotic time, particularly with this administration and it's very hard to plan around it. "
Mowbray said it had been difficult to keep up with the daily changes, and he had been monitoring the president's social media for shifts in direction.
"As soon as I wake up, I am checking both Bloomberg. I'm checking X and I'm checking Truth Social and trying to get a sense of what's happened that day."
Projects the business had planned on doing had been put on hold, he said.
"Your business gets a little bit paralysed, to be honest. We're building a factory in Thailand and a tariff gets put on Thailand, which would have made our wet pet food business out of Thailand unfeasible, it wouldn't have worked.
"Then the tariff was removed, now they're renegotiating the tariffs. You go into this holding pattern and that's the same for our retail partners."
US President Donald Trump holding a signed executive order after delivering his announcement on reciprocal tariffs. Photo: SAUL LOEB / AFP
Mowbray said 80 percent of the company's toys were made in China.
"The ecosystem there is very deep and wide. The supply chain is all in very close proximity, whether it's packaging or tooling or electronics or injection molding.
"I think in Shenzhen alone, more manufacturing engineers graduate each year than the whole of America."
He said manufacturing of the same scale could not happen in America.
"America has record low unemployment of four percent. I think in China about 12 million people are employed in the manufacturing sector - in America it's about 11 million.
"The total workforce in America is 160 million people. So, there is no chance of the supply chain relocating to America."
The export number from the US was $3.5 trillion from China, he said.
"About 30 percent of that 3.5 trillion in China is actually American companies making products in China and shipping to the rest of world.
"America also makes about $6.3 trillion worth of goods outside of America. That's not counted in that export number."
Tariffs would not make America wealthy, significant inflation in the US would lead to stagflation (the combination of economic stagnation and inflation) and yields on Treasury bonds would increase, affecting the whole financial system, Mowbray said.
"They're going to cut rates, mortgages are going to go up, the cost of borrowing is going to go up. You're getting this environment that is definitely recessionary."
Politicians like Peter Navarro and Howard Lutnick were not rational with their decision making, he said.
"It's just shooting from the hip, I think it's completely irrational the way they're approaching things."
He said he understood reciprocal tariffs as a bargaining tool, but the US had looked at deficits with countries instead.
"People like Navarro are really amplifying Trump's deep held views as well. I think this is dangerous for the economy. You're seeing the financial system already come under strain.
"I think that's going to accelerate in the coming months. I guess we're just weathering the storm - we're fortunate to be in a position where we can do that, but the impacts are certainly significant."
The US tariffs would have long lasting and long reaching effects across the globe, he said.
"When people specialise in what they are best at, it drives costs down. It drives innovation up and global supply chains are deeply intertwined for a reason."
He said after World War II , globalisation brought many people out of poverty.
"Globalisation, free trade is a great thing and it's just unfortunate that America is going through this current thinking with a few people that in my view aren't very rational at all.
"If they had have looked at just reciprocal tariffs, so if someone put a tariff on them, 20 percent for cars, they would return for 20 percent and they would come to the negotiating table."
He said he supports some of Trump's policies but doesn't support people around him amplifying his views.
"I support things like cutting government waste, government inefficiency. I think those are good things and good resets to have.
"But people feel maybe you need a few more adults in the room. They're a little bit more rational. It's certainly worrying times for the economy with what he's doing at the moment."
The kids in the room were White House trade advisor Navarro and American billionaire businessman Lutnick, he said.
"Their rationale and understanding of economics and global supply chains and just Navarro talking about deficits with countries and trying to penalise them.
"I think that tells you everything you need to know about his understanding of these things."
"He's held these beliefs for a very long time and he's stubborn in them. That's just going to play havoc with global economies."
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