You’re a Mean One, Mr. Tariff

What Toys Tell Us About Affordability Politics

My late father’s favorite store was Wal-Mart. He loved it because even though he didn’t make much money, the prices were low enough that his kids could get toys there. Sometimes you’ll hear people deride “cheap plastic” as frivolous and in some sense decadent. Just the other day, President Trump, once again, told American families that they should make do with fewer dolls to support his tariffs. As my colleague Tahra Hoops has pointed out, the Trump administration’s focusing on dolls is an attempt to portray consumers’ interest as somehow unmanly and distract from how much their trade policies are raising prices.

But whether Trump understands it or not, being able to provide, including being able to put presents under the Christmas tree, means a lot to people. It certainly meant a lot to my dad. Providing for my own daughter means a great deal to me, and in this day and age that means fun stuff too, not just the barebones necessities of the past. So earlier this year, I was walking through Costco and I saw this enormous (17 feet across) water slide/splash pad and at $349 I thought it was a great deal! I thought “she’s 6 for only so long.” So I bought it. My kid and her friends had a blast on it all summer! It was pretty great to watch.

A lot of things are way too expensive and there are many policies we need to reform in order to bring costs down (this is in fact a newsletter entirely about that). But sometimes it also makes sense to look at successes, celebrate them, and see what lessons can be learned from them that can be applied elsewhere. Toys are an important long-term success story. Today, even with this year’s price increases driven by Trump’s tariffs, they cost less than a quarter of what they did 30 years ago.

Even compared to other goods, to say nothing of services, the price trend for toys is remarkable.

There are three big takeaways from this success story. First, standardization and modularization, however boring and corporate they may sound, are incredibly helpful for bringing production costs down. Second, large-scale retailers save Americans’ money. Big can be beautiful. Third, globalization and automation benefits consumers and should be leaned into, not thwarted; we shouldn’t fear the future, we should be excited about it.

Standardization and Modularization are Boring But Helpful

The clearest example of the power of standardization in toys is LEGO. The basic system has remained essentially unchanged since 1958, and that’s the whole point. Every LEGO brick made today clicks perfectly with every brick made decades ago. This standardization is what allows LEGO to produce thousands of different sets, while only manufacturing a relatively small number of distinct components. This, in essence, is the same logic many companies use with injection molding.

The upfront investment in creating molds for injection molding is substantial but once you have the mold, you can produce thousands of identical pieces at very low marginal cost. This allows toymakers to take advantage of massive economies of scale.

The counterintuitive lesson here is that standardization doesn’t limit creativity. LEGO manages to feel endlessly varied precisely because the underlying system is modularized; the designers can focus on the cool spaceship or castle they want to build rather than reinventing the fundamental building blocks every time. LEGO isn’t alone in this approach. Dolls and action figures manufacturers have figured out they can use standardized body molds and just swap out heads, accessories, and paint schemes to create what appear to be completely different characters. The toy industry has essentially figured out that the way to deliver variety and creativity affordably is to standardize the inputs so you can diversify the outputs.

Importantly, this is a lesson that extends way beyond toys. Consider housing; the more we can rely on prefabricated, modular construction, the more we can bring manufacturing-style economies of scale to homebuilding and reduce costs. This is why it’s so important that we repeal the chassis rule (as I wrote about earlier this year). It is also why pre-approved building plans, as Andrew Justus wrote about for us earlier this week, can be so helpful. Single-stair reform and prefab elevators are other good examples here.

It’s also a major component of how hearing aids became so much better and more affordable over time. Again, I know that ‘modularization’ is the kind of word that makes people’s eyes glaze over, but policymakers have a responsibility to address the high cost-of-living and sometimes the answers will not be exciting. That’s ok. Being able to afford the necessities and joys of life is how you increase the quality of life for the average American.

Large-Scale Retail is Good for Affordability

I get that big-box retail doesn’t fit everyone’s aesthetic preferences, but the scale of retailers like Walmart, Target, and Costco translates directly into lower prices for consumers. First, there’s the sheer buying power: when you’re purchasing toys by the millions rather than by the hundreds, you can negotiate better prices from manufacturers. Large retailers can also work directly with factories, cutting out middlemen and their markups. No one’s being exploited by that; it’s simplya more efficient way to do things, and that translates into lower prices. Sophisticated logistics networks help too. Here, while big-box stores are often excellent, Amazon is in a class of its own. Their almost indescribably impressive distribution system is a big part of how they save consumers time and money. A big-box store can also spread its fixed costs (rent, utilities, etc.) across far more sales than a small boutique can.

You’ll sometimes hear critics argue that we should favor small, local retailers over big chains. I get the impulse. There’s a boutique toy store near me that I’ve bought several excellent board games from. But we need to be honest about the trade-offs. For families on tight budgets, while they may sometimes want or need to go to the small boutique retailer, the cost savings at big retail can be very helpful. This isn’t about being anti-small business. Competition and choice are good things, and there’s room in the market for different retail models. But it does mean we shouldn’t treat scale as inherently bad. When large retailers deliver lower prices, that’s a win for consumers, especially those who need it most. Being able to walk into a Walmart or Costco and find toys at prices that make gift-giving possible….that matters to a lot people, including parents who don’t make much money.

Tariffs Hurt ‘Cheap Goods’ the Most, and That’s a Problem

A huge part of why toys became so much cheaper is that manufacturing shifted to China and other parts of Asia starting in the 1980s and 1990s. Producing toys in countries with lower wages means lower prices for American consumers. That Costco water slide I bought for $349 would probably have cost double or triple that if it had been made in the U.S. I could splurge the $349. $800 almost certainly would have been a no-go.

But recently we’ve seen pressure to reverse course. Tariffs on Chinese imports have hit the toy industry hard. An NPR interview with a toy company CEO revealed that a Tonka truck that cost $25 two years ago has jumped to $40, in large part because of tariffs. Tariffs on toys and Christmas decorations are ten times higher this year than they were last year. Maybe there are national security considerations to consider for a small range of specialty items like leading-edge semiconductors, but toys? Come on.

Tariffs are a highly regressive tax. In part this is because they’re especially high in food and clothing, items that are both highly traded and comprise a higher share of low-income consumers’ basket of purchases. Additionally, even within product categories, tariffs are higher for mass-market goods than luxury goods.

Image Credit: Ed Gresser.

This Isn’t Just About Toys

My dad didn’t need fancy explanations about supply chain efficiency or economies of scale. He just knew that Walmart let him put toys under the tree for his kids, and that mattered. Today, when I watch my daughter play on that giant water slide with her friends, I’m grateful that the same forces that helped my dad help me. These lessons from toys aren’t just about toys. They’re a roadmap for tackling the cost-of-living crisis more broadly. If we want families to thrive, we need to embrace what actually works to bring costs down (standardization, scale, and globalization), even when it challenges our aesthetic or ideological preferences.

-GW