Tariffs Unravel India’s Dream of Challenging China in Toymaking

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Tariffs Unravel India’s Dream of Challenging China in Toymaking

By K Oanh Ha | Bloomberg Businessweek | December 23, 2025

2 key takeaways from the article

1. Three years ago, Vijendra Babu opened India’s largest toy factory, a two-story building with enough space to play 11 football games simultaneously. The plant near Bangalore was a revelation for India at the time, offering a one-stop shop that could engineer toys, cut steel molds for their production and manufacture them. At the time, the $30 million investment seemed ambitious but not absurd: Babu’s business was almost doubling every two years. These days, he’s wondering whether he did the right thing. “We had plans to expand,” says Babu, managing director of Micro Plastics Pvt Ltd. “Now we will have to see how this affects all that.”  “This” is US tariffs of 50% on Indian goods, which President Donald Trump announced on Aug. 6 to punish India for purchasing Russian oil. 
2. Exporters like Babu express optimism. But if tariffs remain high, they can adjust and focus on India which has more than 350 million children.

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Topics:  Tariff, USA & China, Toy Manufacturing

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Three years ago, Vijendra Babu opened India’s largest toy factory, a two-story building with enough space to play 11 football games simultaneously. The plant near Bangalore was a revelation for India at the time, offering a one-stop shop that could engineer toys, cut steel molds for their production and manufacture them. At the time, the $30 million investment seemed ambitious but not absurd: Babu’s business was almost doubling every two years. These days, he’s wondering whether he did the right thing. “We had plans to expand,” says Babu, managing director of Micro Plastics Pvt Ltd. “Now we will have to see how this affects all that.”

“This” is US tariffs of 50% on Indian goods, which President Donald Trump announced on Aug. 6 to punish India for purchasing Russian oil. Babu’s company had been prospering, with contracts from global giants such as Hasbro, Mattel and Spin Master to churn out Nerf guns, Paw Patrol trucks and thousands of other products sold in big-box stores worldwide. But now, when the loading docks should be dispatching a dozen or more trucks a day with containers full of Christmas cheer, the warehouse is eerily quiet.

For decades, the logic of manufacturing was simple: Make it cheap, make it fast and make it in China. But the trade wars that began during Trump’s first term shattered that formula, setting off a race by Western companies to find new manufacturing hubs. There was so much demand from US companies that Babu, backed by private equity money, this year completed construction of a 250,000-square-foot facility next to the one where he’s standing. It’s now empty. “We should have opened, and we should be getting the machines in,” he says.

Babu was projecting 40% growth this year, but he’s more likely to see a 15% drop, and he’s bracing for a further decline in 2026. For some long-standing customers, he’s even agreed to make products at cost just to keep the assembly lines moving and avoid laying off any of his 2,000 workers.

India’s toy exports to the US were only $100 million last year, versus China’s $11 billion and Vietnam’s $3 billion. Labor in India is abundant and cheap, and the overall labor force tops 600 million, or almost twice the population of the US. But the country is short on know-how and lacks a robust supply chain. Key components such as specialized synthetic plush fabrics, electronics and even the eyes for dolls and teddy bears must often be imported—frequently from China.

And unlike Vietnam, where toymakers are heavily dependent on Chinese components and capital, India has a tricky relationship with China, and political tensions have dampened the enthusiasm of mainland entrepreneurs. Kharbanda says that needs to change. For decades, he notes, American companies transferred both production and knowledge to China. Now, he says, it’s time for India to get a similar injection of assistance. “We have to learn from the best,” he says.

Kharbanda and Babu both express optimism, regardless of what happens with the White House. Yes, they want to sell to the US and tap its massive market. But if tariffs remain high, they can adjust and focus on India. While the country remains poor, it has more than 350 million children, and hundreds of millions of parents, grandparents, aunts, uncles and cousins eager to spoil them. “Plan A, tariffs are going to go away. Plan B, we need to start expanding the markets. Plan C, focus on the Indian market,” Kharbanda says. “We hope for the best, but we prepare for the worst.”