Name: Why Small Businesses Can’t Quit China
Uploaded: 2025-05-21T04:00:00Z
Duration: 6 min 5 s
Description: President Trump’s tariffs are designed, in part, to motivate companies to manufacture in the U.S. But many small businesses, like puzzle company Le Puzz, are finding that to be nearly impossible.

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President Trump’s tariffs are designed, in part, to motivate companies to manufacture in the U.S. But many small businesses, like puzzle company Le Puzz, are finding that to be nearly impossible. Illustration: Madeline Marshall

https://m.wsj.net/video/20250521/1cd5dba1-e83c-4554-911a-97e65beed413/2/hls/manifest-hd-wifi.m3u8

President Trump’s tariffs are designed, in part, to motivate companies to manufacture in the U.S. But many small businesses, like puzzle company Le Puzz, are finding that to be nearly impossible.

Why Small Businesses Can’t Quit China  

Narrator: This is Le Puzz. They're a small puzzle company based in Brooklyn, New York. And like a lot of small businesses in the toy and game industry, their puzzles are made in China. So when they got a shipment delivered in March, they were hit with a tariff.

So we got our first bill for,

20%.

20% on that manufacturing cost.

Narrator: President Trump's tariffs are in part, designed to make companies like Le Puzz make their products in the US.

If you have your company here, if you build your product, make your product, make your car, or whatever it is you're making, no tariffs.

Narrator: But as they are learning, moving manufacturing completely to the US is not always possible.

Even if we could make our exact same product for maybe just a little bit more here, I think we would probably do that.

Yeah.

But as it stands, it seems like we can't make our exact product here.

Narrator: Here's why. Let's look at what it actually takes to make a puzzle.

Alistair: So there's the ink, the paper, the cardboard.

Narrator: The machines, the glue, the plastic packaging. Here's all the industries needed to even make the cardboard in the first place. And the industries needed to make the ink. And those industries also need these industries. This is really what a supply chain looks like.

The term supply chain, I almost wish we would move away from it, because it really oversimplifies things, and really it's an entire ecosystem that exists.

Narrator: And it's not easy or even possible to move every component to the US, because this system is so global. Most puzzles made in the US actually use specialized cardboard from Europe. And nearly all the dies, the shape that cuts the pieces, are made in Europe or China. Sure, they could be made in the US, but would it be economically feasible?

In many instances where there's already competitors overseas that are very experienced at making types of goods, setting up production in the United States, especially for something that's highly specialized in volume is gonna be very small. It's just not cost competitive. And certainly because of the knowledge that that oversees supplier has, the initial quality coming from the US is not going to match that overseas supplier.

Narrator: That quality gap is because of the learning curve. This is the classic one. How long it took to build a B-17 plane during World War II. When they started, it took more than 140,000 labor hours to make one plane. A year in, it took a third of that time.

Jason: As you start producing more and more of a product, you become much more efficient.

Narrator: And also, highly skilled.

For many categories of goods where sourcing has shifted predominantly to China, Chinese manufacturers have been producing tens of thousands, hundreds of thousands, or even millions of units. And that means that they're highly specialized in making these goods. In the US, volumes are much smaller, and so it's a more standardized product.

Narrator: For example, the reason iPhones are made in China isn't because of labor costs.

The reason is because of the skill.

Narrator: As Le Puzz has also found out. Their puzzle isn't standard.

This is everyone's least favorite corner piece.

Narrator: Their hand-drawn, custom-cut pieces come in a resealable bag with a double-sided poster. They are unusually thick pieces and have colorful backs. And the box is even printed on the inside.

A lot of times people will use the box lid and bottom as sorting trays. So we wanted to make those kind of special.

Narrator: As they've looked for a US manufacturer, they haven't been able to find one to say yes to all this customization

Alistair: And all of that isn't necessary to a good puzzle, but it's kind of necessary to our good puzzle.

Narrator: Plus, because of this supply chain, I mean, ecosystem, they would have to invest in new dies from Europe. That would also be tariffed.

To think that we were gonna have to make upwards of like a $35,000 investment, in just the die lines, we were like, "Wow, that's like a lot of risk for us to take on," not even knowing if these tariffs are gonna stay in place.

Not to mention how long they're gonna take to make. I almost feel like we didn't even have an option.

Right, yeah.

Like we have to move forward with our current manufacturer.

Narrator: What staying with China will cost is unclear. 145%? 30%?

Alistair: We kind of just hold our breath, and see what the tariff is the day it lands.

If that means we have to raise our price, then we're gonna have to raise our price. That's, I mean, that's really what you're faced with.

Narrator: That wouldn't just affect their small business, but many of the other small businesses they work with. The making of a puzzle is more than just manufacturing. It involves a lot of people. Stylists, designers, Le Puzz employees, renting out the studio space, web design. And then there's the employees at the warehouse, marketing, shipping, and then all the retail stores.

The bulk of our business is,

Mom and pop.

Is mom and pop-like shops, game stores.

What's important to understand is, production in the United States in this industry is generally minimal. There's about 5,600 individuals employed across all the doll, toy and game plants in the United States. In comparison, just its specialized retailers that sell hobbies, games, and toys, there's about 128,000 individuals employed in those stores.

Narrator: This is who will face the effects of the tariffs, besides the US manufacturers who now have added costs.

And so what's important to understand is when you make these products much more expensive, you are expecting declining consumer demand, and that ends up costing far more jobs in the retail and wholesale sector than you would ever gain back in manufacturing.

Narrator: The economic puzzle of where to manufacture has many pieces. Tariffs are the ever changing one.

Speaker: Oh no. Of all the things!

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