Cra-Z-Art Expands US Factories Amid Tariff Uncertainty

The largest toy maker in the US, Cra-Z-Art, is significantly expanding its domestic manufacturing operations to address the growing concerns of retailers and mitigate the risksassociated with escalating tariffs on Chinese imports. Based in New Jersey, the arts and crafts company is investing millions of dollars to increase the size of its factories in Tennessee and Florida by more than 500,000 square feet, a move that represents a 50% expansion of its current domestic production capacity. This strategic decision comes amid heightened uncertainty about the future of US-China trade relations, as President Trump’s administration imposed a 20% tariff on goods from China, sparking fears of rising costs and potential economic repercussions.

Cra-Z-Art’s chairman, Lawrence Rosen, revealed that the company is under immense pressure from major retail chains, including Walmart, Target, Amazon, and Walgreens, which are bracing for the potential impact of tariffs on consumer demand. With basic necessities set to become more expensive, retailers are increasingly looking to domestic manufacturers like Cra-Z-Art to help them maintain competitive pricing. Rosen emphasized that the company is taking proactive steps to protect both its customers and its own interests by ramping up US production.

Retailers Push for Domestic Manufacturing

Big-box retailers are viewing domestic manufacturing as a key strategy to “de-risk” their supply chains against the unpredictability of tariffs. Rosen explained that these retailers have pledged to increase their orders from Cra-Z-Art if the company expands its US-based production. This commitment has incentivized Cra-Z-Art to prioritize domestic manufacturing, particularly for popular products such as “Softee Dough,” “Massaging Foot Spa,” “Sidewalk Chalk,” and “Spiral Art” sets. By shifting more production to the US, Cra-Z-Art aims to align with the growing demand for domestically made goods and reduce its reliance on international supply chains.

Over the past month, the company has been relocating manufacturing equipment, including plastic molds, from China to the US. Rosen highlighted that Cra-Z-Art is duplicating some of its existing machinery and investing in high-speed automation equipment to enhance efficiency. “When Trump announced the higher tariffs on China, it’s been full steam ahead,” Rosen remarked, underscoring the company’s commitment to controlling its own destiny rather than being at the mercy of fluctuating tariffs and geopolitical tensions.

A Century-Old Company Adapts to Changing Markets

Cra-Z-Art, a 102-year-old family-owned business, has long balanced its production between the US and China. Currently, about 35% of its products, including pencils, jigsaw puzzles, crayons, and markers, are made domestically. However, the company is now aiming to increase its US-based production to at least 45% of its total output. This shift reflects not only the pressures of tariffs but also the broader trend of reshoring manufacturing operations to the US.

Rosen has expressed optimism about the potential financial benefits of this strategy. He estimates that the expansion could double the company’s revenues to $400 million within the next two years. Additionally, by manufacturing in the US, Cra-Z-Art expects to reduce costs associated with overseas freight, which can range from $4,000 to $11,000 per 40-foot container. Domestically produced goods also reach retailers faster, with production and delivery timelines slashed to just 90 days.

The Economics of Reshoring Manufacturing

One of the key advantages of producing in the US, according to Rosen, is the lower cost of raw materials like plastic, which is derived from fossil fuels. While labor costs in the US are significantly higher than in China, where workers earn between $3 and $4 per hour, Cra-Z-Art is mitigating this challenge through significant investments in automation. The company is currently expanding its factories in Lewisburg, Tennessee, where it owns the facility, and Jacksonville, Florida, where it has been renting space since 2021.

“You need more automation in the US because of the higher pay,” Rosen explained, though he declined to specify how many new jobs the expansion would create. While Cra-Z-Art is well-positioned to produce a wide range of toys and crafts, certain labor-intensive items, such as Barbie dolls with intricate details like hair, painted faces, and stitched clothing, are still more cost-effective to manufacture in China.

A Growing Trend in the Toy Industry

Cra-Z-Art is part of a small but growing group of US-based toy manufacturers, including MGA Entertainment’s Little Tikes and Simplay3, both of which produce larger outdoor toys in Ohio, and American Plastic Toys in Michigan. While the vast majority of toys are still made in China, where labor costs remain low, some companies are exploring opportunities to diversify their supply chains and reduce their reliance on imports.

Rosen also noted that Cra-Z-Art is fielding inquiries from competitors interested in outsourcing their manufacturing to the company. He revealed that he personally owns a 20% stake in Jakks Pacific, a publicly held toy maker based in Santa Monica, California, which produces items like Fly Wheels ride toys. “I can produce for another company,” Rosen said, hinting at the possibility of Cra-Z-Art becoming a contract manufacturer for other firms.

The Future of US Toy Manufacturing

As the US-China trade relationship continues to evolve, companies like Cra-Z-Art are taking bold steps to navigate the challenges and opportunities posed by tariffs and shifting consumer demand. By expanding its domestic manufacturing capabilities, Cra-Z-Art is not only safeguarding its business against external risks but also capitalizing on the growing preference for domestically made products. While the toy industry as a whole remains heavily dependent on Chinese manufacturing, the success of Cra-Z-Art’s strategy could pave the way for other companies to explore similar paths.

In the meantime, Rosen remains focused on driving growth and innovation, ensuring that Cra-Z-Art remains a leader in the arts and crafts sector for years to come. With its rich history, strategic investments, and commitment to adaptability, the company is well-positioned to thrive in an increasingly uncertain global marketplace.