US toy makers are getting slammed by China tariffs — and have dire warnings if the mess isn't fixed soon
Toy prices nationwide rose nearly 2% in June — their sharpest monthly gain since the height of the post-pandemic inflation surge in April 2021 — as tariffs that briefly surged as high as 145% got passed on to shoppers, according to the US Consumer Price Index.
Those price increases aren't translating into higher sales, industry executives say.
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6 Toy prices nationwide rose nearly 2% in June — their sharpest monthly gain since the height of the post-pandemic inflation surge in April 2021.
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'Since the tariffs, we are selling about 10% fewer value-oriented items,' said Jonathan Cathey, chief executive of The Loyal Subjects, a Los Angeles-based toy maker whose assortment ranges from high-dollar collectibles to budget-priced fashion dolls.
That's because when the price of a doll, a plush toy or an action figure rises above a certain threshold, value-focused shoppers stop buying altogether, Cathey said.
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Isaac Larian, CEO of MGA Entertainment, said the company's LOL Surprise dolls, which had long typically retailed for $9.99, have lately risen as high as $11.99.
'Toy prices have already gone up big time,' Larian said. 'And that's affecting the sales because the consumer is very stretched right now.'
Larian and other toy makers say they are not expecting business will grow this year. This they say, is partly because retailers are not placing big orders as they wait to see themselves how the tariff drama will play out.
6 Isaac Larian, CEO of MGA Entertainment, may not have much to smile about during the holiday shopping season.
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That's after toy sales dropped nearly 1% in 2024 to $42 billion following a calamitous 7% decline in 2023, according to Circana, a retail industry research firm.
'Business will be down this year,' Larian warned. 'A lot of retailers are putting orders on hold to see where the tariffs end up.'
Treasury Secretary Scott Bessent and top US operatives held a two-day meeting in Stockholm with Chinese trade officials that ended Wednesday.
'I believe that we have the makings of a deal,' Bessent said Thursday during an interview on CNBC's 'Squawk Box.'
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6 Sales of toys in 2024 were down by 1%.
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'There's still a few technical details to be worked out on the Chinese side between us. I'm confident that it will be done, but it's not 100% done.'
Trump imposed 145% tariff on China imports in April before lowering it to 30% the following month. The White House gave Beijing an Aug. 12 deadline to reach a deal but that could get extended into the fall, Bessent said.
While toy makers wait, those that can afford to invest in new manufacturing facilities in other countries are trying to hedge their bets. But the recently announced tariffs for Vietnam and Indonesia, in particular — 20% and 19%, respectively — were higher than many had expected.
'The feeling was tariffs would stay the same rate at 10% or go down – not up,' said Jay Foreman, CEO of Basic Fun, which makes Care Bears, Tonka Trucks and Lincoln Logs.
6 Jay Foreman, who heads up Basic Fun, says the 20% tariff rate for Vietnam was surprisingly high.
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MGA Entertainment's Larian spent two weeks in Indonesia last month touring factories and drawing plans to move a substantial amount of production there from China. Shortly thereafter, President Trump announced the 19% tariff on Indonesia — and Larian put the project on hold.
'Everyone says that Indonesia will be the next frontier' — but the country's future as a consistently viable option for US manufacturers is at least a few years away, Larian said.
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About 10% of what MGA Entertainment makes, including LOL Surprise and Bratz dolls, are made in Vietnam. But the factories there are behind schedule and that means toy companies are paying retailers late fees.
Still, pulling up stakes from China, which makes 80% of the world's toys, is impossible for some.
6 Alan Dorfman, founder of Super Impulse, says his company is 'entrenched' in China.
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'We are deeply entrenched in China,' said Alan Dorfman, CEO of Super Impulse, a Bristol, Pa.-based maker of miniature toys that mostly cost under $10. 'It's a huge undertaking for a smaller company like us to set up elsewhere. It's not a reasonable option for us.'
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6 Toy companies sped up their shipping cycle in May and June.
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The good news is that the industry rushed to get products to the US from China in May and June while the two countries negotiated a trade deal – and most expect to have enough toys for the holidays.
It's what happens afterwards to tariffs, prices and inflation that's keeping the industry on edge.
'We are at risk of having to pay penalties to our retail customers,' Dorfman told The Post. 'In extreme cases retailers can also reject our goods if they arrive at their warehouses late.'
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Toy makers are still holding out hope that their lobbying efforts for a tariff exemption on toys – which they enjoyed during Trump's first term in office – will pay off in the end.
'The outlook for this year is survival,' Dorfman said. 'We lowered our expectations from where we started the year. We hope to get through next year.'
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