The aisle of toys is about to become more expensive.
President Donald Trump has expanded his trade war this week, placing a reference rate of 10% on almost all countries and much steer levies over dozens of others. Among the people affected by higher prices were China and Vietnam – two nations which are vital for the national toy industry.
For decades, American toy companies have worked with Chinese manufacturers to provide the hottest action figures, dolls and retail games. Vietnam has become a solid secondary market for companies seeking to diversify their factory locations in the midst of growing trade tensions between Washington and Beijing.
Trump slapped China with an additional right of 34%on Wednesday, bringing the total tax on nation goods to 54%, and hit Vietnam with a rate of 46%. The levy is much higher than that toy companies have been waiting for and could cause massive price increases on toys, said industry experts.
“Everyone is really in scramble mode,” said Greg Ahearn, president and chief executive officer of the Toy Association, in CNBC. “It will have massive negative repercussions for the consumer and for our industry.”
Adding to tensions, China is expected to impose a 34% reprisal fee on all American products, its Ministry of Commerce announced on Friday.
“I think that the situation of Vietnam will be a little easier to negotiate, as far as I think, we will see the country and the Vietnamese government arriving at the table faster than China by trying to solve all trade disputes,” said Curtis McGill, co-founder of Hey Buddy Hey Pal, which makes markers to color them. “They are just not in a place where they can remain losing a large part of the business.”
About 77% of toys imported in the United States come from China, according to data from the Toy Association. Vietnam is third, just behind Mexico. Trump had previously placed a 25% rate on Mexico goods which do not comply with the agreement of the United States-Mexico-Canada.
Hasbro And MatelThe managers of the toy space, both incorporated a tariff impact of 20% of China into their orientation projections for 2025 and have implemented strategies to move production to other countries, such as Vietnam, Indonesia and India, the three were also struck by prices – 46%, 32% and 26%, respectively.
“Consequently, the resettlement of production may not be financially viable,” wrote Eric Handler, analyst at Roth, in a research note to investors published Thursday. “The consumer should soon see the price increases to partially compensate for the pricing impact.”
Hasbro and Mattel are publishing profits from the first quarter this month, and Handler said that investors will probably see discounts of advice from the two companies.
Toy companies have already been criticized at Wall Street following the price announcement. Mattel’s shares fell by more than 16.5% in trade Thursday, Hasbro lost more than 12% and FunkoWho also has the manufacture in China and Vietnam, saw his stock drop by 18%.
While Handler expects companies to try to reduce costs thanks to contractual renegotiations with manufacturers and, perhaps, even the modification of packaging to improve the margins, he said that he made no doubt that consumers will endure the weight of Trump’s functions.
“You may have 35% to potentially even a point price increase on products according to the margin of these products,” said Ahearn of the association of toys. “It can be a price increase of 50%, since it is a rate of 54%.”
Most toy margins are high, he noted. So there is very little room for maneuver so that companies absorb these costs.
“There is no room for this to have, but for the consumer,” said Ahearn, noting that the toy association expects the price increases to coincide with this year’s back -to -school season.
“The biggest budget impact on people, unfortunately, which can afford it the least,” he said.