The new tariffs have come at a bad time for the toy industry, as September is a key holiday shipping month, and any charges will likely be passed on directly to the consumer.
While a number of these toymakers have come up with contingency plans, like lowering their reliance on manufacturing in China, many have made it clear that price increases will come if tariffs hit.
“These measures, if they go through, will substantially impact American consumers, including their ability to gift quality toys to their children during the holidays,” Hasbro told CNBC Friday. “If the proposed tariffs are put in place, Hasbro will have no choice but to pass along the increased costs to our U.S. customers by pricing our products to address the tariffs.”
At the end of 2018, 50% of Funko’s manufacturing was outside of China. By the end of this year, the percentage is expected to rise to 70%. Funko makes the majority of its goods in Vietnam.
Funko has said if tariffs are proposed on their Chinese products it would only take a small increase to offset the potential profit impact. However, the company does not currently have plans to raise prices.
Less than two-thirds of Mattel’s products that are sold in the U.S. are imported from China, but Mattel is at a disadvantage to Hasbro, Weiser said.
“With regard to flexibility in moving its production, about 50% of Mattel’s manufacturing is in owned plants (about 50% outsourced), whereas nearly 100% of HAS’ manufacturing is outsourced,” she wrote.
The majority of Mattel’s Hot Wheels and Barbie toys are not manufactured in China. These brands are some of Mattel’s best-selling toys. In the most recent quarter, sales of Barbie rose 9% and sales of Hot Wheels jumped 5%.
We will be watching this closely, along with its impact on the industry and consumers.