More than 75% of toys sold in the United States come from China, making the sector one of the most vulnerable to President Donald Trump's trade war. Photo / The Washington Post
Toy prices are rising at their fastest pace on record, the result of stiff new tariffs in an industry where three out of four items come from China – one of the first examples of just how quickly new trade policies are raising prices for Americans.
Although the full impact of President Donald Trump’s new import taxes has yet to show up in economic data, analysts say the toy industry – which relies on a steady flow of relatively low-priced imports – offers clues into how higher costs could soon ripple through the economy.
The price of toys, games and playground equipment rose a record 2.2% between April and May, far outpacing the 0.1% inflation rate for all items that month, according to the Bureau of Labor Statistics. Economists expect those increases to pick up in the coming months, as more manufacturers and retailers are forced to pass on higher costs.
“Prices have gone up, there’s no doubt about it,” said Isaac Larian, chief executive of MGA Entertainment, the toy giant behind L.O.L. Surprise, Little Tikes and Bratz. “But the inflation is just starting. There’s going to be a domino effect: You’re going to see prices go even higher. You’re going to see empty shelves and a lack of innovation.”
More than 75% of toys sold in the United States come from China, Census Bureau data shows, making the sector one of the most vulnerable to the President’s trade war. Tariffs on Chinese imports have swung as high as 145% this year, though they are currently at 30%, thanks to a 90-day reprieve that’s scheduled to end in early August.
In Keene, New Hampshire, Douglas, which sells plush bears, flamingos and other stuffed animals, has raised prices by 5% to offset recent tariffs.
The company receives as many as 30 shipping containers per month of toys from Indonesia, Vietnam and China. Each container comes with roughly $100,000 (NZ$166,510) of goods, and so far this year, each one has required immediate tariff payments to the US Government that range from $10,000 to $145,000, president Scott Clarke said. He’s had to pass on those costs to the small businesses he sells to – most of which have no choice but to mark up their prices, as well.
“It’s a tough situation: we’ve absorbed some of the tariffs, but there’s only so much we can do,” he said. “Ultimately, this is a tax on American businesses, and it’s the consumer that’s having to pay.”
Trump has suggested that tariffs could lead to higher toy prices, but appeared to shrug off the impact on families and businesses. Although his administration gave the toy industry an exemption from the 25% tariffs on China during his first term, it has offered no such carve-outs this time around.
“Maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally,” Trump told reporters at the White House in April.
“I’m just saying they don’t need to have 30 dolls,” he added later. “They can have three.”
That assumption – that families will respond to higher costs by buying fewer toys – has upended holiday plans for retailers. Many are treading cautiously, sticking to classics such as board games and dolls, and lower-priced games and craft supplies instead of large dollhouses and block sets.
“We’re doubling down on bestsellers and not trying anything new this year because we just don’t know what’s going to happen,” said Amy Rutherford, who owns Pippin Toy, in Alexandria, Virginia. “People are already moving to lower-dollar items – spending $30 on a plush toy instead of $75, for example – and I think that’ll continue.”
At the same time, toy makers are rapidly raising prices by as much as 36% to offset tariffs. Popular items such as Jellycat stuffed animals, Crocodile Creek puzzles and Jellystone Designs’ Calm Down sensory bottles all cost more than they did at the beginning of the year, she said.
Although the toy industry is mostly made up of small and medium-sized companies, even the largest players have warned of tariff-related disruptions. Mattel, the maker of Barbie and Hot Wheels, last month scrapped its financial forecasts for the year, saying economic volatility and changing trade policies made it “hard to predict consumer spending” for the coming months.
Meanwhile, Hasbro, the company behind Monopoly and Play-Doh, laid off 3% of its workforce this month, following earlier warnings that tariffs could spur job cuts and higher prices.
The toy industry has built a stronghold in China over decades, relying on the country’s factories to churn out low-priced products in short order. Toys sold in the US are also required to undergo testing at third-party safety labs that are based primarily in China, as well, making the country a one-stop shop for the industry.
As a result, nearly all of the toys at Caroline Rodrigues’ Merci Milo toy shops in Los Angeles and Portland, Oregon, have some connection to China. She primarily buys from European, Japanese and Korean toy companies, but says almost all rely on Chinese parts or manufacturing to some extent.
“There’s just no escaping China,” she said. “Even when I think I’m buying from a European company, the shipments arrive from China.”
Rodrigues has already raised prices by as much as 20 to 30% to keep up with tariffs and is shutting down her Portland store, where she has two employees, to save money. Fast-changing trade policies and steep import costs have made it all but impossible to plan for the future.
“Every package I get now, I get hit with a tariff – sometimes it’s $50 and sometimes it’s $1000 or $2500,” she said. “I place an order and it’s like ‘Okay, what am I going to have to pay this time?’ It’s anybody’s guess.”