By Jessica DiNapoli and Arriana McLymore
NEW YORK (Reuters) -A major supplier of toys to Walmart and Target is accelerating its shift out of China as it reshapes production amid President Donald Trump’s intensifying trade war with the country.
California-based MGA Entertainment, which makes its Bratz and L.O.L. Surprise! dolls and other toys primarily in China, is taking steps to move 40% of its manufacturing to India, Vietnam and Indonesia within six or so months, up from around 10% to 15% currently, CEO Isaac Larian said in an interview.
Roughly 60% of the company’s manufacturing will still be in China after the speedier shift to India, Vietnam and Indonesia in the coming months, Larian said.
He noted that he may have to raise wholesale prices on China-made products to protect his company’s already-thin profit margins. “It’s going to hurt the consumer because we have to pass the extra cost to the retailer,” he said.
MGA’s plans, first reported by Reuters, show how U.S. makers of everyday items, which rely heavily on Chinese factories for their products, are adjusting as quickly as possible as a result of Trump’s trade war with China– and hiking prices to cover the cost of tariffs on remaining China-made products.
Walmart and Target did not immediately return messages seeking comment.
Greg Ahearn, the CEO of the Toy Association, a U.S. toy industry group, said higher prices will likely be seen on retailers’ shelves by back-to-school, adding that 20% tariffs will likely mean as much as 20% price hikes.
Beijing officials met with Walmart this week to discuss media reports that the U.S. retailer has asked Chinese suppliers to slash prices on their goods to offset the impact of the Trump administration’s tariffs, according to social media posts affiliated with state-run broadcaster CCTV.
Trump imposed a 10% tariff on all Chinese imports in early February, on top of existing duties, and doubled that to 20% earlier this month. Trump’s China tariffs are intended to punish Beijing for what he says is its failure to halt shipments of chemicals used for the production of the deadly opioid fentanyl to the United States.
Before Trump’s new tariffs on China imports, Walmart supplier MGA Entertainment, one of the world’s largest privately-held toy makers, had planned to move around 20% to 25% of manufacturing from China to the new countries in the same six-month time frame, the toymaker’s CEO said.
Chinese factories currently manufacture about 77% of U.S. toys, according to the Toy Association, forcing firms like Barbie maker Mattel to consider price hikes to offset the cumulative 20% tariffs on Chinese goods.
Mattel also plans to decrease its dependency on any one region, and plans to close a factory in China by the end of 2025.
“We used to have four factories that we owned in China. By the end of the year, it will be down to one,” Mattel CEO Ynon Kreiz said on Thursday, referring to a supply chain diversification strategy that started in 2018.
Mattel is working to ensure that each of the countries where it produces toys and games makes up less than 25% of its global manufacturing. China currently makes up less than 40%, according to Kreiz. Less than 10% comes from Mexico, which is also facing tariffs.
Play-Doh maker Hasbro listed tariffs on China as risk to its business in its annual report filed last month. The company did not respond to a request for comment on whether it would move some manufacturing out of the country.
Target supplier Beautiful Curly Me, a Georgia-based company that sells China-made dolls, is starting to inquire about sourcing dolls from other countries in Asia and South America, its chief operating officer told Reuters in an interview.
During Trump’s prior administration, tariffs never reached toy makers, Ahearn said.
He currently does not have any indication if they will receive exemptions now.
MGA also has a factory in Hudson, Ohio, but it’s too costly to make certain toys domestically, Larian said.
“There is no way to get American labor to do that tedious work,” he said.
Larian said that 70% of the toys MGA sold last year were below $15. The company’s Bratz and L.O.L. Surprise! dolls and Little Tikes toddler toys are carried in retail chains throughout the United States.
Toy subscription service Lovevery in a public comment urged for toys to receive exemptions from tariffs, saying that as toys rise in price, consumers will buy cheap, dangerous knock-offs.
(Reporting by Jessica DiNapoli and Arriana McLymore in New York; additional reporting by Siddharth Cavale in New York; editing by Diane Craft)
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