Mattel Speeds up Withdrawal from China to Counter Impact of Trade War

With the further escalation of the US-China trade war, major US retailers Walmart and Target are accelerating the relocation of their main toy suppliers out of China.

Headquartered in California, the US toy giant MGA Entertainment, owner of popular brands like Bratz and L.O.L. Surprise!, currently manufactures most of its products in China.

Isaac Larian, the founder and CEO of the company, revealed in a recent interview that MGA plans to reduce its production in China from 85%-90% to 60% within the next six months. They intend to shift 40% of their production to India, Vietnam, and Indonesia, a significant increase from the current 10%-15%.

However, even with this relocation plan, MGA will still retain 60% of its production capacity in China. Larian admitted that if the production costs of Chinese-made products increase, the company may have to raise prices and pass on the additional costs to retailers and consumers.

The recent tariffs imposed by the US government on Chinese imports have prompted many American companies, including MGA, to hasten their supply chain adjustments. In February this year, President Trump imposed a 10% tariff on all Chinese imports, which was further raised to 20% earlier this month, aiming to press Beijing to curb the flow of Fentanyl-related drugs into the US.

Prior to this, MGA initially planned to relocate 20%-25% of its production out of China within six months, but due to the impact of the new tariff policy, this percentage has been increased to 40%.

Retail giants Walmart and Target have yet to respond to these developments. However, according to reports from Chinese state media, Beijing officials have met with representatives from Walmart this week to discuss the retailer’s significant requests for price reductions from Chinese suppliers.

For years, the US toy industry has heavily relied on manufacturing in China due to its low labor costs, mature supply chains, and robust export capabilities.

According to the Toy Association of America, Chinese factories currently produce about 77% of US toys. Faced with the challenges brought about by the trade war, renowned toy brands like Mattel and Hasbro are also reassessing their supply chain strategies.

Mattel, the company behind Barbie dolls and the world’s second-largest toy manufacturer, plans to shut down one of its factories in China by the end of 2025 and ensure that no single country’s production capacity exceeds 25% of its global manufacturing regions.

Ynon Kreiz, CEO of Mattel, disclosed, “We had four factories in China that will be reduced to one by the end of this year.” The company’s current manufacturing percentage in China has dropped below 40%, with plans to increase capacity in Vietnam and India by 2025.

Hasbro, which produces Play-Doh, began listing overreliance on Chinese production as an operational risk in its 2018 annual report and sought subcontracting partnerships with Indian suppliers for the first time that year. In its latest annual report, the company identified Chinese tariffs as one of its business risks.

Furthermore, the US toy giant Cra-Z-Art is expanding its factories in Tennessee and Florida to cope with the challenges of increased tariffs on Chinese goods. The company plans to increase its domestic production from 35% to at least 45% and introduce automation technology to reduce labor costs.

At the same time, Beautiful Curly Me, a Georgia-based company supplying Chinese-made toys to Target, is also exploring new production bases in Asia and South America to diversify risks.

In recent years, US toy manufacturers have faced several challenges with manufacturing in China. Labor costs in China have steadily increased over the past decade, nearly tripling in the last 10 years, narrowing profit margins. The new tariffs may have a greater impact on toy manufacturers. Additionally, disruptions in the supply chain during the COVID-19 pandemic, rising shipping costs, and China’s containment policies have prompted companies to seek manufacturing diversification.

Despite actively seeking alternatives outside of China, reverting production to the US faces challenges such as high labor costs, labor shortages, and infrastructure limitations. Furthermore, some products require intensive labor, for which US factories struggle to provide competitive solutions.

While MGA currently has a factory in Hudson, Ohio, Larian acknowledged that manufacturing toys requires a significant amount of labor, making production costs in the US prohibitively high. “American workers are unlikely to want to do this kind of tedious work,” he added.

Of the toys sold by MGA last year, 70% were priced below $15, and the tariff hike will directly impact pricing and sales. Greg Ahearn, CEO of the Toy Association, stated that the tariff increase will lead to a direct increase in toy prices, with an expected up to 20% rise before the back-to-school season this year.

Toy subscription service provider Lovevery has publicly urged the government to exclude toys from the tariff scope, warning that if prices rise, consumers may turn to cheap but potentially unsafe counterfeit products.

As the US-China trade war intensifies, American companies are accelerating the reshaping of their supply chains, signaling a profound transformation in the global toy industry. While businesses actively seek alternative solutions, completely breaking free from reliance on Chinese manufacturing in the short term remains challenging.