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.
