MGA Entertainment to shift manufacturing base from China to India, 2 other nations amid Donald Trump's tariffs: Report

MGA Entertainment, which makes its Bratz and L.O.L. Surprise! Dolls and other toys, primarily in China, are taking steps to move 40 per cent of its manufacturing to India, Vietnam, and Indonesia within six or so months, up from around 10 per cent to 15 per cent currently. The California-based company's CEO Isaac Larian told news agency Reuters that the toymaker is accelerating plans to shift its manufacturing base out of China soon.

The major suppliers of toys to Walmart and Target are reshaping production amid US President Donald Trump's intensifying trade war with China. According to Reuters, after the shift to India, Vietnam, and Indonesia in the coming months, 60 per cent of the company's manufacturing will still be in China.

Larian 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.

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MGA's plans show how US makers of everyday items, which rely heavily on Chinese factories for their products, are adjusting as quickly as possible due to Trump's trade war with China-- and hiking prices to cover the cost of tariffs on remaining China-made products.

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Greg Ahearn, the CEO of the Toy Association, a US toy industry group, said higher prices will likely be seen on retailers' shelves by back-to-school, adding that 20 per cent tariffs will likely mean as much as 20 per cent price hikes.

Beijing officials met with Walmart this week to discuss media reports that the US retailer has asked Chinese suppliers to slash prices on their goods to offset the impact of the Donald Trump administration's tariffs, according to social media posts affiliated with state-run broadcaster CCTV.

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On top of duties, Trump imposed a 10 per cent tariff on all Chinese imports in early February and doubled that to 20 per cent 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 US.

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 per cent to 25 per cent of manufacturing from China to the new countries in the same six-month time frame.

According to the Toy Association, Chinese factories currently manufacture about 77 per cent of US toys. This is forcing firms like Barbie maker Mattel to consider price hikes to offset the cumulative 20 per cent tariffs on Chinese goods. Mattel also plans to decrease its dependency on any one region and close a factory in China by the end of 2025.

"We used to own four factories 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 country where it produces toys and games makes up less than 25 per cent of its global manufacturing. 

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China makes up less than 40 per cent, according to Kreiz. Less than 10 per cent comes from Mexico, which is also facing tariffs. Play-Doh maker Hasbro listed tariffs on China as a 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.

Ahearn said tariffs never reached toy makers during Donald Trump's previous administration. He told Reuters he did not indicate if they would receive exemptions now amid the US-China trade war. MGA also has a factory in Hudson, Ohio, but it is too costly to make certain toys domestically.

Larian said 70 per cent 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 US. 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.