Mattel could soon raise the prices of toys such as Barbie and Hot Wheels in response to new tariffs imposed by President Donald Trump, executives said Tuesday.
The toy giant, which manufactures about 40% of its toys in China and less than 10% in Mexico, told analysts it will look to move around its supply chain to mitigate the effect of tariffs, but it is also considering price hikes.
“Certainly against the tariff, we have a range of mitigating actions,” said finance chief Anthony DiSilvestro on the company’s fiscal fourth-quarter earnings call. He said those actions include leveraging Mattel’s supply chains and “potential price increases.”
“We do work closely with our retail partners to achieve the right balance and always keep consumers in mind when we consider pricing actions,” he added.
The comments come after Trump imposed a 10% tariff on Chinese goods this week. He also paused planned 25% duties on imports from Mexico and Canada for 30 days.
Mattel Inc. Hot Wheels cars.Daniel Acker / Bloomberg via Getty Images file
Economists on both sides of the aisle have agreed that the levies will likely lead to price increases for consumers. There is no guarantee Trump will impose the tariffs on Mexico and Canada, as he has often used the threat of duties as a negotiating tactic to bend foreign governments to his will.
Shortly after Trump announced the 25% tariff on goods from Canada and Mexico, both countries announced they would bolster security at their respective borders, leading Trump to suspend the duties. The two nations had already been enhancing border security before Trump’s threat.
China and the U.S. have yet to come to a similar agreement to avoid the tariffs. If the 10% duty remains in effect, it will have a significant effect on the toy industry, which sources about 80% of its goods from the region.
While companies such as Mattel have said publicly that they plan to leverage their supply chains and work with suppliers to mitigate the effects of the tariffs, executives have admitted privately that they are loath to take on the cost themselves and reduce profits. If they are not able to pass on the entire cost of the tariffs to suppliers, some plan to have consumers pay the rest through price hikes.
Some companies with diversified supply chains such as Mattel, which operates its own and third-party factories in seven different countries, have more flexibility to move production and lean on suppliers to lessen the hit to profits. It also does about 40% of its business outside of North America, where tariffs are not being imposed in the same way they are in the U.S.
By 2027, Mattel expects sourcing from Mexico and China to represent more than 25% of total global production, down from about 50% now. It does not currently source from Canada.