MGA Entertainment, based in California, relies heavily on Chinese manufacturing for its toys supplied to Walmart, now facing tariffs. To offset costs, company executives are seeking price increases at Walmart, which may impact consumers.
The company plans to shift 40% of its production to India, Vietnam, and Indonesia. However, these countries may also be subjected to tariffs from the United States, with current average rates in India at 13-15% and as high as 100% for agricultural goods.
Challenges Of Moving Production
Chinese factories account for approximately 77% of US toy production, and bringing manufacturing back to the US is deemed unfeasible due to labor concerns.
Walmart will have a decision to make. If the retailer accepts higher prices, shoppers will ultimately bear the burden. If it resists, MGA Entertainment may need to absorb some costs or explore further adjustments to its supply chain. Neither option is ideal.
Shifting manufacturing to India, Vietnam, and Indonesia may provide some relief, but it introduces new uncertainties. While diversification reduces reliance on one country, it does not eliminate exposure to trade policies. The possibility of new tariffs on these nations cannot be ignored. If levies rise, any cost savings from moving production could quickly diminish.
Labour costs are another variable. Wages in Southeast Asia remain lower than in China, but that may not last. As demand for workers grows, so will pay expectations. Training new staff and ensuring product quality will take time. These challenges make any transition far from straightforward.
Future Outlook
Factories in China will still play a large role in toy manufacturing. It’s where industry expertise, infrastructure, and supply networks are most efficient. Moving away is more than just shifting equipment; it’s about rebuilding entire systems elsewhere—a costly and complex process.
For traders watching tariff policies, manufacturing decisions like these are worth noting. Price negotiations with retailers, supply chain shifts, and changing trade policies all influence costs. Tracking how firms respond to market pressures will help anticipate pricing trends in the coming months.
