Mattel, the toy giant behind iconic brands like Barbie and Hot Wheels, is navigating the complexities of the ongoing trade war between the United States and China. CEO Ynon Kreiz recently addressed the potential impact of President Trump’s tariffs on the company’s operations and consumer prices. In an appearance on CNBC’s "Squawk Box," Kreiz made it clear that Mattel has no plans to shift its manufacturing base back to the United States, despite the tariffs on Chinese goods.
Kreiz emphasized that Mattel is actively implementing strategies to mitigate the financial consequences of the trade war. A key element of this strategy involves "pricing action," suggesting that consumers should expect to see price increases on Mattel products in the US market. This approach aligns with a broader trend of companies passing on tariff-related costs to consumers.
The CNBC interview followed Mattel’s decision to withdraw its annual financial forecast. This decision was revealed in the company’s first-quarter earnings report, which cited the volatile macroeconomic environment and the unpredictable nature of US tariffs as key factors making it difficult to project consumer spending and Mattel’s US sales for the rest of the year, especially during the critical holiday season.
In addition to raising prices, Mattel is focusing on cost savings. The company announced an increase in its cost savings target for the year, from $60 million to $80 million. These savings are to be achieved through various measures, including reducing promotions and discounts. The company has already taken steps to cut costs, including laying off more than 100 employees from its headquarters in El Segundo, California, at the end of March.
Diversifying its global supply chain is another crucial strategy for Mattel. The company aims to reduce its reliance on China as a manufacturing hub. Kreiz stated that within two years, no single country will account for more than 25% of Mattel’s sourcing. This diversification effort seeks to cushion the impact of tariffs by spreading production across multiple locations.
Mattel’s sourcing extends beyond China to other countries, including Indonesia, Malaysia, and Thailand. These countries are also subject to reciprocal tariffs announced by the Trump administration. Although these tariffs were temporarily paused for 90 days, the potential for their reimplementation remains a concern.
President Trump has addressed the potential impact of tariffs on the toy industry, where China accounts for 80% of global toy production. During a cabinet meeting, Trump suggested that children might have to settle for fewer toys, perhaps two dolls instead of 30, and that these toys might cost slightly more.
When asked about the possibility of a Christmas crisis for the toy industry, Kreiz emphasized Mattel’s commitment to providing a consistent supply of products at a range of affordable price points. Roth analyst Eric Handler has indicated that Mattel expects to keep 40% to 50% of its products priced below $20.
The Toy Association, a trade group representing the US toy industry, has been actively lobbying for an exemption from the tariffs. Kreiz voiced his support for the association’s advocacy efforts. He emphasized the importance of toys in children’s lives.
Ynon Kreiz assumed the role of Mattel CEO in 2018. He previously worked at Maker Studios, a content creation company acquired by Disney. Kreiz is credited with leading Mattel through a successful turnaround, with the Barbie brand achieving its best full-year sales results ever in 2021 under his leadership.
President Trump suggested that Americans would be willing to make sacrifices in the form of fewer or more expensive presents in pursuit of whatever he deems to be the ultimate goal of the trade war. However, the specific objectives of the trade war remain unclear.
Mattel’s response to the trade war reflects the challenges faced by many multinational corporations operating in a globalized economy. The company is balancing the need to maintain profitability with the desire to offer affordable products to consumers. The strategies being implemented by Mattel, including pricing adjustments, cost savings, and supply chain diversification, are common responses to the trade war. The uncertainty surrounding future trade policy continues to create challenges for businesses. The holiday season will be a critical test of Mattel’s ability to navigate these challenges.
The shifting landscape of international trade has forced Mattel to become more agile and adaptable. The company is constantly monitoring the situation and adjusting its strategies as needed. The long-term impact of the trade war on Mattel and the broader toy industry remains to be seen, but it is clear that the company is taking steps to mitigate the potential risks. The success of these efforts will depend on a variety of factors, including the evolving trade policies of the US and China.
Mattel’s story illustrates the interconnectedness of the global economy. The trade war between the US and China has had a ripple effect on businesses and consumers around the world. The company’s response highlights the complex decisions that businesses must make in order to navigate these challenges. As the trade war continues, it will be interesting to see how Mattel and other companies adapt and evolve.
