Tariffs on Toys: How US-China Trade War Threatens Walmart’s Supply Chain

The U.S.-China trade war has escalated into a full-blown crisis for the toy industry, with tariffs as high as 145% pushing manufacturers to the brink. For a U.S-owned toy factory in Anhui province—supplying Walmart—the stakes have never been higher. As production halts, prices soar, and shelves empty, the ripple effects are shaking the retail giant’s supply chain to its core.

The Tariff Timebomb

The U.S. tariffs on Chinese imports, which began under the Trump administration in 2023, have evolved into a financial stranglehold for toy manufacturers. For a factory like Vivi Tong’s in Anhui, which produces toy cars for Walmart, the costs are existential. Orders were temporarily suspended in early 2025 as tariffs hit 145%, forcing Tong to accept price cuts to salvage business. “There’s really nothing we can do about it,” she admitted. “Toys are low value-added products—tariffs over 30% make compliance impossible.”

The data underscores the urgency:

A Crisis Beyond One Factory

The Anhui factory is emblematic of a broader industry collapse. U.S. toy companies like Basic Fun! (maker of Care Bears) and Duncan Toys (Frisbee) have halted shipments, warning of empty shelves by late 2025. The Toy Association’s survey reveals the depth of the problem:
- 81% of small U.S. toy firms delayed orders due to tariffs.
- 64% canceled orders entirely, with half of all U.S. toy businesses at risk of closure within months.

For Walmart, this translates to $100–$300 million in lost revenue (as projected by Hasbro’s CFO) and the specter of empty shelves during the critical holiday season.

The Cost of Reliance on China

The U.S. imports 80% of its toys from China, a dependency rooted in cost efficiency and specialized expertise. For instance, rooted doll hair—a critical component for American Girl dolls—is produced almost exclusively in China. Isaac Larian of MGA Entertainment (Bratz dolls) laments, “What am I supposed to do? Sell bald dolls?” Relocating production to the U.S. would double prices, pricing out consumers.

Political rhetoric has worsened the crisis. President Trump’s dismissal of concerns—saying children could “have two dolls instead of 30”—fueled backlash from industry leaders. Greg Ahearn of the Toy Association called the 145% tariff rate “untenable,” while Walmart’s suppliers face impossible demands to absorb tariff costs via price cuts.

The Geopolitical Chessboard

China’s exporters are fighting back. Yiwu, a major manufacturing hub, has pivoted to South America and the Middle East, reducing U.S. sales to 20–30% of business. Factories now offer Arabic and Spanish language training to engage new markets. Meanwhile, Beijing has refused tariff concessions, labeling U.S. demands “groundless.”

The standoff has global economic consequences. Goldman Sachs projects China’s 2025 GDP growth at 4.5%—below Beijing’s 5% target—due to trade disruptions. For U.S. retailers, the pain is immediate:

Conclusion: A Holiday Without Toys?

The U.S.-China trade war has pushed the toy industry to a tipping point. With tariffs at 145%, manufacturers face a stark choice: shut down, relocate (at prohibitive cost), or accept unsustainable losses. For Walmart, the risks are dire: empty shelves, soaring prices, and eroded consumer trust loom by Christmas 2025.

The data paints a grim picture:
- 96% of U.S. toy manufacturers are small- or medium-sized firms, with no financial buffer.
- $100–$300 million in losses for Hasbro and Mattel alone.
- 80% of U.S. toys rely on Chinese production—a gap no other nation can fill quickly.

Unless tariffs are slashed or exemptions granted, the holiday season could become a cautionary tale of supply chain failure. Investors in Walmart (WMT), Mattel (MAT), and Hasbro (HAS) should brace for volatility, as the toy crisis tests the resilience of retail giants and the global economy alike.

The clock is ticking—and the shelves are already emptying.