Toy Makers Drop Batteries and Materials to Cut Costs Amid Tariff War

Rising Costs and Changing Strategies in the U.S. Toy Industry

As the holiday season approaches, U.S. parents may find themselves making an unexpected stop at the store—not for toys, but for batteries. This shift is driven by a combination of rising tariffs and cost-cutting measures by toy manufacturers, who are reevaluating their product designs and packaging to maintain profitability.

Toy makers that supply major retailers such as Walmart, Target, and Amazon are making significant changes to their products. For example, some companies are reducing the number of accessories in toy kitchen sets, removing batteries from electronic playsets, simplifying doll makeup, and cutting down on packaging. These adjustments are a response to the 30% tariff imposed on Chinese imports, which has placed a financial burden on many companies.

The impact of these tariffs is particularly felt by companies like Hasbro and Mattel, which rely heavily on Chinese manufacturing. According to the Toy Association, 80% of toys sold in the U.S. come from China. This dependency makes it difficult for these companies to avoid the effects of the tariffs, forcing them to make tough decisions about how to maintain their margins.

One example is Popular Playthings, an educational toy maker whose products are available on Amazon. The company recently delayed the launch of a magnetic cake set and made several modifications to reduce costs. The redesigned set now includes only one serving plate instead of two, uses cheaper packaging, and has a slightly weaker magnet. The price was also increased from $29.99 to $34.99.

CEO Jason Cheung explained that while the changes are necessary, they compromise the original design. “Originally, it would come with two plates so two kids can have cake at the same time,” he said. Now, “one (child) will serve, while the other can eat.” Despite this, Cheung emphasized that the product remains a multiplayer experience, albeit with fewer features.

Toys remain a top category during the U.S. holiday shopping season, which is the biggest spending period of the year. Adobe Analytics reported an $8.1 billion online spend on toys last holiday season, reflecting a 5.8% increase from the previous year. This growth highlights the importance of the toy industry, even as companies face challenges related to tariffs and production costs.

Basic Fun!, another toy manufacturer that sources most of its products from China, is navigating these challenges carefully. The company generates 40% of its annual sales in North America through Amazon, making it essential to keep products on the platform. CEO Jay Foreman stated that the company is offering retailers the option to remove batteries from electronic toys and plans to reduce or eliminate packaging in 2026.

“The consumer will either pay more or get less value,” Foreman said, highlighting the trade-offs companies must make. Some businesses are taking a different approach by shifting their supply chains out of China. Companies like MGA Entertainment, the maker of Bratz and L.O.L. Surprise! dolls, are investing in alternative manufacturing locations, although this process is costly and time-consuming.

Isaac Larian, CEO of MGA Entertainment, noted that it takes nine to 12 months to implement cost-cutting changes to toys. While the company is planning to modify its products for later next year, Larian stressed the importance of maintaining the "magic" of the toy. “Too much cost-cutting destroys the play value for the toy, and you turn off the kids,” he said.

Other companies are exploring innovative ways to reduce costs without sacrificing quality. Mattel has invested in "playable packaging," where the box itself becomes part of the game. Meanwhile, Hasbro is reimagining its board games, including Candy Land and Operation, as part of a broader effort to cut costs through changes in materials, manufacturing, and packaging.

ECR4Kids, which supplies school and daycare products, also relies heavily on Chinese manufacturing. Managing partner Lee Siegel described the company’s strong ties to Amazon, noting that it cannot make substantial changes to products like a $175 foam climbing set for toddlers. However, the company is focusing on efficiency, such as reducing color variations and optimizing packaging to use space more effectively.

These efforts reflect a broader trend in the industry, where companies are adapting to new economic realities. As tariffs and production costs continue to shape the market, toy manufacturers are finding creative ways to balance affordability, quality, and consumer expectations.