Robert Insall comments on the impact of rising tariffs on toy brands

When tariffs rose at the start of 2025, Robert Insall, Partner at BTG, was asked to contribute his thoughts to a Bloomberg article about the impact on toy makers that were reliant on Chinese manufacturers for their products.

The article noted that the 145% tariff had a significant impact on a number of major, international brands causing one listed company to withdraw its guidance for the year and others to experience spreads on their US dollar bonds to widen substantially.

However, smaller companies were said to be the most at risk of greatest hurt with a survey of 400 SME US toy companies by The Toy Association finding that nearly half of those asked were expecting to go out of business within months due to tariff changes.

Robert comments:

“We certainly envisage companies in the sector, particularly those with significant debts, facing financial challenges. This may lead to restructurings being required  - potentially both financially and operationally.”

The article notes that the increase in tariffs will be hard to pass on to consumers in the US, especially as (at the time the story was written), US consumer confidence had fallen to a five-year low.

Robert comments:

“We see the toy sector, as one exposed to considerable seasonality and discretionary spending from the ultimate consumer, as being particularly challenged by the current economic climate and tariff impositions…driving cautious [consumer] decision making.”

Before the introduction of rising tariffs some companies had been diversifying supply chains. Some having moved to other countries, or removed focus on one country to several, or are set to open factories in the US in the coming years.

Read the full article here (Bloomberg)