Toy Stocks Rally After Levies Slashed

Introduction to Tariff Reduction

Toys made by Mattel, Hasbro and others are seen at a Macy’s store in New York. Shares of major toy makers rallied on Monday after the U.S. agreed to temporarily reduce tariffs on China.

The Agreement

The agreement will pause most tariffs and other trade barriers for 90 days, including reducing the 145% levy President Donald Trump had in place on Chinese imports to 30%.

Impact on Toy Makers

Shares of Mattel jumped more than 10% Monday, Hasbro traded up 6.5%, Jakks rose more than 15% and Funko soared a whopping 46.4%. The rally pushed shares of Hasbro above their trading level from early April, before Trump first announced his "reciprocal tariffs" on dozens of trade partners. The rest of the toy stocks are still trading below their April 1 closing prices.

Previous Concerns

The stocks had been hammered by Wall Street as investors anticipated manufacturing hiccups and price hikes resulting from the tariff scheme. The toy industry is heavily reliant on supply chains in China, leaving toy makers at the mercy of trade policy. Bank of America estimates both Mattel and Hasbro source about 40% of their U.S. product from China.

Estimated Impact

Last month, Hasbro estimated it would see as much as a $300 million hit to its bottom line if Trump’s 145% China duty held. Mattel, too, warned last week that it was taking mitigating actions to fully offset costs associated with Trump’s trade war with China, including raising prices in the U.S.

Previous Forecasts

Both companies had previously issued forecasts that assumed 25% tariffs on Chinese imports. Mattel retracted its guidance earlier this month, citing macroeconomic volatility and uncertainty surrounding U.S. tariffs. Hasbro, meanwhile, maintained the full-year guidance it issued last quarter, but warned investors about the uncertainty of the current tariff environment.

Company Responses

Representatives from Hasbro, Mattel, Jakks and Funko did not immediately respond to CNBC’s request for comment.

Conclusion

The temporary reduction in tariffs on China has provided a welcome boost to the shares of major toy makers. However, the industry remains vulnerable to changes in trade policy, and companies will need to continue to adapt to mitigate the impact of tariffs on their businesses.

FAQs

Q: What was the main reason for the rally in toy maker shares?
A: The main reason for the rally was the temporary reduction in tariffs on China, which will pause most tariffs and other trade barriers for 90 days.
Q: How much did the shares of Mattel and Hasbro rise?
A: Mattel’s shares jumped more than 10%, while Hasbro’s shares traded up 6.5%.
Q: What percentage of their U.S. product do Mattel and Hasbro source from China?
A: According to Bank of America, both Mattel and Hasbro source about 40% of their U.S. product from China.
Q: How much did Hasbro estimate it would be impacted by the 145% China duty?
A: Hasbro estimated it would see as much as a $300 million hit to its bottom line if the 145% China duty held.