Toy prices surge ahead of holiday season
Sales growth expected to accelerate to 4.2% this year, report says
Consumers shop for Labubus and other art toys Dec. 12 at Pop Mart's Skullpanda pop-up shop in New York.
ECONOMY
NEW YORK — Cash-strapped U.S. consumers face a squeeze in their shopping budgets this holiday season, hit by the double whammy of tariffs and high energy costs.
While overall inflation is creeping up, toy prices are surging, with an increase of 6.6% in the last year, the latest U.S. consumer inflation data showed. Other products that depend on both overseas shipments and petroleum in their manufacturing processes also are posting higher prices.
The toy industry, which manufactures a majority of products sold in the U.S. in China, remains exposed to the Trump administration's shifting tariff policies. At the same time, toys are largely made of fossil-fuel-based plastics, meaning higher oil prices from the Middle East war likely also are contributing to the sticker shock consumers will run into on retail shelves.
"Those dual issues appear to be showing up in pricing," said David Silverman, senior director at Fitch Ratings, who focuses on retail and consumer companies. "The impact from the Iran conflict on commodity costs and shipping costs will certainly persist for the next several quarters."
Prices rose in September for apparel and footwear, too, according to the U.S. Consumer Price Index report. But the gain in toy prices was greater than in other consumer categories, just as Americans start drafting their holiday gift lists. Toy prices rose 4.2% from August, seasonally adjusted.
Soon after returning to the White House and imposing sweeping levies on imports from China, President Donald Trump in April 2025 acknowledged that his tariff policies might boost prices for consumers. At the time, he drew backlash when he suggested children might have "two dolls instead of 30 dolls."
Since then, his approval rating dropped sharply, particularly on economic issues. A Reuters/Ipsos poll through Oct. 5 showed just 21% of voters approve of Trump's handling of cost-of-living issues, with 67% disapproving.
U.S. tariffs on Chinese goods eased since the Trump administration's initial 145% rate, which then fell to 30% in May 2025. The U.S. and China also reached an agreement in late September to reduce tariffs on $30 billion each of imported and exported goods.
Still, current prices reflect the fallout from higher tariff rates, said Jay Foreman, the CEO of Basic Fun, a Florida-based toy company that makes Tonka trucks and Care Bears. The toy industry used those rates last year to price the goods that hit shelves this fall, he said.
"Tariffs add a noticeable cost to toys and other goods," he added. "Reducing them now will over time lower the price of toys as long as other global issues subside, like the various wars that are pushing up fuel and raw material costs."
Barbie maker Mattel is "seeing some moderate inflationary pressures associated with events in the Middle East," Chief Financial Officer Paul Ruh said on an earnings call in August after reporting that tariff-related c osts squeezed the toy maker's margins. Hasbro absorbed "higher input costs," Chief Financial Officer Gina Goetter said in July.
The two companies did not immediately respond to requests for comment on the factors affecting their prices.
Sales likely to accelerate
U.S. holiday sales growth is expected to accelerate to 4.2% this year, the National Retail Federation said last week, betting that consumers would remain resilient even as major retailers flag spending pressures.
"This year's forecast reflects our confidence that consumers will prioritize the holiday season even as they remain mindful of their budgets," NRF President and CEO Matthew Shay said.
Sales during November and December are projected to rise 4.2% to $1.013 trillion, compared with a 3.1% increase to $972 billion last year.
NRF said its forecast was based on economic modeling that incorporates consumer spending, employment, wages and historical retail sales data. It excludes automobile, gasoline and restaurant sales.
Higher household costs amid rising inflation have made shoppers more selective, with retailers including Walmart, Kohl's and American Eagle flagging pressure on consumer spending ahead of the critical holiday period.
A Deloitte survey of about 4,000 U.S. consumers showed last week that average household holiday spending could increase 4% to $1,654 this year, with gains driven by increased spending among Generation Z and millennial shoppers.
Consumers expect retail spending to rise 10% to $988, while spending on holiday activities is projected to fall 4% to $666, Deloitte said, adding that 79% of shoppers planning to gift an experience also aim to pair it with a physical item.
"The impact from the Iran conflict on commodity costs and shipping costs will certainly persist for the next several quarters."
David Silverman, senior director at Fitch ratings
