Toy manufacturing won’t come to U.S., but price hikes will

One of the goals of President Donald Trump‘s 145% tariffs against China is to drive manufacturing back to America. But the odds of that are low, at least when it comes to toys.

“We don’t see that happening,” Mattel CEO Ynon Kreiz said on CNBC’s “Squawk Box” Tuesday, less than a day after the company withdrew annual financial targets.

“We need to remember that a significant part of toy creation happens in America,” he said. “Design, development, product engineering, brand management all happens in America. Making product, producing product in other countries, allows us to create quality products at affordable price points.”

Mattel has been diversifying its global manufacturing for nearly a decade in an effort to reduce its dependence on China. By the end of the year, less than 40% of Mattel’s product will be sourced from the country. Kreiz noted that in two years, no country will represent more than 25% of Mattel’s sourcing.

In the meantime, Mattel is taking mitigating actions to fully offset costs associated with Trump’s trade war with China, including raising prices in the U.S., while aiming to keep the cost of many toys low.

The company is expecting to keep between 40% and 50% of its products under $20, according to Roth analyst Eric Handler.

“This is something we are committed to do,” Kreiz said. “To continue to create quality product and find the right balance of price and value all in the service of the consumer.”

Since the tariffs were announced on April 2, Mattel’s stock is down about 19%.