Toy Industry Shows Model for Absorbing Tariffs

While the Trump Administration was at its height of unleashing new tariffs and tariff hikes last year, the toy industry saw sales growth. The way the industry handled imports, tariffs, and their supply chains may be a good lesson for businesses that import the goods they sell.

Eric Johnson wrote an interesting article on the topic for the Journal of Commerce (JOC) that looked at how U.S. toymakers absorbed tariffs, lowered imports, and increased sales. He wrote:

US toymakers increased their sales last year on lower import volumes by absorbing higher tariff costs rather than passing them on to consumers, according to industry analysts and executives.

Overall US retail toy sales grew 6% in 2025, led primarily by games, puzzles, building sets and trading cards — such as Pokémon or Magic the Gathering — according to the Toy Association, an advocacy and research group representing toy manufacturers and retailers. Containerized imports of those products, however, fell 7.7%, according to PIERS, a sister company of the Journal of Commerce within S&P Global.

Consumers of toys weren’t completely immune to cost increases, but toy retailers were strategic about where they passed on any cost increases:

“Consumers maybe picked up 5% or so at the most,” he said. “Manufacturers looked very selectively at which products could support a price increase.”

Instead, toymakers “redesigned” their supply chains to account for the rapid changes in tariff levels, [Greg Ahearn, president and CEO of the Toy Association] said.

…

“Tariffs on toys fluctuated incredibly over a short period of time given that development of toys takes two years on average. They went from 30% to 70% before settling at 30% for most of last year,” he said, adding that he doesn’t “believe tariffs will go beyond 30%, even with” Section 301 tariffs.

Adjusting when to import more or less based on price factors showed wisdom too.

Freight Rates a Mitigating Factor

Johnson’s article doesn’t mention a big mitigating factor that helped many retailers absorb higher tariff costs in 2025: falling freight rates.

Freight rates fell dramatically last year. By the third quarter of 2025, ocean freight rates were down by between 50 and 60%.

This side of the story seemed to be ignored by the mainstream media as it reported on tariff escalation and projected the higher tariffs to trigger major inflation. Instead, inflation decelerated in 2025, averaging 2.6% compared to 2.9% in 2024, which was the best annual average of inflation over the Biden Administration years (4.1% in 2023, 8% in 2022, and 4.7% in 2021).

In fact, freight rates were falling in 2025 right through the international shipping peak season when freight rates are normally climbing.

Over the last couple months, we’ve seen freight rates climb, largely with fuel bunker surcharges and GRIs (general rate increases) related to the conflict in Iran and the Strait of Hormuz.

Johnson’s article did touch on the war and oil prices as the toy industry looks to the future of this year:

Looking ahead to the rest of 2026, Ahearn said toy importers will be selling into a “pretty uncertain geopolitical and macroeconomic market,” in which an extended war in the Middle East could further increase manufacturing and transportation costs for shippers while dampening consumer spending.

“Petroleum and oil are in everything,” he said. “That being a volatile component has everyone worried, in terms of the cost of components and movement of goods. But having come through the last year … we don’t think the things that are driving growth are going to slow down, because they are built into people’s lives.”

Though somewhat volatile, oil prices have come down from their peak of around $123 per barrel to consistently under $100. However, they are still well-elevated from pre-war prices, around $72 a barrel. (All these numbers are Brent Crude rates).

Freight rates, though elevated, have steadied again. Actually, Drewry’s World Container Index (DWI) shows freight rates down 3% last week for Shanghai to Los Angeles, New York, and Rotterdam, as well as Rotterdam to New York. And it’s worth noting freight rates are nowhere near their highs of the geopolitical wakes of the Iran-backed Houthi attacks in the Red Sea and Gulf of Aden or the pandemic.

Furthermore, big importing industries, like the toy and furniture sectors, are about to get bolstered by tariff refunds, for which the federal government launched its refund portal yesterday.

How a Successful Furniture Importer Absorbed Tariffs

One of Universal Cargo’s successful furniture importer clients told our CEO, Devin Burke, about how he handled the tariff hikes with his company.

His company imported furniture from Vietnam. In 2025, President Trump’s tariffs on furniture from Vietnam hit 20%.

The importer absorbed 10%, his suppliers in Vietnam absorbed 5%, and the remaining 5% was passed on to the customer.

His business continued to do well, maintaining good profit and sales numbers.

While the furniture industry’s demand has different driving factors than the toy industry’s has, this successful furniture importer followed a similar strategy to what the toy industry did when it came to absorbing tariffs.

Compare Universal Cargo’s customer’s absorbing half of the furniture tariff while the other half was split between his suppliers and customers to the following summation of tariff absorption from Johnson’s JOC article:

Ahearn estimates manufacturers absorbed approximately two-thirds of the higher tariffs imposed by the Trump administration to shield their customers from price hikes, while suppliers absorbed the other third.

As earlier put, in selective places where the products supported it, “Consumers maybe picked up 5% or so at the most” in the toy industry.

Importing Furniture Vs. Importing Toys

The furniture industry didn’t see growth in 2025 like the toy industry did.

Most reporting, such as Furniture Today’s, seems to show sales were fairly flat in 2025 compared to 2024. There was actually a marginal decrease of less than 1%. Early in the year, there was a surge in furniture buying, which could be explained by customers front-loading their buying to get ahead of tariff hikes and potential price increases they might cause.

The toy industry tends to do well year-in and year-out because, as the toy CEO puts it in Johnson’s JOC article:

“Our category is not recession-proof, but it is recession-resistant,” Ahearn said. “It’s the last thing that parents and caregivers will pull back on.”

He even mentioned 2025’s numbers were helped by adults buying toys for themselves, “a boon to an industry that historically has relied heavily on holiday spending for children.”

The furniture industry, on the other hand, tends to be closely tied to the home-buying market. Not surprisingly, that market was largely flat in 2025, similar to furniture’s.

Conclusion

While demand factors vary from industry to industry, as they do with toys and furniture, similar tariff strategies have the potential to be successful across sectors.

Of course, importers shouldn’t blindly follow 2025’s successful roadmap. There are new bumps and curves ahead on the terrain of 2026 and 2027. For one thing, consumer expectations may change with the onset of tariff refunds. They may be looking for companies that share the savings of those returns with them and possibly resentful toward companies that don’t.

Still, the toy industry may have provided a good model for businesses to learn from. And those businesses that struggled with managing the challenges of tariffs well should also be able to learn from their misadventures.