US toy stores face bankruptcy threat amid tariffs and Iran war

Data from the US Bureau of Labor Statistics shows that toy prices in the United States rose by 8.3% between February and September 2026, with a year-on-year increase of 6.6% in September—the highest annual growth rate since 1988.

According to a report by US business news platform Business Insider, these figures are particularly significant as toy prices have typically declined over time, making the current rise a notable shift for the sector.

The toy industry, which sources most of its products for the US market from factories in China, remains vulnerable to legacy tariff policies from the Trump administration. At the same time, many toys are made from plastic derived from fossil fuels, meaning that higher oil prices—driven by the Iran war—are likely to further increase the cost pressures faced by consumers at retail stores.

The report noted that small toy retailers in the US are facing mounting pressure as toy prices have risen at their fastest pace in nearly four decades, amid a broader wave of inflation across the American economy.

The US platform attributed these current pressures on the toy sector to American tariffs, which have added burdens for importers. Small stores lack the financial flexibility to wait for tariff refunds, putting them at a disadvantage.

The report also highlighted the impact of the Iran war, which has driven up fuel prices and shipping costs for various goods, in addition to supply chain disruptions that increase procurement costs and complicate inventory planning.

The report included testimonies from store owners reflecting the direct impact on profits. Helen Dean, owner of Toy Safari in California for 34 years, said her usual profit margin of 7 to 8% fell to around 5% last year. She had to cut her own salary and stop hiring college students for the holiday season.

Dean added that major toy companies have long offered large retailers preferential pricing, and that tariffs, fuel costs, and supply disruptions have worsened this imbalance, noting that "everyone is losing out."

Daniel Orloff, co-owner of Clever Monsters, a New York store specializing in children's toys and educational products, said he recalculates prices for each order and sometimes absorbs part of the cost to keep prices reasonable for consumers. He sometimes knows before putting toys on the shelves that he will make no profit, noting that "small stores are more affected because they lack financial reserves or sufficient guarantees," which has forced him to open credit lines and take out loans.

Major companies are not immune to these pressures either. The report noted rising costs from tariffs, resin prices linked to oil, shipping, packaging, and labor.

US toy giant Hasbro reported an adjusted operating loss of $8 million in its consumer products segment for the second quarter of 2026, attributing this to extra tariff expenses and changes in entertainment mix and seasonality.

The report said Mattel's gross profit margin remains under pressure, though it has received about $90 million in tariff refunds.

It pointed to a growing gap between large companies able to absorb shocks and small retailers who bear the costs without safety nets. While independent stores rely on following trends and building close customer relationships, ongoing tariff and logistical pressures will be crucial in determining the future of toy prices and the survival of these stores.