Shares of Mattel (MAT) tumbled 5.03% in pre-market trading on Thursday, as investors react to growing concerns about the impact of tariffs on the toy industry. The significant drop comes as toy manufacturers grapple with the challenges posed by the ongoing trade tensions between the United States and China.

The toy industry is particularly vulnerable to these tariffs, with approximately 80% of toys sold in the U.S. originating from China, according to the Toy Association. Mattel, as one of the largest toy manufacturers, is facing increased pressure on its bottom line due to these import duties. The company, along with its competitors, is being forced to make difficult decisions to mitigate the impact of the 30% blanket tariff currently imposed on Chinese imports.

Industry-wide cost-cutting measures are being implemented, including reducing product features, simplifying designs, and altering packaging. These changes could potentially affect consumer perception and sales, especially as the crucial holiday shopping season approaches. While Mattel has not made specific announcements regarding its strategy, the company is likely considering similar tactics to maintain profitability in this challenging environment. The pre-market plunge suggests that investors are increasingly concerned about Mattel's ability to navigate these headwinds effectively.