Morgan Stanley Says Pop Mart Can Withstand 130% US Tariff Shock
As the specter of renewed US-China trade hostilities looms, with a potential 130% tariff on Chinese-made toys threatening to disrupt supply chains, Morgan Stanley has issued a surprisingly sanguine analysis.
In a research note published on October 12, 2025, the investment bank argues that the market is overstating the risk to China's designer toy giant, Pop Mart International.
The detailed breakdown offers a crucial counter-narrative, suggesting the company's fundamentals, pricing power, and strategic foresight position it to weather the storm with minimal damage.
The note, which maintains an “Overweight” rating on the stock, gets straight to the point — asserting that the headline risk is largely manageable. The bank’s confidence stems from both industry-wide dynamics and company-specific agility.
“A higher US tariff on toys imported from China should not change Pop Mart's comparative advantages, as around 75–80% of US toy imports come from China,”
the analysts write, framing the tariff not as a targeted strike but as a broad-based industry pressure point that affects all players reliant on Chinese manufacturing.
A Muted Impact and a Vietnam Pivot
Morgan Stanley’s analysis quantifies the potential fallout, concluding it would be remarkably contained.
Even in a dire scenario, the bank’s modeling suggests a negligible hit to the bottom line.
This resilience is partly due to contingency plans that were shelved when trade tensions previously eased.
“The company had a plan to cover the vast majority of US merchandise from Vietnam, which was postponed after trade tensions eased previously.
Based on its prior indication, we think it would take 4–6 months to shift the supply chain if needed, although efficiency in Vietnam would lag behind China.”
More strikingly, the note projects that even if Pop Mart fails to pivot its supply chain or adjust prices, the financial consequence of a massive tariff hike would still be trivial.
“In a scenario where the US does impose ~130% tariff on toys from China since Nov 1 and PPMT makes no pricing adjustment,
we estimate ~1% earnings impact for 2025,” the report states.
The Margin Buffer: How Pop Mart Is Already Ahead
The core of Morgan Stanley’s argument rests on Pop Mart’s impressive profit margins in the US market, which provide a substantial cushion against cost pressures.
The company proactively raised prices earlier in 2025 — a move that inadvertently prepared it for the current turmoil.
“Pop Mart's basic figures were retailed at ~US$17 before around April 10, with new launches at US$19–20 after that.
Existing figures were then raised to US$19–20 in May–June (vs. basic plush from US$22 to US$28).
We note these hikes were prepared for a 50–55% tariff on China’s toys potentially, vs. around 30–35% on average in 1Q.
However, as the trade negotiation progressed, toy tariff has stayed at ~30% since May.
That likely resulted in higher US GPM in 2Q than 1Q, leading to ~80% US GPM in 1H25, we estimate.”
This existing margin “miracle” means the company has significant room to absorb tariff costs without immediately passing them all to consumers.
Even if it chose to, the required price adjustment would be modest.
“An increase of ~US$4.5 for a basic plush and US$3 for a basic figure can offset the incremental 100% tariff and keep its GP/OP per unit unchanged.”
A Durable Brand with Pricing Power
Ultimately, Morgan Stanley remains confident that Pop Mart’s strong brand resonance and limited direct competition in the US will protect its growth story.
“Our analysis shows that the US is a substantial market for IP products, where Pop Mart enjoys strong consumer appeal and limited direct competition.
We believe the proposed tariff, if eventually implemented, won’t alter this dynamic.”