1 00:00:02,720 --> 00:00:10,560 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Do you want to 2 00:00:10,600 --> 00:00:12,119 Speaker 1: look at it number seven or do you want to 3 00:00:12,119 --> 00:00:19,520 Speaker 1: look at something else? Okay, a clear one. 4 00:00:19,880 --> 00:00:23,239 Speaker 2: This summer, Dylan Brochar's four and seven year old daughters 5 00:00:23,320 --> 00:00:26,440 Speaker 2: got hooked on a British cartoon that teaches kids about 6 00:00:26,440 --> 00:00:27,479 Speaker 2: counting and math. 7 00:00:27,960 --> 00:00:33,880 Speaker 3: One bed, Hello bird, one tree, Hello tree. 8 00:00:34,320 --> 00:00:37,720 Speaker 2: The stars of Number Blocks are bright, playful characters built 9 00:00:37,760 --> 00:00:41,319 Speaker 2: from stackable plastic blocks, with faces and hands that bring 10 00:00:41,400 --> 00:00:45,200 Speaker 2: them to life. They've captured the imagination of young kids everywhere, 11 00:00:45,479 --> 00:00:47,360 Speaker 2: including Dylan's youngest daughter. 12 00:00:47,920 --> 00:00:52,040 Speaker 1: She'll just sit and watch it and she'll sing the 13 00:00:52,080 --> 00:00:53,440 Speaker 1: song because one and one. 14 00:00:53,280 --> 00:00:57,120 Speaker 4: Mate two one is that's three. 15 00:00:58,400 --> 00:00:59,400 Speaker 5: It's calling for her. 16 00:01:03,680 --> 00:01:06,520 Speaker 2: The characters from Number Blocks are licensed by an American 17 00:01:06,560 --> 00:01:10,160 Speaker 2: toy maker, Learning Resources, which produces the line of toys, 18 00:01:10,840 --> 00:01:14,040 Speaker 2: and naturally, Dylan's daughter wanted a set of her own. 19 00:01:15,319 --> 00:01:18,960 Speaker 1: Like any other consumer, would you know. I got on 20 00:01:19,040 --> 00:01:22,640 Speaker 1: Google and found where to purchase them, and I think 21 00:01:22,720 --> 00:01:25,360 Speaker 1: the cheapest set we could find it was just like 22 00:01:25,400 --> 00:01:29,000 Speaker 1: a one, two and three blocks, so three little tiny toys. 23 00:01:29,000 --> 00:01:31,919 Speaker 1: It was you know, twenty dollars and the smaller sets 24 00:01:31,959 --> 00:01:34,440 Speaker 1: were twenty five thirty dollars each. 25 00:01:35,319 --> 00:01:38,880 Speaker 2: The price gave Dylan pause. He and his family live 26 00:01:38,920 --> 00:01:42,200 Speaker 2: in what he calls the cornfields of Indiana. As a 27 00:01:42,240 --> 00:01:45,399 Speaker 2: seventh grade science teacher, Dylan keeps a careful watch on 28 00:01:45,440 --> 00:01:49,800 Speaker 2: the family spending. In June, Learning Resources raised prices on 29 00:01:49,840 --> 00:01:52,960 Speaker 2: its toys by an average of six percent, which bumped 30 00:01:53,000 --> 00:01:56,120 Speaker 2: most number blocks up by a few dollars. That may 31 00:01:56,120 --> 00:01:58,880 Speaker 2: not seem like much, but for Dylan, who's seen costs 32 00:01:58,920 --> 00:02:02,600 Speaker 2: of everything from groceries to toys climb this year, the 33 00:02:02,720 --> 00:02:04,200 Speaker 2: increase was too steep. 34 00:02:04,600 --> 00:02:06,840 Speaker 5: You're getting less stuff for the same amount of money. 35 00:02:07,200 --> 00:02:10,840 Speaker 1: It's not in the budget to buy multiple sets of 36 00:02:11,200 --> 00:02:14,640 Speaker 1: prices of toys that are, you know, continuing to go 37 00:02:14,760 --> 00:02:16,040 Speaker 1: up the same way everything is. 38 00:02:17,520 --> 00:02:20,359 Speaker 2: The girls did get their number blocks, but it wasn't 39 00:02:20,400 --> 00:02:22,040 Speaker 2: from Amazon or the stores. 40 00:02:23,280 --> 00:02:24,800 Speaker 5: Are you coming helping us? Send it to the printer? 41 00:02:24,880 --> 00:02:29,560 Speaker 2: Baby Dylan sat down at his computer, designed the characters himself, 42 00:02:29,880 --> 00:02:32,480 Speaker 2: and printed them out on his home three D printer 43 00:02:33,040 --> 00:02:35,760 Speaker 2: for a fraction of the price the amount. 44 00:02:35,520 --> 00:02:38,040 Speaker 1: Of plastic that I use on It's less than fifty 45 00:02:38,120 --> 00:02:42,280 Speaker 1: cents for a little doll so it's it's crazy. 46 00:02:42,440 --> 00:02:45,160 Speaker 2: For Dylan. It was a thrifty hack to save money 47 00:02:45,600 --> 00:02:49,760 Speaker 2: for learning resources. It's a troubling tipping point when prices 48 00:02:49,800 --> 00:02:53,079 Speaker 2: climb too high. Some consumers don't just cut back, they 49 00:02:53,120 --> 00:02:59,080 Speaker 2: walk away altogether. But the company felt it had no choice. 50 00:02:59,400 --> 00:03:01,720 Speaker 6: We did that to kind of balance the books, if 51 00:03:01,720 --> 00:03:02,160 Speaker 6: you will. 52 00:03:02,760 --> 00:03:05,720 Speaker 2: Rick Woldenberg is the CEO of Learning Resources. 53 00:03:06,120 --> 00:03:10,480 Speaker 6: We raise prices middle single digits and we're trying to 54 00:03:10,680 --> 00:03:13,680 Speaker 6: make that stick. By that, I mean we're trying to 55 00:03:13,840 --> 00:03:18,560 Speaker 6: hold there. I really don't want a penny relating to 56 00:03:18,639 --> 00:03:19,440 Speaker 6: tariffs that. 57 00:03:19,400 --> 00:03:23,639 Speaker 2: I don't need, Rick says. Learning Resources price increase was 58 00:03:23,720 --> 00:03:26,280 Speaker 2: driven by President Donald Trump's tariff hikes. 59 00:03:26,760 --> 00:03:29,160 Speaker 4: Here is the deal that I will be offering to 60 00:03:29,280 --> 00:03:32,560 Speaker 4: every major company and manufacture on Earth. I will give 61 00:03:32,600 --> 00:03:35,320 Speaker 4: you the lowest taxes. 62 00:03:35,440 --> 00:03:38,040 Speaker 2: Since the start of his second term, President Trump has 63 00:03:38,040 --> 00:03:42,240 Speaker 2: imposed sweeping tariffs, most notably on China, where most toys 64 00:03:42,280 --> 00:03:45,280 Speaker 2: are made. The policy was billed as a way to 65 00:03:45,320 --> 00:03:49,320 Speaker 2: boost US tax revenue and push brands to bring manufacturing 66 00:03:49,480 --> 00:03:53,520 Speaker 2: back home, and Trump insists that foreign countries and companies 67 00:03:53,560 --> 00:03:56,120 Speaker 2: would be the ones footing the bill. Here he is 68 00:03:56,160 --> 00:03:57,920 Speaker 2: on c SPAN during his campaign. 69 00:03:58,600 --> 00:04:02,080 Speaker 4: A tariff is a tax or to foreign country. That's 70 00:04:02,080 --> 00:04:03,440 Speaker 4: the way it is whether you like it, and that 71 00:04:03,520 --> 00:04:04,680 Speaker 4: a lot of people like to soil, or. 72 00:04:04,640 --> 00:04:05,520 Speaker 6: It's a tax or US. 73 00:04:05,920 --> 00:04:09,800 Speaker 4: No, no, no, it's a tax on a foreign country. 74 00:04:10,400 --> 00:04:13,119 Speaker 2: That's not the way things have turned out for Learning Resources. 75 00:04:13,480 --> 00:04:16,160 Speaker 2: About half of its products are still made in China, 76 00:04:16,520 --> 00:04:19,960 Speaker 2: where tariffs hit one hundred and forty five percent in April, 77 00:04:19,960 --> 00:04:22,560 Speaker 2: though that's now been reduced to thirty one percent. The 78 00:04:22,640 --> 00:04:26,800 Speaker 2: company has accelerated its shift from China to neighboring Vietnam, 79 00:04:27,080 --> 00:04:30,000 Speaker 2: where exports to the US face a twenty percent levy. 80 00:04:30,640 --> 00:04:33,839 Speaker 2: But tariffs aren't paid by the foreign factories that make 81 00:04:33,880 --> 00:04:37,600 Speaker 2: the toys. They're paid by the importer when goods are 82 00:04:37,640 --> 00:04:41,839 Speaker 2: brought into the US, in this case Learning Resources. 83 00:04:41,760 --> 00:04:46,919 Speaker 6: And that's actual cash out the door from US, not 84 00:04:47,040 --> 00:04:52,080 Speaker 6: from China or India or Vietnam. No countries are paying it. 85 00:04:52,800 --> 00:04:56,040 Speaker 6: We write the checks, we borrow the money from the bank, 86 00:04:56,240 --> 00:04:57,599 Speaker 6: and send the money to the government. 87 00:04:58,800 --> 00:05:01,760 Speaker 2: In twenty twenty four, the company paid about two million 88 00:05:01,800 --> 00:05:05,760 Speaker 2: dollars in tariffs. This year that's jumped to about fourteen 89 00:05:05,800 --> 00:05:11,640 Speaker 2: million dollars. Like many American companies manufacturing overseas, Learning Resources 90 00:05:11,800 --> 00:05:16,200 Speaker 2: front loaded inventory before higher levees took effect. That's helped 91 00:05:16,200 --> 00:05:20,039 Speaker 2: it to avoid passing the full cost onto consumers. But 92 00:05:20,120 --> 00:05:23,200 Speaker 2: that wasn't the only battle it took on. In April, 93 00:05:23,279 --> 00:05:26,240 Speaker 2: the company took its fight to court, arguing the president 94 00:05:26,360 --> 00:05:30,520 Speaker 2: lacked authority to impose tariffs. The case now sits before 95 00:05:30,560 --> 00:05:33,720 Speaker 2: the Supreme Court. Rick is hopeful the court will rule 96 00:05:33,720 --> 00:05:38,320 Speaker 2: the tariffs illegal, but if it upholds administration's levees, he says, 97 00:05:38,360 --> 00:05:41,080 Speaker 2: his company won't be able to hold on much longer. 98 00:05:41,960 --> 00:05:45,920 Speaker 6: No American consumers should kid themselves as to who will 99 00:05:45,960 --> 00:05:50,560 Speaker 6: pay this tax. We can't absorb it, and they're kidding 100 00:05:50,600 --> 00:05:53,800 Speaker 6: themselves as they think that companies will absorb it. They 101 00:05:53,800 --> 00:05:57,320 Speaker 6: will just pass it on, maybe not all in one go, 102 00:05:57,839 --> 00:06:01,839 Speaker 6: but they will preserve their margin in order to remain viable. 103 00:06:02,400 --> 00:06:05,719 Speaker 6: And that means foreign countries are not paying less tax 104 00:06:06,200 --> 00:06:10,520 Speaker 6: and US companies will pass it along. So you know 105 00:06:10,560 --> 00:06:12,120 Speaker 6: who's going to pay it you. 106 00:06:18,640 --> 00:06:21,799 Speaker 2: This is the big take Asia from Bloomberg News. I'm wanha. 107 00:06:22,680 --> 00:06:25,560 Speaker 2: Over the past year, we followed an American toy company 108 00:06:25,640 --> 00:06:28,680 Speaker 2: as it fled China and scrambled to rebuild its supply 109 00:06:28,800 --> 00:06:32,520 Speaker 2: chains in Asia. Today, in our final chapter, we see 110 00:06:32,560 --> 00:06:35,359 Speaker 2: what the tariff chaos looks like when it lands on 111 00:06:35,440 --> 00:06:39,880 Speaker 2: American shores, when the bill finally comes due, and how 112 00:06:39,920 --> 00:06:48,160 Speaker 2: one family owned toy maker is pushing back in the courts. 113 00:06:53,600 --> 00:06:56,600 Speaker 6: This warehouse is three hundred and fifty six thousand square feets. 114 00:06:57,200 --> 00:07:00,280 Speaker 6: It's about a half mile around on the PREMI at her, 115 00:07:00,520 --> 00:07:03,039 Speaker 6: so if you walked along the wall in a circle, 116 00:07:03,600 --> 00:07:04,880 Speaker 6: they'd be about a half a mile. 117 00:07:06,960 --> 00:07:09,400 Speaker 2: Rick Woldenberg is taking us on a tour of what 118 00:07:09,480 --> 00:07:13,200 Speaker 2: he calls his Shiny Penny in Burning Hills outside of Chicago. 119 00:07:13,840 --> 00:07:16,560 Speaker 2: It's a warehouse the company built four years ago and 120 00:07:16,640 --> 00:07:19,920 Speaker 2: it holds nearly all of learning resources two thousand or 121 00:07:19,960 --> 00:07:23,320 Speaker 2: so products. When you order one of the company's toys online, 122 00:07:23,440 --> 00:07:26,680 Speaker 2: the Noodle Puzzles or Botley, the coating Robot, chances are 123 00:07:26,760 --> 00:07:31,880 Speaker 2: it will come through here. The space stretches out like 124 00:07:31,920 --> 00:07:36,040 Speaker 2: a canyon, and Bayer belt crisscross the floor, while shelves 125 00:07:36,080 --> 00:07:38,920 Speaker 2: stacked more than thirty feet high are loaded with pallets. 126 00:07:39,840 --> 00:07:42,560 Speaker 2: On the floor, a worker moves through the aisles, pulling 127 00:07:42,640 --> 00:07:46,080 Speaker 2: individual toys from the shelves and packing them into cardboard 128 00:07:46,120 --> 00:07:48,800 Speaker 2: boxes that make their way through the factory. 129 00:07:50,080 --> 00:07:52,800 Speaker 6: So you see she's wearing a headset so that's voice 130 00:07:52,800 --> 00:07:55,800 Speaker 6: to pick. And on her arm she has a little display, 131 00:07:55,840 --> 00:07:58,600 Speaker 6: and on her finger she has a scanner. And then 132 00:07:58,880 --> 00:08:02,760 Speaker 6: she just scanned the products, scans it out of its 133 00:08:02,840 --> 00:08:04,720 Speaker 6: ol pation, scans it into the box. 134 00:08:04,880 --> 00:08:07,960 Speaker 2: As Rick shows off the plant's technology, he says he's 135 00:08:08,040 --> 00:08:12,880 Speaker 2: frustrated by the Trump administration's narrative that companies importing goods 136 00:08:12,920 --> 00:08:16,720 Speaker 2: into the US are somehow bad actors that don't invest 137 00:08:16,800 --> 00:08:20,160 Speaker 2: at home, and that if you tax those companies heavily enough, 138 00:08:20,440 --> 00:08:23,200 Speaker 2: they'll be forced to build factories in America. 139 00:08:23,760 --> 00:08:26,920 Speaker 4: Companies know that if they build in America, there are 140 00:08:26,960 --> 00:08:30,000 Speaker 4: no tariffs, and that's why they're coming home to the 141 00:08:30,080 --> 00:08:34,880 Speaker 4: USA in record numbers. They're building factories and plants and level. 142 00:08:35,080 --> 00:08:37,680 Speaker 7: The main thing that the Trump administration is trying to 143 00:08:37,720 --> 00:08:41,720 Speaker 7: accomplish with tariffs is to make those goods from overseas 144 00:08:41,760 --> 00:08:45,440 Speaker 7: more expensive, so that the companies rethink where they buy 145 00:08:45,440 --> 00:08:47,880 Speaker 7: them from and source them in the US. 146 00:08:47,679 --> 00:08:48,120 Speaker 5: If they can. 147 00:08:48,800 --> 00:08:52,480 Speaker 2: Brendon Murray is Bloomberg's Global Trade editor. He spent much 148 00:08:52,480 --> 00:08:54,720 Speaker 2: of the last year covering the Trade Board and its 149 00:08:54,760 --> 00:08:58,440 Speaker 2: effect on global supply chains. He says, in some cases, 150 00:08:58,640 --> 00:09:02,679 Speaker 2: President Trump's tarf policy show signs of their intended outcome. 151 00:09:03,200 --> 00:09:06,440 Speaker 7: We've seen pharmaceutical companies say that they are going to 152 00:09:06,480 --> 00:09:11,880 Speaker 7: produce more drugs in the US, and so the effect 153 00:09:12,240 --> 00:09:16,080 Speaker 7: is happening. It's just happening at a very slow pace 154 00:09:16,480 --> 00:09:19,480 Speaker 7: and not a huge scale at this point. The big 155 00:09:19,559 --> 00:09:22,560 Speaker 7: question really is how much of it is going to 156 00:09:22,600 --> 00:09:26,680 Speaker 7: be these kinds of good paying factory jobs that the 157 00:09:26,720 --> 00:09:29,880 Speaker 7: administration thinks they're going to create, or are these a 158 00:09:29,920 --> 00:09:33,120 Speaker 7: lot of these going to be data centers and not 159 00:09:33,320 --> 00:09:37,960 Speaker 7: very labor intensive facilities that don't create this renaissance of 160 00:09:38,120 --> 00:09:42,240 Speaker 7: manufacturing jobs that the administration has pledged they're going to 161 00:09:42,280 --> 00:09:45,240 Speaker 7: try to accomplish. 162 00:09:45,840 --> 00:09:49,600 Speaker 2: Rick says Trump's vision of bringing back manufacturing jobs may 163 00:09:49,679 --> 00:09:54,040 Speaker 2: never materialize in his industry. That's because toy companies like 164 00:09:54,080 --> 00:09:58,360 Speaker 2: his rely heavily on manual labor, actual human hands that 165 00:09:58,480 --> 00:10:03,160 Speaker 2: braid doll hair, Teddy Bears, and solder electronics. For years, 166 00:10:03,200 --> 00:10:06,240 Speaker 2: the company's production has been concentrated in China and other 167 00:10:06,240 --> 00:10:09,840 Speaker 2: emerging markets where labor costs are lower. Rick says most 168 00:10:09,880 --> 00:10:13,360 Speaker 2: toy companies made that pivot decades ago. Same goes for 169 00:10:13,440 --> 00:10:16,559 Speaker 2: the fast network of suppliers the toy industry depends on 170 00:10:17,000 --> 00:10:21,200 Speaker 2: everything from plastics to electronics. The stuffing and rebuilding that 171 00:10:21,280 --> 00:10:25,080 Speaker 2: infrastructure here, he argues, just wouldn't make financial sense. 172 00:10:25,800 --> 00:10:29,720 Speaker 6: The jingoistic desire to have things made in the US 173 00:10:30,000 --> 00:10:34,840 Speaker 6: is a sort of recurrent theme. It comes and it goes. 174 00:10:35,640 --> 00:10:38,800 Speaker 6: And so for many years, at least ten, we've looked 175 00:10:38,840 --> 00:10:42,960 Speaker 6: for any factory that would work with us to make 176 00:10:43,160 --> 00:10:48,600 Speaker 6: anything so that we could cobble together a ten product range. 177 00:10:48,720 --> 00:10:51,920 Speaker 6: We have over two thousand products, ten products that are 178 00:10:51,920 --> 00:10:54,040 Speaker 6: made in the USA. So we go to a retailer 179 00:10:54,040 --> 00:10:57,920 Speaker 6: and say, here, made in the USA. Can't do it. 180 00:10:58,520 --> 00:11:02,120 Speaker 6: And so I firmly believe that there is no capacity 181 00:11:02,160 --> 00:11:04,320 Speaker 6: to make the kinds of products that we make. We're 182 00:11:04,320 --> 00:11:06,040 Speaker 6: going to stay in this business. We can't make the 183 00:11:06,080 --> 00:11:08,000 Speaker 6: stuff in the US. Nobody wants to make it. 184 00:11:10,679 --> 00:11:13,840 Speaker 2: What learning resources can build in the US? Is this 185 00:11:14,600 --> 00:11:20,200 Speaker 2: a high tech distribution center that maximizes automation. Inside conveyor 186 00:11:20,240 --> 00:11:23,680 Speaker 2: belts move boxes that are tracked by software. The system 187 00:11:23,720 --> 00:11:26,960 Speaker 2: knows exactly where boxes and exactly what needs to be 188 00:11:27,000 --> 00:11:31,080 Speaker 2: filled for customers. Gigantic robotic arms the size of cars 189 00:11:31,120 --> 00:11:34,000 Speaker 2: swing into action, wrapping palettes in plastic. 190 00:11:36,400 --> 00:11:40,959 Speaker 8: The system is paperless Mahant, and we've been payperless since 191 00:11:41,080 --> 00:11:46,480 Speaker 8: ninety nine and highly automated. I'll show you this pick 192 00:11:46,600 --> 00:11:49,280 Speaker 8: module here is for ship ins of full cases. 193 00:11:50,200 --> 00:11:53,920 Speaker 2: And though his warehouse doesn't make any toys, Rick says 194 00:11:54,000 --> 00:11:57,440 Speaker 2: it still represents a huge investment in the US that 195 00:11:57,520 --> 00:11:59,559 Speaker 2: the White House unfairly dismisses. 196 00:12:00,160 --> 00:12:03,839 Speaker 9: This building's not free and self that Senate is not free, 197 00:12:03,960 --> 00:12:06,480 Speaker 9: and like this is technology, and you know where this 198 00:12:06,679 --> 00:12:10,760 Speaker 9: was made, of course, in the United States. And there's 199 00:12:10,800 --> 00:12:14,000 Speaker 9: probably a dozen pieces of software here that are talking. 200 00:12:13,760 --> 00:12:16,200 Speaker 6: To each other. And guess where that comes from. 201 00:12:16,960 --> 00:12:19,920 Speaker 9: This is a high tech place. It's just not what 202 00:12:20,040 --> 00:12:23,960 Speaker 9: they have in mind. But like, come on, isn't this 203 00:12:24,040 --> 00:12:27,680 Speaker 9: an encouraged activity. Isn't this good? These people have jobs. 204 00:12:28,280 --> 00:12:30,680 Speaker 9: They're good jobs too, or else they wouldn't work here. 205 00:12:34,320 --> 00:12:37,640 Speaker 2: Rick had plans to open an even bigger distribution center, 206 00:12:38,000 --> 00:12:41,640 Speaker 2: doubling his footprint and adding scores of new employees, but 207 00:12:41,840 --> 00:12:44,520 Speaker 2: those ambitions have been put on ice as he's been 208 00:12:44,559 --> 00:12:48,600 Speaker 2: forced to divert funds from developing new projects to paying tariffs. 209 00:12:49,360 --> 00:12:52,320 Speaker 2: And Rick says the tariffs haven't just affected the company's 210 00:12:52,360 --> 00:12:57,160 Speaker 2: plans to expand and innovate, they've also eroded its existing business. 211 00:12:57,720 --> 00:12:59,920 Speaker 2: As he walks us through the factory, Rick says he 212 00:13:00,080 --> 00:13:03,040 Speaker 2: and his team have had to make tough decisions about 213 00:13:03,080 --> 00:13:07,280 Speaker 2: which products deserve space on the shelves. Some simply don't 214 00:13:07,280 --> 00:13:08,280 Speaker 2: make the cut anymore. 215 00:13:09,080 --> 00:13:15,440 Speaker 6: It's also sacrifice of new revenue, because as your backlist declines, 216 00:13:15,480 --> 00:13:17,440 Speaker 6: you want to bring in new products to create new 217 00:13:17,520 --> 00:13:21,720 Speaker 6: revenue opportunities. It's innovation, and our customers want new product. 218 00:13:22,240 --> 00:13:24,560 Speaker 6: You don't go into a toy store and say, show 219 00:13:24,600 --> 00:13:25,280 Speaker 6: me what's old. 220 00:13:27,480 --> 00:13:30,840 Speaker 2: Rick's decision to put new investments on hold while covering 221 00:13:30,880 --> 00:13:34,360 Speaker 2: tariff costs first is one that many small and mid 222 00:13:34,400 --> 00:13:38,199 Speaker 2: sized firms face. Brendan says, perhaps the biggest issue for 223 00:13:38,280 --> 00:13:42,280 Speaker 2: companies big and small is the unpredictability of the policy. 224 00:13:43,000 --> 00:13:47,559 Speaker 2: Fifty percent on India, new levies on Vietnam, renegotiated tariffs 225 00:13:47,640 --> 00:13:48,240 Speaker 2: on China. 226 00:13:48,840 --> 00:13:51,480 Speaker 7: The officials that we have talked to would say privately, 227 00:13:51,559 --> 00:13:54,959 Speaker 7: it's been chaotic. It's been it's kind of zigzagged back 228 00:13:55,040 --> 00:13:59,760 Speaker 7: and forth between going full on with tariffs and scaling 229 00:13:59,800 --> 00:14:03,360 Speaker 7: them back and creating carve outs and exclusions, and so 230 00:14:03,920 --> 00:14:07,760 Speaker 7: the end result the administration would probably say, look, we 231 00:14:07,840 --> 00:14:13,240 Speaker 7: have taken tariffs, which were essentially rarely used at the 232 00:14:13,240 --> 00:14:16,080 Speaker 7: beginning of the second Trump administration, to something that is 233 00:14:16,360 --> 00:14:19,240 Speaker 7: now kind of an everyday tool that the President has used, 234 00:14:19,480 --> 00:14:22,400 Speaker 7: the stock market has gotten used to it, and it's 235 00:14:22,440 --> 00:14:25,480 Speaker 7: just a matter of this adjustment that small companies in 236 00:14:25,520 --> 00:14:26,680 Speaker 7: particular are going. 237 00:14:26,680 --> 00:14:27,560 Speaker 5: To have to go through. 238 00:14:30,320 --> 00:14:34,240 Speaker 2: In his shiny Penny warehouse in Chicago, Rick says all 239 00:14:34,280 --> 00:14:38,040 Speaker 2: of that disruption leaves him feeling like a nomad moving 240 00:14:38,040 --> 00:14:40,440 Speaker 2: from one country to the next in search of a 241 00:14:40,440 --> 00:14:44,160 Speaker 2: safe harbor where teriff rates won't threaten his company's survival. 242 00:14:44,760 --> 00:14:47,720 Speaker 6: We go from jurisdiction to jurisdiction, and no matter what 243 00:14:47,760 --> 00:14:49,720 Speaker 6: we guess, it seems like it's wrong. 244 00:14:55,480 --> 00:14:58,600 Speaker 2: After the break, how the tariff shock waves have rippled 245 00:14:58,600 --> 00:15:03,360 Speaker 2: out from China a Chicago warehouse and into storefronts, and 246 00:15:03,440 --> 00:15:06,119 Speaker 2: how Learning Resources is fighting back. 247 00:15:19,040 --> 00:15:24,000 Speaker 3: This one. I love this one. This is by Learning Resources, 248 00:15:24,360 --> 00:15:25,920 Speaker 3: and I love this. 249 00:15:26,160 --> 00:15:30,000 Speaker 2: Kathleen Donahue owns Labyrinth Games and Puzzles in Washington, DC. 250 00:15:30,960 --> 00:15:34,120 Speaker 3: It's a speed dice rolling where you work on math skills, 251 00:15:34,400 --> 00:15:36,520 Speaker 3: so you're rolling dice as fast as you can. 252 00:15:36,680 --> 00:15:40,440 Speaker 2: In Dice of Fury, Kathleen celebrating fifteen years in business, 253 00:15:40,680 --> 00:15:43,560 Speaker 2: but she says this year has been a roller coaster. 254 00:15:44,240 --> 00:15:47,680 Speaker 3: It feels like every six months someone else hits me 255 00:15:47,720 --> 00:15:52,920 Speaker 3: in the face. This year has been challenging, but also 256 00:15:53,760 --> 00:15:54,720 Speaker 3: weirdly good. 257 00:15:55,640 --> 00:15:58,960 Speaker 2: Weirdly good because she feels the community is rallying to 258 00:15:58,960 --> 00:16:03,680 Speaker 2: support small business, but the economics are getting tougher. Brands 259 00:16:03,760 --> 00:16:07,640 Speaker 2: keep raising wholesale prices and retailers can't pass all of 260 00:16:07,640 --> 00:16:11,520 Speaker 2: that onto consumers without losing sales. She says there's a 261 00:16:11,600 --> 00:16:13,800 Speaker 2: limit to what families are willing to spend. 262 00:16:14,680 --> 00:16:18,200 Speaker 3: I feel like people are now going twenty five to 263 00:16:18,320 --> 00:16:22,680 Speaker 3: thirty dollars for a birthday present, but certainly we'd try 264 00:16:22,720 --> 00:16:26,640 Speaker 3: not to carry very many games that go over that 265 00:16:26,680 --> 00:16:27,640 Speaker 3: twenty five dollars. 266 00:16:28,040 --> 00:16:31,640 Speaker 2: Kathleen says she's seen inflation effect just about everyone lately, 267 00:16:32,080 --> 00:16:36,360 Speaker 2: but it's been especially hard on younger families. In Washington, DC, we. 268 00:16:36,360 --> 00:16:39,040 Speaker 3: Had tons of people in the store playing games and stuff, 269 00:16:39,040 --> 00:16:41,840 Speaker 3: but nobody was spending money, especially if they work for 270 00:16:41,880 --> 00:16:44,880 Speaker 3: the federal government. When they shut down the government, you know, 271 00:16:45,000 --> 00:16:47,040 Speaker 3: a lot of those people had to take loans to 272 00:16:47,200 --> 00:16:50,320 Speaker 3: just live. They're certainly not going to be spending on 273 00:16:51,120 --> 00:16:54,960 Speaker 3: games or puzzles like that's going to happen these days. 274 00:16:55,000 --> 00:16:57,600 Speaker 2: When Kathleen looks at the toy business, she sees an 275 00:16:57,600 --> 00:17:01,800 Speaker 2: industry in disarray. She says, small board game makers, often 276 00:17:01,880 --> 00:17:05,080 Speaker 2: mom and pop businesses, have been hit especially hard by 277 00:17:05,119 --> 00:17:08,320 Speaker 2: the chaos. She's been caught in the tariff trap herself, 278 00:17:08,480 --> 00:17:11,720 Speaker 2: paying board game publishers for goods that have never arrived. 279 00:17:12,119 --> 00:17:15,760 Speaker 3: They have my money, I have no games. Yes, there 280 00:17:15,800 --> 00:17:19,480 Speaker 3: have been multiple things that I've already paid for that 281 00:17:19,840 --> 00:17:22,520 Speaker 3: we're supposed to be here that aren't here because they 282 00:17:22,560 --> 00:17:25,720 Speaker 3: can't ship them from China because they don't have enough 283 00:17:25,760 --> 00:17:27,200 Speaker 3: money to pay the tariffs. 284 00:17:27,600 --> 00:17:30,520 Speaker 2: The math on her own business is getting brutal, and 285 00:17:30,600 --> 00:17:33,440 Speaker 2: Kathleen says she's making a lot less overall. 286 00:17:34,040 --> 00:17:38,200 Speaker 3: The prices have gone up, the margins have gone down. Basically, 287 00:17:38,440 --> 00:17:40,399 Speaker 3: it looks like our sales are up a little bit, 288 00:17:40,640 --> 00:17:43,600 Speaker 3: but our margins are down by two to three percent 289 00:17:43,760 --> 00:17:47,840 Speaker 3: across the board from this year this time to last 290 00:17:47,920 --> 00:17:50,880 Speaker 3: year this time. But we've also just said we have 291 00:17:51,000 --> 00:17:52,360 Speaker 3: to charge. 292 00:17:52,040 --> 00:17:56,840 Speaker 2: More Earlier this year, Trump made headlines when he suggested 293 00:17:56,920 --> 00:18:00,439 Speaker 2: the tariffs could mean fewer toys for American kids. 294 00:18:01,119 --> 00:18:04,040 Speaker 4: Maybe the children will have two dollars instead of thirty dollars, 295 00:18:05,160 --> 00:18:07,119 Speaker 4: and maybe the two dolls will cost a couple of 296 00:18:07,119 --> 00:18:08,399 Speaker 4: bucks more than they would normally. 297 00:18:08,560 --> 00:18:11,639 Speaker 2: Bloomberg's Brendan Murray says Trump and the White House are 298 00:18:11,760 --> 00:18:15,280 Speaker 2: using tariffs to safeguard an American way of life that 299 00:18:15,359 --> 00:18:19,320 Speaker 2: they feel is at risk, and higher prices for consumers 300 00:18:19,600 --> 00:18:20,320 Speaker 2: is a trade off. 301 00:18:21,000 --> 00:18:23,960 Speaker 7: I think that's the administration's view, is that the American 302 00:18:24,040 --> 00:18:27,040 Speaker 7: dream is not built around the ability to buy things 303 00:18:27,280 --> 00:18:30,919 Speaker 7: as cheaply as possible. It's built around having a middle 304 00:18:30,920 --> 00:18:34,320 Speaker 7: class job where you can educate your children's and have 305 00:18:34,440 --> 00:18:38,359 Speaker 7: a home and live that sort of romanticized version of 306 00:18:38,400 --> 00:18:43,640 Speaker 7: what Americans considered to be a prosperous lifestyle. And President 307 00:18:43,640 --> 00:18:47,520 Speaker 7: Trump believes that's then lost and he's trying to regain that, 308 00:18:47,760 --> 00:18:50,000 Speaker 7: and tariffs are the main tool that is using to 309 00:18:50,040 --> 00:18:56,240 Speaker 7: do so. 310 00:18:56,600 --> 00:19:01,120 Speaker 2: Back at Learning Resources headquarters in Illinois, Ldenberg says he 311 00:19:01,160 --> 00:19:04,240 Speaker 2: also wants to preserve the American dream that began with 312 00:19:04,320 --> 00:19:07,560 Speaker 2: his grandfather. His granddad started the business more than one 313 00:19:07,600 --> 00:19:10,520 Speaker 2: hundred years ago, and he and his children are running it. 314 00:19:11,080 --> 00:19:15,520 Speaker 2: But Rick's now facing a reality he never imagined, chaotic pricing. 315 00:19:15,800 --> 00:19:19,119 Speaker 2: The hibernation of products millions of dollars to move his 316 00:19:19,160 --> 00:19:19,840 Speaker 2: supply chain. 317 00:19:20,560 --> 00:19:24,240 Speaker 6: And this is what happens for stops. Start, turn left, 318 00:19:24,280 --> 00:19:27,439 Speaker 6: turn right, yo yo, here yo yo. There is my 319 00:19:27,600 --> 00:19:28,200 Speaker 6: life now. 320 00:19:29,119 --> 00:19:33,679 Speaker 2: In this April, Learning Resources sued Trump, arguing that the 321 00:19:33,680 --> 00:19:37,760 Speaker 2: president doesn't have the constitutional authority to impose these taxes 322 00:19:37,960 --> 00:19:42,920 Speaker 2: without congressional approval. Rick calls it taxation without representation. 323 00:19:43,400 --> 00:19:47,680 Speaker 6: I was kissed and the future of our company. You're 324 00:19:47,680 --> 00:19:49,920 Speaker 6: talking about over one hundred years of a family business, 325 00:19:50,000 --> 00:19:53,920 Speaker 6: which I see in the context of providing jobs to 326 00:19:54,040 --> 00:19:56,840 Speaker 6: thousands of people who live in the Chicago area since 327 00:19:56,920 --> 00:20:00,840 Speaker 6: nineteen sixteen and having a substantial impact on the community 328 00:20:00,920 --> 00:20:05,040 Speaker 6: I live in. I was not point to passively allow 329 00:20:05,119 --> 00:20:09,439 Speaker 6: this to be extinguished by politicians, and I thought this 330 00:20:09,600 --> 00:20:12,399 Speaker 6: was unlawful, so I sighed. 331 00:20:12,160 --> 00:20:16,119 Speaker 2: Sue suing the President of the United States isn't cheap. 332 00:20:16,480 --> 00:20:19,560 Speaker 2: The legal fees are likely to total millions of dollars, 333 00:20:20,040 --> 00:20:23,840 Speaker 2: and Rick's company is responsible for paying that bill. If 334 00:20:23,920 --> 00:20:27,280 Speaker 2: Learning Resources wins, it could get a refund of millions 335 00:20:27,280 --> 00:20:30,920 Speaker 2: of dollars in tariffs, money that could restart those canceled 336 00:20:30,920 --> 00:20:31,679 Speaker 2: product lines. 337 00:20:32,200 --> 00:20:37,800 Speaker 6: But if it loses, I can tell you that in 338 00:20:37,800 --> 00:20:42,440 Speaker 6: my opinion that is a horrific outcome that every American 339 00:20:42,560 --> 00:20:47,080 Speaker 6: should lose sleepover. It would affect people's faith in rule 340 00:20:47,119 --> 00:20:51,639 Speaker 6: of law. And if you doubt rule of law, you 341 00:20:51,760 --> 00:20:55,000 Speaker 6: also doubt whether your personal freedoms will be respected, and 342 00:20:55,040 --> 00:20:58,640 Speaker 6: the whole concept of the country unravels. 343 00:21:00,160 --> 00:21:03,439 Speaker 2: The Global trade War has reshaped the world map, moving 344 00:21:03,520 --> 00:21:07,560 Speaker 2: factories from China to Vietnam, India and other emerging countries, 345 00:21:08,000 --> 00:21:12,080 Speaker 2: but the shock waves have also hit home in West Lafayette, Indiana. 346 00:21:12,800 --> 00:21:17,399 Speaker 2: Inside Dylan Bushar's living room, Dylan's daughter has autism and 347 00:21:17,480 --> 00:21:20,800 Speaker 2: for her, toys like number blocks aren't just playthings. 348 00:21:21,280 --> 00:21:22,600 Speaker 5: It's comfortable for her. 349 00:21:23,040 --> 00:21:26,040 Speaker 1: I don't know if that makes sense, but like if 350 00:21:26,040 --> 00:21:29,399 Speaker 1: she's overwhelmed, if she's you know, overstimulated, which is what 351 00:21:29,520 --> 00:21:34,520 Speaker 1: happens to her oftentimes, like number blocks will like calm 352 00:21:34,560 --> 00:21:36,560 Speaker 1: her heart rate. Now, like she'll set in my laugh, 353 00:21:36,880 --> 00:21:39,640 Speaker 1: I'll hold her. I can feel her heart beating slower. 354 00:21:40,200 --> 00:21:40,439 Speaker 4: You know. 355 00:21:40,520 --> 00:21:43,879 Speaker 1: It's just it's something she's she knows and she's comfortable 356 00:21:43,920 --> 00:21:46,040 Speaker 1: with and she's learning. 357 00:21:47,000 --> 00:21:50,080 Speaker 2: Dylan was able to make his own version of number Blocks, 358 00:21:50,359 --> 00:21:53,600 Speaker 2: but he knows not every family has that option. For some, 359 00:21:53,720 --> 00:21:56,240 Speaker 2: the choice comes down to a twenty five dollars toy 360 00:21:56,520 --> 00:21:59,879 Speaker 2: or putting food on the table, and while he sidesteps 361 00:22:00,119 --> 00:22:03,639 Speaker 2: expense by three D printing sem toys, Dylan says the 362 00:22:03,720 --> 00:22:07,919 Speaker 2: decision to wage tariff wars weighs heavily on families like his. 363 00:22:08,600 --> 00:22:11,000 Speaker 2: He can see the impact of tariffs just by looking 364 00:22:11,000 --> 00:22:13,679 Speaker 2: at his plans for the holidays. Things are going to 365 00:22:13,680 --> 00:22:15,880 Speaker 2: be a lot less Christmasy this year. 366 00:22:16,600 --> 00:22:20,320 Speaker 1: For the girls because we spent the same amount of 367 00:22:20,320 --> 00:22:21,480 Speaker 1: money as we always do. 368 00:22:21,520 --> 00:22:23,440 Speaker 5: We just have less stuff. 369 00:22:23,640 --> 00:22:25,080 Speaker 1: You know, it's still going to be Christmas more, He's 370 00:22:25,080 --> 00:22:28,399 Speaker 1: still going to be presents to open, but it's noticeable 371 00:22:28,640 --> 00:22:30,240 Speaker 1: what a dollar is going. 372 00:22:30,040 --> 00:22:30,560 Speaker 5: To buy you. 373 00:22:31,119 --> 00:22:33,200 Speaker 2: So it sounds like there's going to be less presence 374 00:22:33,280 --> 00:22:35,760 Speaker 2: underneath the Christmas tree this year, even though you're spending 375 00:22:35,840 --> 00:22:36,360 Speaker 2: just as much. 376 00:22:36,800 --> 00:22:39,439 Speaker 1: Yeah, we didn't need to start a second ring around, 377 00:22:39,520 --> 00:22:42,720 Speaker 1: Like you know, there's no stacking. It's just a it's 378 00:22:42,720 --> 00:22:46,360 Speaker 1: a donut, so there's no there's no third dimension to it. 379 00:22:53,560 --> 00:22:56,720 Speaker 2: This is the big take Asia from Bloomberg News. I'm Wanha. 380 00:22:57,480 --> 00:23:00,200 Speaker 2: We followed learning resources from the factory floor. You're in 381 00:23:00,280 --> 00:23:03,720 Speaker 2: Vietnam and India to the Supreme Court. You can listen 382 00:23:03,720 --> 00:23:06,840 Speaker 2: to the full series wherever you get your podcasts. If 383 00:23:06,880 --> 00:23:09,280 Speaker 2: you like the episode, be sure to subscribe at Bloomberg 384 00:23:09,280 --> 00:23:12,840 Speaker 2: dot com slash podcast offer, leave a review, and even better, 385 00:23:12,960 --> 00:23:16,399 Speaker 2: tell a friend it really makes a difference. Thanks for listening, 386 00:23:16,560 --> 00:23:17,320 Speaker 2: See you next time.