1 00:00:02,720 --> 00:00:17,680 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:20,280 --> 00:00:23,720 Speaker 2: On a summer morning, a group of US Americans, Chinese, 3 00:00:23,800 --> 00:00:27,400 Speaker 2: and Vietnamese are packed in a van. We're moving fast 4 00:00:27,520 --> 00:00:30,640 Speaker 2: on a brand new highway that slices through Vietnam's Red 5 00:00:30,720 --> 00:00:34,200 Speaker 2: River Delta. We're on our way to a toy factory, 6 00:00:34,720 --> 00:00:37,440 Speaker 2: but just a few hundred yards away from the factory gate, 7 00:00:37,720 --> 00:00:41,280 Speaker 2: we've come to a dead halt, stem met by an 8 00:00:41,360 --> 00:00:44,839 Speaker 2: unexpected obstacle. Huge puddles. 9 00:00:46,280 --> 00:00:55,480 Speaker 3: Apparently didn't identify the. 10 00:00:51,640 --> 00:00:54,440 Speaker 2: The road leading to the factory gate is pocked marked 11 00:00:54,440 --> 00:00:58,319 Speaker 2: with water filled potholes as big as truck tires. The 12 00:00:58,360 --> 00:01:00,560 Speaker 2: only option is to get out and walk the last 13 00:01:00,680 --> 00:01:01,400 Speaker 2: hundred yards. 14 00:01:01,760 --> 00:01:07,240 Speaker 3: Okay, this is the truth. 15 00:01:09,800 --> 00:01:13,480 Speaker 2: It's barely nine am and it's already ninety degrees. My 16 00:01:13,560 --> 00:01:15,959 Speaker 2: travel companion is ready to face the heat. 17 00:01:16,920 --> 00:01:19,440 Speaker 3: It's hard to dress for these factory tours. I've now 18 00:01:19,480 --> 00:01:22,040 Speaker 3: just basically green an attire of a T shirt and 19 00:01:22,280 --> 00:01:24,000 Speaker 3: some sort of very light white pants. 20 00:01:24,760 --> 00:01:28,520 Speaker 2: I'm here with Alana Woldenberg Ruffman, vice president of marketing 21 00:01:28,600 --> 00:01:32,440 Speaker 2: and product development for Learning Resources, a family run toy 22 00:01:32,480 --> 00:01:36,400 Speaker 2: company just outside of Chicago. She's a mechanical engineer by 23 00:01:36,400 --> 00:01:39,640 Speaker 2: training and helps run the family business alongside her dad, 24 00:01:40,000 --> 00:01:42,720 Speaker 2: CEO Rick Woldenberg, and her two brothers. 25 00:01:43,040 --> 00:01:45,960 Speaker 3: You know, some of my earliest memories with toys would 26 00:01:45,959 --> 00:01:49,520 Speaker 3: be like the Learning Resources cash register, or like the 27 00:01:49,600 --> 00:01:53,240 Speaker 3: Pretend phone, which is a little dated at this point. 28 00:01:53,280 --> 00:01:54,680 Speaker 3: You need the Pretend iPhone. 29 00:01:55,080 --> 00:01:58,160 Speaker 2: The company traces its roots back more than a century 30 00:01:58,200 --> 00:02:02,040 Speaker 2: ago to Lana's great grand father. These days, if you 31 00:02:02,080 --> 00:02:04,600 Speaker 2: have young kids, there's a chance you know their products. 32 00:02:04,920 --> 00:02:08,480 Speaker 2: Botley the coding robot, and Pretend cash registers are hit 33 00:02:08,639 --> 00:02:09,400 Speaker 2: with consumers. 34 00:02:10,440 --> 00:02:15,880 Speaker 4: Hey you see money to Yes, this is the pretendent plane, 35 00:02:15,919 --> 00:02:18,360 Speaker 4: Learning Resources cash registered. 36 00:02:21,240 --> 00:02:23,880 Speaker 2: Most of these toys are made in China and sold 37 00:02:23,919 --> 00:02:27,840 Speaker 2: through major retailers like Target and Walmart. For years, it 38 00:02:27,960 --> 00:02:32,400 Speaker 2: was a winning formula. Efficient Chinese factories produced low cost 39 00:02:32,440 --> 00:02:40,640 Speaker 2: goods and American consumers benefited with affordable prices. But President 40 00:02:40,680 --> 00:02:43,799 Speaker 2: Donald Trump's returned to the White House, an escalation of 41 00:02:43,840 --> 00:02:46,720 Speaker 2: the trade war that began in his first term has 42 00:02:46,880 --> 00:02:51,480 Speaker 2: upended that formula. On April second, Trump announced the steepest 43 00:02:51,480 --> 00:02:54,679 Speaker 2: American tariffs in more than a century, with a ten 44 00:02:54,720 --> 00:02:59,040 Speaker 2: percent minimum tariff and even higher duties on some sixty nations, 45 00:02:59,480 --> 00:03:03,200 Speaker 2: starting with China. 46 00:03:01,919 --> 00:03:06,680 Speaker 5: So if you look at that China first row, China 47 00:03:07,160 --> 00:03:12,520 Speaker 5: sixty seven percent, that's tariffs charged to the USA, including 48 00:03:13,080 --> 00:03:15,480 Speaker 5: currency manipulation and trade barriers. 49 00:03:15,600 --> 00:03:19,960 Speaker 2: For Learning Resources, this was a gut punch. The company 50 00:03:19,960 --> 00:03:23,560 Speaker 2: had already started shifting production out of China during Trump's 51 00:03:23,600 --> 00:03:26,560 Speaker 2: first term, but at the beginning of the year, about 52 00:03:26,600 --> 00:03:29,760 Speaker 2: sixty percent of its toys were still made there. Here's 53 00:03:29,760 --> 00:03:31,960 Speaker 2: Alana at one hundred and forty five percent. 54 00:03:32,280 --> 00:03:34,640 Speaker 3: It's a van on our products. People didn't know what 55 00:03:34,720 --> 00:03:35,760 Speaker 3: was going to happen to our business. 56 00:03:36,480 --> 00:03:40,400 Speaker 2: Within weeks, Learning Resources took the Trump administration to court 57 00:03:40,800 --> 00:03:44,480 Speaker 2: and won. A district judge in Washington, d c. Ruled 58 00:03:44,480 --> 00:03:47,640 Speaker 2: the president's tariffs were illegal, but the Levey stayed in 59 00:03:47,680 --> 00:03:51,360 Speaker 2: place as Trump appealed. Now the case is headed to 60 00:03:51,400 --> 00:03:54,320 Speaker 2: the Supreme Court, with arguments set for next week. 61 00:03:55,000 --> 00:03:57,240 Speaker 3: We're the only private company that brought our own lawsuit. 62 00:03:57,480 --> 00:04:00,640 Speaker 3: We were kind of faced with the decision of die 63 00:04:00,760 --> 00:04:01,480 Speaker 3: or do something. 64 00:04:02,800 --> 00:04:06,000 Speaker 2: While battling it out in court, the company also began 65 00:04:06,120 --> 00:04:10,120 Speaker 2: rebuilding the manufacturing network it has been decades developing. 66 00:04:11,000 --> 00:04:12,680 Speaker 3: We don't know what the teriff rates are going to 67 00:04:12,720 --> 00:04:15,040 Speaker 3: be at any given time, on any given day, and 68 00:04:15,120 --> 00:04:18,360 Speaker 3: so we're proactively out here trying to diversifire our supply 69 00:04:18,480 --> 00:04:22,000 Speaker 3: chain so that we are able to ride the waves. 70 00:04:22,400 --> 00:04:24,159 Speaker 3: At the end of the day, we're just we're betting 71 00:04:24,200 --> 00:04:26,760 Speaker 3: it is highly likely that some products that we move, 72 00:04:26,920 --> 00:04:28,160 Speaker 3: we will have to move again. 73 00:04:28,760 --> 00:04:32,560 Speaker 2: We're following along as Learning Resources is forced to shift 74 00:04:32,600 --> 00:04:36,360 Speaker 2: its supply chain to Vietnam, and as a company tries 75 00:04:36,440 --> 00:04:40,960 Speaker 2: to move forward, it's also confronting a hard truth. China's 76 00:04:41,040 --> 00:04:45,880 Speaker 2: manufacturing infrastructure, built over decades isn't something you can walk 77 00:04:45,920 --> 00:04:47,400 Speaker 2: away from overnight. 78 00:04:47,839 --> 00:04:50,920 Speaker 3: Because China has been manufacturing hub for so long, it 79 00:04:51,080 --> 00:04:55,560 Speaker 3: developed a lot of expertise. That same infrastructure doesn't exist 80 00:04:55,600 --> 00:05:04,359 Speaker 3: anywhere else in the world today. 81 00:05:04,400 --> 00:05:07,440 Speaker 2: This is the big take Asia from Bloomberg News. I'm 82 00:05:07,440 --> 00:05:11,920 Speaker 2: Wanha today on the show. You can move manufacturing out 83 00:05:11,920 --> 00:05:15,320 Speaker 2: of China, but can you really take China out of manufacturing? 84 00:05:15,839 --> 00:05:18,599 Speaker 2: We hit the road with an American toymaker caught in 85 00:05:18,680 --> 00:05:22,920 Speaker 2: the crosshairs of Trump's shifting trade policy and uncover the 86 00:05:23,040 --> 00:05:42,240 Speaker 2: hidden costs of trying to stay one step ahead. Before 87 00:05:42,279 --> 00:05:45,080 Speaker 2: this trip, I hadn't been back to Northern Vietnam since 88 00:05:45,120 --> 00:05:48,919 Speaker 2: the pandemic. I was born in Saigon, when it was 89 00:05:48,960 --> 00:05:52,920 Speaker 2: still the capital of South Vietnam, a country divided by war. 90 00:05:53,800 --> 00:05:56,680 Speaker 2: After the US withdrew in defeat in nineteen seventy five, 91 00:05:56,960 --> 00:06:00,640 Speaker 2: the country was unified under Communist rule, but it was 92 00:06:00,720 --> 00:06:04,680 Speaker 2: left deeply impoverished. Families like mine, who had fought on 93 00:06:04,760 --> 00:06:09,680 Speaker 2: the losing side faced bleak futures. Here's my dad recounting 94 00:06:09,680 --> 00:06:12,159 Speaker 2: the fears that gripped him after the war ended. 95 00:06:12,600 --> 00:06:16,440 Speaker 6: I feel danger. I don't know when they kept me 96 00:06:16,680 --> 00:06:19,880 Speaker 6: put to the yale, and I don't know what they 97 00:06:19,960 --> 00:06:22,880 Speaker 6: can do because I am a soldier. 98 00:06:23,440 --> 00:06:26,799 Speaker 2: My dad fought for South Vietnam against the Communist forces. 99 00:06:27,440 --> 00:06:29,800 Speaker 2: After the war, soldiers like him were sent to re 100 00:06:29,960 --> 00:06:34,400 Speaker 2: education camps and their families were branded as traders. They 101 00:06:34,400 --> 00:06:38,760 Speaker 2: were denied access to jobs, higher education, opportunities to improve 102 00:06:38,800 --> 00:06:39,560 Speaker 2: their lives. 103 00:06:40,320 --> 00:06:44,040 Speaker 6: Then I don't see a future for me. Then how 104 00:06:44,080 --> 00:06:48,800 Speaker 6: about you guy? You know no future. That's the reason 105 00:06:49,320 --> 00:06:51,400 Speaker 6: we tried to escap You know, we need to go 106 00:06:52,560 --> 00:06:53,279 Speaker 6: leave Vietnam. 107 00:06:53,320 --> 00:06:53,600 Speaker 3: We go. 108 00:06:54,600 --> 00:06:56,880 Speaker 2: We fled as boat refugees when I was a child 109 00:06:57,120 --> 00:07:00,960 Speaker 2: and resettled in California. I still remember my parents reading 110 00:07:01,000 --> 00:07:04,960 Speaker 2: letters from relatives back home. My mom reduced to tears 111 00:07:05,080 --> 00:07:08,320 Speaker 2: by the accounts of failed harvests, the lack of medicine, 112 00:07:08,480 --> 00:07:12,800 Speaker 2: and please for financial help. In the late eighties, Vietnam 113 00:07:12,880 --> 00:07:16,760 Speaker 2: began economic reforms, but it wasn't until nineteen ninety four, 114 00:07:16,880 --> 00:07:19,920 Speaker 2: when the US lifted a decades long trade embargo, that 115 00:07:20,000 --> 00:07:22,320 Speaker 2: the country truly opened to global trade. 116 00:07:22,680 --> 00:07:25,520 Speaker 5: A year after Vietnam and the US signed a historic 117 00:07:25,600 --> 00:07:28,840 Speaker 5: trade pact, sales at this garment factory in Hanoi have 118 00:07:28,920 --> 00:07:30,320 Speaker 5: hit record levels. 119 00:07:30,760 --> 00:07:34,040 Speaker 2: Orders in twenty ten, more than thirty years after my 120 00:07:34,120 --> 00:07:37,560 Speaker 2: family left, I was hired as Bloomberg's Vietnam Beer chief 121 00:07:37,600 --> 00:07:42,160 Speaker 2: in Hanoi, where we chronicled the country's growing manufacturing prowess. 122 00:07:42,600 --> 00:07:46,040 Speaker 2: I followed Vietnam's rise since then, but nothing prepared me 123 00:07:46,240 --> 00:07:48,920 Speaker 2: for the pace of change I'm seeing now while look 124 00:07:49,040 --> 00:07:53,560 Speaker 2: all of us, Look how much construction. We're heading to 125 00:07:53,640 --> 00:07:57,640 Speaker 2: a factory called dum Fun. It's tucked inside an industrial 126 00:07:57,720 --> 00:08:00,640 Speaker 2: park in the town of Fully, about an hours drive 127 00:08:00,760 --> 00:08:03,239 Speaker 2: south of Hanoi and roughly one hundred and thirty miles 128 00:08:03,240 --> 00:08:06,680 Speaker 2: from the Chinese border. The industrial zone was approved in 129 00:08:06,680 --> 00:08:10,560 Speaker 2: twenty seventeen, just months after President Trump first took office 130 00:08:10,880 --> 00:08:15,080 Speaker 2: and began threatening China with trade actions. Within two years, 131 00:08:15,320 --> 00:08:21,000 Speaker 2: rice fields were transformed into a sprawling complex of factories Dungfu, 132 00:08:21,320 --> 00:08:24,760 Speaker 2: stretching nearly two football fields. Long was started by a 133 00:08:24,880 --> 00:08:28,680 Speaker 2: Chinese entrepreneur who ran a manufacturing plant in eastern China 134 00:08:28,800 --> 00:08:29,720 Speaker 2: for fifteen years. 135 00:08:30,320 --> 00:08:33,920 Speaker 7: They are tiny, is like kind a big palm in 136 00:08:33,920 --> 00:08:34,280 Speaker 7: the front. 137 00:08:34,800 --> 00:08:38,640 Speaker 2: That's Jimmy Lee, a manager from Longshore. The company makes 138 00:08:38,679 --> 00:08:41,720 Speaker 2: toys in China and is a longtime partner of Learning 139 00:08:41,720 --> 00:08:45,679 Speaker 2: Resources in Vietnam. They're helping to connect the American company 140 00:08:45,760 --> 00:08:48,960 Speaker 2: to factories like this one, with Jimmy often on the 141 00:08:48,960 --> 00:08:52,760 Speaker 2: ground to oversee projects. He's talking about the pond at 142 00:08:52,800 --> 00:08:56,760 Speaker 2: the factory gate. In Chinese culture, having water near the 143 00:08:56,920 --> 00:09:00,120 Speaker 2: entrance is seen as a sign of good luck. And 144 00:09:00,160 --> 00:09:02,959 Speaker 2: if you add a north facing gate even better. 145 00:09:03,400 --> 00:09:06,320 Speaker 8: It seems like they had a yeah, one hundred percent 146 00:09:06,440 --> 00:09:10,280 Speaker 8: north door with a pond in the front. You know, 147 00:09:10,400 --> 00:09:11,720 Speaker 8: it's a It's a typical. 148 00:09:11,360 --> 00:09:12,120 Speaker 7: Full set up. 149 00:09:12,920 --> 00:09:16,520 Speaker 2: Elana and her team are visiting Dumbfung for the first time. 150 00:09:17,120 --> 00:09:19,600 Speaker 2: It's one of a dozen factories they'll visit this week 151 00:09:19,679 --> 00:09:23,400 Speaker 2: to assess production and find ways to control costs that 152 00:09:23,480 --> 00:09:28,400 Speaker 2: are already rising. We begin our tour in the warehouse 153 00:09:28,600 --> 00:09:32,280 Speaker 2: where bags of raw materials, including plastic resin are stacked 154 00:09:32,400 --> 00:09:33,360 Speaker 2: five feet high. 155 00:09:33,400 --> 00:09:35,120 Speaker 3: So one of the things that we've been working through 156 00:09:35,160 --> 00:09:38,319 Speaker 3: with our factories is literally where they get the raw materials. 157 00:09:38,600 --> 00:09:42,640 Speaker 3: That's a big element of controlling the cost. So, like 158 00:09:42,679 --> 00:09:43,559 Speaker 3: this is ABS. 159 00:09:43,559 --> 00:09:48,200 Speaker 2: Alana leans over sacks of glossy plastic pellets, scanning the labels. 160 00:09:48,679 --> 00:09:52,199 Speaker 2: She's inspecting ABS, a common plastic used to make lego 161 00:09:52,240 --> 00:09:54,560 Speaker 2: bricks as well as learning resources toys. 162 00:09:54,640 --> 00:09:54,840 Speaker 1: Yeah. 163 00:09:54,840 --> 00:09:56,439 Speaker 3: So do you know if all the avs comes from 164 00:09:56,480 --> 00:09:58,199 Speaker 3: China for this factory or are they getting it from 165 00:09:58,200 --> 00:10:02,080 Speaker 3: other countries too. 166 00:10:01,000 --> 00:10:03,800 Speaker 8: Out of China also, but plain sauce to be in China. 167 00:10:03,960 --> 00:10:06,640 Speaker 3: Yeah, And as there is a particularly challenging type of plant. 168 00:10:06,480 --> 00:10:09,360 Speaker 2: It turns out only two types of plastic the factory 169 00:10:09,400 --> 00:10:12,800 Speaker 2: needs can be sourced locally in Vietnam. And we soon 170 00:10:12,880 --> 00:10:16,680 Speaker 2: realized the trucks pulling into the factory earlier were loaded 171 00:10:16,720 --> 00:10:21,280 Speaker 2: with raw materials from China, making routine deliveries of imported parts. 172 00:10:24,440 --> 00:10:27,400 Speaker 2: We passed the warehouse and step onto the factory floor, 173 00:10:27,679 --> 00:10:30,640 Speaker 2: stopping in front of an injection molding machine. 174 00:10:30,920 --> 00:10:34,200 Speaker 3: So there's piping in here that's feeding in the plastic 175 00:10:34,240 --> 00:10:36,600 Speaker 3: pullets that we just saw and it's going to melt 176 00:10:36,640 --> 00:10:40,000 Speaker 3: them into a shape of the steelhol. 177 00:10:40,640 --> 00:10:44,200 Speaker 2: The plant is currently making more than fifty learning resources toys, 178 00:10:44,400 --> 00:10:50,439 Speaker 2: with more coming in. One of them is Campfire chat Mellows, 179 00:10:50,640 --> 00:10:53,640 Speaker 2: a product that's being made in Vietnam for the first time. 180 00:10:54,280 --> 00:10:58,920 Speaker 2: It's a storytelling toy designed to spark conversations. Imagine a 181 00:10:58,960 --> 00:11:02,800 Speaker 2: cozy campfire that flickers with led light. There are soft, 182 00:11:02,840 --> 00:11:07,319 Speaker 2: squishy marshmallows called chat mellows, each printed with a unique emoji, 183 00:11:07,640 --> 00:11:10,720 Speaker 2: a magic wand a storm a jigsaw puzzle. 184 00:11:11,040 --> 00:11:13,319 Speaker 3: Once upon time, there is one little boy who is 185 00:11:13,360 --> 00:11:15,040 Speaker 3: playing jigsaw puzzles. 186 00:11:15,240 --> 00:11:19,559 Speaker 2: And then these images are story starters. Kids slide them 187 00:11:19,559 --> 00:11:22,280 Speaker 2: onto sticks and pretend to roast them over the campfire 188 00:11:22,600 --> 00:11:28,720 Speaker 2: while telling stories to each other. At the injection molding machine, 189 00:11:28,760 --> 00:11:32,600 Speaker 2: a robotic steal arm grabs onto squishy marshmallows that have 190 00:11:32,679 --> 00:11:36,320 Speaker 2: emerged from the mold. Elana says that kind of automation 191 00:11:36,600 --> 00:11:39,560 Speaker 2: is actually missing in many of the factories she's visited 192 00:11:39,640 --> 00:11:40,079 Speaker 2: this week. 193 00:11:40,840 --> 00:11:43,439 Speaker 3: The automation is a period, so like you look around 194 00:11:43,480 --> 00:11:45,480 Speaker 3: and there's a lot of people, but there's not as 195 00:11:45,520 --> 00:11:48,400 Speaker 3: many machines covering the same thing that a person might do, 196 00:11:48,679 --> 00:11:51,120 Speaker 3: and so that's gonna bring the cost up a little bit. 197 00:11:51,880 --> 00:11:56,280 Speaker 2: In Vietnam, factories still rely heavily on manual labor because 198 00:11:56,320 --> 00:12:00,040 Speaker 2: advanced machinery like this isn't easy to come by and 199 00:12:00,880 --> 00:12:04,479 Speaker 2: often needs to be imported, likely from China, which dominates 200 00:12:04,559 --> 00:12:07,920 Speaker 2: much of the market for toy manufacturing. And even in 201 00:12:07,960 --> 00:12:11,480 Speaker 2: factories that do have automation like this one, Alana's noticed 202 00:12:11,520 --> 00:12:13,479 Speaker 2: something else that affects productivity. 203 00:12:13,960 --> 00:12:16,559 Speaker 3: So whereas in China, am I in tape one worker 204 00:12:16,600 --> 00:12:18,960 Speaker 3: to worker machine, in Vietnam I will take two workers 205 00:12:19,160 --> 00:12:21,439 Speaker 3: because they don't understand they're not as familiar with the 206 00:12:21,480 --> 00:12:23,839 Speaker 3: machine free it. So that'll take six to twelve months 207 00:12:23,840 --> 00:12:26,040 Speaker 3: for them to really learn it and to get it 208 00:12:26,080 --> 00:12:29,840 Speaker 3: to the same level of automation that exists already in China. 209 00:12:30,559 --> 00:12:33,800 Speaker 2: You know you're trying to squeeze, Jimmy says. This factory 210 00:12:33,920 --> 00:12:36,640 Speaker 2: has about a third more workers than a similar plant 211 00:12:36,679 --> 00:12:41,079 Speaker 2: in China, and unlike Chinese laborers who've worked years or 212 00:12:41,120 --> 00:12:44,840 Speaker 2: even decades at facilities like this, many of these workers 213 00:12:44,920 --> 00:12:47,599 Speaker 2: are new to assembly work. Some of the staff we 214 00:12:47,640 --> 00:12:50,960 Speaker 2: spoke to came off farms and are relatively new to 215 00:12:51,000 --> 00:12:55,400 Speaker 2: assembly lines. That lack of experience, combined with lower automation 216 00:12:55,840 --> 00:12:59,920 Speaker 2: hits productivity. Alana says some vendors report making four pound 217 00:13:00,120 --> 00:13:02,680 Speaker 2: and units a day in China, but only twenty five 218 00:13:02,760 --> 00:13:07,280 Speaker 2: hundred in Vietnam. We follow the Chatmellow's productions through the 219 00:13:07,280 --> 00:13:11,440 Speaker 2: paint department, where workers manually spray red and orange flames 220 00:13:11,440 --> 00:13:15,720 Speaker 2: on the toy, then onto the assembly floor, where hundreds 221 00:13:15,720 --> 00:13:18,840 Speaker 2: of workers in blue company issued polo shirts and caps 222 00:13:19,200 --> 00:13:23,000 Speaker 2: sit at long metal tables. Workers on the line split 223 00:13:23,040 --> 00:13:27,360 Speaker 2: open the plastic logs, insert screws, install battery contacts, and 224 00:13:27,480 --> 00:13:32,400 Speaker 2: solder the electronics board. On the assembly line, a Chinese 225 00:13:32,480 --> 00:13:35,439 Speaker 2: manager is showing a worker how to fit apart together, 226 00:13:35,800 --> 00:13:44,880 Speaker 2: pointing out where to pay extra attention. His instructions and 227 00:13:45,000 --> 00:13:48,880 Speaker 2: mandra are translated into Vietnamese and the workers questions are 228 00:13:48,880 --> 00:14:02,280 Speaker 2: relaid back. This factory has relocated about twenty engineers and 229 00:14:02,320 --> 00:14:06,080 Speaker 2: managers from China to Vietnam, and that's to help bridge 230 00:14:06,120 --> 00:14:09,240 Speaker 2: the gap in experience and technical know how. It's a 231 00:14:09,280 --> 00:14:13,160 Speaker 2: common practice for factories here. Jimmy says, Chinese workers have 232 00:14:13,280 --> 00:14:17,200 Speaker 2: developed specialized skills over decades that are difficult to quickly 233 00:14:17,240 --> 00:14:18,400 Speaker 2: replicate elsewhere. 234 00:14:18,800 --> 00:14:21,720 Speaker 8: Every single Chinese factory moving from here, they will rely 235 00:14:21,840 --> 00:14:24,680 Speaker 8: on their own team to split up. I mean the 236 00:14:24,760 --> 00:14:29,760 Speaker 8: core member of the team WI still Chinese, he posed 237 00:14:30,040 --> 00:14:31,239 Speaker 8: that is with experienced. 238 00:14:33,920 --> 00:14:37,920 Speaker 2: The tariffs also bring another risk Learning Resources has yet 239 00:14:37,960 --> 00:14:41,720 Speaker 2: to calculate. To explain. Alana picks up the chat Mellow. 240 00:14:41,400 --> 00:14:46,360 Speaker 3: Toy the interior. These chips are made introduced in China 241 00:14:46,400 --> 00:14:50,200 Speaker 3: and then imported here. The soldering is done locally. This 242 00:14:50,320 --> 00:14:53,440 Speaker 3: product will need batteries, those will be imported. You cannot 243 00:14:53,480 --> 00:14:57,120 Speaker 3: five batteries locally in Vietnam. The metal is. 244 00:14:57,160 --> 00:15:02,200 Speaker 2: Imported, so a big contrast to China, where more than 245 00:15:02,240 --> 00:15:05,920 Speaker 2: ten thousand companies form an extensive sourcing network for the 246 00:15:05,920 --> 00:15:10,000 Speaker 2: toy industry. Vietnam's toy suppliers are in the hundreds, a 247 00:15:10,040 --> 00:15:11,560 Speaker 2: fraction of what China has. 248 00:15:12,000 --> 00:15:15,720 Speaker 3: So within a city center or geographic area in China 249 00:15:15,920 --> 00:15:18,560 Speaker 3: you can find a plastics flyer, a print supplier, a 250 00:15:18,600 --> 00:15:22,400 Speaker 3: foam supplier, a wood supplier, and so on. So all 251 00:15:22,480 --> 00:15:27,440 Speaker 3: that is available locally. That same infrastructure doesn't exist anywhere 252 00:15:27,440 --> 00:15:28,440 Speaker 3: else in the world. 253 00:15:28,680 --> 00:15:33,320 Speaker 2: Today, all these imported materials could spell trouble for businesses. 254 00:15:33,960 --> 00:15:37,000 Speaker 2: On top of the twenty percent terrace on Vietnam. Trump 255 00:15:37,080 --> 00:15:40,920 Speaker 2: has also slapped a forty percent transshipment rate on goods 256 00:15:40,920 --> 00:15:44,480 Speaker 2: that originate in China but are then exported from Vietnam. 257 00:15:45,200 --> 00:15:47,840 Speaker 2: That extra levy is designed to crack down on companies 258 00:15:47,880 --> 00:15:51,800 Speaker 2: that re route made in China products through Vietnam, adding 259 00:15:51,840 --> 00:15:56,480 Speaker 2: little or sometimes no additional manufacturing. So far, the administration 260 00:15:56,600 --> 00:16:00,280 Speaker 2: hasn't offered any guidance on how these higher duties will 261 00:16:00,320 --> 00:16:02,680 Speaker 2: actually be enforced, So. 262 00:16:02,600 --> 00:16:05,680 Speaker 3: The rules on trendshipment haven't been fully defined yet. So 263 00:16:05,800 --> 00:16:08,160 Speaker 3: these are things that we need to guess on and 264 00:16:08,360 --> 00:16:11,800 Speaker 3: whether componentry which is brought in from other countries might 265 00:16:11,880 --> 00:16:13,120 Speaker 3: impact the terraff raight. 266 00:16:13,840 --> 00:16:18,920 Speaker 2: Elana says all these factors add up more workers, less automation, 267 00:16:19,400 --> 00:16:24,440 Speaker 2: imported components, Chinese engineers. They make manufacturing in Vietnam ten 268 00:16:24,480 --> 00:16:29,240 Speaker 2: to fifteen percent more expensive than in China. Elana says 269 00:16:29,320 --> 00:16:35,040 Speaker 2: the entire process scouting factories, moving molds, prototyping adds up 270 00:16:35,080 --> 00:16:36,560 Speaker 2: to millions of dollars. 271 00:16:36,960 --> 00:16:37,920 Speaker 3: They're not recoverable. 272 00:16:38,040 --> 00:16:40,000 Speaker 2: There's a lot of costs here that aren't recoverable. 273 00:16:40,160 --> 00:16:42,680 Speaker 3: Orders that we've lost, like those will never come back. 274 00:16:43,400 --> 00:16:47,600 Speaker 3: Costs they are being passed to customers like all these things. 275 00:16:47,360 --> 00:16:50,160 Speaker 4: Are irreparable harm. 276 00:16:50,400 --> 00:16:53,200 Speaker 3: And that's part of why we were motivated to bring 277 00:16:53,200 --> 00:16:55,840 Speaker 3: the lawsuit, is because there's a lot of damage being 278 00:16:55,880 --> 00:16:58,360 Speaker 3: done and there's a lot of small medium sized businesses 279 00:16:58,400 --> 00:17:02,440 Speaker 3: who don't have the ability to stand up, and so 280 00:17:02,560 --> 00:17:05,800 Speaker 3: we wanted to stand up on behalf of the thousands 281 00:17:05,840 --> 00:17:06,960 Speaker 3: of companies like our start A. 282 00:17:07,000 --> 00:17:08,000 Speaker 8: Factor Vennez. 283 00:17:10,760 --> 00:17:14,000 Speaker 2: After the break, what does the supply chain shift mean 284 00:17:14,080 --> 00:17:18,000 Speaker 2: for workers on the factory floor, for families in nearby villages, 285 00:17:18,400 --> 00:17:41,320 Speaker 2: and for American consumers back home. The town of Fully, 286 00:17:41,600 --> 00:17:45,199 Speaker 2: about forty miles from Vietnam's capital city of Hanois, sits 287 00:17:45,280 --> 00:17:48,679 Speaker 2: in the Red River Delta. It's in a valley surrounded 288 00:17:48,720 --> 00:17:53,480 Speaker 2: by lush, green, karst limestone mountains, a post guard landscape 289 00:17:53,680 --> 00:17:56,600 Speaker 2: until you get close and see the peaks being quarried 290 00:17:56,600 --> 00:18:00,400 Speaker 2: to build roads and industrial parks. It's a small, off 291 00:18:00,400 --> 00:18:04,320 Speaker 2: the beaten path town that historically attracted mostly locals, but 292 00:18:04,400 --> 00:18:07,320 Speaker 2: during our time there, we bumped into Chinese visitors and 293 00:18:07,400 --> 00:18:11,840 Speaker 2: heard Mandarin at breakfast and at roadside cafes. Most hotels 294 00:18:11,880 --> 00:18:14,800 Speaker 2: were nearly full because most rooms were now being used 295 00:18:14,800 --> 00:18:17,639 Speaker 2: to house Chinese workers. A trend that began in the 296 00:18:17,680 --> 00:18:23,720 Speaker 2: past year. My own family left Vietnam during a time 297 00:18:23,800 --> 00:18:27,360 Speaker 2: of high tensions with China, with the two countries engaged 298 00:18:27,400 --> 00:18:31,200 Speaker 2: in a border war in nineteen seventy nine. Then Vietnam 299 00:18:31,280 --> 00:18:36,000 Speaker 2: harassed ethnic Chinese and questioned their loyalty. It forcibly expelled 300 00:18:36,000 --> 00:18:39,760 Speaker 2: families with Chinese roots who lived along the northern border regions. 301 00:18:40,600 --> 00:18:43,200 Speaker 2: My father's side of the family had immigrated from China 302 00:18:43,280 --> 00:18:46,560 Speaker 2: to southern Vietnam in the early nineteen hundreds, and those 303 00:18:46,640 --> 00:18:51,360 Speaker 2: discriminatory policies after the war pushed out families like ours. 304 00:18:52,160 --> 00:18:56,520 Speaker 6: And we're by the Obo and we modify the bowl 305 00:18:56,680 --> 00:18:58,520 Speaker 6: running on the ocean. 306 00:18:59,640 --> 00:19:02,720 Speaker 2: In summer of nineteen seventy nine, my father and his 307 00:19:02,760 --> 00:19:06,720 Speaker 2: brothers retrofitted a riverboat to make it seaworthy, and my 308 00:19:06,800 --> 00:19:11,000 Speaker 2: grandfather navigated our way through the South China Sea. All 309 00:19:11,080 --> 00:19:13,719 Speaker 2: three hundred of the people who fled on our overloaded 310 00:19:13,720 --> 00:19:15,200 Speaker 2: boat were ethnic Chinese. 311 00:19:15,720 --> 00:19:18,920 Speaker 6: And we take a chance fifty to fifty, you know, fifty, 312 00:19:19,880 --> 00:19:23,520 Speaker 6: diet fifty, you know a lie, No, fifty to fifty. 313 00:19:25,119 --> 00:19:27,800 Speaker 2: Through the years, my dad has talked about that difficult 314 00:19:27,800 --> 00:19:30,560 Speaker 2: decision to risk all of our lives on the sea 315 00:19:30,880 --> 00:19:33,720 Speaker 2: because he and my grandfather couldn't see a way for 316 00:19:33,760 --> 00:19:37,360 Speaker 2: his children to have hopeful futures in our homeland. Because 317 00:19:37,400 --> 00:19:41,560 Speaker 2: of our ancestry, we brave storms and pirate attacks to 318 00:19:41,600 --> 00:19:46,200 Speaker 2: become refugees in far away countries. Countless others didn't survive 319 00:19:46,280 --> 00:19:51,520 Speaker 2: the journey. In Vietnam, that dark chapter is all but forgotten. 320 00:19:52,160 --> 00:19:55,840 Speaker 2: The relations between China and Vietnam still have points of contention. 321 00:19:56,359 --> 00:20:00,800 Speaker 2: They're entwined economically, Chinese investors are brave more than ever, 322 00:20:01,320 --> 00:20:05,119 Speaker 2: and Chinese capital funds nearly thirty percent of all new projects. 323 00:20:09,400 --> 00:20:11,840 Speaker 2: Just a few hundred yards from the dum Fund plant, 324 00:20:12,080 --> 00:20:15,399 Speaker 2: we stop at a roadside eatery right across from the 325 00:20:15,440 --> 00:20:24,200 Speaker 2: site of new factories under construction. Winty Twin is seventy 326 00:20:24,200 --> 00:20:26,840 Speaker 2: eight years old. She's just finished lunch and is chatting 327 00:20:26,880 --> 00:20:27,439 Speaker 2: with her neighbor. 328 00:20:30,560 --> 00:20:33,879 Speaker 7: This is my hometown. These will rice fields all the 329 00:20:33,880 --> 00:20:34,600 Speaker 7: way to the river. 330 00:20:36,960 --> 00:20:41,440 Speaker 2: Long before the factories arrived. Generations of families here, including 331 00:20:41,480 --> 00:20:46,840 Speaker 2: the winds, worked the land rice, wheat, cassava. In Vietnam, 332 00:20:47,119 --> 00:20:51,119 Speaker 2: land is sacred. After babies are born, their umbilical cords 333 00:20:51,160 --> 00:20:53,760 Speaker 2: are buried in the fields to ask the land to 334 00:20:53,800 --> 00:20:57,240 Speaker 2: protect them, and when they die, they're often buried in 335 00:20:57,280 --> 00:20:59,359 Speaker 2: the same rice fields where they toiled. 336 00:21:01,280 --> 00:21:06,919 Speaker 7: Who all of this area used to be in my 337 00:21:07,040 --> 00:21:13,120 Speaker 7: family's fields, all the way out to there. We have farmers. 338 00:21:13,760 --> 00:21:19,520 Speaker 7: What do we do without our fields? 339 00:21:23,600 --> 00:21:26,520 Speaker 2: In twenty thirteen, the government requisitioned the land to make 340 00:21:26,560 --> 00:21:30,239 Speaker 2: way for industrial development. Duyen and her neighbors say they 341 00:21:30,240 --> 00:21:33,800 Speaker 2: were forced to sell their ancestral farms and compensated about 342 00:21:33,840 --> 00:21:36,960 Speaker 2: ten thousand dollars, a price they deemed to both. 343 00:21:39,840 --> 00:21:44,119 Speaker 7: They reclaimed the land, so we had to sell. No 344 00:21:44,119 --> 00:21:48,960 Speaker 7: one wanted to sell, but we had no choice. You 345 00:21:48,960 --> 00:21:51,600 Speaker 7: couldn't refuse. Come, Come what is. 346 00:21:53,520 --> 00:21:57,040 Speaker 2: In the end, Duyn's family brought a small plot across 347 00:21:57,040 --> 00:22:00,919 Speaker 2: the street from the construction site. They paid nearly seven 348 00:22:01,000 --> 00:22:05,440 Speaker 2: times the government's compensation price per square meter. They built 349 00:22:05,480 --> 00:22:08,960 Speaker 2: a house and opened a small cafe serving construction workers, 350 00:22:09,640 --> 00:22:13,400 Speaker 2: but she worries it won't last. That workers will eat 351 00:22:13,400 --> 00:22:19,280 Speaker 2: at the factory canteens once construction ends. During our visit, 352 00:22:19,560 --> 00:22:23,480 Speaker 2: the air hung heavy with dust. Duyn and her neighbors 353 00:22:23,600 --> 00:22:27,240 Speaker 2: worry about pollution, both in the air and from the factories, 354 00:22:27,400 --> 00:22:31,639 Speaker 2: given the breakneck pace of development. Still, she acknowledges the 355 00:22:31,720 --> 00:22:36,160 Speaker 2: factories have open doors. Her daughter in law, once a farmer, 356 00:22:36,400 --> 00:22:38,879 Speaker 2: now earns nearly three hundred dollars a month at the 357 00:22:38,920 --> 00:22:43,480 Speaker 2: dum Fun factory making toys for learning resources. Her husband 358 00:22:43,480 --> 00:22:46,880 Speaker 2: weilds at construction sites. Together, they've saved enough to send 359 00:22:46,920 --> 00:22:51,600 Speaker 2: their son, Luin's grandson to study automotive engineering in South Korea. 360 00:22:52,280 --> 00:22:55,680 Speaker 2: It's a future, she says, made possible by factory work. 361 00:23:01,080 --> 00:23:04,320 Speaker 2: That hope for a better future also lies a few 362 00:23:04,359 --> 00:23:08,879 Speaker 2: miles away at the Hannam Vocational School. Here, students as 363 00:23:08,920 --> 00:23:12,840 Speaker 2: young as fifteen are training to become machine operators and engineers. 364 00:23:13,640 --> 00:23:17,880 Speaker 2: The school says nearly all graduates land factory jobs. Global 365 00:23:17,920 --> 00:23:22,560 Speaker 2: companies like LG, Hyundai and Samsung send trainers and donate equipment. 366 00:23:24,320 --> 00:23:27,359 Speaker 3: And what thought, I have a movie through you. 367 00:23:27,720 --> 00:23:31,159 Speaker 2: Sixteen year old Duncom is a returning student at the school. 368 00:23:31,640 --> 00:23:35,200 Speaker 2: Gum says he loves tinkering with electronics and he's eager 369 00:23:35,280 --> 00:23:36,200 Speaker 2: to find a factory job. 370 00:23:36,240 --> 00:23:38,080 Speaker 3: Am I garden. 371 00:23:37,920 --> 00:23:40,400 Speaker 8: Factories have a lot of equipment and machines, so they 372 00:23:40,400 --> 00:23:41,760 Speaker 8: need people to fix and maintain them. 373 00:23:42,200 --> 00:23:44,520 Speaker 1: That's why I chose to study industrial electricity. 374 00:23:44,680 --> 00:23:45,800 Speaker 6: Fixed machines at the planks. 375 00:23:49,119 --> 00:23:52,639 Speaker 2: Gaum says a university education might not lead to a 376 00:23:52,720 --> 00:23:55,679 Speaker 2: career right away, but he's certain he can have his 377 00:23:55,840 --> 00:24:00,520 Speaker 2: choice of factory jobs. My conversation with his confident teenager, 378 00:24:00,800 --> 00:24:04,480 Speaker 2: upbeat about his future, left an impression on me. After 379 00:24:04,520 --> 00:24:07,760 Speaker 2: a week in Vietnam, it's clear that optimism runs deep, 380 00:24:08,200 --> 00:24:12,000 Speaker 2: centered around the factories and foreign investors pouring capital into 381 00:24:12,000 --> 00:24:15,439 Speaker 2: the region. The country's leaders are highly attuned to the 382 00:24:15,520 --> 00:24:20,480 Speaker 2: shifting geopolitical wins and are bent on maintaining growth. The US, 383 00:24:20,760 --> 00:24:24,720 Speaker 2: once a wartime enemy turned trading partner, now seems like 384 00:24:24,760 --> 00:24:28,719 Speaker 2: a fickle friend with its high tariffs, so Vietnam's counting 385 00:24:28,720 --> 00:24:33,160 Speaker 2: on foreign investors to help ride it out. Before heading home, 386 00:24:33,280 --> 00:24:36,080 Speaker 2: I asked Alana for her final thoughts after a week 387 00:24:36,200 --> 00:24:39,520 Speaker 2: of crisscrossing the country and visiting a dozen factories. 388 00:24:40,040 --> 00:24:43,000 Speaker 3: Vietnam certainly has potential. The products that we saw made 389 00:24:43,040 --> 00:24:47,600 Speaker 3: here are very high quality. They're certainly expertise here, and 390 00:24:47,920 --> 00:24:51,000 Speaker 3: it's growing and changing rapidly. I think some of the 391 00:24:51,040 --> 00:24:53,840 Speaker 3: hang ups though, or that there's not as much capacity, 392 00:24:53,960 --> 00:24:56,879 Speaker 3: so there's just physically not as much manufacturing space here 393 00:24:56,880 --> 00:24:59,760 Speaker 3: as there is in China. And then Additionally, you can't 394 00:24:59,760 --> 00:25:01,719 Speaker 3: get a lot of the raw materials locally, and so 395 00:25:01,760 --> 00:25:02,879 Speaker 3: that is driving cost. 396 00:25:04,800 --> 00:25:09,360 Speaker 2: For now, Learning Resources is placing its bets on Vietnam, 397 00:25:09,880 --> 00:25:14,080 Speaker 2: but tariffs are adding pressure. The company has already raised 398 00:25:14,119 --> 00:25:16,840 Speaker 2: prices of its toys by an average of six percent 399 00:25:17,359 --> 00:25:20,800 Speaker 2: the bare minimum to cover the costs, and Alana says 400 00:25:20,960 --> 00:25:24,560 Speaker 2: more hikes are on the way if Trump imposes additional tariffs. 401 00:25:25,800 --> 00:25:30,040 Speaker 2: But the biggest cost isn't on any invoice. Because of 402 00:25:30,080 --> 00:25:33,480 Speaker 2: the tariffs, Learning Resources had to cut its product development 403 00:25:33,520 --> 00:25:37,639 Speaker 2: budget in half. That meant shelving over one hundred new products, 404 00:25:37,960 --> 00:25:42,000 Speaker 2: including an entire line of educational toys for classrooms. 405 00:25:42,560 --> 00:25:44,600 Speaker 3: That whole range had to go on hold because it 406 00:25:44,680 --> 00:25:47,359 Speaker 3: was too big and too complex. It was going to 407 00:25:47,359 --> 00:25:50,159 Speaker 3: take too many resources, and we just couldn't justify it 408 00:25:50,200 --> 00:25:51,919 Speaker 3: given all the other things I had to do. So 409 00:25:52,240 --> 00:25:55,000 Speaker 3: that's one that just personally for me, that makes me 410 00:25:55,200 --> 00:25:58,479 Speaker 3: very sad because it's a product that teachers have been 411 00:25:58,480 --> 00:25:59,840 Speaker 3: asking us to do for years. 412 00:26:00,560 --> 00:26:03,960 Speaker 2: Elana says consumers will pay for the tariffs twice in 413 00:26:04,040 --> 00:26:08,119 Speaker 2: higher prices and in toys from the industry with a 414 00:26:08,160 --> 00:26:12,040 Speaker 2: little less magic because instead of investing in innovation toy 415 00:26:12,080 --> 00:26:15,760 Speaker 2: makers are syncing their budgets into tariffs and supply. 416 00:26:15,560 --> 00:26:19,680 Speaker 3: Chains, theser costs that have led to us slashing budgets 417 00:26:21,320 --> 00:26:23,680 Speaker 3: and pulling back on investments that we were going to make. 418 00:26:24,520 --> 00:26:28,159 Speaker 3: We are hiring less people, We're coming out with fewer 419 00:26:28,200 --> 00:26:30,399 Speaker 3: products for the consumers. 420 00:26:30,440 --> 00:26:41,679 Speaker 4: This is just going to mean higher prices and less choice. 421 00:26:44,760 --> 00:26:48,240 Speaker 2: This is the big take, Asia from Bloomberg News. I'm wanha. 422 00:26:49,080 --> 00:26:51,960 Speaker 2: This is the first episode in an ongoing series on 423 00:26:52,040 --> 00:26:55,760 Speaker 2: how one American toy maker is grappling with record high tariffs. 424 00:26:56,440 --> 00:27:00,000 Speaker 2: Join us as the journey continues. If you like the episode, 425 00:27:00,119 --> 00:27:03,280 Speaker 2: sure to subscribe at Bloomberg dot com, slash podcast offer, 426 00:27:03,680 --> 00:27:06,480 Speaker 2: leave a review, and even better, tell a friend It 427 00:27:06,560 --> 00:27:09,640 Speaker 2: really makes a difference. Thanks for listening, See you next time.