1 00:00:00,160 --> 00:00:03,640 Speaker 1: This holiday season, families around the US are grappling with 2 00:00:03,680 --> 00:00:08,840 Speaker 1: stubborn inflation and higher prices on virtually everything, including holiday gifts. 3 00:00:09,560 --> 00:00:13,200 Speaker 1: President Trump's tariff policies have hit a broad range of industries, 4 00:00:13,400 --> 00:00:18,280 Speaker 1: including toymakers. But earlier this year, one Chicago based toymaker 5 00:00:18,360 --> 00:00:23,040 Speaker 1: with manufacturers in China decided to hit back with a lawsuit, 6 00:00:23,680 --> 00:00:26,360 Speaker 1: and that case has found its way to the Supreme Court. 7 00:00:27,360 --> 00:00:30,040 Speaker 1: Arguments in the case started on November fifth, and the 8 00:00:30,080 --> 00:00:33,680 Speaker 1: Supreme Court's decision, when it comes down, could support or 9 00:00:33,800 --> 00:00:37,920 Speaker 1: upend a key piece of the Trump Administration's legal justification 10 00:00:38,240 --> 00:00:41,160 Speaker 1: for many of the tariffs. In the meantime, the Big 11 00:00:41,200 --> 00:00:44,520 Speaker 1: Take Asia team has been tracking this story closely. We've 12 00:00:44,560 --> 00:00:47,879 Speaker 1: reported out how the tariffs have impacted learning resources on 13 00:00:48,040 --> 00:00:52,080 Speaker 1: the ground in Illinois. Wears headquartered in China, were produced 14 00:00:52,120 --> 00:00:55,600 Speaker 1: toys for decades in Vietnam, were setting up a new 15 00:00:55,640 --> 00:00:59,240 Speaker 1: manufacturing hub, and back to the US to small town 16 00:00:59,320 --> 00:01:02,240 Speaker 1: Indiana to meet a family that can't afford to buy 17 00:01:02,560 --> 00:01:05,959 Speaker 1: from this American toy company. Over the next few days, 18 00:01:06,000 --> 00:01:08,680 Speaker 1: we'll bring you our reporting on this high stakes lawsuit, 19 00:01:09,120 --> 00:01:12,880 Speaker 1: the company's battle to hedge tariff risks, and consumer frustration 20 00:01:13,319 --> 00:01:16,560 Speaker 1: with rising prices. 21 00:01:17,640 --> 00:01:32,600 Speaker 2: Bloomberg Audio Studios, podcasts, radio news. 22 00:01:35,200 --> 00:01:38,640 Speaker 1: On a summer morning, a group of US Americans, Chinese, 23 00:01:38,720 --> 00:01:42,319 Speaker 1: and Vietnamese are packed in a van. We're moving fast 24 00:01:42,440 --> 00:01:45,560 Speaker 1: on a brand new highway that slices through Vietnam's Red 25 00:01:45,640 --> 00:01:49,080 Speaker 1: River Delta. We're on our way to a toy factory, 26 00:01:49,640 --> 00:01:52,360 Speaker 1: but just a few hundred yards away from the factory gate, 27 00:01:52,640 --> 00:01:56,200 Speaker 1: we've come to a dead halt stem meet by an 28 00:01:56,280 --> 00:01:59,400 Speaker 1: unexpected obstacle. Huge puddles. 29 00:02:01,240 --> 00:02:03,720 Speaker 2: Apparently didn't identify the that's. 30 00:02:06,560 --> 00:02:09,359 Speaker 1: The road leading to the factory gate is pocked marked 31 00:02:09,400 --> 00:02:13,240 Speaker 1: with water filled potholes as big as truck tires. The 32 00:02:13,280 --> 00:02:15,480 Speaker 1: only option is to get out and walk the last 33 00:02:15,600 --> 00:02:16,320 Speaker 1: hundred yards. 34 00:02:16,639 --> 00:02:22,160 Speaker 3: Okay, just this theory. 35 00:02:24,720 --> 00:02:28,400 Speaker 1: It's barely nine am and it's already ninety degrees. My 36 00:02:28,480 --> 00:02:30,880 Speaker 1: travel companion is ready to face the heat. 37 00:02:31,840 --> 00:02:34,240 Speaker 4: It's hard to dress for these factory tours. I've now 38 00:02:34,400 --> 00:02:36,799 Speaker 4: just basically green and a tire of a t shirt 39 00:02:36,840 --> 00:02:38,920 Speaker 4: and some sort of very light white pants. 40 00:02:39,680 --> 00:02:43,440 Speaker 1: I'm here with Alana Woldenberg Ruffman, vice president of marketing 41 00:02:43,520 --> 00:02:47,360 Speaker 1: and product development for Learning Resources, a family run toy 42 00:02:47,400 --> 00:02:51,320 Speaker 1: company just outside of Chicago. She's a mechanical engineer by 43 00:02:51,320 --> 00:02:54,560 Speaker 1: training and helps run the family business alongside her dad, 44 00:02:54,919 --> 00:02:57,639 Speaker 1: CEO Rick Woldenberg, and her two brothers. 45 00:02:57,960 --> 00:03:00,200 Speaker 5: You know, some of my earliest memories with toy as 46 00:03:00,600 --> 00:03:04,280 Speaker 5: would be like the Learning Resources cash register, or like 47 00:03:04,360 --> 00:03:08,160 Speaker 5: the Pretend phone, which is a little dated at this point. 48 00:03:08,200 --> 00:03:09,600 Speaker 5: You need the Pretend iPhone. 49 00:03:10,000 --> 00:03:13,079 Speaker 1: The company traces its roots back more than a century 50 00:03:13,120 --> 00:03:17,080 Speaker 1: ago to Lana's great grandfather. These days, if you have 51 00:03:17,120 --> 00:03:20,280 Speaker 1: young kids, there's a chance you know their products. Botley 52 00:03:20,280 --> 00:03:24,520 Speaker 1: the coding robot, and Pretend cash registers are hit with consumers. 53 00:03:25,360 --> 00:03:30,800 Speaker 6: Hey do you see money? Yes, this is the pretendent plane, 54 00:03:30,840 --> 00:03:33,320 Speaker 6: Learning Resources cash registered. 55 00:03:36,160 --> 00:03:38,800 Speaker 1: Most of these toys are made in China and sold 56 00:03:38,840 --> 00:03:42,800 Speaker 1: through major retailers like Target and Walmart. For years, it 57 00:03:42,880 --> 00:03:47,320 Speaker 1: was a winning formula. Efficient Chinese factories produced low cost 58 00:03:47,360 --> 00:03:55,560 Speaker 1: goods and American consumers benefited with affordable prices. But President 59 00:03:55,600 --> 00:03:58,760 Speaker 1: Donald Trump's returned to the White House, an escalation of 60 00:03:58,760 --> 00:04:01,320 Speaker 1: the trade war that he began in his first term 61 00:04:01,440 --> 00:04:05,880 Speaker 1: has upended that formula. On April second, Trump announced the 62 00:04:05,920 --> 00:04:09,360 Speaker 1: steepest American tariffs in more than a century, with a 63 00:04:09,400 --> 00:04:12,960 Speaker 1: ten percent minimum tariff and even higher duties on some 64 00:04:13,000 --> 00:04:16,720 Speaker 1: sixty nations, starting with China. 65 00:04:16,839 --> 00:04:21,600 Speaker 7: So if you look at that China first row, China 66 00:04:22,080 --> 00:04:27,440 Speaker 7: sixty seven percent, that's tariffs charged to the USA, including 67 00:04:28,000 --> 00:04:30,400 Speaker 7: currency manipulation and trade barriers. 68 00:04:30,520 --> 00:04:34,839 Speaker 1: For Learning Resources, this was a gut punch. The company 69 00:04:34,880 --> 00:04:38,480 Speaker 1: had already started shifting production out of China during Trump's 70 00:04:38,520 --> 00:04:41,480 Speaker 1: first term, but at the beginning of the year, about 71 00:04:41,520 --> 00:04:44,679 Speaker 1: sixty percent of its toys were still made there. Here's 72 00:04:44,680 --> 00:04:46,880 Speaker 1: Alana at one hundred and forty five percent. 73 00:04:47,200 --> 00:04:49,560 Speaker 8: It's a van on our products. People didn't know what 74 00:04:49,640 --> 00:04:50,680 Speaker 8: was going to happen to our business. 75 00:04:51,400 --> 00:04:55,320 Speaker 1: Within weeks, Learning Resources took the Trump administration to court 76 00:04:55,720 --> 00:04:59,360 Speaker 1: and won. A district judge in Washington, d C. Ruled 77 00:04:59,400 --> 00:05:02,560 Speaker 1: the presidences to were illegal, but the levee stayed in 78 00:05:02,600 --> 00:05:06,279 Speaker 1: place as Trump appealed. Now the case is headed to 79 00:05:06,320 --> 00:05:09,240 Speaker 1: the Supreme Court, with arguments set for next week. 80 00:05:09,920 --> 00:05:12,160 Speaker 8: We're the only private company that brought our own lawsuit. 81 00:05:12,400 --> 00:05:15,520 Speaker 8: We were kind of faced with the decision of die 82 00:05:15,680 --> 00:05:16,440 Speaker 8: or do something. 83 00:05:17,720 --> 00:05:20,919 Speaker 1: While battling it out in court, the company also began 84 00:05:21,040 --> 00:05:25,040 Speaker 1: rebuilding the manufacturing network it has spent decades developing. 85 00:05:25,920 --> 00:05:27,599 Speaker 8: We don't know what the tariff rates are going to 86 00:05:27,640 --> 00:05:29,960 Speaker 8: be at any given time on any given day, and 87 00:05:30,040 --> 00:05:33,279 Speaker 8: so we're proactively out here trying to diversifire our supply 88 00:05:33,400 --> 00:05:36,920 Speaker 8: chain so that we are able to ride the waves. 89 00:05:37,320 --> 00:05:39,080 Speaker 8: At the end of the day, We're just we're betting 90 00:05:39,120 --> 00:05:41,680 Speaker 8: it is highly likely that some products that we move, 91 00:05:41,839 --> 00:05:43,080 Speaker 8: we will have to move again. 92 00:05:43,680 --> 00:05:47,480 Speaker 1: We're following along as Learning Resources is forced to shift 93 00:05:47,520 --> 00:05:51,279 Speaker 1: its supply chain to Vietnam, and as the company tries 94 00:05:51,360 --> 00:05:55,920 Speaker 1: to move forward, it's also confronting a hard truth. China's 95 00:05:55,960 --> 00:06:00,560 Speaker 1: manufacturing infrastructure, built over decades isn't some thing you can 96 00:06:00,600 --> 00:06:02,320 Speaker 1: walk away from overnight. 97 00:06:02,760 --> 00:06:05,840 Speaker 8: Because China has been manufacturing hub for so long, it 98 00:06:06,000 --> 00:06:10,480 Speaker 8: developed a lot of expertise. That same infrastructure doesn't exist 99 00:06:10,520 --> 00:06:14,440 Speaker 8: anywhere else in the world today. 100 00:06:19,320 --> 00:06:22,360 Speaker 1: This is the big take Asia from Bloomberg News. I'm 101 00:06:22,360 --> 00:06:26,839 Speaker 1: Wanha today on the show. You can move manufacturing out 102 00:06:26,839 --> 00:06:30,240 Speaker 1: of China, but can you really take China out of manufacturing? 103 00:06:30,760 --> 00:06:33,520 Speaker 1: We hit the road with an American toymaker caught in 104 00:06:33,600 --> 00:06:37,840 Speaker 1: the crosshairs of Trump's shifting trade policy and uncover the 105 00:06:37,960 --> 00:06:57,159 Speaker 1: hidden costs of trying to stay one step ahead. Before 106 00:06:57,200 --> 00:06:59,960 Speaker 1: this trip, I hadn't been back to northern Vietnam since 107 00:07:00,080 --> 00:07:03,839 Speaker 1: the pandemic. I was born in Saigon when it was 108 00:07:03,880 --> 00:07:07,840 Speaker 1: still the capital of South Vietnam, a country divided by war. 109 00:07:08,720 --> 00:07:11,600 Speaker 1: After the US withdrew in defeat in nineteen seventy five, 110 00:07:11,880 --> 00:07:15,560 Speaker 1: the country was unified under Communist rule, but it was 111 00:07:15,640 --> 00:07:19,600 Speaker 1: left deeply impoverished. Families like mine, who had fought on 112 00:07:19,680 --> 00:07:24,600 Speaker 1: the losing side faced bleak futures. Here's my dad recounting 113 00:07:24,600 --> 00:07:27,080 Speaker 1: the fears that gripped him after the war ended. 114 00:07:27,520 --> 00:07:31,360 Speaker 3: I feel danger. I don't know when they kept me 115 00:07:31,600 --> 00:07:34,760 Speaker 3: put to the yale, and I don't know what it 116 00:07:34,880 --> 00:07:37,800 Speaker 3: can do because I am a soldier. 117 00:07:38,360 --> 00:07:41,720 Speaker 1: My dad fought for South Vietnam against the Communist forces. 118 00:07:42,360 --> 00:07:44,720 Speaker 1: After the war, soldiers like him were sent to re 119 00:07:44,880 --> 00:07:49,320 Speaker 1: education camps and their families were branded as traders. They 120 00:07:49,320 --> 00:07:53,680 Speaker 1: were denied access to jobs, higher education, opportunities to improve 121 00:07:53,720 --> 00:07:54,520 Speaker 1: their lives. 122 00:07:55,240 --> 00:07:58,960 Speaker 3: Then I don't see a future for me. Then how 123 00:07:58,960 --> 00:08:03,720 Speaker 3: about you, guy? You know no future. That's the reason 124 00:08:04,240 --> 00:08:08,200 Speaker 3: we tried to escape. You know, weder to go leave Vietnam, 125 00:08:08,240 --> 00:08:08,560 Speaker 3: we go. 126 00:08:09,520 --> 00:08:11,800 Speaker 1: We fled as boat refugees. When I was a child, 127 00:08:12,040 --> 00:08:15,600 Speaker 1: and we settled in California. I still remember my parents 128 00:08:15,600 --> 00:08:19,400 Speaker 1: reading letters from relatives back home. My mom reduced to 129 00:08:19,480 --> 00:08:23,240 Speaker 1: tears by the accounts of failed harvests, the lack of medicine, 130 00:08:23,400 --> 00:08:27,720 Speaker 1: and please for financial help. In the late eighties, Vietnam 131 00:08:27,800 --> 00:08:31,680 Speaker 1: began economic reforms, but it wasn't until nineteen ninety four, 132 00:08:31,800 --> 00:08:34,840 Speaker 1: when the US lifted a decades long trade embargo, that 133 00:08:34,920 --> 00:08:37,240 Speaker 1: the country truly opened to global trade. 134 00:08:37,600 --> 00:08:40,439 Speaker 7: A year after Vietnam and the US signed a historic 135 00:08:40,520 --> 00:08:43,760 Speaker 7: trade pact, sales at this garment factory in Hanoi have 136 00:08:43,840 --> 00:08:45,240 Speaker 7: hit record levels. 137 00:08:45,679 --> 00:08:48,960 Speaker 1: Orders in twenty ten, more than thirty years after my 138 00:08:49,040 --> 00:08:52,480 Speaker 1: family left, I was hired as Bloomberg's Vietnam Beer chief 139 00:08:52,480 --> 00:08:57,200 Speaker 1: in Hanoi, where we chronicled the country's growing manufacturing prowess. 140 00:08:57,520 --> 00:09:00,959 Speaker 1: I followed Vietnam's rise since then, but nothing prepared me 141 00:09:01,160 --> 00:09:03,800 Speaker 1: for the pace of change I'm seeing now while look 142 00:09:03,960 --> 00:09:08,480 Speaker 1: all of us is how much construction. We're heading to 143 00:09:08,559 --> 00:09:12,559 Speaker 1: a factory called dum Fun. It's tucked inside an industrial 144 00:09:12,640 --> 00:09:15,560 Speaker 1: park in the town of Fuli, about an hour's drive 145 00:09:15,679 --> 00:09:18,160 Speaker 1: south of Hanoi and roughly one hundred and thirty miles 146 00:09:18,160 --> 00:09:21,600 Speaker 1: from the Chinese border. The industrial zone was approved in 147 00:09:21,600 --> 00:09:25,480 Speaker 1: twenty seventeen, just months after President Trump first took office 148 00:09:25,800 --> 00:09:30,000 Speaker 1: and began threatening China with trade actions. Within two years, 149 00:09:30,240 --> 00:09:34,559 Speaker 1: rice fields were transformed into a sprawling complex of factories 150 00:09:35,400 --> 00:09:39,400 Speaker 1: dum Fun stretching nearly two football fields. Long was started 151 00:09:39,480 --> 00:09:42,800 Speaker 1: by a Chinese entrepreneur who ran a manufacturing plant in 152 00:09:42,840 --> 00:09:44,640 Speaker 1: eastern China for fifteen years. 153 00:09:45,240 --> 00:09:49,200 Speaker 9: They are tiny, like got a big palm in the front. 154 00:09:49,720 --> 00:09:53,560 Speaker 1: That's Jimmy Lee, a manager from Longshore. The company makes 155 00:09:53,600 --> 00:09:56,640 Speaker 1: toys in China and is a longtime partner of Learning 156 00:09:56,679 --> 00:10:00,640 Speaker 1: Resources in Vietnam. They're helping to connect the America Company 157 00:10:00,679 --> 00:10:03,880 Speaker 1: to factories like this one, with Jimmy often on the 158 00:10:03,880 --> 00:10:07,679 Speaker 1: ground to oversee projects. He's talking about the pond at 159 00:10:07,720 --> 00:10:11,680 Speaker 1: the factory gate. In Chinese culture, having water near the 160 00:10:11,840 --> 00:10:15,040 Speaker 1: entrance is seen as a sign of good luck, and 161 00:10:15,080 --> 00:10:17,880 Speaker 1: if you add a north facing gate even better. 162 00:10:18,320 --> 00:10:21,240 Speaker 9: It seems like they had a yeah, one hundred percent 163 00:10:21,360 --> 00:10:24,160 Speaker 9: north door with a pond in the front. 164 00:10:25,000 --> 00:10:27,040 Speaker 6: You know, it's a typical set up. 165 00:10:27,840 --> 00:10:31,439 Speaker 1: Elana and her team are visiting Dumbfung for the first time. 166 00:10:32,040 --> 00:10:34,520 Speaker 1: It's one of a dozen factories they'll visit this week 167 00:10:34,600 --> 00:10:38,320 Speaker 1: to assess production and find ways to control costs that 168 00:10:38,400 --> 00:10:43,360 Speaker 1: are already rising. We begin our tour in the warehouse, 169 00:10:43,520 --> 00:10:47,240 Speaker 1: where bags of raw materials, including plastic resin, are stacked 170 00:10:47,320 --> 00:10:48,280 Speaker 1: five feet high. 171 00:10:48,320 --> 00:10:50,040 Speaker 10: So one of the things that we've been working through 172 00:10:50,080 --> 00:10:53,239 Speaker 10: with our factories is literally where they get the raw materials. 173 00:10:53,520 --> 00:10:57,560 Speaker 10: That's a big element of controlling the cost. So, like 174 00:10:57,600 --> 00:10:58,439 Speaker 10: this is ABS. 175 00:10:58,480 --> 00:11:03,120 Speaker 1: Alana leans over sack of glossy plastic pellets, scanning the labels. 176 00:11:03,640 --> 00:11:07,120 Speaker 1: She's inspecting ABS, a common plastic used to make legel 177 00:11:07,160 --> 00:11:09,480 Speaker 1: bricks as well as learning resources toys. 178 00:11:09,559 --> 00:11:11,200 Speaker 10: Yeah, so do you know if all the ABS comes 179 00:11:11,200 --> 00:11:12,959 Speaker 10: from China for those factory or are they getting it 180 00:11:12,960 --> 00:11:14,120 Speaker 10: from other countries too? 181 00:11:14,600 --> 00:11:17,440 Speaker 9: I think the import out of China also, but plain 182 00:11:17,600 --> 00:11:18,720 Speaker 9: sauce to be in China. 183 00:11:18,880 --> 00:11:21,360 Speaker 4: Yeah, and ABS is a particularly challenging type of plant. 184 00:11:21,400 --> 00:11:24,280 Speaker 1: It turns out only two types of plastic the factory 185 00:11:24,320 --> 00:11:27,719 Speaker 1: needs can be sourced locally in Vietnam, and we soon 186 00:11:27,800 --> 00:11:31,600 Speaker 1: realized the trucks pulling into the factory earlier were loaded 187 00:11:31,640 --> 00:11:36,200 Speaker 1: with raw materials from China, making routine deliveries of imported parts. 188 00:11:39,360 --> 00:11:42,320 Speaker 1: We passed the warehouse and step onto the factory floor, 189 00:11:42,600 --> 00:11:45,559 Speaker 1: stopping in front of an injection molding machine. 190 00:11:45,840 --> 00:11:49,120 Speaker 4: So there's piping in here that's feeding in the plastic 191 00:11:49,160 --> 00:11:51,520 Speaker 4: pellets that we just saw, and it's going to melt 192 00:11:51,559 --> 00:11:54,480 Speaker 4: them into a shape of the steel mold. 193 00:11:55,559 --> 00:11:59,120 Speaker 1: The plant is currently making more than fifty learning resources toys, 194 00:11:59,320 --> 00:12:05,400 Speaker 1: with more come in. One of them is Campfire chat Mellows, 195 00:12:05,559 --> 00:12:08,560 Speaker 1: a product that's being made in Vietnam for the first time. 196 00:12:09,200 --> 00:12:13,840 Speaker 1: It's a storytelling toy designed to spark conversations. Imagine a 197 00:12:13,880 --> 00:12:17,720 Speaker 1: cozy campfire that flickers with led light. There are soft, 198 00:12:17,760 --> 00:12:22,239 Speaker 1: squishy marshmallows called chat mellows, each printed with a unique emoji, 199 00:12:22,559 --> 00:12:25,640 Speaker 1: a magic wand a storm a jigsaw puzzle. 200 00:12:25,960 --> 00:12:28,280 Speaker 5: Once upon time, there is one little boy who is 201 00:12:28,280 --> 00:12:29,960 Speaker 5: playing jigsaw puzzles. 202 00:12:30,160 --> 00:12:34,480 Speaker 1: And then these images are story starters. Kids slide them 203 00:12:34,480 --> 00:12:37,199 Speaker 1: onto sticks and pretend to roast them over the campfire 204 00:12:37,520 --> 00:12:43,640 Speaker 1: while telling stories to each other. At the injection molding machine, 205 00:12:43,679 --> 00:12:47,520 Speaker 1: a robotic steal arm grabs onto squishy marshmallows that have 206 00:12:47,600 --> 00:12:51,240 Speaker 1: emerged from the mold. Elana says that kind of automation 207 00:12:51,520 --> 00:12:54,480 Speaker 1: is actually missing in many of the factories she's visited 208 00:12:54,559 --> 00:12:55,000 Speaker 1: this week. 209 00:12:55,760 --> 00:12:58,360 Speaker 4: The automation is a period, so like you look around 210 00:12:58,400 --> 00:13:00,720 Speaker 4: and there's a lot of people, is not as many 211 00:13:00,760 --> 00:13:03,360 Speaker 4: machines covering the same thing that a person might do, 212 00:13:03,600 --> 00:13:06,080 Speaker 4: and so that's gonna bring the cost up a little bit. 213 00:13:06,800 --> 00:13:11,199 Speaker 1: In Vietnam, factories still rely heavily on manual labor because 214 00:13:11,240 --> 00:13:14,640 Speaker 1: advanced machinery like this isn't easy to come by. It's 215 00:13:14,679 --> 00:13:18,400 Speaker 1: expensive and often needs to be imported, likely from China, 216 00:13:18,559 --> 00:13:22,439 Speaker 1: which dominates much of the market for toy manufacturing. And 217 00:13:22,480 --> 00:13:25,320 Speaker 1: even in factories that do have automation like this one, 218 00:13:25,520 --> 00:13:28,440 Speaker 1: Alanas noticed something else that affects productivity. 219 00:13:28,880 --> 00:13:31,480 Speaker 10: So whereas in China, am I in tape one worker 220 00:13:31,520 --> 00:13:33,880 Speaker 10: to worker machine, in Vietnam it will take two workers 221 00:13:34,080 --> 00:13:36,400 Speaker 10: because they don't understand they're not as familiar with the 222 00:13:36,440 --> 00:13:38,760 Speaker 10: machine for it, so that'll take six to twelve months 223 00:13:38,760 --> 00:13:41,000 Speaker 10: for them to really learn it and to get it 224 00:13:41,000 --> 00:13:44,760 Speaker 10: to the same level of automation that exists already in China. 225 00:13:45,480 --> 00:13:48,760 Speaker 1: You know you're trying to squeeze, Jimmy says. This factory 226 00:13:48,840 --> 00:13:51,560 Speaker 1: has about a third more workers than a similar plant 227 00:13:51,600 --> 00:13:56,000 Speaker 1: in China, and unlike Chinese laborers who've worked years or 228 00:13:56,040 --> 00:13:59,680 Speaker 1: even decades at facilities like this, many of these workers 229 00:13:59,720 --> 00:14:02,520 Speaker 1: aren't new to assembly work. Some of the staff we 230 00:14:02,559 --> 00:14:05,880 Speaker 1: spoke to came off farms and are relatively new to 231 00:14:05,920 --> 00:14:10,319 Speaker 1: assembly lines. That lack of experience, combined with lower automation, 232 00:14:10,760 --> 00:14:15,120 Speaker 1: hits productivity. Alana says some vendors report making four thousand 233 00:14:15,200 --> 00:14:18,040 Speaker 1: units a day in China, but only twenty five hundred 234 00:14:18,080 --> 00:14:22,920 Speaker 1: in Vietnam. We follow the Chatmello's productions through the paint department, 235 00:14:23,160 --> 00:14:26,840 Speaker 1: where workers manually spray red and orange flames on the toy, 236 00:14:28,160 --> 00:14:31,280 Speaker 1: then onto the assembly floor, where hundreds of workers in 237 00:14:31,360 --> 00:14:34,880 Speaker 1: blue company issued polo shirts and caps sit at long 238 00:14:34,960 --> 00:14:39,120 Speaker 1: metal tables. Workers on the line split open the plastic logs, 239 00:14:39,360 --> 00:14:43,720 Speaker 1: insert screws, install battery contacts, and solder the electronics board. 240 00:14:45,880 --> 00:14:48,400 Speaker 1: On the assembly line, a Chinese manager is showing a 241 00:14:48,440 --> 00:14:51,520 Speaker 1: worker how to fit apart together, pointing out where to 242 00:14:51,520 --> 00:15:01,520 Speaker 1: pay extra attention. His instructions in and are translated into 243 00:15:01,600 --> 00:15:14,280 Speaker 1: Vietnamese and the workers questions are relaid back Yo. This 244 00:15:14,440 --> 00:15:18,360 Speaker 1: factory has relocated about twenty engineers and managers from China 245 00:15:18,480 --> 00:15:21,520 Speaker 1: to Vietnam, and that's to help bridge the gap in 246 00:15:21,680 --> 00:15:25,040 Speaker 1: experience and technical know how. It's a common practice for 247 00:15:25,120 --> 00:15:29,720 Speaker 1: factories here. Jimmy says, Chinese workers have developed specialized skills 248 00:15:29,760 --> 00:15:33,320 Speaker 1: over decades that are difficult to quickly replicate elsewhere. 249 00:15:33,720 --> 00:15:36,640 Speaker 9: Every single Chinese factory moving from here, they will rely 250 00:15:36,760 --> 00:15:39,600 Speaker 9: on their own team to split up. I mean the 251 00:15:39,680 --> 00:15:45,320 Speaker 9: core member of Platino still Chinese. He posed that is 252 00:15:45,400 --> 00:15:46,120 Speaker 9: with experience. 253 00:15:48,840 --> 00:15:52,840 Speaker 1: The tariffs also bring another risk Learning Resources has yet 254 00:15:52,880 --> 00:15:56,320 Speaker 1: to calculate. To explain, Alana picks up the chat Mellow 255 00:15:56,320 --> 00:15:57,840 Speaker 1: toy the interior. 256 00:15:58,080 --> 00:16:02,240 Speaker 4: These chips are made introduced in China and then imported here. 257 00:16:02,720 --> 00:16:06,560 Speaker 4: The soldering is done locally. This product will need batteries. 258 00:16:07,000 --> 00:16:10,080 Speaker 4: Those will be imported. You cannot five batteries lobally in Vietnam. 259 00:16:10,640 --> 00:16:14,000 Speaker 4: The metal is imported, so all. 260 00:16:13,880 --> 00:16:16,920 Speaker 1: These different That's a big contrast to China, where more 261 00:16:17,000 --> 00:16:20,720 Speaker 1: than ten thousand companies form an extensive sourcing network for 262 00:16:20,760 --> 00:16:24,600 Speaker 1: the toy industry. Vietnam's toy suppliers are in the hundreds, 263 00:16:24,760 --> 00:16:26,480 Speaker 1: a fraction of what China has. 264 00:16:26,920 --> 00:16:30,640 Speaker 8: So within a city center or geographic area in China, 265 00:16:30,840 --> 00:16:33,480 Speaker 8: you can find a plastic splier, a print supplier, a 266 00:16:33,520 --> 00:16:37,320 Speaker 8: foam supplier, a wood supplier, and so on. So all 267 00:16:37,400 --> 00:16:42,360 Speaker 8: that is available locally. That same infrastructure doesn't exist anywhere 268 00:16:42,360 --> 00:16:43,960 Speaker 8: else in the world today. 269 00:16:44,480 --> 00:16:49,000 Speaker 1: All these imported materials could spell trouble for businesses. On 270 00:16:49,040 --> 00:16:52,160 Speaker 1: top of the twenty percent terrace in Vietnam, Trump has 271 00:16:52,200 --> 00:16:55,920 Speaker 1: also slapped a forty percent transshipment rate on goods that 272 00:16:56,000 --> 00:17:00,240 Speaker 1: originate in China but are then exported from Vietnam. That 273 00:17:00,320 --> 00:17:02,960 Speaker 1: extra levy is designed to crack down on companies that 274 00:17:03,120 --> 00:17:07,280 Speaker 1: reroute made in China products through Vietnam, adding little or 275 00:17:07,280 --> 00:17:12,240 Speaker 1: sometimes no additional manufacturing. So far, the administration hasn't offered 276 00:17:12,280 --> 00:17:16,480 Speaker 1: any guidance on how these higher duties will actually be enforced. 277 00:17:17,359 --> 00:17:20,280 Speaker 4: So the rules on trendshipment haven't been fully defined yet. 278 00:17:20,520 --> 00:17:22,440 Speaker 4: So these are things that we need to guess on 279 00:17:22,920 --> 00:17:26,240 Speaker 4: and whether componentry which is brought in from other countries 280 00:17:26,480 --> 00:17:28,040 Speaker 4: might impact the terraffraight. 281 00:17:28,760 --> 00:17:33,840 Speaker 1: Elana says. All these factors add up more workers, less automation, 282 00:17:34,320 --> 00:17:39,359 Speaker 1: imported components, Chinese engineers. They make manufacturing in Vietnam ten 283 00:17:39,400 --> 00:17:44,120 Speaker 1: to fifteen percent more expensive than in China. Elana says, 284 00:17:44,240 --> 00:17:49,960 Speaker 1: the entire process scouting factories, moving molds, prototyping adds up 285 00:17:50,000 --> 00:17:51,480 Speaker 1: to millions of dollars. 286 00:17:51,880 --> 00:17:54,119 Speaker 8: They're not recoverable. There's a lot of costs here that 287 00:17:54,160 --> 00:17:54,920 Speaker 8: aren't recoverable. 288 00:17:55,080 --> 00:17:57,600 Speaker 5: Orders that we've lost, like those will never come back, 289 00:17:58,320 --> 00:18:02,000 Speaker 5: Costs that are being passed to customer, like all these 290 00:18:02,040 --> 00:18:02,600 Speaker 5: things are. 291 00:18:04,000 --> 00:18:04,640 Speaker 1: Irreparable. 292 00:18:04,680 --> 00:18:07,919 Speaker 5: Heart And that's part of why we were motivated to 293 00:18:07,920 --> 00:18:10,520 Speaker 5: bring the lawsuit, is because there's a lot of damage 294 00:18:10,560 --> 00:18:12,760 Speaker 5: being done and there's a lot of small medium sized 295 00:18:12,800 --> 00:18:17,120 Speaker 5: businesses who don't have the ability to stand up, and 296 00:18:17,200 --> 00:18:20,240 Speaker 5: so we wanted to stand up on behalf of the 297 00:18:20,320 --> 00:18:21,920 Speaker 5: thousands of companies like our store. 298 00:18:21,760 --> 00:18:22,880 Speaker 8: Impactor Venus. 299 00:18:25,680 --> 00:18:28,920 Speaker 1: After the break, what does the supply chain shift mean 300 00:18:29,000 --> 00:18:32,880 Speaker 1: for workers on the factory floor, for families in nearby villages, 301 00:18:33,320 --> 00:18:56,240 Speaker 1: and for American consumers back home. The town of Fully, 302 00:18:56,520 --> 00:19:00,320 Speaker 1: about forty miles from Vietnam's capital city of hanois in 303 00:19:00,359 --> 00:19:04,600 Speaker 1: the Red River Delta. It's in a valley surrounded by lush, green, 304 00:19:04,760 --> 00:19:09,160 Speaker 1: karst limestone mountains, a post guard landscape until you get 305 00:19:09,200 --> 00:19:12,440 Speaker 1: close and see the peaks being quarried to build roads 306 00:19:12,560 --> 00:19:15,960 Speaker 1: and industrial parks. It's a small, off the beaten path 307 00:19:16,040 --> 00:19:20,280 Speaker 1: town that historically attracted mostly locals, but during our time there, 308 00:19:20,400 --> 00:19:23,800 Speaker 1: we bumped into Chinese visitors and heard Mandarin at breakfast 309 00:19:23,800 --> 00:19:28,159 Speaker 1: and at roadside cafes. Most hotels were nearly fooled because 310 00:19:28,200 --> 00:19:31,080 Speaker 1: most rooms were now being used to house Chinese workers, 311 00:19:31,520 --> 00:19:36,560 Speaker 1: a trend that began in the past year. My own 312 00:19:36,640 --> 00:19:40,359 Speaker 1: family left Vietnam during a time of high tensions with China, 313 00:19:40,920 --> 00:19:43,359 Speaker 1: with the two countries engaged in a border war in 314 00:19:43,440 --> 00:19:48,400 Speaker 1: nineteen seventy nine. Then Vietnam harassed ethnic Chinese and questioned 315 00:19:48,440 --> 00:19:52,720 Speaker 1: their loyalty. It forcibly expelled families with Chinese roots who 316 00:19:52,800 --> 00:19:56,240 Speaker 1: lived along the northern border regions. My father's side of 317 00:19:56,280 --> 00:19:59,320 Speaker 1: the family had immigrated from China to southern Vietnam in 318 00:19:59,320 --> 00:20:03,679 Speaker 1: the early nineties hundreds, and those discriminatory policies after the 319 00:20:03,720 --> 00:20:06,840 Speaker 1: war pushed out families like ours. 320 00:20:07,080 --> 00:20:12,480 Speaker 3: And we're buy the old bow and we modify the boat, running, 321 00:20:12,520 --> 00:20:13,440 Speaker 3: you know, on the ocean. 322 00:20:14,640 --> 00:20:17,439 Speaker 1: In the summer of nineteen seventy nine, my father and 323 00:20:17,480 --> 00:20:20,800 Speaker 1: his brothers retrofitted a river boat to make it seaworthy, 324 00:20:21,400 --> 00:20:24,840 Speaker 1: and my grandfather navigated our way through the South China Sea. 325 00:20:25,760 --> 00:20:27,959 Speaker 1: All three hundred of the people who fled on our 326 00:20:28,040 --> 00:20:30,119 Speaker 1: overloaded boat were ethnic Chinese. 327 00:20:30,640 --> 00:20:33,320 Speaker 3: And we take a chance. Fifty to fifty, you know, 328 00:20:33,440 --> 00:20:39,800 Speaker 3: fifty diet fifty, you know, a lie, No, fifty to fifty. 329 00:20:40,040 --> 00:20:42,720 Speaker 1: Through the years My dad has talked about that difficult 330 00:20:42,720 --> 00:20:45,480 Speaker 1: decision to risk all of our lives on the sea 331 00:20:45,800 --> 00:20:48,639 Speaker 1: because he and my grandfather couldn't see a way for 332 00:20:48,680 --> 00:20:52,280 Speaker 1: his children to have hopeful futures in our homeland. Because 333 00:20:52,320 --> 00:20:56,479 Speaker 1: of our ancestry, we brave storms and pirate attacks to 334 00:20:56,520 --> 00:21:01,120 Speaker 1: become refugees in far away countries. Countless other didn't survive 335 00:21:01,200 --> 00:21:06,440 Speaker 1: the journey. In Vietnam, that dark chapter is all but forgotten. 336 00:21:07,080 --> 00:21:10,760 Speaker 1: The relations between China and Vietnam still have points of contention. 337 00:21:11,280 --> 00:21:15,720 Speaker 1: They're entwined economically, Chinese investors are embraced more than ever, 338 00:21:16,240 --> 00:21:20,000 Speaker 1: and Chinese capital funds nearly thirty percent of all new projects. 339 00:21:24,320 --> 00:21:26,760 Speaker 1: Just a few hundred yards from the Dumb Fund plant, 340 00:21:27,000 --> 00:21:30,320 Speaker 1: we stop at a roadside eatery right across from the 341 00:21:30,359 --> 00:21:39,119 Speaker 1: site of new factories under construction. Windy Twin is seventy 342 00:21:39,119 --> 00:21:41,760 Speaker 1: eight years old. She's just finished lunch and is chatting 343 00:21:41,800 --> 00:21:42,359 Speaker 1: with her neighbor. 344 00:21:45,480 --> 00:21:48,800 Speaker 6: This is my hometown. These will rice views all the 345 00:21:48,800 --> 00:21:49,520 Speaker 6: way to the river. 346 00:21:51,880 --> 00:21:56,360 Speaker 1: Long before the factories arrived. Generations of families here, including 347 00:21:56,400 --> 00:22:01,760 Speaker 1: the Winds, worked the land rice wheat tsava in Vietnam. 348 00:22:02,040 --> 00:22:06,040 Speaker 1: Land is sacred after babies are born, their umbilical courts 349 00:22:06,080 --> 00:22:08,679 Speaker 1: are buried in the fields to ask the land to 350 00:22:08,720 --> 00:22:12,159 Speaker 1: protect them, and when they die, they're often buried in 351 00:22:12,200 --> 00:22:14,320 Speaker 1: the same rice fields where they toiled. 352 00:22:19,840 --> 00:22:23,480 Speaker 6: All of this area used to be in my family's fields, 353 00:22:24,200 --> 00:22:28,840 Speaker 6: all the way out to there. We are farmers. What 354 00:22:28,840 --> 00:22:36,399 Speaker 6: do we do without our fields? 355 00:22:38,520 --> 00:22:41,440 Speaker 1: In twenty thirteen, the government requisitioned the land to make 356 00:22:41,480 --> 00:22:45,159 Speaker 1: way for industrial development. Duyen and her neighbors say they 357 00:22:45,160 --> 00:22:48,720 Speaker 1: were forced to sell their ancestral farms and compensated about 358 00:22:48,760 --> 00:22:51,920 Speaker 1: ten thousand dollars, a price they deemed to both. 359 00:22:54,760 --> 00:22:59,040 Speaker 6: They reclaimed the land, so we had to sell. No 360 00:22:59,080 --> 00:23:03,879 Speaker 6: one wanted to sell, but we had no choice. You 361 00:23:03,880 --> 00:23:04,720 Speaker 6: couldn't refuse. 362 00:23:05,480 --> 00:23:06,920 Speaker 3: Come what is our lack? 363 00:23:08,480 --> 00:23:11,959 Speaker 1: In the end, Duyn's family bought a small plot across 364 00:23:11,960 --> 00:23:15,840 Speaker 1: the street from the construction site. They paid nearly seven 365 00:23:15,920 --> 00:23:20,359 Speaker 1: times the government's compensation price per square meter. They built 366 00:23:20,400 --> 00:23:23,880 Speaker 1: a house and opened a small cafe serving construction workers, 367 00:23:24,560 --> 00:23:28,320 Speaker 1: but she worries it won't last that workers will eat 368 00:23:28,320 --> 00:23:34,200 Speaker 1: at the factory canteens once construction ends. During our visit, 369 00:23:34,480 --> 00:23:38,400 Speaker 1: the air hung heavy with dust. Duyn and her neighbors 370 00:23:38,520 --> 00:23:42,160 Speaker 1: worry about pollution. Both in the air and from the factories. 371 00:23:42,320 --> 00:23:46,560 Speaker 1: Given the breakneck pace of development, still she acknowledges the 372 00:23:46,640 --> 00:23:51,080 Speaker 1: factories have open doors. Her daughter in law, once a farmer, 373 00:23:51,320 --> 00:23:53,800 Speaker 1: now earns nearly three hundred dollars a month at the 374 00:23:53,840 --> 00:23:58,720 Speaker 1: Dumbfun factory making toys for learning resources. Her husband weilds 375 00:23:58,720 --> 00:24:02,200 Speaker 1: at construction sites. Together, they've saved enough to send their son, 376 00:24:02,520 --> 00:24:07,360 Speaker 1: Lunn's grandson, to study automotive engineering in South Korea. It's 377 00:24:07,400 --> 00:24:14,800 Speaker 1: a future, she says, made possible by factory work. That 378 00:24:16,280 --> 00:24:19,560 Speaker 1: hope for a better future also lies a few miles 379 00:24:19,600 --> 00:24:24,040 Speaker 1: away at the Hannam Vocational School. Here, students as young 380 00:24:24,080 --> 00:24:27,760 Speaker 1: as fifteen are training to become machine operators and engineers. 381 00:24:28,560 --> 00:24:32,800 Speaker 1: The school says nearly all graduates land factory jobs. Global 382 00:24:32,840 --> 00:24:37,360 Speaker 1: companies like LG, Hyundai and Samsung send trainers and donate. 383 00:24:37,040 --> 00:24:42,280 Speaker 9: Equipment, And what thought, I have a movie through you. 384 00:24:42,640 --> 00:24:46,080 Speaker 1: Sixteen year old Duncom is a returning student at the school. 385 00:24:46,560 --> 00:24:50,119 Speaker 1: Gum says he loves tinkering with electronics, and he's eager 386 00:24:50,200 --> 00:24:50,959 Speaker 1: to find a factory. 387 00:24:51,160 --> 00:24:52,600 Speaker 8: Am I Garden. 388 00:24:52,840 --> 00:24:55,320 Speaker 9: Factories have a lot of equipment and machines, so they 389 00:24:55,320 --> 00:24:56,679 Speaker 9: need people to fix and maintain them. 390 00:24:57,119 --> 00:24:59,560 Speaker 3: That's why I chose to study industrial electricity to. 391 00:24:59,560 --> 00:24:59,840 Speaker 2: Fix ma. 392 00:25:04,040 --> 00:25:07,560 Speaker 1: GM says a university education might not lead to a 393 00:25:07,640 --> 00:25:10,600 Speaker 1: career right away, but he's certain he can have his 394 00:25:10,760 --> 00:25:15,400 Speaker 1: choice of factory jobs. My conversation with his confident teenager, 395 00:25:15,720 --> 00:25:19,400 Speaker 1: upbeat about his future, left an impression on me. After 396 00:25:19,440 --> 00:25:22,640 Speaker 1: a week in Vietnam, it's clear that optimism runs deep, 397 00:25:23,119 --> 00:25:26,920 Speaker 1: centered around the factories and foreign investors pouring capital into 398 00:25:26,920 --> 00:25:30,359 Speaker 1: the region. The country's leaders are highly attuned to the 399 00:25:30,440 --> 00:25:35,399 Speaker 1: shifting geopolitical wins and are bent on maintaining growth. The US, 400 00:25:35,680 --> 00:25:39,639 Speaker 1: once a wartime enemy turned trading partner, now seems like 401 00:25:39,680 --> 00:25:43,639 Speaker 1: a fickle friend with its high tariffs, so Vietnam's counting 402 00:25:43,640 --> 00:25:48,080 Speaker 1: on foreign investors to help ride it out. Before heading home, 403 00:25:48,200 --> 00:25:51,000 Speaker 1: I asked Alana for her final thoughts after a week 404 00:25:51,119 --> 00:25:54,440 Speaker 1: of crisscrossing the country and visiting a dozen factories. 405 00:25:54,960 --> 00:25:57,920 Speaker 8: Vietnam certainly has potential. The products that we saw made 406 00:25:57,960 --> 00:26:02,520 Speaker 8: here are very high quality. They're certainly expertise here, and 407 00:26:02,840 --> 00:26:05,879 Speaker 8: it's growing and changing rapidly. I think some of the 408 00:26:05,960 --> 00:26:08,760 Speaker 8: hang ups though, or that there's not as much capacity, 409 00:26:08,880 --> 00:26:11,800 Speaker 8: so there's just physically not as much manufacturing space here 410 00:26:11,840 --> 00:26:14,680 Speaker 8: as there is in China. And then additionally, you can't 411 00:26:14,720 --> 00:26:16,639 Speaker 8: get a lot of the raw materials locally, and so 412 00:26:16,680 --> 00:26:17,800 Speaker 8: that is driving cost. 413 00:26:19,720 --> 00:26:24,280 Speaker 1: For now, Learning Resources is placing its bets on Vietnam, 414 00:26:24,800 --> 00:26:29,000 Speaker 1: but tariffs are adding pressure. The company has already raised 415 00:26:29,040 --> 00:26:31,760 Speaker 1: prices of its toys by an average of six percent 416 00:26:32,280 --> 00:26:35,720 Speaker 1: the bare minimum to cover the costs, and Alana says 417 00:26:35,880 --> 00:26:39,480 Speaker 1: more hikes are on the way if Trump imposes additional tariffs. 418 00:26:40,720 --> 00:26:44,960 Speaker 1: But the biggest cost isn't on any invoice. Because of 419 00:26:45,000 --> 00:26:48,400 Speaker 1: the tariffs, Learning Resources had to cut its product development 420 00:26:48,440 --> 00:26:52,560 Speaker 1: budget in half. That meant shelving over one hundred new products, 421 00:26:52,880 --> 00:26:56,920 Speaker 1: including an entire line of educational toys for classrooms. 422 00:26:57,480 --> 00:26:59,479 Speaker 8: That whole range had to go on hold because it 423 00:26:59,600 --> 00:27:01,200 Speaker 8: was too big and too complex. 424 00:27:01,800 --> 00:27:04,119 Speaker 5: It was going to take too many resources, and we 425 00:27:04,200 --> 00:27:05,879 Speaker 5: just couldn't justify it given all the other things that 426 00:27:05,880 --> 00:27:06,320 Speaker 5: we had to do. 427 00:27:06,720 --> 00:27:09,280 Speaker 8: So like that's one that just personally for me, that 428 00:27:09,560 --> 00:27:13,200 Speaker 8: makes me very sad because it's a product that teachers 429 00:27:13,200 --> 00:27:14,800 Speaker 8: have been asking us to do for years. 430 00:27:15,480 --> 00:27:18,879 Speaker 1: Elana says consumers will pay for the tariffs twice in 431 00:27:18,960 --> 00:27:23,040 Speaker 1: higher prices and in toys from the industry with a 432 00:27:23,080 --> 00:27:26,960 Speaker 1: little less magic because instead of investing in innovation, toy 433 00:27:27,000 --> 00:27:30,840 Speaker 1: makers are syncing their budgets into tariffs and supply chains. 434 00:27:31,440 --> 00:27:36,480 Speaker 8: Theser costs that have led to us slashing budgets and 435 00:27:36,600 --> 00:27:38,600 Speaker 8: pulling back on investments that we were going to make. 436 00:27:39,440 --> 00:27:43,080 Speaker 8: We are hiring less people, We're coming out with fewer 437 00:27:43,119 --> 00:27:45,320 Speaker 8: products for the consumers. 438 00:27:45,359 --> 00:27:56,600 Speaker 11: This is just going to mean higher prices and less choice. 439 00:27:59,640 --> 00:28:03,159 Speaker 1: This is the big take, Asia from Bloomberg News. I'm wanha. 440 00:28:04,000 --> 00:28:06,840 Speaker 1: This is the first episode in an ongoing series on 441 00:28:06,960 --> 00:28:10,680 Speaker 1: how one American toymaker is grappling with record high tariffs. 442 00:28:11,359 --> 00:28:14,720 Speaker 1: Join us as the journey continues. If you like the episode, 443 00:28:14,800 --> 00:28:18,240 Speaker 1: be sure to subscribe at Bloomberg dot com slash podcast, offer, 444 00:28:18,640 --> 00:28:21,399 Speaker 1: leave a review, and even better, tell a friend it 445 00:28:21,480 --> 00:28:24,560 Speaker 1: really makes a difference. Thanks for listening, See you next time.