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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: The morning of August fourteenth, like the start of most days,

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Speaker 2: on the outskirts of New Delhi, was hectic. Cars jostled

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Speaker 2: with buses, tooktooks, trucks, and occasional cow as millions of

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Speaker 2: Indians made their way to work. But for Amitop Carbunda,

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Speaker 2: that was all a breeze compared to what awaited him

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Speaker 2: on his factory floor.

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Speaker 3: That was a crazy day. Our team work NonStop.

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Speaker 2: Ami tab is the managing director of Sunlord, a manufacturer

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Speaker 2: that specializes in plush toys. I met a metisfactory in

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Speaker 2: the city of Noida, just outside of New Delhi, and

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Speaker 2: he told me about that hectic day.

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Speaker 3: That day, I cloked about twenty nine thousand steps he's

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Speaker 3: an average of ten thousand.

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Speaker 2: Most of Sunlord's toys end up in American homes, Teddy

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Speaker 2: Bears and Disney's Elsa Princess dolls for Walmart, nursery products

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Speaker 2: for Pottery Barn and West Elm.

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Speaker 3: This is the packing area of metal detection was coming.

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Speaker 2: His factory was racing to get a container of kids

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Speaker 2: yoga balls covered in plush fabric, assembled, packed and shipped

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Speaker 2: out fast. This was the very first order for a

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Speaker 2: new customer, American toymaker Learning Resources, and they had two

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Speaker 2: days to make it happen. But some lord's deadline wasn't

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Speaker 2: set by their new customer. It was put in play

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Speaker 2: by the White House and President Donald Trump.

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Speaker 4: The White House making a move to slap of fifty

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Speaker 4: percent tariff on imports from India. White House trade advisor

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Speaker 4: Peter Navarro cranked up pressure on India to halt its

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Speaker 4: purchases of Russian oil.

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Speaker 2: Earlier this year, India seemed like a safe bet. President

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Speaker 2: Trump and Indian Prime Minister render Amodi were developing what

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Speaker 2: seemed like a romance. Modi visited the White House in February.

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Speaker 2: Many businesses thought India would be one of the first

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Speaker 2: countries to strike a new trade deal with the US.

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Speaker 4: The government had kind of said, you know, this is

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Speaker 4: going to be a safe place to manufacture. This is

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Speaker 4: one of our priority countries.

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Speaker 2: Elana Woldenberg Ruffman is vice president of product development for

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Speaker 2: Learning Resources, based outside Chicago. We met earlier this year

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Speaker 2: when I traveled with her to visit factories in Vietnam.

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Speaker 4: We really started to amp up our efforts to expand

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Speaker 4: our presence within India. The fact that the tariffies in

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Speaker 4: India changed with like four weeks notice has real implications

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Speaker 4: on real businesses like US.

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Speaker 2: Like many US companies, Learning Resources has been looking to

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Speaker 2: reduce its reliance on China since Trump's first trade war.

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Speaker 2: But when Trump took office this year and began ramping

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Speaker 2: up tariffs with the aim of raising money and bringing

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Speaker 2: manufacturing back to the US, that put the China end

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Speaker 2: of the supply chain under pressure. It pushed Learning Resources

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Speaker 2: to accelerate its plans to shift its supply chains elsewhere,

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Speaker 2: to Vietnam and to India, to companies like sun Lord.

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Speaker 2: But then Trump surprised India and slapped its goods with

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Speaker 2: one of the highest terraff freights facing any major manufacturing country.

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Speaker 2: India has been a good friend, but India has charged

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Speaker 2: basically more tariffs and almost any other country, And for

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Speaker 2: sun Lord, that meant the pressure was on.

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Speaker 3: So the goods need to be in the stores by

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Speaker 3: first of October for the Christmas sales.

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Speaker 2: With tariffs doubling, Learning Resources asked Omiitov's factory to speed

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Speaker 2: up production. His team worked into the night, pushing fifteen

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Speaker 2: thousand pieces through final assembly and packing that shipment barely

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Speaker 2: made it out, and we slayed it to land in

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Speaker 2: the US one day before the higher tariffs went into effect.

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Speaker 3: Whatever was before twenty seven dougars was twenty five percent

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Speaker 3: a ship novice fifty percent.

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Speaker 2: When you're an American company sourcing products half a world away,

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Speaker 2: there's already enough uncertainty to contend with. Tariffs don't just

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Speaker 2: add cost, they add chaos.

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Speaker 4: The boat ended up getting checked in six hours too late,

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Speaker 4: so the shipment had a fifty percent tariff instead of

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Speaker 4: a twenty five percent tariff.

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Speaker 2: That costs the company fifty thousand dollars.

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Speaker 4: The cost of those terraffs is entirely something that we,

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Speaker 4: as an organization have to pay. It is US, an

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Speaker 4: American business.

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Speaker 5: That had to pay those tariffs.

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Speaker 4: The irony of it is, had we left it in

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Speaker 4: China and eliminated all the work of finding a new factory,

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Speaker 4: moving it, the product, training, the factory testing, et cetera,

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Speaker 4: it would have been cheaper.

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Speaker 2: This is the big take Asia from Bloomberg News. I'm wanha.

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Speaker 2: Trump's tariff war with China was supposed to create an

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Speaker 2: opportunity for India, a chance to become the world's next

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Speaker 2: factory floor, but then the White House changed its mind.

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Speaker 2: Today in the show, I traveled to India and go

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Speaker 2: inside the factory scrambling to adapt to Washington's tariff whiplash

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Speaker 2: and get a ground view of the uniquely Indian solutions

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Speaker 2: to build a manufacturing powerhouse without China And every lunch,

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Speaker 2: I met Sun Lord's factory in an industrial park outside

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Speaker 2: New Delhi known as Neuda Toy City.

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Speaker 3: Bloomberg New channelna.

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Speaker 2: Amitap Karbunda is introducing me to his father, eighty one

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Speaker 2: year old Ashak Karbanda.

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Speaker 5: Papa, Hello, sir. She is from Bloomberg.

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Speaker 2: Ashak founded Son Lord in nineteen seventy nine. Back then,

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Speaker 2: the company made women's clothing and decor like curtains and

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Speaker 2: cushions for export. Amitop built out the company's toy sector,

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Speaker 2: which now makes up the bulk of the business. Ashak

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Speaker 2: still serves as chairman, overseeing the company's finances and comes

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Speaker 2: into the office most days. Father and son often eat

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Speaker 2: lunch together in the office's homie kitchen.

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Speaker 3: This is Lentil's. Normally are Lentil's and gravy, but this

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Speaker 3: is where I formed the speciality the family. The city

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Speaker 3: cotta cheese and this is potatoes.

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Speaker 2: Amiitop joined the business after college with a degree in

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Speaker 2: chemical engineering. Over lunch, he shares that his own son,

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Speaker 2: representing the family's third generation, will soon be joining the company.

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Speaker 3: He studied economics here in India and then the US

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Speaker 3: he did his master's in sustainability management.

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Speaker 2: It occurs to me that most of the toymakers I've

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Speaker 2: met during this journey are family businesses. The Chicago toymaker

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Speaker 2: I've been following learning Resources is run by the found

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Speaker 2: under's grandchildren and great grandchildren. For decades, it's relied on

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Speaker 2: Chinese manufacturers, who are also family owned. In Vietnam and

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Speaker 2: here in India, the toy industry is dominated by companies

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Speaker 2: passed down from generation to generation. It's part of the

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Speaker 2: reason the US trade war is so devastating. The mom

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Speaker 2: and pops here lack the deep pockets of major corporations.

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Speaker 2: As a terra regime changes pivoting won't come easy.

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Speaker 6: The kind of uncertain day we are facing now, I've

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Speaker 6: never faced it in my life, un certainly, which is

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Speaker 6: totally out of your controling.

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Speaker 2: In Today, sun Lord employees about nine hundred workers in

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Speaker 2: three factories. It specializes in bespoke nursery items like crib

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Speaker 2: bedding and fabric toys.

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Speaker 3: This Christmas decord for one of the Williams Sonoma brands,

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Speaker 3: which is that Disney Range Disney Design Custmos dech Cord.

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Speaker 3: It's a snoopy ye.

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Speaker 2: When Trump briefly raised tariffs on China to one hundred

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Speaker 2: and forty five percent earlier this year, Ami Toob was

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Speaker 2: inundated with phone calls and emails. His factory was already

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Speaker 2: running full, so he's only been able to take on

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Speaker 2: a few new clients. One of those was Learning Resources,

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Speaker 2: which ordered the yoga balls. They're covered with colorful furry

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Speaker 2: animal faces unicorns, penguins, and puppies, and they'll be sold

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Speaker 2: in Walmart stores for the Christmas holidays. But after that

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Speaker 2: first rush shipment in August, things have stalled.

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Speaker 3: It was a plan for a second order, but that

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Speaker 3: has now been postponed.

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Speaker 2: Omiitob says Learning Resources has put about two dozen other

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Speaker 2: products it was exploring with this factory on hold too.

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Speaker 2: New orders from existing customers have also been pared down,

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Speaker 2: and instead of growing fifteen percent this year as planned,

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Speaker 2: the company will be lucky to even see a three

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Speaker 2: percent growth.

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Speaker 3: There's a lot of unpredictability. You don't know what's going

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Speaker 3: to happen tomorrow. In the short term, new investments, new

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Speaker 3: products are a bit on hold.

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Speaker 2: It's a pattern playing out across India's burgeoning toy sector.

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Speaker 2: India's higher tariffs on goods to the US put it

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Speaker 2: at a disadvantage. Both China and Vietnam have struck better

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Speaker 2: deals with lower levees, and the weight of India's sky

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Speaker 2: high tariffs is causing pain in the country's biggest industrial hubs.

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Speaker 1: We produced two hundred thousand darts every day.

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Speaker 2: That's VIJENDERA. Babu, the founder of Microplastics, the largest toymaker

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Speaker 2: in the country. I've flown to Bengalore, one thousand miles

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Speaker 2: south of New Delhi to tour Vigendria's plant. The factory

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Speaker 2: is huge, six hundred and fifty thousand square feet of

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Speaker 2: manufacturing space that stretches over more than eleven football fields.

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Speaker 1: This three is apply to Walmart completely.

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Speaker 2: The plant looks busy with hundreds of workers assembling NERF guns,

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Speaker 2: paw patrol cars, and Little Tykes baseball sets, but Viajendra

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Speaker 2: says the factory isn't anywhere near capacity.

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Speaker 1: We are in still end of September, supposed to be

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Speaker 1: a very, very peak season, but you can see still

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Speaker 1: it is a bit slow.

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Speaker 2: I really come to understand how badly tariffs have hit

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Speaker 2: his business when he shows me the plant's warehouse and

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Speaker 2: it's eerily quiet. The storage area is as big as

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Speaker 2: five Olympic sized swimming pools, full of products that were

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Speaker 2: pulled off the production lines after Trump slapped that fifty

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Speaker 2: percent tariff on India.

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Speaker 1: All these are waiting to be fully assembled now and

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Speaker 1: then to be shipped because of the older stoppages or

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Speaker 1: out of cancelation. So we are just trying to store here,

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Speaker 1: so different toys, different parts of toys. You can see

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Speaker 1: in thousands and thousands.

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Speaker 2: It is that during our tour he gets on a

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Speaker 2: video call with one of his two other factories and

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Speaker 2: shows me an even bigger warehouse with racks stacked full

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Speaker 2: of finished products, not.

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Speaker 1: Eating, frusture, eating future, hacked and ready to go, everything done,

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Speaker 1: fact and ready to be shipped.

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Speaker 2: As much as a quarter of the factory's orders have

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Speaker 2: been put on hold or canceled. Thegender estimates the factory

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Speaker 2: might be stuck with as much as twenty million dollars

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Speaker 2: worth of goods. Then there's the loss of new business,

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Speaker 2: which he says represents as much as fifteen million dollars

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Speaker 2: all on pause. Like Omitop, the gender started the year

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Speaker 2: with an ambitious growth plan. Forty percent existing customers were

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Speaker 2: already looking to move products from China. New clients wanted

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Speaker 2: to place orders, so he built a new three hundred

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Speaker 2: thousand square foot facility to prepare for the new demand.

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Speaker 1: His plant is completely ready. We should have opened and

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Speaker 1: we should be getting the machines in next two months now.

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Speaker 1: But now we are also waiting. Should we order those machines?

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Speaker 1: Should we weight and watch? So we have taken addation

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Speaker 1: to wait and watch.

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Speaker 2: Now with so much uncertainty, where does India's toy industry

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Speaker 2: go from here? And can President Trump's tariffs really bring

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Speaker 2: toy manufacturing back to the States. That's after the break. Wow,

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Speaker 2: it's huge in here.

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Speaker 1: It's a six hundred and fifty thousands coudfoot plant. You'll

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Speaker 1: have good about of walking today.

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Speaker 2: In a corner of the massive microplastics factory outside Bangalore,

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Speaker 2: the sound of heavy machinery fades away. Vijender Baboo, the founder,

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Speaker 2: brings me to the second floor. Here, the facility's industrial

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Speaker 2: scale gives way to delicate artistry.

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Speaker 1: It's like going to a beauty salon to get those hairstyles.

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Speaker 2: And it really is like a salon for tiny dolls,

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Speaker 2: and it requires all the expertise of a team of

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Speaker 2: highly trained hairdressers, only in miniature. I watch you worker

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Speaker 2: handle the first critical step hair rooting. He holds a

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Speaker 2: bald plastic doll head up to a machine. As he

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Speaker 2: rotates it, needles punch fine blonde strands with rapid fire speed.

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Speaker 2: In seconds, the doll goes from bald to having a

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Speaker 2: full head of shimmering hair.

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Speaker 1: Like hair transplantation.

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Speaker 2: You know, you can see that that is very much

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Speaker 2: like a hair transplant.

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Speaker 1: You can see.

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Speaker 2: Then the real magic happens. I watch as dozens of

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Speaker 2: women transform these wild manes into bobs, wavy curls, high ponies,

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Speaker 2: and elaborate braids.

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Speaker 1: Yeah, you see the different styles there. It's very difficult

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Speaker 1: to do it by machine.

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Speaker 2: Watching these rows of skillful stylists, I realize this is

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Speaker 2: where India's manufacturers have a true advantage over the rest

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Speaker 2: of the world. Even today, you can't automate a tiny,

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Speaker 2: perfect front braid you need human hands, I asked Vijendra

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Speaker 2: if he thinks this kind of toy manufacturing can be

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Speaker 2: done in the US.

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Speaker 1: It's not that it can't be done, obviously, but it's

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Speaker 1: all about the cost. Machines can manufacture these things, but

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Speaker 1: then there's a lot of decoration, a lot of printing,

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Speaker 1: a lot of plush which requires stuffing.

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Speaker 2: This reliance on skilled human hands reveals the flaw in

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Speaker 2: Trump's promise to bring manufacturing jobs back to the US.

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Speaker 2: These workers here make about twenty three thousand rupees a

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Speaker 2: month or about two hundred and fifty dollars. Americans can't

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Speaker 2: live on wages that low, so if these toys were

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Speaker 2: made in the US, one of two things would have

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Speaker 2: to happen. Either wage costs would rise, pushing the price

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Speaker 2: of these toys to unaffordable levels and driving the manufacturer

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Speaker 2: out of business, or the entire process would need to

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Speaker 2: be automated. This leaves the world's toy makers in a bind.

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Speaker 2: They can't stay in China and in the USA is

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Speaker 2: out of reach for low cost, low margin products. The

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Speaker 2: world needs a new workshop, a place with millions of

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Speaker 2: workers ready to step onto the assembly line. Could that

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Speaker 2: place be India.

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Speaker 5: I believe this is India's moment.

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Speaker 2: Manugupta is chairman of the Toy Association of India, a

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Speaker 2: trade group for the manufacturers and dealers in the country.

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Speaker 3: This industry has the potential to become the next extile

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Speaker 3: of the government innistry for India.

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Speaker 5: Entrepreneurs are here ready when willing to invest. An ecosystem

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Speaker 5: has been created.

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Speaker 2: Prime Minister Mody is certainly betting that India can become

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Speaker 2: the world's next toy factory. In twenty twenty, he launched

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Speaker 2: the National Action Plan for Toys to try and capture

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Speaker 2: a slice of the one hundred billion dollar global toy market.

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Speaker 2: Mody's blueprint includes strict safety controls for all toys sold

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Speaker 2: in India and ironically, a seventy percent tariff on imported toys.

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Speaker 2: That's all designed to keep foreign competitors, namely China out.

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Speaker 2: Companies like Learning Resources see a lot of advantage in

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Speaker 2: India's scale and unlike Vietnam, where wages are rising as

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Speaker 2: factories compete for a smaller pool of workers, the size

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Speaker 2: of India's workforce keeps labor costs low, and Gupta of

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Speaker 2: the Toy Association says the country's manufacturers are playing the

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Speaker 2: long game.

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Speaker 5: A lot of companies understand and consider that these tariffs

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Speaker 5: are not going to stay for too long. You need

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Speaker 5: to prepare India and their manufacturers so that whenever these

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Speaker 5: tariffs come down, they become an alternative to what they're

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Speaker 5: buying in China of Yourtama Indonesia.

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Speaker 2: Preparing India's toy industry will require some big changes. Modi's

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Speaker 2: National Action Plan has shut out foreign producers, but local

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Speaker 2: manufacturers have been making toys mainly for domestic consumers. A

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Speaker 2: lot of learning Resources says this means most Indian factories

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Speaker 2: aren't yet making good with a quality that international buyers demand.

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Speaker 4: I think really the next big thing is just going

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Speaker 4: to be adjusting the factories to align to Western standards,

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Speaker 4: so quality standards, timelines, all those sort of little details

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Speaker 4: that come with working with a new partner.

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Speaker 2: Alana sees India's potential, but right now it's still a

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Speaker 2: tiny player in a massive market. India sold about one

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Speaker 2: hundred million dollars worth of toys to Americans last year. China,

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Speaker 2: on the other hand, sold eleven billion dollars worth in

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Speaker 2: Vietnam three billion. Still as Trump's tariffs push companies like

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Speaker 2: Learning Resources to pivot away from China. India's share of

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Speaker 2: the toy market is growing, but China still dominates the

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Speaker 2: entire toy making industry. I saw this in Vietnam. Most

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Speaker 2: of the raw materials used to make toys still come

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Speaker 2: from China, so does most of the investments and expertise.

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Speaker 2: Ami toop Karbanda for sun Lord says he'd like to

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Speaker 2: see more of that Chinese capital and influence in India.

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Speaker 3: To be the best, we have to learn from the best,

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Speaker 3: right and right now.

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Speaker 2: China is the best in this, but thanks to deep

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Speaker 2: rooted tensions between India and China, it's hard to develop

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Speaker 2: ties to Chinese entrepreneurs and to Chinese capital. Omitob says

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Speaker 2: that's forcing entrepreneurs like him to come up with their

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Speaker 2: own uniquely Indian solutions. At sun Lord's plant outside New Delhi,

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Speaker 2: Omitob shows me one particularly expensive pain point for toymakers.

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Speaker 3: This is a two head laser cutting machine with an

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Speaker 3: overhead camera. This is an elephant being cut. There you

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Speaker 3: see there, you be hears. The tail is the body

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Speaker 3: of the elephant.

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Speaker 2: Elephant ears and trunks have been stamped onto the gray

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Speaker 2: plush fabric, a red laser being cuts the fabric, leaving

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Speaker 2: a thin trail of smoke. Machines like this laser cutter

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Speaker 2: cost the kind of money that few Indian factory owners have.

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Speaker 2: Omiitob solution is to start a joint venture with two

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Speaker 2: of his biggest competitors.

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Speaker 3: One plus one normally means in mathematics it translates to two.

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Speaker 2: Tarun Chiitwani owns a toy factory just up the road

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Speaker 2: from some lord's facility, but in.

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Speaker 3: Terms of manufacturing activities and all that, one plus one

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Speaker 3: translates to eleven.

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Speaker 2: Tarun Omitob and a third partner are opening a facility

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Speaker 2: together next door to Tarun's toy factory. It will run

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Speaker 2: twenty four to seven, the first laser cutting facility of

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Speaker 2: its kind in India, and they're also planning a new

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Speaker 2: factory with more than three hundred sewing machines. In the past,

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Speaker 2: these three entrepreneurs would have been rivals.

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Speaker 3: Not today, we're not competing against each other. Our objective

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Speaker 3: is to get business into India.

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Speaker 2: And as they wait for India to clinch a better

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Speaker 2: deal with Trump that would lower the high tariffs, they

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Speaker 2: have to come up with alternative strategies.

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Speaker 3: Plan A, tariffs are going to go away. We're going

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Speaker 3: to be back to normal. Plan B we need to

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Speaker 3: start expanding the market, look at other options. Plan C

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Speaker 3: we have to focus on the Indian market.

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Speaker 2: Back in Chicago, Learning Resources has learned to be flexible too.

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Speaker 2: Earlier this year, with China facing one hundred and forty

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Speaker 2: five percent tariff, Alana says the company scouted a number

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Speaker 2: of promising partnerships in India and plan to source about

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Speaker 2: one hundred new products there, but Trump's tariff on India

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Speaker 2: has changed that calculation.

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Speaker 4: As of today, we're shifting more into Vietnam than we

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Speaker 4: are into India because there's no long term certainty being

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Speaker 4: given to us by the administration. We would really love

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Speaker 4: to manufacture there in broader scale, but economically, it doesn't

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Speaker 4: make sense for me to manufacture in a location where

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Speaker 4: it is going to be more expensive than manufacturing in

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Speaker 4: another location where I can have equal quality.

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Speaker 2: I asked Alana about those yoga balls that were rushed

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Speaker 2: out from Omiitab's factory over the summer. She says the

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Speaker 2: company has enough stock for Christmas and the holidays, and

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Speaker 2: perhaps a little more to stretch out inventory into twenty

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Speaker 2: twenty six, and after that, tell me.

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Speaker 4: What the tariffs are, and I can tell you where

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Speaker 4: I'll make it. But I really can't answer that question

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Speaker 4: unless I know what my costs.

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Speaker 3: Are going to be.

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Speaker 2: This is the Big Take, Asia from Bloomberg News. I'm wanh.

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Speaker 2: This was the second episode in our series following an

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Speaker 2: American toymaker as it navigates the uncertainty of tariffs. Join

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Speaker 2: us next time as we go to Vernon Hills outside

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Speaker 2: Chicago to explore the final chapter. If you like the episode,

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Speaker 2: be sure to subscribe at Bloomberg dot com, slash Podcast, offer,

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Speaker 2: leave a review, and even better, tell a friend it

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Speaker 2: really makes a difference. Thanks for listening. To see you

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Speaker 2: next time.