WEBVTT - India Wanted to Become The World’s Toymaker. Then Tariffs Happened 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.320 --> 0:00:12.760 The morning of August fourteenth, like the start of most days, 0:00:12.800 --> 0:00:16.800 on the outskirts of New Delhi, was hectic. Cars jostled 0:00:16.840 --> 0:00:21.840 with buses, tooktooks, trucks, and occasional cow as millions of 0:00:21.920 --> 0:00:25.720 Indians made their way to work. But for Amitop Carbunda, 0:00:25.880 --> 0:00:28.600 that was all a breeze compared to what awaited him 0:00:28.680 --> 0:00:29.880 on his factory floor. 0:00:31.160 --> 0:00:33.960 That was a crazy day. Our team work NonStop. 0:00:34.920 --> 0:00:38.919 Ami tab is the managing director of Sunlord, a manufacturer 0:00:38.960 --> 0:00:43.080 that specializes in plush toys. I met a metisfactory in 0:00:43.120 --> 0:00:46.040 the city of Noida, just outside of New Delhi, and 0:00:46.120 --> 0:00:48.240 he told me about that hectic day. 0:00:49.240 --> 0:00:55.080 That day, I cloked about twenty nine thousand steps he's 0:00:55.120 --> 0:00:56.320 an average of ten thousand. 0:00:57.320 --> 0:01:01.200 Most of Sunlord's toys end up in American homes, Teddy 0:01:01.200 --> 0:01:05.520 Bears and Disney's Elsa Princess dolls for Walmart, nursery products 0:01:05.520 --> 0:01:08.000 for Pottery Barn and West Elm. 0:01:08.400 --> 0:01:12.720 This is the packing area of metal detection was coming. 0:01:13.440 --> 0:01:16.360 His factory was racing to get a container of kids 0:01:16.480 --> 0:01:20.760 yoga balls covered in plush fabric, assembled, packed and shipped 0:01:20.760 --> 0:01:28.200 out fast. This was the very first order for a 0:01:28.280 --> 0:01:32.839 new customer, American toymaker Learning Resources, and they had two 0:01:32.920 --> 0:01:36.840 days to make it happen. But some lord's deadline wasn't 0:01:36.920 --> 0:01:39.679 set by their new customer. It was put in play 0:01:39.959 --> 0:01:42.560 by the White House and President Donald Trump. 0:01:42.600 --> 0:01:45.199 The White House making a move to slap of fifty 0:01:45.200 --> 0:01:48.920 percent tariff on imports from India. White House trade advisor 0:01:49.000 --> 0:01:51.840 Peter Navarro cranked up pressure on India to halt its 0:01:51.880 --> 0:01:53.279 purchases of Russian oil. 0:01:54.200 --> 0:01:58.520 Earlier this year, India seemed like a safe bet. President 0:01:58.520 --> 0:02:01.800 Trump and Indian Prime Minister render Amodi were developing what 0:02:01.960 --> 0:02:06.160 seemed like a romance. Modi visited the White House in February. 0:02:06.600 --> 0:02:09.320 Many businesses thought India would be one of the first 0:02:09.320 --> 0:02:12.480 countries to strike a new trade deal with the US. 0:02:12.840 --> 0:02:15.080 The government had kind of said, you know, this is 0:02:15.080 --> 0:02:16.760 going to be a safe place to manufacture. This is 0:02:16.760 --> 0:02:18.119 one of our priority countries. 0:02:18.560 --> 0:02:22.160 Elana Woldenberg Ruffman is vice president of product development for 0:02:22.280 --> 0:02:26.640 Learning Resources, based outside Chicago. We met earlier this year 0:02:26.800 --> 0:02:29.560 when I traveled with her to visit factories in Vietnam. 0:02:29.840 --> 0:02:32.880 We really started to amp up our efforts to expand 0:02:32.880 --> 0:02:36.120 our presence within India. The fact that the tariffies in 0:02:36.160 --> 0:02:40.959 India changed with like four weeks notice has real implications 0:02:41.040 --> 0:02:42.760 on real businesses like US. 0:02:43.880 --> 0:02:47.200 Like many US companies, Learning Resources has been looking to 0:02:47.240 --> 0:02:50.639 reduce its reliance on China since Trump's first trade war. 0:02:51.240 --> 0:02:53.919 But when Trump took office this year and began ramping 0:02:54.000 --> 0:02:56.680 up tariffs with the aim of raising money and bringing 0:02:56.720 --> 0:03:00.480 manufacturing back to the US, that put the China end 0:03:00.480 --> 0:03:04.080 of the supply chain under pressure. It pushed Learning Resources 0:03:04.120 --> 0:03:07.320 to accelerate its plans to shift its supply chains elsewhere, 0:03:07.720 --> 0:03:11.600 to Vietnam and to India, to companies like sun Lord. 0:03:12.160 --> 0:03:15.400 But then Trump surprised India and slapped its goods with 0:03:15.480 --> 0:03:19.280 one of the highest terraff freights facing any major manufacturing country. 0:03:19.639 --> 0:03:22.760 India has been a good friend, but India has charged 0:03:22.960 --> 0:03:27.160 basically more tariffs and almost any other country, And for 0:03:27.240 --> 0:03:30.080 sun Lord, that meant the pressure was on. 0:03:31.040 --> 0:03:34.280 So the goods need to be in the stores by 0:03:35.080 --> 0:03:37.320 first of October for the Christmas sales. 0:03:38.400 --> 0:03:42.800 With tariffs doubling, Learning Resources asked Omiitov's factory to speed 0:03:42.880 --> 0:03:46.360 up production. His team worked into the night, pushing fifteen 0:03:46.440 --> 0:03:50.760 thousand pieces through final assembly and packing that shipment barely 0:03:50.800 --> 0:03:52.600 made it out, and we slayed it to land in 0:03:52.640 --> 0:03:56.520 the US one day before the higher tariffs went into effect. 0:03:56.680 --> 0:03:59.880 Whatever was before twenty seven dougars was twenty five percent 0:04:00.400 --> 0:04:01.760 a ship novice fifty percent. 0:04:02.800 --> 0:04:06.200 When you're an American company sourcing products half a world away, 0:04:06.400 --> 0:04:10.480 there's already enough uncertainty to contend with. Tariffs don't just 0:04:10.520 --> 0:04:12.360 add cost, they add chaos. 0:04:12.760 --> 0:04:15.200 The boat ended up getting checked in six hours too late, 0:04:15.440 --> 0:04:18.200 so the shipment had a fifty percent tariff instead of 0:04:18.200 --> 0:04:19.320 a twenty five percent tariff. 0:04:19.960 --> 0:04:22.680 That costs the company fifty thousand dollars. 0:04:23.040 --> 0:04:26.240 The cost of those terraffs is entirely something that we, 0:04:26.279 --> 0:04:28.919 as an organization have to pay. It is US, an 0:04:28.960 --> 0:04:30.200 American business. 0:04:29.800 --> 0:04:31.040 That had to pay those tariffs. 0:04:31.320 --> 0:04:33.520 The irony of it is, had we left it in 0:04:33.600 --> 0:04:37.120 China and eliminated all the work of finding a new factory, 0:04:37.240 --> 0:04:41.159 moving it, the product, training, the factory testing, et cetera, 0:04:41.520 --> 0:04:42.360 it would have been cheaper. 0:04:54.480 --> 0:04:58.360 This is the big take Asia from Bloomberg News. I'm wanha. 0:04:58.600 --> 0:05:01.600 Trump's tariff war with China was supposed to create an 0:05:01.600 --> 0:05:05.239 opportunity for India, a chance to become the world's next 0:05:05.360 --> 0:05:09.080 factory floor, but then the White House changed its mind. 0:05:09.880 --> 0:05:12.720 Today in the show, I traveled to India and go 0:05:12.920 --> 0:05:17.960 inside the factory scrambling to adapt to Washington's tariff whiplash 0:05:18.000 --> 0:05:21.160 and get a ground view of the uniquely Indian solutions 0:05:21.480 --> 0:05:35.800 to build a manufacturing powerhouse without China And every lunch, 0:05:37.880 --> 0:05:40.960 I met Sun Lord's factory in an industrial park outside 0:05:40.960 --> 0:05:42.880 New Delhi known as Neuda Toy City. 0:05:42.960 --> 0:05:45.240 Bloomberg New channelna. 0:05:45.120 --> 0:05:48.680 Amitap Karbunda is introducing me to his father, eighty one 0:05:48.720 --> 0:05:50.520 year old Ashak Karbanda. 0:05:50.200 --> 0:05:54.400 Papa, Hello, sir. She is from Bloomberg. 0:05:55.040 --> 0:05:58.760 Ashak founded Son Lord in nineteen seventy nine. Back then, 0:05:58.880 --> 0:06:01.960 the company made women's clothing and decor like curtains and 0:06:02.000 --> 0:06:06.200 cushions for export. Amitop built out the company's toy sector, 0:06:06.440 --> 0:06:09.560 which now makes up the bulk of the business. Ashak 0:06:09.600 --> 0:06:13.520 still serves as chairman, overseeing the company's finances and comes 0:06:13.560 --> 0:06:17.200 into the office most days. Father and son often eat 0:06:17.279 --> 0:06:19.720 lunch together in the office's homie kitchen. 0:06:20.440 --> 0:06:25.040 This is Lentil's. Normally are Lentil's and gravy, but this 0:06:25.240 --> 0:06:28.800 is where I formed the speciality the family. The city 0:06:29.240 --> 0:06:31.599 cotta cheese and this is potatoes. 0:06:32.160 --> 0:06:35.520 Amiitop joined the business after college with a degree in 0:06:35.600 --> 0:06:39.320 chemical engineering. Over lunch, he shares that his own son, 0:06:39.560 --> 0:06:43.440 representing the family's third generation, will soon be joining the company. 0:06:43.600 --> 0:06:47.559 He studied economics here in India and then the US 0:06:47.560 --> 0:06:49.760 he did his master's in sustainability management. 0:06:50.279 --> 0:06:52.760 It occurs to me that most of the toymakers I've 0:06:52.800 --> 0:06:56.960 met during this journey are family businesses. The Chicago toymaker 0:06:57.000 --> 0:06:59.960 I've been following learning Resources is run by the found 0:07:00.040 --> 0:07:04.520 under's grandchildren and great grandchildren. For decades, it's relied on 0:07:04.600 --> 0:07:09.160 Chinese manufacturers, who are also family owned. In Vietnam and 0:07:09.200 --> 0:07:12.600 here in India, the toy industry is dominated by companies 0:07:12.680 --> 0:07:16.200 passed down from generation to generation. It's part of the 0:07:16.200 --> 0:07:19.400 reason the US trade war is so devastating. The mom 0:07:19.440 --> 0:07:22.880 and pops here lack the deep pockets of major corporations. 0:07:23.400 --> 0:07:26.880 As a terra regime changes pivoting won't come easy. 0:07:27.400 --> 0:07:29.840 The kind of uncertain day we are facing now, I've 0:07:29.880 --> 0:07:32.280 never faced it in my life, un certainly, which is 0:07:32.320 --> 0:07:42.920 totally out of your controling. 0:07:38.080 --> 0:07:41.440 In Today, sun Lord employees about nine hundred workers in 0:07:41.480 --> 0:07:46.080 three factories. It specializes in bespoke nursery items like crib 0:07:46.080 --> 0:07:47.520 bedding and fabric toys. 0:07:47.880 --> 0:07:52.000 This Christmas decord for one of the Williams Sonoma brands, 0:07:52.000 --> 0:07:55.880 which is that Disney Range Disney Design Custmos dech Cord. 0:07:56.920 --> 0:07:58.160 It's a snoopy ye. 0:08:02.840 --> 0:08:05.920 When Trump briefly raised tariffs on China to one hundred 0:08:05.920 --> 0:08:09.160 and forty five percent earlier this year, Ami Toob was 0:08:09.240 --> 0:08:13.280 inundated with phone calls and emails. His factory was already 0:08:13.400 --> 0:08:15.800 running full, so he's only been able to take on 0:08:15.840 --> 0:08:19.360 a few new clients. One of those was Learning Resources, 0:08:19.480 --> 0:08:23.160 which ordered the yoga balls. They're covered with colorful furry 0:08:23.200 --> 0:08:27.560 animal faces unicorns, penguins, and puppies, and they'll be sold 0:08:27.600 --> 0:08:31.040 in Walmart stores for the Christmas holidays. But after that 0:08:31.080 --> 0:08:34.240 first rush shipment in August, things have stalled. 0:08:34.600 --> 0:08:36.560 It was a plan for a second order, but that 0:08:36.600 --> 0:08:37.720 has now been postponed. 0:08:38.120 --> 0:08:41.760 Omiitob says Learning Resources has put about two dozen other 0:08:41.840 --> 0:08:44.960 products it was exploring with this factory on hold too. 0:08:45.840 --> 0:08:49.040 New orders from existing customers have also been pared down, 0:08:49.480 --> 0:08:52.280 and instead of growing fifteen percent this year as planned, 0:08:52.480 --> 0:08:54.960 the company will be lucky to even see a three 0:08:55.000 --> 0:08:56.199 percent growth. 0:08:55.920 --> 0:08:58.680 There's a lot of unpredictability. You don't know what's going 0:08:58.760 --> 0:09:03.080 to happen tomorrow. In the short term, new investments, new 0:09:03.200 --> 0:09:05.680 products are a bit on hold. 0:09:07.080 --> 0:09:10.880 It's a pattern playing out across India's burgeoning toy sector. 0:09:11.520 --> 0:09:14.480 India's higher tariffs on goods to the US put it 0:09:14.559 --> 0:09:18.520 at a disadvantage. Both China and Vietnam have struck better 0:09:18.559 --> 0:09:21.920 deals with lower levees, and the weight of India's sky 0:09:22.000 --> 0:09:26.240 high tariffs is causing pain in the country's biggest industrial hubs. 0:09:27.360 --> 0:09:29.960 We produced two hundred thousand darts every day. 0:09:30.679 --> 0:09:35.240 That's VIJENDERA. Babu, the founder of Microplastics, the largest toymaker 0:09:35.360 --> 0:09:38.720 in the country. I've flown to Bengalore, one thousand miles 0:09:38.800 --> 0:09:42.120 south of New Delhi to tour Vigendria's plant. The factory 0:09:42.200 --> 0:09:45.240 is huge, six hundred and fifty thousand square feet of 0:09:45.360 --> 0:09:49.800 manufacturing space that stretches over more than eleven football fields. 0:09:50.760 --> 0:09:53.160 This three is apply to Walmart completely. 0:09:53.360 --> 0:09:57.480 The plant looks busy with hundreds of workers assembling NERF guns, 0:09:57.640 --> 0:10:02.000 paw patrol cars, and Little Tykes baseball sets, but Viajendra 0:10:02.120 --> 0:10:04.760 says the factory isn't anywhere near capacity. 0:10:05.400 --> 0:10:07.800 We are in still end of September, supposed to be 0:10:07.840 --> 0:10:10.120 a very, very peak season, but you can see still 0:10:10.160 --> 0:10:10.920 it is a bit slow. 0:10:12.160 --> 0:10:15.160 I really come to understand how badly tariffs have hit 0:10:15.200 --> 0:10:18.720 his business when he shows me the plant's warehouse and 0:10:18.760 --> 0:10:24.120 it's eerily quiet. The storage area is as big as 0:10:24.280 --> 0:10:28.040 five Olympic sized swimming pools, full of products that were 0:10:28.080 --> 0:10:31.720 pulled off the production lines after Trump slapped that fifty 0:10:31.720 --> 0:10:33.160 percent tariff on India. 0:10:33.920 --> 0:10:36.720 All these are waiting to be fully assembled now and 0:10:36.760 --> 0:10:39.480 then to be shipped because of the older stoppages or 0:10:39.480 --> 0:10:41.720 out of cancelation. So we are just trying to store here, 0:10:42.200 --> 0:10:45.880 so different toys, different parts of toys. You can see 0:10:45.880 --> 0:10:47.040 in thousands and thousands. 0:10:47.040 --> 0:10:49.800 It is that during our tour he gets on a 0:10:49.880 --> 0:10:52.520 video call with one of his two other factories and 0:10:52.640 --> 0:10:56.520 shows me an even bigger warehouse with racks stacked full 0:10:56.720 --> 0:10:58.080 of finished products, not. 0:10:58.160 --> 0:11:01.600 Eating, frusture, eating future, hacked and ready to go, everything done, 0:11:01.720 --> 0:11:03.120 fact and ready to be shipped. 0:11:03.960 --> 0:11:06.320 As much as a quarter of the factory's orders have 0:11:06.400 --> 0:11:10.160 been put on hold or canceled. Thegender estimates the factory 0:11:10.320 --> 0:11:12.800 might be stuck with as much as twenty million dollars 0:11:12.840 --> 0:11:16.360 worth of goods. Then there's the loss of new business, 0:11:16.600 --> 0:11:19.640 which he says represents as much as fifteen million dollars 0:11:20.160 --> 0:11:24.040 all on pause. Like Omitop, the gender started the year 0:11:24.120 --> 0:11:28.439 with an ambitious growth plan. Forty percent existing customers were 0:11:28.480 --> 0:11:32.480 already looking to move products from China. New clients wanted 0:11:32.480 --> 0:11:35.240 to place orders, so he built a new three hundred 0:11:35.280 --> 0:11:38.520 thousand square foot facility to prepare for the new demand. 0:11:38.760 --> 0:11:41.040 His plant is completely ready. We should have opened and 0:11:41.080 --> 0:11:43.240 we should be getting the machines in next two months now. 0:11:43.600 --> 0:11:46.400 But now we are also waiting. Should we order those machines? 0:11:46.720 --> 0:11:48.679 Should we weight and watch? So we have taken addation 0:11:48.760 --> 0:11:49.559 to wait and watch. 0:11:49.600 --> 0:12:01.920 Now with so much uncertainty, where does India's toy industry 0:12:02.120 --> 0:12:06.120 go from here? And can President Trump's tariffs really bring 0:12:06.200 --> 0:12:25.280 toy manufacturing back to the States. That's after the break. Wow, 0:12:25.360 --> 0:12:26.240 it's huge in here. 0:12:26.600 --> 0:12:28.760 It's a six hundred and fifty thousands coudfoot plant. You'll 0:12:28.800 --> 0:12:31.160 have good about of walking today. 0:12:32.880 --> 0:12:36.640 In a corner of the massive microplastics factory outside Bangalore, 0:12:37.120 --> 0:12:41.640 the sound of heavy machinery fades away. Vijender Baboo, the founder, 0:12:41.760 --> 0:12:45.960 brings me to the second floor. Here, the facility's industrial 0:12:46.000 --> 0:12:48.960 scale gives way to delicate artistry. 0:12:49.559 --> 0:12:54.560 It's like going to a beauty salon to get those hairstyles. 0:12:54.000 --> 0:12:57.959 And it really is like a salon for tiny dolls, 0:12:58.200 --> 0:13:00.960 and it requires all the expertise of a team of 0:13:01.080 --> 0:13:05.640 highly trained hairdressers, only in miniature. I watch you worker 0:13:05.679 --> 0:13:10.640 handle the first critical step hair rooting. He holds a 0:13:10.679 --> 0:13:13.680 bald plastic doll head up to a machine. As he 0:13:13.800 --> 0:13:17.680 rotates it, needles punch fine blonde strands with rapid fire speed. 0:13:18.200 --> 0:13:20.880 In seconds, the doll goes from bald to having a 0:13:20.920 --> 0:13:22.800 full head of shimmering hair. 0:13:22.880 --> 0:13:24.040 Like hair transplantation. 0:13:24.160 --> 0:13:26.800 You know, you can see that that is very much 0:13:26.840 --> 0:13:27.800 like a hair transplant. 0:13:28.720 --> 0:13:29.520 You can see. 0:13:30.160 --> 0:13:34.840 Then the real magic happens. I watch as dozens of 0:13:34.840 --> 0:13:40.160 women transform these wild manes into bobs, wavy curls, high ponies, 0:13:40.200 --> 0:13:41.440 and elaborate braids. 0:13:41.600 --> 0:13:44.319 Yeah, you see the different styles there. It's very difficult 0:13:44.360 --> 0:13:45.800 to do it by machine. 0:13:47.400 --> 0:13:51.360 Watching these rows of skillful stylists, I realize this is 0:13:51.400 --> 0:13:55.200 where India's manufacturers have a true advantage over the rest 0:13:55.200 --> 0:13:59.040 of the world. Even today, you can't automate a tiny, 0:13:59.200 --> 0:14:04.040 perfect front braid you need human hands, I asked Vijendra 0:14:04.240 --> 0:14:06.960 if he thinks this kind of toy manufacturing can be 0:14:07.000 --> 0:14:08.000 done in the US. 0:14:08.920 --> 0:14:11.640 It's not that it can't be done, obviously, but it's 0:14:11.640 --> 0:14:15.080 all about the cost. Machines can manufacture these things, but 0:14:15.160 --> 0:14:17.960 then there's a lot of decoration, a lot of printing, 0:14:18.280 --> 0:14:21.240 a lot of plush which requires stuffing. 0:14:22.040 --> 0:14:26.160 This reliance on skilled human hands reveals the flaw in 0:14:26.200 --> 0:14:29.680 Trump's promise to bring manufacturing jobs back to the US. 0:14:30.400 --> 0:14:33.280 These workers here make about twenty three thousand rupees a 0:14:33.360 --> 0:14:37.040 month or about two hundred and fifty dollars. Americans can't 0:14:37.120 --> 0:14:40.240 live on wages that low, so if these toys were 0:14:40.280 --> 0:14:42.400 made in the US, one of two things would have 0:14:42.520 --> 0:14:46.000 to happen. Either wage costs would rise, pushing the price 0:14:46.080 --> 0:14:49.560 of these toys to unaffordable levels and driving the manufacturer 0:14:49.640 --> 0:14:53.320 out of business, or the entire process would need to 0:14:53.360 --> 0:14:57.880 be automated. This leaves the world's toy makers in a bind. 0:14:58.400 --> 0:15:01.120 They can't stay in China and in the USA is 0:15:01.240 --> 0:15:04.800 out of reach for low cost, low margin products. The 0:15:04.920 --> 0:15:08.560 world needs a new workshop, a place with millions of 0:15:08.640 --> 0:15:12.240 workers ready to step onto the assembly line. Could that 0:15:12.400 --> 0:15:13.600 place be India. 0:15:13.880 --> 0:15:15.440 I believe this is India's moment. 0:15:16.720 --> 0:15:20.240 Manugupta is chairman of the Toy Association of India, a 0:15:20.360 --> 0:15:23.320 trade group for the manufacturers and dealers in the country. 0:15:23.920 --> 0:15:26.640 This industry has the potential to become the next extile 0:15:26.680 --> 0:15:28.040 of the government innistry for India. 0:15:28.840 --> 0:15:32.520 Entrepreneurs are here ready when willing to invest. An ecosystem 0:15:32.680 --> 0:15:33.520 has been created. 0:15:34.240 --> 0:15:37.560 Prime Minister Mody is certainly betting that India can become 0:15:37.600 --> 0:15:41.040 the world's next toy factory. In twenty twenty, he launched 0:15:41.080 --> 0:15:44.200 the National Action Plan for Toys to try and capture 0:15:44.280 --> 0:15:47.440 a slice of the one hundred billion dollar global toy market. 0:15:48.040 --> 0:15:51.560 Mody's blueprint includes strict safety controls for all toys sold 0:15:51.600 --> 0:15:56.640 in India and ironically, a seventy percent tariff on imported toys. 0:15:57.240 --> 0:16:01.560 That's all designed to keep foreign competitors, namely China out. 0:16:02.360 --> 0:16:05.400 Companies like Learning Resources see a lot of advantage in 0:16:05.520 --> 0:16:09.720 India's scale and unlike Vietnam, where wages are rising as 0:16:09.800 --> 0:16:13.680 factories compete for a smaller pool of workers, the size 0:16:13.720 --> 0:16:17.920 of India's workforce keeps labor costs low, and Gupta of 0:16:18.000 --> 0:16:22.000 the Toy Association says the country's manufacturers are playing the 0:16:22.160 --> 0:16:22.640 long game. 0:16:23.200 --> 0:16:27.600 A lot of companies understand and consider that these tariffs 0:16:27.640 --> 0:16:30.080 are not going to stay for too long. You need 0:16:30.160 --> 0:16:34.080 to prepare India and their manufacturers so that whenever these 0:16:34.120 --> 0:16:37.440 tariffs come down, they become an alternative to what they're 0:16:37.480 --> 0:16:40.359 buying in China of Yourtama Indonesia. 0:16:41.240 --> 0:16:45.880 Preparing India's toy industry will require some big changes. Modi's 0:16:45.960 --> 0:16:50.000 National Action Plan has shut out foreign producers, but local 0:16:50.120 --> 0:16:54.480 manufacturers have been making toys mainly for domestic consumers. A 0:16:54.560 --> 0:16:58.360 lot of learning Resources says this means most Indian factories 0:16:58.720 --> 0:17:03.040 aren't yet making good with a quality that international buyers demand. 0:17:03.840 --> 0:17:05.879 I think really the next big thing is just going 0:17:05.960 --> 0:17:11.160 to be adjusting the factories to align to Western standards, 0:17:11.720 --> 0:17:16.120 so quality standards, timelines, all those sort of little details 0:17:16.200 --> 0:17:18.720 that come with working with a new partner. 0:17:19.840 --> 0:17:23.639 Alana sees India's potential, but right now it's still a 0:17:23.800 --> 0:17:27.800 tiny player in a massive market. India sold about one 0:17:27.880 --> 0:17:32.240 hundred million dollars worth of toys to Americans last year. China, 0:17:32.320 --> 0:17:35.840 on the other hand, sold eleven billion dollars worth in 0:17:35.960 --> 0:17:40.680 Vietnam three billion. Still as Trump's tariffs push companies like 0:17:40.800 --> 0:17:44.399 Learning Resources to pivot away from China. India's share of 0:17:44.440 --> 0:17:48.080 the toy market is growing, but China still dominates the 0:17:48.280 --> 0:17:51.880 entire toy making industry. I saw this in Vietnam. Most 0:17:51.920 --> 0:17:54.560 of the raw materials used to make toys still come 0:17:54.640 --> 0:17:58.000 from China, so does most of the investments and expertise. 0:17:58.840 --> 0:18:01.520 Ami toop Karbanda for sun Lord says he'd like to 0:18:01.560 --> 0:18:05.520 see more of that Chinese capital and influence in India. 0:18:06.119 --> 0:18:07.840 To be the best, we have to learn from the best, 0:18:08.440 --> 0:18:09.240 right and right now. 0:18:09.320 --> 0:18:11.680 China is the best in this, but thanks to deep 0:18:11.760 --> 0:18:15.320 rooted tensions between India and China, it's hard to develop 0:18:15.480 --> 0:18:20.880 ties to Chinese entrepreneurs and to Chinese capital. Omitob says 0:18:21.040 --> 0:18:24.040 that's forcing entrepreneurs like him to come up with their 0:18:24.119 --> 0:18:31.960 own uniquely Indian solutions. At sun Lord's plant outside New Delhi, 0:18:32.200 --> 0:18:36.760 Omitob shows me one particularly expensive pain point for toymakers. 0:18:37.320 --> 0:18:39.479 This is a two head laser cutting machine with an 0:18:39.840 --> 0:18:45.080 overhead camera. This is an elephant being cut. There you 0:18:45.200 --> 0:18:49.480 see there, you be hears. The tail is the body 0:18:49.520 --> 0:18:50.160 of the elephant. 0:18:50.720 --> 0:18:53.840 Elephant ears and trunks have been stamped onto the gray 0:18:53.960 --> 0:18:57.920 plush fabric, a red laser being cuts the fabric, leaving 0:18:57.960 --> 0:19:01.640 a thin trail of smoke. Machines like this laser cutter 0:19:01.880 --> 0:19:05.080 cost the kind of money that few Indian factory owners have. 0:19:05.880 --> 0:19:09.320 Omiitob solution is to start a joint venture with two 0:19:09.640 --> 0:19:11.320 of his biggest competitors. 0:19:12.000 --> 0:19:15.760 One plus one normally means in mathematics it translates to two. 0:19:16.400 --> 0:19:19.560 Tarun Chiitwani owns a toy factory just up the road 0:19:19.640 --> 0:19:21.840 from some lord's facility, but in. 0:19:22.000 --> 0:19:25.320 Terms of manufacturing activities and all that, one plus one 0:19:25.359 --> 0:19:26.399 translates to eleven. 0:19:27.040 --> 0:19:30.720 Tarun Omitob and a third partner are opening a facility 0:19:30.800 --> 0:19:34.360 together next door to Tarun's toy factory. It will run 0:19:34.440 --> 0:19:37.240 twenty four to seven, the first laser cutting facility of 0:19:37.320 --> 0:19:40.760 its kind in India, and they're also planning a new 0:19:40.880 --> 0:19:44.520 factory with more than three hundred sewing machines. In the past, 0:19:44.760 --> 0:19:47.200 these three entrepreneurs would have been rivals. 0:19:47.760 --> 0:19:52.240 Not today, we're not competing against each other. Our objective 0:19:52.400 --> 0:19:54.679 is to get business into India. 0:19:55.119 --> 0:19:57.360 And as they wait for India to clinch a better 0:19:57.440 --> 0:20:00.320 deal with Trump that would lower the high tariffs, they 0:20:00.400 --> 0:20:02.600 have to come up with alternative strategies. 0:20:03.080 --> 0:20:05.679 Plan A, tariffs are going to go away. We're going 0:20:05.720 --> 0:20:08.320 to be back to normal. Plan B we need to 0:20:08.400 --> 0:20:13.040 start expanding the market, look at other options. Plan C 0:20:13.840 --> 0:20:15.399 we have to focus on the Indian market. 0:20:17.280 --> 0:20:21.320 Back in Chicago, Learning Resources has learned to be flexible too. 0:20:22.160 --> 0:20:24.840 Earlier this year, with China facing one hundred and forty 0:20:24.880 --> 0:20:28.680 five percent tariff, Alana says the company scouted a number 0:20:28.720 --> 0:20:32.120 of promising partnerships in India and plan to source about 0:20:32.119 --> 0:20:35.439 one hundred new products there, but Trump's tariff on India 0:20:35.680 --> 0:20:37.240 has changed that calculation. 0:20:38.119 --> 0:20:40.920 As of today, we're shifting more into Vietnam than we 0:20:41.000 --> 0:20:44.439 are into India because there's no long term certainty being 0:20:44.480 --> 0:20:47.520 given to us by the administration. We would really love 0:20:47.640 --> 0:20:51.720 to manufacture there in broader scale, but economically, it doesn't 0:20:51.720 --> 0:20:54.120 make sense for me to manufacture in a location where 0:20:54.200 --> 0:20:56.920 it is going to be more expensive than manufacturing in 0:20:56.960 --> 0:20:59.320 another location where I can have equal quality. 0:21:00.440 --> 0:21:03.000 I asked Alana about those yoga balls that were rushed 0:21:03.040 --> 0:21:06.240 out from Omiitab's factory over the summer. She says the 0:21:06.320 --> 0:21:09.560 company has enough stock for Christmas and the holidays, and 0:21:09.680 --> 0:21:12.480 perhaps a little more to stretch out inventory into twenty 0:21:12.560 --> 0:21:15.879 twenty six, and after that, tell me. 0:21:15.920 --> 0:21:17.520 What the tariffs are, and I can tell you where 0:21:17.520 --> 0:21:19.600 I'll make it. But I really can't answer that question 0:21:19.640 --> 0:21:20.760 unless I know what my costs. 0:21:20.560 --> 0:21:20.960 Are going to be. 0:21:31.080 --> 0:21:34.119 This is the Big Take, Asia from Bloomberg News. I'm wanh. 0:21:34.920 --> 0:21:37.600 This was the second episode in our series following an 0:21:37.600 --> 0:21:42.080 American toymaker as it navigates the uncertainty of tariffs. Join 0:21:42.200 --> 0:21:44.520 us next time as we go to Vernon Hills outside 0:21:44.600 --> 0:21:48.320 Chicago to explore the final chapter. If you like the episode, 0:21:48.440 --> 0:21:51.800 be sure to subscribe at Bloomberg dot com, slash Podcast, offer, 0:21:52.240 --> 0:21:54.800 leave a review, and even better, tell a friend it 0:21:55.000 --> 0:21:57.359 really makes a difference. Thanks for listening. To see you 0:21:57.480 --> 0:21:57.840 next time.