Tariffed: The Toymaker That Took on Trump Part Three

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. Do you want to look at a number seven or do you want to look at something else? I've got something else. Okay. A clear one. Yeah. Ooh, pretty. This summer, Dylan Broshard's four and seven-year-old daughters got hooked on a British cartoon that teaches kids about counting and math. One bird. Hello, bird. One tree. Hello, tree. The stars of Number Blocks are bright, playful characters built from stackable plastic blocks with faces and hands that bring them to life. They've captured the imagination of young kids everywhere, including Dylan's youngest daughter.

1:47She'll just sit and watch it and she'll sing the song because one and one makes two. And another one is me. That's three. It's calming for her. You can count on us within all of us. The characters from Number Blocks are licensed by an American toy maker, Learning Resources, which produces the line of toys. And naturally, Dylan's daughter wanted a set of her own. Like any other consumer would, you know, I got on Google and found where to purchase them. And I think the cheapest set we could find, it was just like a one, two, and three block. So three little tiny toys. It was$20, and the smaller sets were$25,$30 each.

2:35The price gave Dylan pause. He and his family live in what he calls the cornfields of Indiana. As a 7th grade science teacher, Dylan keeps a careful watch on the family's spending. In June, Learning Resources raised prices on its toys by an average of 6%, which bumped most number blocks up by a few dollars. That may not seem like much, but for Dylan, who's seen costs of everything, from groceries to toys, climb this year, the increase was too steep. You're getting less stuff for the same amount of money. It's not in the budget to buy multiple sets of prices of toys that are, you know, continuing to go up the same way everything is.

3:17The girls did get their number blocks, but it wasn't from Amazon or the stores. Are you going to come help me send it to the printer, baby? Dylan sat down at his computer, designed the characters himself, and printed them out on his home 3D printer for a fraction of the price. The amount of plastic that I use on it's less than 50 cents for a little doll, so it's crazy. For Dylan, it was a thrifty hack to save money. For learning resources, it's a troubling tipping point. When prices climb too high, some consumers don't just cut back, they walk away altogether. But the company felt it had no choice.

3:59We did that to kind of balance the books, if you will. Rick Woldenberg is the CEO of Learning Resources. We raise prices middle single digits, and we're trying to make that stick. By that, I mean we're trying to hold there. I really don't want a penny relating to tariffs that I don't need. Rick says Learning Resources' price increase was driven by President Donald Trump's tariff hikes. Here is the deal that I will be offering to every major company and manufacturer on Earth. I will give you the lowest taxes. Since the start of his second term, President Trump has imposed sweeping tariffs, most notably on China, where most toys are made.

4:43The policy was billed as a way to boost U.S. tax revenue and push brands to bring manufacturing back home. And Trump insists that foreign countries and companies would be the ones footing the bill. Here he is on C-SPAN during his campaign. A tariff is a tax on a foreign country. That's the way it is, whether you like it or not. A lot of people like to say, oh, it's a tax on us. No, no, no. It's a tax on a foreign country. That's not the way things have turned out for Learning Resources. About half of its products are still made in China, where tariffs hit 145 percent in April. Though that's now been reduced to 31 percent, the company has accelerated its shift from China to neighboring Vietnam, where exports to the U.S.

5:28face a 20 percent levy. But tariffs aren't paid by the foreign factories that make the toys. They're paid by the importer when goods are brought into the U.S. In this case, learning resources. And that's actual cash out the door. From us, not from China or India or Vietnam. No countries are paying it. We write the checks. We borrow the money from the bank and send the money to the government. In 2024, the company paid about$2 million in tariffs. This year, that's jumped to about$14 million. Like many American companies manufacturing overseas, learning resources front-loaded inventory before higher levies took effect.

6:15That's helped it to avoid passing the full cost onto consumers. But that wasn't the only battle it took on. In April, the company took its fight to court, arguing the president lacked authority to impose tariffs. The case now sits before the Supreme Court. Rick is hopeful the court will rule the tariffs illegal. But if it upholds the administration's levies, he says his company won't be able to hold on much longer. No American consumer should kid themselves as to who will pay this tax. We can't absorb it. And they're kidding themselves if they think that companies will absorb it. They will just pass it on.

6:55Maybe not all in one go, but they will preserve their margins in order to remain viable. And that means foreign countries are not paying this tax and U.S. companies will pass it along. So you know who's going to pay it. You.

7:18This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Over the past year, we followed an American toy company as it fled China and scrambled to rebuild its supply chains in Asia. Today, in our final chapter, we see what the tariff chaos looks like when it lands on American shores, when the bill finally comes due, and how one family-owned toy maker is pushing back in the courts.

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8:49This warehouse is 356 ,000 square feet. It's about a half mile around on the perimeter. So if you walked along the wall in a circle, it'd be about a half a mile. Rick Woldenberg is taking us on a tour of what he calls his shiny penny in Vernon Hills outside of Chicago. It's a warehouse the company built four years ago, and it holds nearly all of Learning Resources' 2 ,000 or so products. When you order one of the company's toys online, Canoodle Puzzles or Botley the Coding Robot, chances are it will come through here. The space stretches out like a canyon. Conveyor belts crisscross the floor, while shelves stacked more than 30 feet high are loaded with pallets.

9:35On the floor, a worker moves through the aisles, pulling individual toys from the shelves and packing them into cardboard boxes that make their way through the factory. So if you see, she's wearing a headset. So that's voice to pick. And on her arm, she has a little display. And on her finger, she has a scanner. And then she just scans the product, scans it out of its location, scans it into the box. As Rick shows off the plan's technology, he says he's frustrated by the Trump administration's narrative that companies importing goods into the U.S. are somehow bad actors that don't invest at home, and that if you tax those companies heavily enough, they'll be forced to build factories in America.

10:19Companies know that if they build in America, there are no tariffs, and that's why they're coming home to the USA in record numbers. They're building factories and plants. The main thing that the Trump administration is trying to accomplish with tariffs is to make those goods from overseas more expensive so that companies rethink where they buy them from and source them in the U.S. if they can. Brendan Murray is Bloomberg's global trade editor. He spent much of the last year covering the trade war and its effect on global supply chains. He says in some cases, President Trump's tariff policies show signs of their intended outcome.

10:59We've seen pharmaceutical companies say that they are going to produce more drugs in the US and so the effect is happening. It's just happening at a very slow pace and not a huge scale at this point. The big question really is how much of it is going to be these kinds of good-paying factory jobs that the administration thinks they're going to create or are these a lot of these going to be data centers and not very labor-intensive facilities that that don't create this renaissance of manufacturing jobs that the administration has pledged they're going to try to accomplish. Rick says Trump's vision of bringing back manufacturing jobs may never materialize in his industry.

11:48That's because toy companies like his rely heavily on manual labor, actual human hands that braid doll hair, stuffed teddy bears, and solder electronics. For years, the company's production has been concentrated in China and other emerging markets, where labor costs are lower. Rick says most toy companies made that pivot decades ago. Same goes for the vast network of suppliers the toy industry depends on. Everything from plastics to electronics to stuffing. And rebuilding that infrastructure here, he argues, just wouldn't make financial sense. The jingoistic desire to have things made in the U.S.

12:26is a sort of recurrent theme. It comes and it goes. And so for many years, at least 10, we've looked for any factory that would work with us to make anything so that we could cobble together a 10 product range. We have over 2 ,000 products, 10 products that are made in the U.S.A. So we go to a retailer and say, here, made in the USA. Can't do it. And so I firmly believe that there is no capacity to make the kinds of products that we make. We're going to stay in this business. We can't make the stuff in the U.S. Nobody wants to make it. What learning resources can build in the U.S. is this, a high-tech distribution center that maximizes automation.

13:15Inside, conveyor belts move boxes that are tracked by software. The system knows exactly where a box is and exactly what needs to be filled for customers. Gigantic robotic arms the size of cars swing into action, wrapping pallets in plastic. The system is paperless. We've been paperless since 99 and highly automated. I'll show you this PIC module here is for shipments of full cases. And though his warehouse doesn't make any toys, Rick says it still represents a huge investment in the U.S. that the White House unfairly dismisses. This building's not free. And the stuff that's in it is not free.

14:00And, like, this is technology. And you know where this was made, of course? in the United States. And there's probably a dozen pieces of software here that are talking to each other. And guess where that comes from? This is a high-tech place. It's just not what they have in mind. But like, come on. Isn't this an encouraged activity? Isn't this good? These people have jobs. They're good jobs too, or else they wouldn't work here.

14:30Rick had plans to open an even bigger distribution center, doubling his footprint and adding scores of new employees. But those ambitions have been put on ice as he's been forced to divert funds from developing new projects to paying tariffs. And Rick says the tariffs haven't just affected the company's plans to expand and innovate. They've also eroded its existing business. As he walks us through the factory, Rick says he and his team have had to make tough decisions about which products deserve space on the shelves. Some simply don't make the cut anymore. It's also a sacrifice of new revenue.

15:08Because as your backlist declines, you want to bring in new products to create new revenue opportunities. It's innovation. Our customers want new product. You don't go into a toy store and say, show me what's old. Rick's decision to put new investments on hold while covering tariff costs first is one that many small and midsize firms face. Brendan says perhaps the biggest issue for companies, big and small, is the unpredictability of the policy. 50 % on India, new levies on Vietnam, renegotiated tariffs on China. The officials that we have talked to would say privately it's been chaotic. It's kind of zigzagged back and forth between going full on with tariffs and scaling them back and creating carve outs and exclusions.

15:59And so the end result, the administration would probably say, look, we have taken tariffs, which were essentially rarely used at the beginning of the second Trump administration, to something that is now kind of an everyday tool that the president has used. The stock market has gotten used to it. And it's just a matter of this adjustment that small companies in particular are going to have to go through. In his shiny penny warehouse in Chicago, Rick says all of that disruption leaves him feeling like a nomad, moving from one country to the next in search of a safe harbor where tariff rates won't threaten his company's survival.

16:40We go from jurisdiction to jurisdiction, and no matter what we guess, it seems like it's wrong.

16:51After the break, how the tariff shockwaves have rippled out from China, through a Chicago warehouse, and into storefronts. And how learning resources is fighting back.

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18:11This one, I love this one. This is by Learning Resources. And I love this one. Kathleen Donahue owns Labyrinth Games and Puzzles in Washington, D.C. It's a speed dice rolling where you work on math skills. So you're rolling dice as fast as you can in dice of fury. Kathleen celebrating 15 years in business, but she says this year has been a roller coaster. It feels like every six months someone else hits me in the face. This year has been challenging, but also weirdly good. Weirdly good because she feels the community is rallying to support small businesses. But the economics are getting tougher.

18:56Brands keep raising wholesale prices, and retailers can't pass all of that on to consumers without losing sales. She says there's a limit to what families are willing to spend. I feel like people are now going$25 to$30 for a birthday present, but certainly we try not to carry very many games that go over that$25. Kathleen says she's seen inflation affect just about everyone lately, But it's been especially hard on younger families in Washington, D.C. We had tons of people in the store playing games and stuff, but nobody was spending money, especially if they worked for the federal government when they shut down the government.

19:37You know, a lot of those people had to take loans to just live. They're certainly not going to be spending on games or puzzles. Like, that's going to happen. These days, when Kathleen looks at the toy business, she sees an industry in disarray. She says small board game makers, often mom-and-pop businesses, have been hit especially hard by the chaos. She's been caught in the tariff trap herself, paying board game publishers for goods that have never arrived. They have my money. I have no games. Yes. There have been multiple things that I've already paid for that were supposed to be here that aren't here because they can't ship them from China because they don't have enough money to pay the tariffs.

20:20The math on her own business is getting brutal. And Kathleen says she's making a lot less overall. The prices have gone up. The margins have gone down. Basically, it looks like our sales are up a little bit, but our margins are down by 2 % to 3 % across the board from this year, this time, to last year, this time. But we've also just said we have to charge more. Earlier this year, Trump made headlines when he suggested the tariffs could mean fewer toys for American kids. Maybe the children will have two dolls instead of$30, you know. And maybe the two dolls will cost a couple of bucks more than they would normally.

21:01Bloomberg's Brendan Murray says Trump and the White House are using tariffs to safeguard an American way of life that they feel is at risk. And higher prices for consumers is a trade-off. I think that's the administration's view, is that the American dream is not built around the ability to buy things as cheaply as possible. It's built around having a middle-class job where you can educate your children and have a home and live that sort of romanticized version of what Americans consider to be a prosperous lifestyle. And President Trump believes that's been lost, and he's trying to regain that, and tariffs are the main tool that he's using to do so.

21:49Back at Learning Resources headquarters in Illinois, Rick Waldenberg says he also wants to preserve the American dream that began with his grandfather. His granddad started the business more than 100 years ago, and he and his children are running it. But Rick's now facing a reality he never imagined. Chaotic pricing, the hibernation of products, millions of dollars to move his supply chain. And this is what happens to a business. Stop, start, turn left, turn right, yo-yo here, yo-yo there. It's my life now. This April, Learning Resources sued Trump, arguing that the president doesn't have the constitutional authority to impose these taxes without congressional approval.

22:33Rick calls it taxation without representation. I was pissed. And the future of our company, you're talking about over 100 years of a family business, which I see in the context of providing jobs to thousands of people who live in the Chicago area since 1916, and having a substantial impact on the community I live in, it's like I was not going to passively allow this to be extinguished by politicians. And I thought this was unlawful, so I decided to sue. Suing the president of the United States isn't cheap. The legal fees are likely to total millions of dollars. And Rick's company is responsible for paying that bill.

23:16If Learning Resources wins, it could get a refund of millions of dollars in tariffs, money that could restart those canceled product lines. But if it loses...

23:29I can tell you that, in my opinion, that is a horrific outcome that every American should lose sleep over. It would affect people's faith in rule of law. and if you doubt rule of law, you also doubt whether your personal freedoms will be respected and the whole concept of the country unravels. The global trade war has reshaped the world map, moving factories from China to Vietnam, India and other emerging countries. But the shockwaves have also hit home in West Lafayette, Indiana, inside Dylan Bouchard's living room. Dylan's daughter has autism and for her toys like number blocks aren't just playthings.

24:14It's comfortable for her. I don't know if that makes sense, but like if she's overwhelmed, if she's overstimulated, which is what happens to her oftentimes, like number blocks will like calm her heart rate down. Like she'll sit on my lap, I'll hold her, I can feel her heart beating slower. You know, it's something she knows and she's comfortable with and she's learning. Dylan was able to make his own version of number blocks, but he knows not every family has that option. For some, the choice comes down to a$25 toy or putting food on the table. And while he sidesteps the expense by 3D printing some toys, Dylan says the decision to wage tariff wars weighs heavily on families like his.

25:01He can see the impact of tariffs just by looking at his plans for the holidays. Things are going to be a lot less Christmassy this year. For the girls, because we spent the same amount of money as we always do. We just have less stuff. You know, it's still going to be Christmas morning, still going to be presents to open, but it's noticeable what a dollar is going to buy you. So it sounds like there's going to be less presents underneath the Christmas tree this year, even though you're spending just as much? Yeah, we didn't need to start a second ring around. Like, you know, there's no stacking.

25:34It's just a, it's a donut. So there's no third dimension to it.