Family-Owned Toymaker Waiting on the Supreme Court

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1:49Well, again, seeing some tariff-related stocks take a hit today, Mattel, Hasbro, Lululemon, for example, all falling after the Supreme Court did not rule on challenges to President Donald Trump's tariffs. So we are waiting until at least next week to learn the fate of his signature economic policy. Rick Waldenberg is also waiting. He's a business owner who's challenging President Trump's tariffs at the Supreme Court. Rick is CEO of the family-owned educational toy company's Learning Resources and Hand to Mind. Rick was profiled late last year in a must-read story by Greg Storr, Bloomberg News Supreme Court reporter.

2:22Rick joins us now from Chicago. Greg joins us, too, from our Washington, D.C. Bureau. Welcome to both of you. Rick, two young kids. I'm very familiar with the learning resources part of the business. My mother-in-law, that's like her go-to gift for our kids. So we love it. I want you to start just with how tariffs have affected your business. Just walk us through what it's looked like over the last year. Well, tariffs have had a dramatic effect on our business. The imposition of these taxes on our company with no advance warning and with seemingly no limit, threw our supply chain administration completely out the window.

3:04We had to rebuild our supply chain on the fly. It was a significant disruption in how we manufactured our product. And so we had an enormous diversion of labor in our office, maybe up to 30 % of our man hours were shifted towards surviving that change. Also, obviously created a huge cost, well in excess of$10 million in 2025, up from zero in the prior year. And so it affected our cash flow. It affected our costs. We had to raise our prices. And it's an economic depressant, a massive tax like that. It's like wearing ankle weights in a sprint. You slow down. And so we're a little smaller as a result of this huge tax.

3:56So, Greg Storer, I want to bring you in. This is a great story, as you do so well. And I feel like how Bloomberg does it, like, reminds us that there are big stories, there are headlines, but there are people and companies being impacted. And in this case, a lot of small and mid-sized companies. I think it's safe to say that Rick's story, not unique. It's not unique. And in fact, it is the smaller companies that have launched this challenge. There are two different cases that are before the Supreme Court. And the other one's also small businesses, actually smaller than Rick's. The bigger companies, while they have subsequently filed some lawsuits to try to get refunds in case the Supreme Court strikes down the tariffs.

4:38They didn't want to be out front in challenging these. So, Rick, come on in here, because I asked this question earlier to Matt Boyle. He's got a great piece out along with Nancy Cook. It's the big take today. Everybody should read it. It's the CEO's playbook to President Trump. And I asked him, you know, why is it the small companies, you know, and Carol made the point earlier, the big companies are not speaking out against this administration. Matt made the point to us. There's no upside for them doing that. Why did you choose to speak out? Why are you speaking publicly about this? Why did you file this lawsuit?

5:10It doesn't. Yes, there's certainly upside, but there's also a lot for you to lose. Like we've seen the way that that this administration has been punitive in some cases. Well, I think that the things that I was afraid of losing were the relationship I have with our customers, the dependents that our employees and their families have on our company. Ours is a family business. I'm third generation. My kids are fourth generation. You have a very strong sense of how the health of your business affects the community that you live in. And so we just couldn't walk away from those folks. And I'm very American in my outlook.

5:56I want to take control of what's happening to us. And I wasn't going to let a politician ruin what we'd built up over 100 years. We're also a mission-driven business. There's lots of families like yours who use our products and depend on them to help educate their children. And that means a whole lot to us. So we felt like we had a lot of reason to stand up. And I was more concerned about not doing something than doing something. You know, the president, Rick, yesterday in Detroit said, quote, to be anti-tariff is to be pro-Chinese. And the tariff challengers at the Supreme Court are China centric.

6:35And he alluded to the idea of people who are challenging tariffs as anti-American. He did that today. How do you respond to that? You know, one of the things I've done in this lawsuit is I've tried not to go tit for tat and to point fingers. In saying that, Mr. Trump points fingers at me, but I'm not sure that I make my point more strongly by engaging in finger pointing back. I would just simply say that Mr. Trump has no legal right to have imposed this tax on us. It's hurt our business. And we've asked the court to adjudicate that. He has no right to do this. And no American wants to or feels exposed to the risk of paying a tax that's not legal.

7:21There are means for him to put taxes on us. He has to go through the House. That's what James Madison wants. And that's what we need to do. So he can't do it. He has no idea if we're China-centric or not. I would tell you we're child-centric and we're trying to help children get a great start in life. That's our orientation. Yeah, what a story, a stark story. And Greg, you know, I look at your story on this and you, you know, you say and you remind us that the president has wielded tariffs to try to get Canada and Mexico to crack down on illegal immigration, Brazil to stop, to drop the prosecution of ex-president Bolsonaro, and India to stop buying Russian oil.

8:02He has used this tool a lot in this administration in this first year. Kamani in on the conversation and, and, you know, you brought Rick to us. I'd love for you to ask Rick a question as well. Well, Carol, one thing you're pointing out there is that the tariffs that he has imposed under the law that's, that's at issue at the Supreme Court known as IEPA, there are other tariff authorities that he's used that are not before the Supreme Court. And so actually my question for Rick is, You know, the president has said that even if he loses a Supreme Court case, he's going to turn to these other authorities and try to replicate the tariffs.

8:38And I'm actually really interested in terms of your business. How concerned are you that even if you win at the Supreme Court, you're just going to see a whole different variety of tariffs, maybe ones that force you to kind of shift your business plans again and shift where you're manufacturing some of your products? Of course, that's a risk, and Mr. Trump has a track record of changing the rules on a very rapid cadence, which makes it hard for us to run our business. It's a little difficult to respond to what he might do or what he might not do. All the other provisions in the law that give him the right to impose tariffs come with a lot of strings attached.

9:18So it requires a lot of fact finding, hearings. It's a slow process. He can't do it by fiat. He can't do it by true social tweet. So I think it's better to wait and see like what he actually does. I'm not aware of a legal mechanism where Mr. Trump can be a taxing body. He's not allowed to do that. The Constitution is quite clear on that. So as much as he wants to do it without going through Congress, he can't. The law says he cannot. And so I don't want to overreact to threats made on TV. I think the Constitution provides the answer to that. Ultimately, at the end of the day, it's going to be a lot harder for him to build a tariff structure going around Congress.

10:09The law doesn't provide for it. And so we'll see what he does. And when When he does it, we'll figure out how to respond. Rick, the story that Greg wrote back in November talks a little bit about in the beginning of this kind of game of whack-a-mole, moving production from one country to another only to find the tariffs have been imposed in this country. Also, that was China to India and the like. At the end of the day, the president wants tariffs because he wants this stuff made in the U.S. So is there a way that you foresee in the future you could ever just make all the products or a good portion of the products that are made overseas right now, you could make them in the U.S.?

10:52Certainly no. And I've answered the questions many times. The answer is still no. And there's no evidence in the marketplace that anyone really disagrees with me. I think, unfortunately, the way this is being dealt with is that our industry and companies like ours are considered a sacrificable rounding error. They don't really have any idea what we do or how we do it. They want cars made here. They want cell phones made here. They want chips made here. And so they've come up with one rule. That's what their intent is. They want to bring back pharmaceuticals. And like if something bad happens to us, it's not really their problem.

11:30We don't move the needle economically. And so they don't care. And I don't think they care about our employees and I don't think they care about your families who use our products. We're rounding error. And I just can't look at the people who work here, the people who use our products and say, I think you're a rounding error. I don't. And I think that we create great jobs. Greg has been through our facilities. He can tell you that we're a massive consumer and user of technology. I think that our businesses and the way we run our business is an exemplar to other companies. We are what you want here.

12:07We just don't make a high-tech product. Yeah, you know, Greg, I think - I'm not sure I should apologize for that. Greg, I think Rick makes a really good point. We talk so much about small and mid-sized businesses being the backbone of the U.S. economy and putting American workers to work. And he is certainly an example of that. Greg, 30 seconds left, though. We're now focusing on next week. Third time's maybe the charm in terms of whether we get the Supreme Court to rule. What should we be watching out for, and are we likely to get it just quickly? Well, we don't even know that we're having opinions at all next week.

12:44We'll probably find that out on Friday. If we don't get the tariff opinion next week, the court goes on a four-week recess. They're not scheduled to take the bench again until February the 20th, and normally that's how they release their opinions. So if we don't get it next week, we could be in for a fairly long wait. Are you surprised it's taking so long? Just 10 more seconds. You know, I'm not sure. I've been saying I still stand with this. I'm not surprised either way. The court has tried to expedite it, but this is a big case. It's going to take a while. All right. So appreciate it. Great story.

13:15As always, Greg Storr, Bloomberg News Supreme Court reporter, and Rick Waldenberg. He is CEO of Learning Resources and Hand to Mind, a favorite of Tim's kids, it turns out.

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