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Box Office Battle; Matt Gaetz Not Rejoining Congress; Impact of Trump Tariffs on Small Businesses?. Aired 11:30a-12p ET

Aired November 22, 2024 - 11:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[11:30:02]

PAMELA BROWN, CNN HOST: Now, small businesses, those owners of them, are watching all of this and wondering what it could mean for them and their bottom line and their business. What should they be doing now?

So, we wanted to talk about this with three small business owners to get their perspectives, go straight to the source here, Laura Modi, CEO and co-founder of organic formula brand Bobbie is here with us. Ryan Zagata, president of Brooklyn Bicycle Company, and Laurel Orley, the CEO and co-founder of Daily Crunch, joins us.

And I have been looking forward to this conversation because we talk about what it could mean for small business owners, and now we can speak to you directly to see what's going through your mind as you look ahead.

Laura, you are a relatively young company. Bobbie formula, it's an organic baby formula. And I'm just wondering, as you look ahead to the next four years, what are you expecting, based on what you have heard from president-elect Trump and his plans?

LAURA MODI, CEO AND CO-FOUNDER, BOBBIE: I mean, I think we're going to see a big push around tariffs, yes, and I think questions around our own supply chain and what it means around prices.

And what we clearly saw was that there was questions from those that voted around the cost of goods. And as an essential product that is feeding those vulnerable audience, we can't ignore it.

BROWN: And how will it impact your business directly, because you actually manufacture out of Ohio, right?

MODI: That is right. So the infant formula shortage of 2022 highlighted major vulnerabilities in the fragility of the infant formula market. And you don't just fix that overnight.

Investing in domestic manufacturing, investing in local supply chains allows you to be able to address a more resilient market. So, over the last two years, we have invested in a facility in the heartland of America in Ohio, allowing us to get to the place where we can now scale beyond our current needs.

BROWN: So, you probably feel a little more insulated then from the plans.

MODI: That's right.

BROWN: Ryan, I want to bring you in, because I spoke with a former Trump administration economic official yesterday about Trump's proposed tariffs. He had overseen the tariff policy in the first go- around.

I want to play some of that and then hear what you have to say.

(BEGIN VIDEO CLIP)

CLETE WILLEMS, FORMER DEPUTY DIRECTOR, NATIONAL ECONOMIC COUNCIL: You cannot look at this tariff plan in isolation.

This tariff plan is part of a larger playbook where President Trump is going to come into office, he's going to work for more tax cuts, he's going to have deregulation, he's going to have an energy and a housing plan. And only against that backdrop are you going to see those tariffs.

And the thinking is that we will be able to absorb that, that our economy will be able to absorb that. And that's what happened last time is, we put in tariffs, there wasn't huge inflation because there were all these other things going on.

And then when you really drill down to a product-by-product basis, it's different, right? There are some products where what's going to end up happening is that other countries will absorb the costs. And there are some products where costs will get passed on. There's no question about that. But the point is you have to look at that holistically.

(END VIDEO CLIP)

BROWN: So I want to bring you in now because, Ryan, your bikes are manufactured in China and Taiwan. What do you make of what we just heard there, and how could these expected tariffs impact your small business?

RYAN ZAGATA, PRESIDENT, BROOKLYN BICYCLE CO.: Yes, so, first, I appreciate you having me on this morning.

I mean, we have been at this for well over a decade, and throughout that time, we have always manufactured in Asia. It's important to understand that the global hub of bike manufacturers is almost exclusively in Asia. So, on each bicycle that we manufacture, we have over 1,000 suppliers -- excuse me -- 100 suppliers that we work with.

And of those 100 suppliers, there's less than 10 of them where we can procure similar components domestically at the volume needed for us to continue meeting the demand. 2018, the administration implemented the 301 tariffs. We adjusted our supply chain predominantly out of China and into Taiwan.

So we have been somewhat insulated from a lot of those, but subsequent to that, we have also had to increase prices to offset the increased costs of manufacturing there. It's been an exercise in price elasticity. How much can we impact prices or affect prices without unduly impacting the demand?

Ultimately, we have made enough changes in our business to continue on our trajectory, but we're obviously fans of trying to increase domestic manufacturing, but most conversations, I think, around tariffs leave out two very important pieces of the puzzle. First of all, they ignore the contribution that small businesses are making to the economy beyond manufacturing.

For example, over 90 cents of every dollar that enters our bank accounts goes right back out the door to major companies like FedEx and UPS for delivering our products, Meta and Google for raising awareness of our brand, but also over 1,000 small businesses that we work with like your local bike shop that we compensate for assembling our bikes for customers, family-owned warehouses, employee wages and benefits that we pay well above what a domestic manufacturing job would pay.

But, second to that, tariffs also hurt domestic manufacturers who don't have access to domestic components and are reliant on importing those components to ensure they can keep building products. So, if we import -- if we implement these blanket tariffs, you're going from step one to step 10.

[11:35:01]

I think the solution lies somewhere in between where, if the majority of the bike components are coming out of Asia, we need some sort of credit to offset that increased cost of these components. So, if we're welding frames and painting domestically, that would be step one.

BROWN: OK.

ZAGATA: Please don't penalize us for...

(CROSSTALK)

ZAGATA: ... components.

BROWN: I'm going to have to jump in here, because I -- thank you so much for laying that out.

I just want to make sure we give everyone enough time to jump in because we have Laurel joining us now.

And I know, Laurel, you probably have some thoughts here too...

LAUREL ORLEY, CO-FOUNDER AND CEO, DAILY CRUNCH: Yes. Yes.

BROWN: ... about Trump's economic promises and what has stood out to you and how you think it will impact your business.

ORLEY: Yes.

Thank you so much for having me.

So, at Daily Crunch Snacks, 70 percent of our raw materials are sourced in the United States. So I initially thought, this isn't my problem. But it very much is. So this is affecting warehousing costs, transportation costs, scaling challenges. I mean, we finally -- we just launched at Whole Foods nationwide.

And we have bags where we were sourcing them in the United States and we wanted to source them to come from China to save five to 10 cents a bag. And when you're producing millions of bags a year, that adds up. And now I don't know if we can do that.

BROWN: And what will that mean for you and your bottom line and your business if you can't do it?

ORLEY: Yes. So I mean, there's a lot of different factors there.

I think there's a lot of actions we could take as small business founders now. So one of them is, get your contracts locked in now, if you can. For example, warehousing costs have gone up already 7 to 12 percent. So -- and they're going to keep on going up, because everybody's getting their raw materials shipped now.

And there's not a lot -- enough space for all of this to go. So if you can get any of your contracts locked in for 2025, do it now. We just got ours locked in this week and we're just trying to get ahead of the curve.

BROWN: Yes, I think that's an important point.

Laura, to bring you back in, economists say that more tariffs plus Trump's mass deportation plan could raise inflation, right? Already, consumers are dealing with higher prices at the grocery store. And that was a big reason in the election, and we saw the results, right?

How do you think that could impact the baby formula industry and your customers' inflation?

MODI: I think it's more multifaceted and complex than it appears on the surface. I think Ryan said it perfectly, is, when you look at tariffs, you can't just take a blanket look at it. You almost need to look in a targeted way.

And in some ways, it could actually help some industries. So, for infant formula very specifically, the more you can invest domestically, the more you can invest in domestic manufacturing and domestic supply chains, over time, you will be able to reduce those prices. So scale gets you lower prices.

And when -- I can't ignore feeding babies and the fact that there is parents and there's families out there who are looking at the cost of goods, and they have voted on the fact that prices are high. So we're actually going to take action and we are going to reduce our prices across the board for infant formula because we have spent the last two years to invest domestically.

BROWN: Well, how much are you reducing prices as a result of the inflation?

MODI: Close to 15 percent across the board.

BROWN: Close to 15 percent because you see how it's impacting your customers.

MODI: It's impacting families. It's impacting customers. And it's hard to ignore.

And it's not as simple as being able to say, well, then we need to rely on all of the cost of goods across the supply chain to come down as well. By investing domestically in manufacturing and looking at your entire operation, you can evolve your business model to be able to support the needs of customers too.

BROWN: Well, Ryan, how are you evolving and making changes now in your business ahead of these expected tariffs?

ZAGATA: Yes, I mean, I think the anticipation is that the tariffs are going to be enacted. I think, again, for us, considering that the manufacturing hub is predominantly in Asia, there is -- if it's a blanket tariff across the board -- I think there was talk of a 60 percent tariff on China and then a 10 percent to 20 percent tariff across the board.

There isn't really an easy solution beyond passing that cost onto consumers. As I mentioned before, our margins are not such that we're lining our pockets with costs. I think that the bulk of our money is going to manufacturing and then our other partners, and we'd have to pass that cost on to consumer.

I mean, small businesses are very much uniquely challenged. I don't have the option of calling up Jamie Dimon at J.P. Morgan to do a bond offering to build a factory. We have limited options in contract manufacturing work for us. So we have to work within the framework that we have built our business on. And that's going to be passing that price increase on to consumers.

BROWN: So you're talking about the price increase, passing it on to consumers.

We just heard Laura talk about the fact that because of inflation and voters went to the ballot box and voted on that issue, they don't want the higher prices. She's cutting prices by 15 percent, you said, right?

Laurel, what about you? How are you looking at this and the potential cost to consumers?

ORLEY: You know, we're navigating -- there's always going to be challenges as a small business owner that you can't predict and you can't control. I think we're trying to take this day by day and really trying to understand how we can get ahead of the curve.

[11:40:05] We produce in the United States. So, both our co-manufacturers are based in Wisconsin and Connecticut. We're very proud of that. But, also, we are scaling so fast that we no longer can warehouse our materials and everything in our co-packers.

So now we have to go ahead and head with finding a warehouse, and with all these costs increasing, that's going to affect our margins. We also don't have a lot of margins to play with being such a fast grow. We're only 4 years old. So we were hoping to save on some of these margins and to help our margins increase.

But it looks like, right now, we're just trying to stabilize it.

BROWN: All right, Laura, Ryan, Laurel, so great to get your perspective, and please keep in touch with us. Let us know how things are going for you. And we will check back in to see how things go with the tariffs and how it impacts your businesses.

ORLEY: Thank you. Thank you so much.

MODI: Thank you for having us.

BROWN: Thank you so much. We appreciate it. Thank you.

ZAGATA: Thanks for having us.

BROWN: And when we come back, breaking news on former Congressman Matt Gaetz and his future in Washington after abruptly ending his bid to be the next attorney general.

(COMMERCIAL BREAK)

[11:45:22]

BROWN: Breaking news into CNN: Matt Gaetz says he is not going to rejoin Congress.

This comes after he withdrew from the nomination for attorney general. He had already resigned from Congress, despite being reelected to the next session.

I want to go straight to CNN's Kristen Holmes.

So, Kristen, what more are we learning here?

KRISTEN HOLMES, CNN NATIONAL CORRESPONDENT: Yes, there had been a lot of speculation as to what exactly Matt Gaetz was going to do.

Was there some kind of loophole, in the sense that he had just been reelected? Would he go back to Congress? He is now saying in an interview with Charlie Kirk that he does not intend to go back, that he is going to continue trying to do things for Donald Trump, but not in the capacity of a congressman.

This obviously comes as we know that there are still questions about whether or not that Ethics report is going to be released. But in this interview, he also talked about what happened in some of those meetings up on Capitol Hill. He downplayed any kind of impact that the Ethics report had, but instead said that, while he had some momentum with senators, he felt he had to explain himself quite a bit. Take a listen.

(BEGIN VIDEO CLIP)

FMR. REP. MATT GAETZ (R-FL): And, again, while our discussions were going well, I found myself having to do two jobs at one time, Charlie, and you got a front-row seat to this, I had a full-time job explaining to senators that maybe a tweet I sent about them was rash and not reflective of how I would serve as attorney general.

And at the same time, I was having to build out the Department of Justice with the right human talent, the right policy infrastructure. And Pam Bondi's confirmation won't have some of the sharp edges that mine would have.

(END VIDEO CLIP)

HOLMES: Now, later, he also went on to blame Kevin McCarthy and politicians who were loyal to Kevin McCarthy for some of the stuff that seemed related to the Ethics report. He also downplayed the allegations there, saying that it was part of a smear campaign.

Obviously, again, as we know, there were questions and concerns among Trump's orbit about, one, whether or not Matt Gaetz could get confirmed, Donald Trump himself calling Gaetz to tell him he did not believe he could get confirmed, and, two, what else was in that Ethics report after we, CNN, reported on another incident that they were aware of that was not previously published.

There's a lot of concern there might be more damning information in there.

BROWN: All right, Kristen Holmes, thank you with this news that Matt Gaetz is not going to rejoin Congress.

Well, coming up: A blockbuster box office battle is brewing at a theater near you. That's next.

(COMMERCIAL BREAK)

[11:52:12]

BROWN: So, remember Barbenheimer? Now enter Glicked. That's right, Glicked, the combo of "Wicked" and "Gladiator II." Studio execs are hoping to replicate the Barbenheimer phenomenon with these two latest blockbusters.

So let's discuss this with entertainment journalist and film critic Scott Mantz.

All right, Scott, can Glicked capture that Barbenheimer magic? That's the question.

SCOTT MANTZ, ENTERTAINMENT JOURNALIST: In a word, yes. Now, I prefer to call it Gladiwicked.

BROWN: OK.

MANTZ: That -- it just has more a blockbuster punch to it.

But, yes, absolutely, this is going to be the Barbenheimer of 2024. Both movies are very similar to 2023. "Gladiator II" is comparable to the kind of audience that "Oppenheimer" went after. And, of course, "Wicked" part one, this is just part one, is definitely going after the "Barbie" crowd.

BROWN: OK. So "Gladiator" is my favorite movie of all time. Like, I have seen it so many times. I have cried so many times watching it.

Is "Gladiator II" as good as "Gladiator" one? I mean, that's the question here.

MANTZ: Well, is it as good as the first? I mean, how can it be?

BROWN: Yes.

MANTZ: The first movie one the Oscar for best picture. Russell Crowe won best actor. Russell Crowe is not in the sequel, but Ridley Scott is back, and he is in top form at 86 years old with his best movie since "The Martian."

And Paul Mescal, who's an Oscar nominee for the low-budget film "Aftersun," does do a great job of filling the sandals vacated by Russell Crowe. He captures that spirit of Maximus. But what makes "Gladiator II" great is Denzel Washington as the bad guy. He won an Oscar playing a bad guy in "Training Day," and he steals this movie. He is fantastic.

BROWN: All right. So I'm heading to Kentucky with my family, three kids. And we're talking about going to see "Wicked" with the kids. Is it family-friendly? Is it a good thing for young kids?

MANTZ: Oh, absolutely it is. I mean, "Wicked" is really fun for the whole family, if you want to -- pardon that expression, but it is a rousing, exhilarating, magical cinematic experience that has to be seen on the big screen, the scope, the production design, the hair, the makeup, the wardrobe, the music.

Cynthia Erivo and Ariana Grande give Oscar-worthy performances. This movie deserves an Oscar nomination for best picture. It really is this year's "Barbie" in terms of the mass audience that it is going to appeal to, especially mothers and parents taking their daughters to see the film.

BROWN: I'm sure my daughter will love it. I have no doubt about that.

OK, so "Gladiator II," "Wicked," if you had to choose one, quickly, which one would it be?

MANTZ: Oh, yes, wow. Well, "Gladiator" is more my jam, but I expected "Gladiator" to be

good, where I was completely blown away by "Wicked." So I'm actually going to go with "Wicked" in this case...

[11:55:09]

BROWN: Wow.

MANTZ: ... but only by a narrow margin, because both movies are great.

And if you really want to be ambitious this weekend, see both movies on the same day. Why not?

BROWN: Wow. Why not? Except, if you have three young kids, who don't just let you go to the movies all day.

(LAUGHTER)

BROWN: Scott Mantz...

MANTZ: Well, do not take the kids to "Gladiator."

(LAUGHTER)

BROWN: There you go. Yes, definitely not "Gladiator" for young kids. That's for sure.

Scott Mantz, thank you so much.

And thank you all for joining me. I'm Pamela Brown. You can follow me on Instagram, TikTok and X @PamelaBrownCNN. As I said, I will be off next week for the Thanksgiving holiday in Kentucky with my family, but I will see you in December.

Stay with us. "INSIDE POLITICS WITH DANA BASH" starts after a short break.