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The Lead with Jake Tapper

Now, High Tide Hits North Carolina as Hurricane Erin Gets Closer; Trump Pressures Another Top Fed Official to Resign; Judge Rejects DOJ Request to Unseal Epstein Grand Jury Documents. Netanyahu Orders Shorter Timeline To Take Control Of Gaza City; Maker Of Labubu Dolls Reports Nearly 400 Percent Profit Jump. Aired 6-7p ET

Aired August 20, 2025 - 18:00   ET

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

[18:00:00]

PHIL MATTINGLY, CNN ANCHOR: Welcome to The Lead. I'm Phil Mattingly in for Jake Tapper. We're following the breaking news tonight. Hurricane Erin already walloping parts of the East Coast during dangerous waves, high tide in North Carolina, just moments away.

Now, Erin is not expected to make landfall, but officials warn its impacts could be severe. Here's North Carolina Governor Josh Stein today.

(BEGIN VIDEO CLIP)

GOV. JOSH STEIN (D-NC): We are anticipating coastal flooding from massive waves, tropical storm force winds and tidal and storm surge for much of the state shoreline.

Life-threatening rip currents, for most of the week, no one should be in the ocean.

(END VIDEO CLIP)

MATTINGLY: Now, over the past two days, crews have rescued dozens of people from those rip currents on popular East Coast beaches.

We have CNN's Dianne Gallagher in North Carolina's outer banks, CNN's Omar Jimenez in Atlantic City, New Jersey, and CNN's. Derek Van Dam is in CNN's Hurricane Headquarters. And we start, Derek, with you. What's the latest forecast telling you?

DEREK VAN DAM, CNN METEOROLOGIST: Okay. So, we have the outer rain bands of this massive hurricane now starting to scrape the outer banks of North Carolina, 110-mile-per-hour winds. This is the latest radar and you can start to see these bands, the outer edge, the outer periphery of Hurricane Erin, and its wind field. This is when the tropical storm force winds could start to impact the outer banks in the very coastal areas of North Carolina.

Right now, gusts at Hatteras right around 26 miles per hour, so not quite to that tropical storm strength, but we know it's coming, right? So, it's agitating the Western Atlantic, sending these huge waves, breaking 15 to 20 feet. That's nearly two stories high.

Now think about the high tide, which is occurring right about now. And then we're going to go through that low tide cycle at about midnight. And then tomorrow morning when we get that closest approach with Hurricane Erin, the winds will come out of the northeast, right along the outer banks. And that high tide cycle at 6:26 in the morning could coincide with that passing of the hurricane. And that brings the potential for major storm surge implications, at least for the outer banks and some of those east and southeast-facing shorelines.

This is the current storm surge right now. This is above normally dry land. They're calling for two to four feet at its peak, especially the outer banks. And there is that rip current risk all along that 2,000 miles of real estate here along the eastern seaboard. That is something we're going to monitor. Stay out of the water. Phil?

MATTINGLY: You know, Dianne, to that point, we've heard up to 20-foot waves could hit the outer banks. Are people there heeding local officials' warnings?

DIANNE GALLAGHER, CNN NATIONAL CORRESPONDENT: So, we are not seeing those 20-foot waves at this point, but you can see that the surf is a little bit rough behind us right now. Honestly, it's just started to kick up probably within the last 45 minutes or so. This is Jeanette's Pier here in Nags Head. It actually was taken out by a hurricane about 22 years ago. They rebuilt again. And you can see there's plenty of people who are watching, walking along this pier, looking at the waves.

I'll be honest, for the most part, we've seen people staying out of the water today, and that is reflected in far fewer rescues being reported because of those dangerous rip currents along the coastline. So, we've seen a couple. Lifeguards have come told them to get out of the water because of that danger. It's a double red flag day. It was yesterday. It's going to be tomorrow and potentially a couple days throughout the week.

The biggest concern for many here in this area right now is, of course, North Carolina Highway 12. That. Is the road that connects the outer banks, again, nearly 200 miles of these barrier islands. You know, and this is how they basically get to each other. So, if NC-12 has overwash or if it's broken up in some way, you can't get out. And that was the reason for those mandatory evacuations of Ocracoke and of Hatteras Island.

And that's the reason why they told tourists, look, if you're not comfortable being stuck for a couple days, you need to go ahead and leave the outer banks right now because it takes time to get that fixed. We witnessed multiple North Carolina DOT crews today taking sand, fortifying those sand dunes because these are very narrow areas, three and a half miles at the widest point, about 150 yards at the most narrow.

We're already starting to see a little bit of overwash on NC-12 further south from here. Now, again, those are areas that tend to have it anyway at high tide, but we're seeing the initial impacts right now.

MATTINGLY: Yes. Listen to local officials.

Omar, over to you. Like the scale of this up and down, kind of the Atlantic Coast of the United States is what's so striking here. We've been hearing about these dangerous riptides. What are conditions like in Atlantic City?

OMAR JIMENEZ, CNN CORRESPONDENT: Yes. So, right now here in Atlantic City, the good thing is we haven't seen too many people at the beach, at least right now. Earlier, there were a lot more people, but right now, we are just a few minutes away from high tide here. You can sort of see how far the water has come up.

The waves have been pretty strong over the course of the day. But what's interesting, as you talk about sort of the scale and size of this hurricane is, you know, people here that we've been speaking to on the beach, they hear a hurricane and they think it's going to be incredibly gusty, it's going to be incredibly rainy.

[18:05:08]

And obviously we're not anticipating that direct hit, but it's these hazardous coastal conditions that officials are so worried about, but not too worried. Clearly, we've been watching this amusement park. Things are still going on like normal there. It's more about the water itself.

So, they've told people to stay out of the water, which. I can say since we've been out here this afternoon, even though people have been at the beach, they have been out of the water. This is also expected to be the beginning of Hurricane Erin's effects in this part of New Jersey. We're expecting the peak to happen around tomorrow. That's when we could see waves up to 12 feet. That's when we could see some more of those wind gusts around 35 to 50 miles per hour. That is also when we could start seeing likely the major effects of coastal flooding, this area under a coastal flood warning as well.

So, the deception here from the people that we've been speaking to is you look out, it's actually pretty nice out here. It's pretty beautiful, windy, breezy. The waves, again, pretty thick and heavy as they've come in, but the reason they've told people to stay out of this water is the effects of rip currents. They make rescues up and down this coast for rip currents all the time on a regular basis. So, in a situation like this where you're looking at increased strength from the outskirts of Hurricane Erin, especially so they want people to stay away, even if it looks as beautiful as this.

MATTINGLY: Yes, a critical, important message, even if there is some deception there.

Derek, I want to swing back over to you because there's actually a couple more storms trailing Hurricane Erin here. What are you seeing?

VAN DAM: Yes, that's right Phil. So, we've got Erin here. The parade of storms continues behind it, right? So, we're watching this area of kind of a flare up of showers and thunderstorms east of the Windward Islands. You can see the official forecast kind of trajectory of this cluster of thunderstorms potentially moving over the extreme northeastern sections of the Leeward Islands as we head into the early parts of the weekend. This has got a 60 percent chance of development. We'll keep a close eye on it before it recurs back out to sea, the middle of the Atlantic Ocean.

And then we've got yet another wave that's just moved off the west coast of Africa. This has got a 40 percent chance of development over the next seven days. It will likely get its act together here in the next couple of days, and then it's going to enter into kind of an unfavorable atmosphere. So, we're going to monitor this closely. We'll see if it continues to make its trek westward towards the Caribbean. Phil?

MATTINGLY: Derek, Dianne, Omar, critical eyes and ears for us in the hours ahead. We'll certainly be looking to you for updates throughout the course of the evening.

Well, joining us now is Kris Cahoon Noble, manager of Hyde County, which includes Ocracoke Island. You just heard Dianne talking about that, under mandatory evacuation.

We can see the trees sway behind you, Kris. The North Carolina Ferry System has evacuated, I believe, over 2,200 people, 1,100 cars from Ocracoke Island. The last ferry just left a few minutes ago. Do you know if everyone on the island is evacuated?

KRISTEN CAHOON NOBLE, HYDE COUNTY MANAGER: We still have some folks here on the island where I believe most of our visitors have left. We still have some diehard locals that are still around.

MATTINGLY: What's your message?

NOBLE: I think that -- sure. I think that our, we've been really busy the last few days making preparations. We're pretty accustomed to having to make these preparations and we've expected -- we expect our peak storm conditions and our peak storm impacts to begin tomorrow.

Now, because this is an open ocean event, our biggest concern is, of course, Highway 12. Just as Dianne's said, that is our biggest concern right now.

Now, Ocracoke is a true barrier island off the coast of North Carolina. And I say it's a true barrier island by the fact there's no bridge. It's only accessible by North Carolina Ferry System or private boat or plane. Our main thoroughfare to Hatteras Island is the route that we utilize for emergency medical services. It's the route we use for our vendors, also it carries our largest volume of people in and out of Ocracoke Island.

Now, in order to access that ferry field on the north end of our island, you have to travel down Highway 12, that is parallel to the ocean and it's in very close proximity to the ocean. And that, of course, with the sheer amount of wave energy that we're expecting, we're very concerned about the fragility of that section of Highway 12.

Now, we've experienced road outages in the past with smaller storms for weeks, and we actually lost access for several months following Hurricane Dorian in September of 2019.

[18:10:02]

And we do expect Erin to have similar impacts.

Our next high tide is upon us now. And up until now, we've had really moderate ocean overwash of the highway withstanding water already on each side of that highway and sand on the highway. It is still passable, but we do not expect that to last through this tide cycle. We're out monitoring conditions with the DOT, the Park Service and Sheriff's Office, and as you said, we've evacuated a little over 2,200 people over the last few days. And as that, ferry just left and Highway 12 being closed now, we're on the island until conditions improve.

MATTINGLY: Well, we are all certainly thinking about you guys. We know you have a lot of experience in these types of moments and in the hours ahead. We're certainly prepared for it.

Kris Cahoon Noble, I really appreciate your time. Thanks so much.

NOBLE: Thank you.

MATTINGLY: Well, much more on our breaking news ahead as we follow the track of Hurricane Erin and the warnings up the coast of the Eastern United States about life-threatening rip currents and storm surge.

Plus, Elon Musk is now pushing back after reports claimed he was abandoning his plans to form a third party to stay in the good graces of Vice President J.D. Vance. Our panel weighs in. That's next.

(COMMERCIAL BREAK)

[18:15:00]

MATTINGLY: In our Politics Lead, President Trump pressuring yet another top official at the Federal Reserve to resign. Lisa Cook, a Biden-appointed Fed governor, is facing allegations of mortgage fraud by Federal Housing Agency Director Bill Pulte. A letter from Pulte to the Justice Department, first reported by Bloomberg, alleges that Cook, quote, falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statute.

I want to bring in my panel. Pulte is a Trump ally. Eva McKend, Jeff Zeleny, I appreciate you guys coming in. He has done this to multiple Democratic officials related to mortgages. This is his latest iteration of things, and he said this on CNBC. I want you take a listen.

(BEGIN VIDEO CLIP) BILL PULTE, DIRECTOR, FEDERAL HOUSING FINANCE AGENCY: I think she needs to resign quickly. You know, I say these things about Powell needing to resign and everything on the political side, this is very different, okay?

There's a lot of questions here and that's why I'm saying, for the sake of the country, she should just resign. And I do think this is a very different situation than, you know, the chair. I really do believe that.

(END VIDEO CLIP)

MATTINGLY: Now, Cook, in her response, says the mortgage application in question was from before she joined the Fed. Her statement that we just got reads in part, I have no intention of being bullied to step down from my position because of some questions raised in a tweet. I'm gathering the accurate information to answer any legitimate questions and provide the facts.

Jeff, Pulte says this is different. This is not like the pressure campaign against Jay Powell or the Fed in general. Is it?

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: Well, look, I mean, that's one of the sort of downsides, I guess, for sounding the alarm about firing someone all the time. Because when you sound the alarm again, they start to sound the same. So, he says it's different, but, look, I mean, the animosity at the Federal Reserve is clear.

Look, we don't know the facts here in particular. We will find out if there actually is something there. I mean, Ms. Cook just said if there are questions that she will respond not in a tweet. But the bigger point here is that we're in this mode where investigations are being just called at a drop of a hat. I'm beginning to lose track of all the investigations that the DOJ is supposed to be doing. I have no idea how they're going to get to the bottom of all of these investigations, really across the board of government.

And as for the Federal Reserve, I mean, she was appointed. The president obviously has made his displeasure quite well known about the Federal Reserve. This is just an easy punching bag, I think. And my guess is that this won't have a lot of staying power unless there actually is something there with her mortgage, and then we'll find out.

MATTINGLY: Yes. Do you think that's probably the right answer here?

EVA MCKEND, CNN NATIONAL POLITICS CORRESPONDENT: I think that occupancy cases are rare. And so for a group that constantly complains about the Justice Department being weaponized, they are going to have a hard time if they're trying to be intellectually consistent beating this drum here. We'll see what facts ultimately are.

But, listen, if he is successful in his quest to push her out, it gives him an opportunity to elevate someone who is more in line with his ultimate policy goal of lowering interest rates. That is what this is all about, and arguably why she is being bullied. You know, they say that this is not about politics, but from everything that we have seen to date, it is about politics.

MATTINGLY: Yes. Just to make that point, this is about politics and it's the exact same thing as what's happening with Jay Powell. And they can say whatever they want about what they're trying to do with the investigation, like this is about getting a 4-3 majority in the Fed governors, and anybody who tells you differently is lying to you.

I want to move on to Elon Musk. There was a report in The Wall Street Journal that he was no longer going to pursue, or at least was backing off a plan to pursue his third party. He subsequently responded to The Wall Street Journal in a post about the report saying, nothing The Wall Street Journal says should ever be thought of as true. But what the report highlights is there haven't been a lot of steps towards this third party. He's got a ton of money. What's happening here, Jeff? Take us behind the scenes.

ZELENY: Look, I mean, Elon Musk has been burned by his involvement in politics. I mean, it worked for him in the sense of helping Donald Trump get elected. But it's been bad for business. It has been bad for his stock prices. So, I think that that is something that he has in mind.

We know how difficult third parties are. I mean, he announced he was going to do a third party when he was very frustrated with the One Big, Beautiful Bill Act, and he thought that the conservatives also were not holding to their principles of being fiscally conservative.

[18:20:01]

So, he thought a new party, a third party, there would be a market for it. There is a market for it in some respects, but it's very hard to do.

So, if he would actually put his money into it, it would be fascinating. But I think that he has been burned by being in politics and he knows it's not good for the business side. So, he would have to sort of divorce himself and just allow himself to have even a lower stock price on Tesla if he wanted to get back involved in politics.

MCKEND: I think he wants back in. You know, even with all of the money in the world, it seems like what animates him is proximity to power. That's why he's keeping this line of communication open with the vice president.

But, listen, no one is watching this more closely than Democrats. They don't shout it from the rafters, but, quietly, they wish that they would've done more to placate Elon Musk so they could have benefited from $300 million last year for the presidential nominee and Democrats across the country. And they are eager to see how this plays out because, no doubt, if Elon Musk were to start that America party, it would eat from the MAGA base.

MATTINGLY: Yes. If Joe Biden just would've invited him to that one meeting in 2021.

Eva, I want to ask you, Congresswoman Elise Stefanik was booed off the stage this week at an event in her own district. Take a listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Our Congresswoman from New York 21, Elise Stefanik.

(END VIDEO CLIP)

MATTINGLY: So, that's happening amid the redistricting discussion happening around her state in New York and California. This is an interesting dynamic. What does it mean, if anything?

MCKEND: It sure is, Phil, literally booed off the stage, she had to take a minute and step aside so that the ceremony could continue.

I used to be a reporter in this market Plattsburgh, Burlington, Vermont. So, I went back and looked at the local reporting on this because it's interesting to see how it was received. And on top of all of that drama, she is beefing with the Clinton County Republican chair. They're on the stage together, not talking to each other. And behind the scenes they are accusing her of being a bully. So, all of that is going on.

But what I think is interesting is that Stefanik ultimately can repackage this, right? She can argue liberals go after me just like they go after President Trump. And what we have seen is sort of the full evolution of Elise Stefanik from Bush Republican to MAGA loyalist. And this is, I think, an outgrowth of that.

MATTINGLY: It's spicy local market politics. I kind of love it, just nothing, if not very adept at handling these moments.

Jeff Zeleny, Eva McKend, I appreciate you guys, thank you.

ZELENY: You bet.

MATTINGLY: Well, parts of the East Coast under a state of emergency right now as Hurricane Erin brings destructive waves and storm surge. We're going to get an update from CNN's Hurricane Headquarters, next.

Plus, today, another judge rejected efforts to release documents in the Jeffrey Epstein investigation. So, what actually comes next here? Will the files ever be released?

Stay with us.

(COMMERCIAL BREAK)

[18:25:00]

MATTINGLY: We are back with the breaking news in our National Lead, Hurricane Erin creating dangerous rip currents off the East Coast.

CNN's Derek Van Dam is in CNN's Hurricane Headquarters. Derek, what can folks expect from this storm as we get closer to nightfall? VAN DAM: All right, Phil. So, I believe in the next coming hours that the outer rain bands of Hurricane Erin will start to scrape the outer banks. So, deteriorating conditions can be anticipated, especially for those coastal areas. We're talking about the outer banks. Right now, Erin is just about 275 miles due south of Cape Hatteras, as we speak.

And you can see the gusts there about 26 miles per hour, but it needs to be sustained above 39 miles per hour for this to be tropical storm conditions. So, when will that happen? Let's time it out for you. Here is our forecast wind gust, and you can see Cape Hatteras there right around 4:00 A.M. this morning. That's when we anticipate gusts to be above that threshold. And then as we take you through the early morning hours and into the middle parts of your Thursday, look at that, the coastal areas of Virginia, the Delmarva Peninsula, Atlantic City, may be reaching that tropical storm status in terms of these outer rain bands.

That is why we have these tropical storm warnings in place from Morehead City all the way to Atlantic City. Phil?

MATTINGLY: Critical updates, as always. Derek Van Dam, thanks so much.

Well, now to our Law and Justice Lead, and another blow to the DOJ's efforts to unseal grand jury testimony related to the investigation of convicted sex trafficker Jeffrey Epstein. Today, a federal judge in New York declined to unseal that testimony, calling the DOJ'S request, quote, a diversion from the breadth and scope of the Epstein files in the government's possession.

I'm joined out by CNN's Evan Perez. Evan, you have new reporting, really good, new reporting, on how Attorney General Pam Bondi is reasserting control over the Justice Department following the intense backlash she faced because of this issue. What are you finding?

EVAN PEREZ, CNN SENIOR JUSTICE CORRESPONDENT: Because of this very issue. Look, Pam Bondi is back. She is so back. You've seen her in the last few days on Fox News, which really was her perch, right, since she took office in February. She's been a regular voice on various Fox shows, sort of, again, cheerleading the president attacking his opponents.

And so what you're seeing in this past few days is her kind of consolidating some of the power, right? She's got Dan Bongino, who was a critic internally about her handling of the Epstein documents and who confronted her, essentially, and kind of put it up to the president to decide whether it was her or him, and the answer is, obviously, she's the one that gets to stay.

It appears from her decision this week to announce that Andrew Bailey, the Missouri attorney general, is going to become a co-deputy director of the FBI is an indication that Bongino is on his way out. And what this means is, you know, she's won the power struggle, not that really she was in any danger.

[18:30:02] It's clear President Trump really trusts her and wants her in that job, but a lot of pitfalls remain for Bondi. And that, a reminder just today from this judge, who told everyone again that the government has a lot of documents in its possession that it has the power to release. It doesn't need this very limited number of files that are sealed because they were grand jury information. The judge points out that the government has a lot of information that they can release related to the Jeffrey Epstein case, and they still have not done so.

So, we'll see in, on Friday when James Comer and the House Republicans start getting some of these files that they subpoenaed, whether that sheds any new light, and whether this Epstein matter can really finally be behind Pam Bondi.

MATTINGLY: So, you're saying getting a co-deputy director, the spin that this wasn't them layering over Dan Bongino, maybe don't buy that?

PEREZ: Don't buy it.

MATTINGLY: Evan Perez, I appreciate you, my friend.

Joining me now is Julie K. Brown. She's an investigative reporter with the Miami Herald covering the Epstein story for years. She's also the author of Perversion of Justice, the Jeffrey Epstein Story. Julie, I really appreciate your time.

Evan just mentioned the House Oversight Committee, the plans on receiving some of the Epstein files they subpoenaed from the Justice Department starting tomorrow. Yesterday, they said they'll make some of those documents public. Today, you posted about your expectations and included the image of a black hole, which I don't want to draw too many conclusions here, but it's fair to say it doesn't seem like you're optimistic. Why not?

JULIE K. BROWN, INVESTIGATIVE REPORTER, THE MIAMI HERALD: Well, I mean, let's just look at the history Pam Bondi had promised early on in her tenure that she was going to release all these Epstein file, that she had the list on her desk, and then she proceeded to release this binder to a small segment of social media influencers. And we know that that fell very flat because it was all dated information that had been made public years before.

Now, it's possible they've learned their lesson and perhaps that they'll be smarter about this release, but it still remains to be seen whether they're going to really release something that's really tangible and that's substantial given the fact also that they've tried to get around it in some ways, and this is basically what the judge has said today.

And the judge last week said the same thing that they've been trying to get around the promise that they had made to release these documents, all the government documents, all the Epstein files, and to get around it. All of a sudden now they're trying to use the courts and trying to use this method of unsealing grand jury files, which are very limited in what they reveal. The judge pointed out -- we learned something new today. The judge pointed out, for example, that only one FBI agent testified before the grand jury. So, there's only 70 pages in that grand jury testimony that they've asked to be unsealed.

So, this is the reason I sort of feel skeptical. I think a lot of the public and especially the victims feel skeptical about what they're going to release even to the committee.

MATTINGLY: Look, it's merited at this point. There's no question about that. And I think it's also what was -- what struck me about a statement that we got from the spokesperson of the oversight committee who said, in addition to redacting information to protect victims abused by Epstein, quote, the committee will also consult with the DOJ to ensure any documents released do not negatively impact ongoing cases and investigations.

Are you aware of any ongoing criminal cases? Because you'll remember the DOJ's July memo said their investigation hadn't found any evidence that could, quote, predicate an investigation against uncharged third parties.

BROWN: I mean, it's hard to know. I mean, that's been the big mystery with this whole scandal, really, the whole Epstein scandal, because we know that there are other people that were involved, that he didn't do this alone.

One would hope that the Justice Department is continuing to investigate who else was involved. I haven't heard any indication of that. My sources haven't told me that they're -- they've opened any kind of investigation related to that. So, it's anybody's guess what that means.

MATTINGLY: Last week, you posted this on X, quote, The Miami Herald and I have a massive amount of Epstein documents. I've been trying to get them to a place where everyone can have access to them minus victim info.

Based on the documents that you've obtained during your reporting, what kind of documents do you think the DOJ is going to share with Congress here?

BROWN: Well, I can't tell you what they're going to share because I really don't know. I mean, they could hold back all kinds of stuff where they can present a lot of different things, but there're several pieces of information that would be revealing that they could release. For one thing, at the time that Epstein was first arrested back in 2005, 2006, and the Justice Department took over the case, they did draw up a very large indictment against him.

[18:35:12]

They were prepared to prosecute him for sex crimes. And that was set aside in favor of this sweetheart deal. It would be good to see, and I think the victims especially would like to see, what they knew, you know, how much information did they have on the extent of his crimes. Because my reporting has revealed that they minimized his crimes, that they knew that there were dozens and dozens of victims, but they minimized that in order to let him get this sweetheart deal.

MATTINGLY: Julie K. Brown, I always appreciates you. Thanks so much.

BROWN: Thank you.

MATTINGLY: Well, some breaking news, Texas House Republicans have just taken a procedural vote to advance their plan to redraw the state's Congressional maps. The final vote could come as soon as tonight. We'll be watching.

We're back in a moment.

(COMMERCIAL BREAK)

MATTINGLY: In the Money Lead, McDonald's is slashing the prices of its combo meals with the CEO responding to concerns the menu is now, quote, too expensive.

[18:40:04]

Pizza Hut, it's hoping it's new $5 pizza will bring budget-conscious customers back after seven consecutive quarters of sales declines, which brings us to our Business Leaders series, where we hear from small business owners from coast-to-coast about Trump's tariffs.

Surf, Wind and Fire is a 20-year-old outdoor lifestyle company in North Carolina with four retail locations and a manufacturing facility.

Owner Danny Batten joins me now. Danny, really appreciate your time. Just to kind of start for people, what's the biggest challenge your business has faced from tariff?

DANNY BATTEN, OWNER, SURF, WIN AND FIRE: Well, on the manufacturing side, it's working with our suppliers that are overseas. We primarily work with suppliers in Taiwan and Vietnam, and we've had some fluctuations in what the tariffs would be, especially in Vietnam. So, there was one point, it went up to, you know, a nominal 48 and I think now it's down to about 20 percent, so kind of navigating the uncertainty around that around that tariff number. I feel like we're probably settle out at 20 for now, and that allows us to sort of introduce new pricing to make sure we address that issue.

On the retail side of it, the vendors are kind of -- our vendors are kind of all over the place. Some are raising their MSRP, their manufacturer suggested retail price. Others are just adding on a surcharge to an invoice and then leaving it up to the retailer to decide how to deal with it.

And then I've noticed some of our vendors are not really raising their prices, but they're reducing their staff, especially in the support staff, like our sales and marketing, the people we work with that mainly work on commission. The ones we would probably work with at a trade show, they're being let go. MATTINGLY: Fluctuations when it comes to Vietnam and Taiwan could not be the big bigger understatement based on covering this over the course of the last few months.

If you think about it, Taiwan is still kind of in the midst of potentially reaching a deal with the administration. We've been reporting on that. We don't necessarily know where it's going to land. I can't imagine what that's like for you. How do you handle the costs here? Like do you absorb them? Are you raising prices? How do you navigate that?

BATTEN: So, so far we have absorbed the cost. We also front loaded our inventory a little bit. So, we've not ordered a lot since the tariffs have gone into place, but we have ordered some. And then one way where one of our strategies, and I'm going to use a little prop, I'm going to use the Ohio State flag knowing that you're from Ohio, and so what we're doing now is typically we would make patches like this in Taiwan with threading that was a little more Earth-friendly and it would be recycled threading. And it gives us this really sort of matted vintage look.

But now, what I'm doing is I'm selectively using the more expensive thread and then I'm and then I'm also incorporating some cheaper thread, like some cheaper polyester threads into the product mix. So, hopefully, the product still looks as good, but it's bringing the price down a little bit. It's sort of the manufacturing equivalent of putting less potato chips in the potato chip bag.

MATTINGLY: You don't need to curry favor with me, but the Ohio flag, well-played, very well-played.

You mentioned your ability to kind of front load or front run in terms of inventory. How long does that sustain? Like how long until you're going to have to pass down prices or you're going to have to make staff cuts? How do you forecast things going forward?

BATTEN: Man, so, recently, I just got back from a trade show and it looks like I think we are going to hold prices all the way to the end of the year, and a lot of our vendors are doing that. Some are -- I'm already getting a lot of notices of prices increases starting in the fall season, which really starts now. But most of the vendors that I work with, you're really going to start seeing price increases around the first of the year, so January 1, 2026. It was just notice after notice after notice that I'm getting from vendors that, hey, this is when our prices are going to increase.

So, I think most -- everybody along the supply chain, it's been so unstable, they're just kind of holding the prices and absorbing some of that cost right now. But I think by the end of the fourth quarter, it'll change.

MATTINGLY: Well, people should know, they can shop Surf, Wind and Fire in New Bern, North Carolina, or as I'm going to do after the show to get that Ohio flag, online as well.

Danny Batten, I really appreciate your time. Thanks so much. BATTEN: Thank you so much, Phil.

MATTINGLY: Well, Israeli Prime Minister Benjamin Netanyahu is speeding up his timeline for his new offensive in Gaza, but some of the reservists he's calling up to serve, they say they aren't going to show up. That's next.

(COMMERCIAL BREAK)

[18:48:49]

PHIL MATTINGLY, CNN HOST: In our world lead, Israeli Prime Minister Benjamin Netanyahu is ordering a shorter timeline for Israel's offensive in Gaza City, according to his office. Reports in the Israeli press say the say Israel's defense minister approved the military's plan, and senior IDF officials say around 120,000 reservists will be mobilized for the offensive.

But as CNN's Oren Liebermann reports, some of the reservists have misgivings.

(BEGIN VIDEOTAPE)

OREN LIEBERMANN, CNN JERUSALEM BUREAU CHIEF (voice-over): The drums of war are pounding Gaza City. A new Israeli military operation has been targeting the largest city in the northern strip, one that will require a surge of reserve soldiers to go back to fight again.

Avshalom Zohar Sal is a reservist who documented his time in Gaza in these photographs. He says he spent more than 300 days in Gaza on four different deployments, the last one ended one month ago.

I'm a little in shock that we're still in this thing, he says. I'm a little in shock that we're still talking about this war that was supposed to end a long time ago. And I think if you were to ask everyone in my unit, it's hard for everyone.

The doubts, he says, began creeping in one year ago, and they've only grown. This month, Israel's security cabinet approved the occupation of Gaza City, a major escalation that could take five months or more.

[18:50:06]

Zohar Sal says he's not going back

I think this decision is a death sentence for the hostages, he says. The government talked and said all the time that we're talking about two missions for this war, to return the hostages and to defeat Hamas. Now it's telling us there's only one goal, which I believe is not achievable to destroy Hamas. And even this won't destroy Hamas.

Amid some of the largest protests Israel has seen since the beginning of the war, families of the hostages are calling the planned operation a deception, an unforgivable moral and security neglect. A recent study of reserve soldiers suggested approximately 40 percent were slightly or significantly less motivated to serve. The military's top general warned the security cabinet of the burden on manpower. An exhausted army in a war that won't end. Israel's military relies on reservists to keep fighting, and the military said Wednesday that the takeover of Gaza City will require up to 60,000 more troops.

Dan Halutz is the former Israeli military chief of staff.

DAN HALUTZ, FORMER ISRAELI MILITARY CHIEF OF STAFF: I believe that some of them will stay home when something is coming to an end. You feel it and it comes to an end.

LIEBERMANN: Prime Minister Benjamin Netanyahu promised the intense fighting would be over by now.

BENJAMIN NETANYANU, ISRAELI PRIME MINISTER: Once we begin the Rafah operation, the intense phase of the fighting is weeks away from completion, not months, weeks away from completion.

LIEBERMANN: That was February 2024. Eighteen months later, Netanyahu says a new operation is the fastest way to end what has long since become Israel's longest war.

(END VIDEOTAPE)

LIEBERMANN (on camera): The military says the new operation to take over and occupy Gaza City will require 120,000 reserve troops in total, 20,000 of whom they say will have their time in the reserves extended as part of this operation. And that's in addition to the active duty troops required for this new fight. And there you see the burden on the military after two years of war.

Oren Liebermann, CNN, in Jerusalem.

MATTINGLY: Our thanks to CNN's Oren Liebermann for that report.

Well, we are tracking hurricane Erin as the storm sends nearly 30-foot waves crashing onto parts of the U.S. East Coast. For updates throughout the night, of course. Keep it here on CNN and CNN.com.

We're back with more ahead.

(COMMERCIAL BREAK)

[18:56:34]

MATTINGLY: In our money lead, a furry monster with sharp teeth, but no one is actually scared. We're talking, of course, about Labubus. They have taken the world of social media by storm. The ugly, cute, plush comes in a keychain, comes in a blind box. You don't know necessarily which doll you're going to get until you open it up.

And the Chinese company behind the plush just reported a net profit of nearly 400 percent in the first half of this year.

I want to bring in Valerie Trapp. She's an assistant editor at "The Atlantic".

You, as a parent, reading this piece was really helpful for me to understand this current obsession. You wrote about how the phenomenon of Labubu isn't necessarily new. We've seen this before. You have Hello Kitty keychains back in the '90s.

What is it about Labubus that has caught on this time around?

VALERIE TRAPP, ASSISTANT EDITOR, THE ATLANTIC: Yeah. Thanks so much for having me. And to the point of what feels new about the Labubu is, you know, we've been talking about like, that scarcity factor that you mentioned, as well as the blind box factor, but something that I found really interesting when talking to scholars in my reporting was the idea of kidulthood, which is the idea that the boundary between childhood and adulthood has been getting a bit blurrier and blurrier.

And this is something that the scholars trace back all the way to the enlightenment. And that kind of showcases how today in our culture, people are starting to kind of push back against some of the more serious kind of descriptions of adulthood and inject a little bit more play into adult life.

MATTINGLY: So I'm so glad you raised that, because this idea of there doesn't seem to be an age boundary here, right? My three year old has one. Don't necessarily know how or why, but. And Madonna recently posted that she had a Labubu cake for her 67th birthday. That's a pretty wide range in terms of an audience, in terms of consumers willing to buy.

Explain more about, like why adults are leaning in here.

TRAPP: Totally. So what's really interesting, too, about Labubu is that, you know, there has always been this little bit of like, a shame element a lot in U.S. culture about having a cute object or a plushie when you're an adult. But because of this kind of like adulthood aspect, people have been kind of embracing a lot more of this.

And especially we've seen this kind of for the past few years since the pandemic especially, there have been a lot of booming sales for different stuffed animals. But the Labubu feels really unique in that its like a one step further in this trend, in the sense that a lot of people, as you mentioned, from all age ranges, are attaching them, especially onto backpacks or purses or taking them to the office, taking them to work. Whereas like before, you might have left a stuffed animal at home as an adult, now it's a much more public display of cuteness.

MATTINGLY: Yeah, and celebrities obviously all in on those public displays as well, which certainly doesn't hurt. The sales, I imagine. Is there another item out there right now that has a similar cultural appeal to Labubu?

TRAPP: I would say that the Labubu does feel pretty unique in like the how widespread the craze has become. But I do think it kind of speaks to different cultural attitudes and esthetics that are becoming a bit more popular. And the piece as well, I mentioned the brat esthetic as something that

kind of has this like ironic more like embrace of the ugly, cute and messy, as opposed to the prepped and polished. So, I think that the kind of fits within that broader esthetic trend, though it does feel like in terms of an object, pretty unique.

MATTINGLY: Yeah. I don't think there's any question about whatever they're doing. It is very clearly working. You capture it so well in your piece in "The Atlantic", you should definitely go and read that online, Valerie Trapp, thanks so much. Appreciate it.

TRAPP: Thank you so much.

MATTINGLY: And my apologies to our team. I forgot to bring in my child's Labubu. We now know a lot more about it. You can follow the show on X @TheLeadCNN. If you ever missed an episode of THE LEAD.

You can of course listen to the show wherever you get your podcasts.

"ERIN BURNETT OUTFRONT" starts now.