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QUEST MEANS BUSINESS

British PM May arrives in U.S. for Trump summit; Mexico's President pulls out of Trump meeting; Trump wants investigation into alleged voter fraud; Trump lays out economic priorities; Mexican President cancels meeting with Trump; Ford CFO: "optimistic" about Trump policies; Theresa May: Time to renew our special relationship; Theresa May is the first foreign leader to meet Trump; Mixed day for European markets; Dow closes at new all-time high; Carnival announces new European routes. Aired 4-5p ET

Aired January 26, 2017 - 00:16:00   ET

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


16:00:00] THERESA MAY, BRITISH PRIME MINISTER: Engage, but beware.

(APPLAUSE)

MAY: There is nothing inevitable about conflict between Russia and the West, and nothing unavoidable about retreating to the days of the Cold War,

but we should engage with Russia from a position of strength and we should build the relationships, systems, and processes that make cooperation more

likely than conflict.

And that, particularly, after the illegal annexation of Crimea, give assurance to Russia's neighboring states that their security is not in

question. We should not jeopardize the freedoms that President Reagan and Mrs. Thatcher brought to Eastern Europe by accepting President Putin's

claim that it is now in his sphere of influence.

(APPLAUSE)

MAY: And progress on this issue would also help secure another of this nation's priorities -- to reduce Iran's maligned influence in the Middle

East. This is a priority for the UK, too, as we support our allies the in the Gulf States to push back against Iran's aggressive efforts to build an

arc of influence from Tehran through to the Mediterranean.

The nuclear deal with Iran was controversial, but it has neutralized the possibility of the Iranians acquiring nuclear weapons for more than a

decade. It has seen Iran remove 13,000 centrifuges together with associated infrastructure and eliminate its stock of 20 percent enriched

uranium. That was vitally important for regional security. But the agreement must now be very carefully and rigorously policed and any

breaches should be dealt with firmly and immediately.

To deal with the threats of the modern world, we need to rebuild confidence in the institutions upon which we all rely. In part, that means

multinational institutions, because we know that so many of the threats we face today -- global terrorism, climate change, organized crime,

unprecedented mass movements of people -- do not respect national borders. So we must turn towards those multinational institutions, like the U.N. and

NATO, that encourage international cooperation and partnership.

But those multinational institutions need to work for the countries that formed them, and to serve the needs and interests of the people of those

nations. They have no democratic mandate of their own, so I share your reform agenda and believe that by working together, we can make those

institutions more relevant and purposeful than they are today.

I call on others, therefore, to join us in that effort and make sure they step up and contribute as they should. That's why I have encouraged

Antonio Gutierrez, the new U.N. secretary general, to pursue an ambitious reform program, focusing the United Nations on its core functions of

peacekeeping, conflict prevention, and resolution. And it's why I've already raised with my fellow European leaders the need to deliver on their

commitments to spend 2 percent of their GDP on defense and 20 percent of their defense budgets on equipment.

It's also why I have already raised with Jens Stoltenberg, secretary general of NATO, the need to make sure the alliance is as equipped to fight

terrorism and cyber warfare as it is to fight more conventional forms of war.

America's leadership in NATO, supported by Britain, must be the central element around which the alliance is built. But alongside this continued

commitment, I'm also clear that EU nations must similarly step up to ensure this institution that provides the cornerstone of the West's defense

continues to be as effective as it can be. Yet the most important institution is and should always be the nation state.

Strong nations form strong institutions. And they form the basis of the international partnerships and cooperation that bring stability to our

world. Nations, accountable to their populations, deriving as the "Declaration of Independence" puts it, their just powers from the consent

of the government. Can choose to join international organizations or not. They can choose to cooperate with others or not. Choose to trade with

others or not.

[16:05:04] Which is why if the countries of the Europe Union wish to integrate further, my view is that they should be free to do so because

that is what they choose. But Britain, as a sovereign nation, which the same values, but a different political and cultural history, has chosen to

take a different path. Because our history and culture is profoundly internationalist.

We are a European country and proud of our shared European heritage, but we are also a country that has always looked beyond Europe to the wider world.

We have ties of family, kinship, and history to countries like India, Pakistan, Bangladesh, Australia, Canada, New Zealand, and countries across

Africa, the Pacific, and Caribbean. And of course we have ties of kinship, language, and culture to these United States, too.

(APPLAUSE)

MAY: As Churchill put it, we speak the same language, kneel at the same altars, and to a very large extent, pursue the same ideals. And today,

increasingly, we have strong economic, commercial, defense, and political relationships as well. So I'm delighted that the new administration has

made a trade agreement between our countries one of its earliest priorities.

(APPLAUSE)

MAY: A new trade deal between Britain and America must work for both sides and serve both of our national interests. It must help to grow our

respective economies and to provide the high-skilled, high-paid jobs of the future for working people across America and across the UK. And it must

work for those who have too often felt left behind by the forces of globalization. People, often those on modest incomes, living in relatively

rich countries like our own, can feel that the global system of free markets and free trade is simply not working for them in its current form.

Such a deal, allied to the reforms we are making to our own economy, to ensure wealth and opportunity is spread across our land, can demonstrate to

those who feel locked out and left behind, that free markets, free economies, and free trade can deliver the brighter future they need. And

it can maintain, indeed it can build, support for the rules-based international system, on which the stability of our world continues to

rely.

The UK is already America's fifth largest export destination, while your markets account for almost a fifth of global exports from our shores,

exports to the UK from the state of Pennsylvania alone account for more than $2 billion a year. The UK is the largest -- somebody from

Pennsylvania.

(LAUGHTER)

MAY: The UK is the largest market in the EU and the third largest market in the world for exporters here. America is the largest single destination

for UK outward investment and the single largest investor in the UK. And your companies are investing or expanding in the UK at the rate of more

than 10 projects a week. British companies employ people in every U.S. state from Texas to Vermont, and the UK-U.S. Defense relationship is the

broadest, deepest and most advanced of any two countries, sharing military hardware and expertise.

And of course, we have recently invested in the new F-35 strike aircraft for our new aircraft carriers, that will secure our naval presence and

increase our ability to project our power around the world for years to come.

Because of these strong economic and commercial links, and our shared history and the strength of our relationship, I look forward to pursuing

talks with President Trump and his new administration about a new U.S.-UK free trade agreement in the coming months. It will take detailed work, but

we welcome your openness to these discussions and hope we can make progress, so that the new global Britain that emerges after Brexit is even

better-equipped to take its place confidently in the world.

(APPLAUSE)

MAY: Such an agreement would see us taking that next step in the special relationship that exists between us, cementing and affirming one of the

greatest forces for progress this world has ever known.

[16:10:04] MAY: Seventy years ago in 1946, Churchill proposed a new phase in this relationship. To win a cold war that many had not even realized

had started. He described how an iron curtain had fallen from the Baltic to the Adriatic, covering all the capitals of the ancient states in Central

and Eastern Europe, Mosul, Berlin, Prague, Vienna, Budapest, Belgrade, Sophia, and Bucharest.

Today those great cities, homes of great culture and heritage, live in freedom and peace, and they do so because of the leadership of Britain and

America, and of Mrs. Thatcher and President Reagan.

(APPLAUSE)

MAY: They do so ultimately because our ideas will always prevail. And they do so because when the world demands leadership, it is this alliance

of values and interests, this special relationship between two countries that is, to borrow the words of another great American statesmen, enters

the arena with our faces marred by dust and sweat and blood, to strive valiantly and know the triumph of high achievement.

As we renew the promise of our nations, to make them stronger at home, in the words of president Reagan, as the sleeping giant stirs, so let us renew

the relationship that can lead the world towards the promise of freedom and prosperity, marked out in parchment by those ordinary citizens 240 years

ago. So that we may not be counted with a cold and timid souls, who know neither victory or defeat, but with those who strive to do the deeds that

will lead us to a better world. That better future is within reach. Together, we can build it. Thank you.

(CHEERS AND APPLAUSE)

ZAIN ASHER, CNN ANCHOR: All right. You have just been listening to a live conference. British Prime Minister Theresa May speaking at the Annual

Republican Congressional Retreat in Philadelphia, essentially reaffirming the special economic commercial relationship between the U.S. and the UK as

well.

One important point that she touched on was on the importance of a bilateral trade agreement between the U.S. and UK, especially important

given the post-Brexit environment that the UK is in right now. Other things that she touched on is the fact that the U.S.' role as the leader of

the free world, she said that the U.S. shouldn't go that role alone, that the UK should be by America's side. That the UK should essentially play

its part.

She also highlighted, and I thought this was interesting, the idea that she is not just the British prime minister, but also a conservative leader,

sharing similar values with Republican leaders who are in that room as well. But she did also touch on the fact that there are some disagreements

between herself and Donald Trump, namely their views on NATO. Namely their views on Russia and Iran as well.

I want to go straight now to Quentin Peel of Chatham House, who's joining me live now from London.

So, Quentin, Theresa May basically there trying to sell the importance of the U.S.-UK special relationship. Was she effective, do you think?

QUENTIN PEEL, EUROPE PROGRAMME, CHATHAM HOUSE: I think it was a rather good speech, actually. To be honest I was expecting her --

ASHER: Explain why.

PEEL: -- to be a little more diplomatic. She was very clear on certain things on which Donald Trump doesn't look so clear. One, the importance of

international organizations, co-founded, as she said, by Britain and America, like the United Nations, like NATO, the IMF, and the World Bank.

All of these multilateral organizations about which Donald Trump seems to be really very skeptical.

And the second, I think, very important message she brought across was stand by your allies. And she wasn't just talking about Britain. No, she

was talking about Ukraine, the Baltic republics, countries that have actually seen their freedom come, as she said, thanks to Ronald Reagan and

Margaret Thatcher, and now needs actually to be protected from any danger that maybe they might be undermined by Russia. So it was actually quite a

forceful speech.

ASHER: And certainly very honest at times in terms of the UK sort of sticking up to their own values. But she does have to walk this very

delicate balance because obviously the UK needs the U.S., but she has to be honest in terms of the UK's values. How does she tailor that speech,

change her words, when she meets with Donald Trump at the White House tomorrow, do you think?

[16:15:03] PEEL: Well, I think she's going to have to be fairly fast on her feet because she doesn't really know how Donald Trump is going to

react. I mean, he is very blunt and very forceful and he's very clear, America first. So even when she comes to welcoming the fact that he said

he wants a new trade agreement with the United Kingdom, she's got to watch out that from his point of view, he doesn't mean it's a trade agreement

that's good for America, and I don't really -- I'm not really bothered how good it is for the United Kingdom.

So I think she's got to sell the fact that she has rushed across the Atlantic to be the first best friend of Donald Trump. As president, she's

got to sell that back home in Britain, where they're actually rather suspicious of it.

ASHER: Right. That was going to be my next question. How is this meeting going over in the UK? I mean, you're in London. It wasn't so long ago

that Donald Trump -- there was a petition in London actually trying to ban Donald Trump from actually coming to the UK. How is this meeting going

over at home?

PEEL: Well, the truth is that the popularity of Donald Trump in Britain is very low. It's something like, you know, 20 percent trust him and so on.

It's actually pretty much on a par with Vladimir Putin in Russia. That's not good. So I think that Theresa May has got to say, I want to be

friends, but I'm going to talk very clearly.

She also has got to watch her back with her partners in the rest of the European Union. They're already pretty upset, very upset, that she is

negotiating to leave the European Union. But they're not going to give her a good deal if they think she just wants to pull the whole house down. So

she's also said to Donald Trump, don't try to destroy the European Union, we want a strong European Union.

ASHER: You know, it's interesting, Quentin, because technically, legally, the UK can't renegotiate with the U.S. while it is still technically a part

of the EU. So what can she realistically expect to get out of this meeting tomorrow morning with Donald Trump in terms of a bilateral trade agreement?

PEEL: Nice words, symbols --

ASHER: Just lots of niceties?

PEEL: Yes.

ASHER: OK.

PEEL: And of course, they're going to come out and say, we're great friends, this has all been very good. The reality, though, is that a trade

agreement is going to be hard bargaining, very tough to negotiate. And Donald Trump's attitude towards NATO is very important for Theresa May.

She wants to prove to the world that NATO is the real core of the British focus in the future. And if Donald Trump were to walk away from it, that

would be a disaster.

ASHER: Yes, she made herself very clear in the speech this afternoon.

Quentin Peel, live for us there, thank you so much for sticking around for that and analyzing that speech with Theresa May for us so much.

Robert Tuttle served as U.S. ambassador to the UK under President George W. Bush. Earlier today, I asked him about how concerned he is about President

Trump's protectionist rhetoric. Take a listen.

(BEGIN VIDEO CLIP)

ROBERT TUTTLE, FORMER U.S. AMBASSADOR TO THE UK: Some concern, but that's why I'm so anxious and so excited that the first to visitor -- first

foreign leader to visit the president is the prime minister of the United Kingdom because this has been such a strong and, as oft-quoted, special

relationship. So I'm hopeful that they can really discuss these issues and come to some positive conclusions. And I think it will be very educational

for the president, too. And I'm sure he's already been briefed as to how important this trading relationship is with the United Kingdom.

ASHER: But the UK has certainly a lot more to gain than the U.S. here?

TUTTLE: Well, I think we both do. The U.S., as I said, Americans have been investing in the United Kingdom for years and years and years, to

their great benefit. There's a tremendous exchange of employees. UK companies, I think, employ over a million U.S. citizens. The travel back

and forth is so important, the educational benefits.

Don't forget, we're the two strongest -- two of the strongest democracies in the world, and we set an example. And an important part of that is, of

course, the trading relationship.

ASHER: So, Ambassador, let's go back in time because Ronald Reagan and Margaret Thatcher had a -- when you think about just how close that

alliance between them really was, what do you expect for the future of relations, specifically between Donald Trump and Theresa May?

TUTTLE: Well, I think that's why I'm excited that he made the point, this is the first foreign leader to visit Donald Trump. So I think that's very

important. And everything that -- I met Theresa May, I didn't know her well, but everything I've read and heard about her is that she's a very

strong and detailed leader, and hopefully they'll establish a very good and positive relationship.

[16:20:06] There's already been an announcement of our new ambassador, someone who is hopefully close to Trump, Woody Johnson. So I think that

this relationship, maybe it won't rise to the level of Reagan and Mrs. Thatcher, but --

ASHER: That's a tall order.

TUTTLE: Yes. It will be great, though, for both countries and for the world.

ASHER: And just talking about just trade overall, you know, it's clear that Donald Trump really doesn't believe in multi-lateral trade agreements.

He's been squarely focused on bilateral trade agreements. What do you make of that? I mean, any deal that he negotiates, he's clearly going to put

American manufacturing and the American worker first.

TUTTLE: I understand that. But a bilateral relationship with the UK trading agreement, especially if they leave the European Union, would be

positive for both countries. So I would be supportive of that. And I'm sure the president is very, very supportive of that.

(END VIDEO CLIP)

ASHER: Well, as I'm sure you can tell by now, it has, a day of whirlwind diplomacy here in the United States. In a moment, we'll explain why

Mexico's president has canceled his trip to the United States. That story, coming up.

(COMMERCIAL BREAK)

ASHER: All right. We've got some really big economic news to share with you that we just got over the past 20 minutes. The White House is saying

that Donald Trump wants a 20 percent tax, a 20 percent tax, on Mexican imports. In the past few minutes, Press Secretary Sean Spicer told

reporters that the proceeds, the funds from this tax, would be used to pay for the president's border wall along the border with Mexico.

It is the latest escalation in the war of words we've seen between the U.S. and Mexico. Earlier today, Enrique Pena Nieto, the Mexican president,

canceled next week's planned meeting with Donald Trump. This after President trump tweeted that the meeting shouldn't go ahead, that he

shouldn't come if Mexico was not going to pay for this wall.

On Wednesday, Donald Trump insisted tighter border security would greatly improve relations between the two countries. Trump's executive order on

the wall and the resulting back and forth caused the Mexican peso to fall as much as 1.4 percent. Donald Trump's campaign and presidency have pushed

the peso to near an all-time low.

For more on the president's proposed tariffs, let's turn now to Carlos Gutierrez, who served as former U.S. Commerce secretary.

Carlos, thank you so much for being with us.

CARLOS GUTIERREZ, FORMER U.S. COMMERCE SECRETARY: Thank you.

ASHER: I can't get over this. 20 percent tax on Mexican imports. What sort of impact do you think that will have on the Mexican economy?

GUTIERREZ: Well, it will have an impact on both economies. Because this is an issue of national pride, and we need to keep that in mind. This

isn't only business. This is an issue, deeply emotional issue --

ASHER: That's why Pena Nieto doesn't want to come to the U.S.?

GUTIERREZ: Of course.

ASHER: Right.

GUTIERREZ: It's sort of a national humiliation. They'll probably respond in kind. So Mexico will slap 20 percent tariffs on our exports.

ASHER: And so begins a trade war.

GUTIERREZ: And we have a trade war.

[16:25:02] And you know, their costs are lower, so you can make a case that 20 percent will be less harmful to them than to our exports. But we're

talking about agricultural exports, millions of jobs in the U.S., billions of dollars in trade.

ASHER: So it hurts the U.S. as well as Mexico. So what -- I mean, what can he achieve by this? I know he says he wants to use the proceeds to pay

for the wall, but realistically, he's damaging both economies.

GUTIERREZ: I think that's the problem. He can say, we're going to build a wall, and Mexico doesn't like a wall, but the U.S. can do that. On their

territory, it's a sovereign decision. The problem is, when you say, "and you're going to pay for it," that is a national humiliation. History looms

large in Mexico. Especially as it refers to the U.S. So all of this can be done, but we have to find a way that both sides feel like they've saved

face and both sides feel like they've won.

ASHER: Do you think that -- I mean, I know you say that it's about saving face and it's about humiliation, but do you think that perhaps Pena Nieto

shouldn't have canceled that meeting, just because, if he does come to Washington, if he does negotiate directly with President Trump, maybe they

can find another solution. Is he making a mistake here?

GUTIERREZ: Look, I don't -- I don't know. I don't think so. You know, President Trump said, if you don't agree on paying for the wall, don't

come, which means that if you do come, you agree with paying for the wall. President Pena Nieto's ratings, his approval ratings are about 12 percent.

There are presidential elections in 2018.

ASHER: But he's not running again?

GUTIERREZ: No, no, but his party, it's the PRI or the PAN. And Mexican voters feel like, we've tried them both. And so we could end up creating

the conditions for an anti-American populist on our southern border. So you've got to think about that. And we've got to think beyond, you know,

having a win right now, a tactical win of who pays for the wall, but strategically, what kind of history are we creating for Mexicans to

remember?

ASHER: So who do you think -- I mean, you touched on this earlier, but who do you think overall has the most to lose between the U.S. and Mexico, if a

trade war was to go ahead?

GUTIERREZ: Well, because of Mexico's economy, the size of the economy, 80 percent of Mexico's exports come to the U.S. So if it came down to a trade

war simply because of their size, they would be impacted more. But we would also be impacted. And especially our southern states and Texas,

agricultural states would be impacted, manufacturing would be impacted. Nobody wins in a trade war. So we have to avoid that. And that should be

one of the objectives.

ASHER: So corporate leaders are watching this unfold, watching Donald Trump say, we're going to impose 20 percent tax on Mexican imports. What

do corporate leaders, especially those who have business in the U.S. and Mexico, what are they thinking right now?

GUTIERREZ: They're worried. They're probably reviewing their plans and saying, should we take down our numbers for Mexico and should we take up

our costs? And, you know, this is a -- this is a very big deal. So there's a way -- there's a way to package things up. Immigration, we can

have a bilateral immigration agreement. President (INAUDIBLE) and I, former president of Mexico, we recommended that. Let's have a bilateral

agreement and let's have joint accountability for border enforcement.

Let's renegotiate NAFTA. It's 25 years old. It needs to be updated. That's all great. But then when you get into things that are culturally

explosive, then everything else can fall apart. And I just hope we have the wisdom to recognize that.

ASHER: In the last year and a half that Pena Nieto has been in office, what can he do to protect Mexican jobs, Mexican manufacturing jobs? That

is what his people are going to be looking to him to do right now?

GUTIERREZ: Well, with right now, what's happening because there's such uncertainty around NAFTA, investment that was coming in is not coming in,

people are sort of standing still and waiting on the sidelines to see what happens. So the economy is already taking --

ASHER: And you look at the Mexican peso, as well.

GUTIERREZ: And the Mexican peso. It means --

ASHER: Ever since Donald Trump came into office, it's fallen dramatically.

GUTIERREZ: That means more inflation. That hurts the whole population. So we are creating history and just one more anecdote in this very

sensitive and delicate relationship between two countries, I hope we can get what we need, what we want, what the president wants. Let's be wise

about it, because we may end up having to work with a government that's very, very bad in three to five years.

ASHER: Carlos Gutierrez, thank you so much for coming on and sharing your expertise and your words of wisdom. Thank you so much.

GUTIERREZ: Thank you.

ASHER: Well, you are watching QUEST MEANS BUSINESS. We'll have much more news after the break. Don't go away.

(COMMERCIAL BREAK)

[16:30:00] ZAIN ASHER, CNN NEWSROOM ANCHOR: Hello everyone, I'm Zain Asher. There's more of QUEST MEANS BUSINESS in just a moment. But first,

these are the top headlines we are following for you at this hour.

British Prime Minister Theresa May has arrived in the U.S., where on Friday, she'll become the first foreign leader to meet with President

Trump. She spoke moments ago at the gathering of republican leaders in Philadelphia, telling her fellow conservatives, American and Britain have a

mutual responsibility to lead.

THERESA MAY, BRITISH PRIME MINISTER: As you renew your nation, just as we renew ours, we have the opportunity, indeed, the responsibility to renew

the special relationship for this new age. We have the opportunity to lead together again.

ASHER: The Mexican and U.S. Presidents are no longer meeting next week. Enrique Pena Nieto tweeted that the talks are off after getting an

ultimatum of sorts from Donald Trump. He tweeted that if Mexico is unwilling to pay for border wall, then it would be best to cancel the

meeting. Mr. Pena Nieto has long stated that Mexico will not pay for the wall.

President Trump is expected to take executive action at any time now and order an investigation into allegations of voter fraud. In recent days,

Mr. Trump has continued to insist that millions of votes were cast illegally in November's election, and it cost him the popular vote. But he

has not provided any evidence.

A group of scientists and scholars have moved what's known as the doomsday clock to 2 1/2 minutes to midnight. That clock is a symbolic countdown to

the end of the world. Scientists say global nationalism and worsening international security contributed to the shift.

Any minute now, President Trump is expected to sign new executive orders focusing on American trade policy. President Trump will need congressional

support for other elements of his economic agenda. Today, he laid out his priorities to republican colleagues in Philadelphia. He promised bold tax

reform, lowering taxes for businesses. He linked border security with jobs, saying the hour of Justice for American workers has arrived, and on

trade, he said, new deals are coming, but only on America's terms.

[16:34:50] DONALD TRUMP, PRESIDENT OF THE UNITED STATS OF AMERICA: We've also withdrawn from the transpacific partnership, paving the way for new

one-on-one trade deals that protect and defend the American worker. And believe me, we're going to have a lot of trade deals. Mitch, don't worry

about it. Just give me a little time. But they'll be one on one. They won't be a whole big mash pot. They'll be one-on-one deals, and if that

particular country doesn't treat us fairly, we send them a 30-day termination, notice of termination. And then, they'll come and say,

"Please don't do that." Then, we'll negotiate a better deal during that 30-day period. The other way, you can't get out of it. It's like

quicksand.

ASHER: Almost all of the President's executive actions so far have focused on the American economy. They include a freeze on new regulation and

hiring, withdrawing the U.S. from the transpacific trade partnership, restarting two oil pipeline projects and the order to immediately start

building a border wall. Senate Majority Leader Mitch McConnell says that will cost between 12 and 15 billion U.S. dollars. That's billion, with a

B, by the way. Joining me now to talk about this, Richard Clarida, is a global strategic adviser at PIMCO. Richard, thank you so much for being

with us.

RICHARD CLARIDA, PIMCO GLOBAL ADVISE: Yes, busy day.

ASHER: It's a busy day. You can say that again. And so Trump is veering away from these multilateral agreements. He's focusing more on bilateral

agreements. But certainly, he is going to be a tough negotiator. He's going to put America first, American jobs first, American manufacturing

first.

CLARIDA: Yes, well, that's certainly the plan. And obviously, we're in a new world right here. I think a key point will be to see whether or not

the administration is going to work within the existing WTO framework, especially dispute settlement or break away from it. Right now, it sounds

like they're trying to work very proactively within the existing framework. You know, you mentioned that 20 percent tax a moment ago, but Sean Spicer

really said that's in the context of a tax reform bill, which would be similar to a VAT tax. So the details here, Zain, are going to be very

important.

ASHER: So in terms of, you know, renegotiating NAFTA, obviously he's putting a 20 percent tariff on Mexican imports, is Canada going to end up

being the winner here, do you think?

CLARIDA: Well, I think they're in relatively different position. The U.S. position with trade - with Canada trade is nearly balanced, obviously a big

deficit with Mexico. Plus, there's a big energy component, the pipeline component. So I do think that they're in a different position and the

Trump folks really do seem to be focusing more on Mexico than Canada indeed. What you see in the papers and on CNN is, in fact, the Canadians

have even been contemplating carving out a separate deal with the U.S., apart from Mexico.

ASHER: So when you think about Donald Trump carving out these bilateral agreements, perhaps one is, you know, on the horizon between the U.K. and

the U.S., momentarily - well, at least, after Brexit becomes official. And how does the U.S. actually go about picking the countries that it wants to

have bilateral agreements with?

CLARIDA: You know, that's a very good point, because in the past, we've had bilateral agreements, as well. South Korea and Chile, for example.

And so, there is a process for that. I'm not really privy to the way that they're going to be doing it. I think it'll be a combination of the size

and importance. And sometimes geopolitics also comes into it, as well.

ASHER: Theresa May has said that she wants a bilateral agreement that is fair for both our countries, both the U.S. and the U.K. Donald Trump is

sort of indicating that he wants to put America first. What advice would you give Theresa May as she begins to negotiate a bilateral agreement with

the U.S.?

CLARIDA: Well, I actually think there's a win-win here for both sides. I think Theresa May in the U.K. actually need a deal, since the Brexit

negotiations are going to drag on for several years. And obviously, I think that could be an important win for the Trump administration, as well.

So, I actually think that if both sides want to, there's probably a deal that can be struck here.

ASHER: OK. And just looking at the Mexican, 20 percent tariffs on Mexican imports, just talking to my last guest, I mean, what sort of impact do you

think that will have, not just on the Mexican economy, we know that's going to be dire, but also on the American economy as well?

CLARIDA: Well, Zain, if it's done within the context of this border adjustment, which Paul Ryan is talking about as part of tax reform, then

the Ryan plan, the Trump plan would actually essentially tax all imports at roughly 20 percent. So it would have a huge impact on the parts of the

economy that are exposed to imports. So Walmart and a lot of other things as well. So this is a very, very big deal. And I actually -- when I heard

the Sean Spicer press conference, he's really talking about it across a broad range of imports.

ASHER: But specifically with Mexico, how should Mexico respond? Because obviously, the Mexican economy depends a lot on the United States and how

should they respond?

CLARIDA: Well, the - I think - I think you're seeing already the adjustment in the exchange rate. So the exchange markets are already

factoring in, and you'll see a stronger dollar and a weaker peso. And the peso, as you mentioned, has moved a lot since Election Day. But I think,

the Trump folks are hoping that this gets them to the bargaining table, you know, pretty soon.

ASHER: Ironically, a weaker peso could actually be better for Mexican exports, though. But Richard Clarida, we have to leave it there. Thank

you so much.

CLARIDA: Thank you so much, Zain.

[16:39:51] ASHER: The CFO of Ford, Bob Shanks, says he is very optimistic about the Trump administration. The company's earnings reveal that

abandoning plans for a new factory in Mexico actually cost the company 200 million U.S. dollars. Yet Ford says 2016 was its second best year ever in

terms of pre-tax adjusted profits. Earlier, I asked Mr. Shanks about how he feels about the Donald Trump White House.

(BEGIN VIDEOTAPE)

ROBERT SHANKS, FORD CHIEF FINANCIAL OFFICER: Well, I'm optimistic about the intent for pro-growth policies. You know, the devil's always in the

details, but as we've said consistently since the election, the market has responded positively. What we're hearing so far sounds good. Now, we just

have to wait and see what the government implements, both through congress, but also through the executive orders. But, yes, I think it's fair to say

that right now we're encouraged.

ASHER: You're encouraged despite obvious sort of protectionist policies?

SHANKS: Well, again, we have to see how that's translated into policy. If it's through for example, the blueprint tax report - proposal board of

adjustable tax, that's actually, in many ways, not so different than what many other countries do around the world with Value-Added Tax. So, I think

it can be a plus for us and we think we're well positioned as we kind of model that policy. But yes, I think, what we're looking at right now,

we're encouraged, but again, let's see what the policies actually turn out to be.

ASHER: One also positive aspect about, you know, Trump America, is that Trump has sort of promised much more investment in infrastructure. He has

promised to fix the nation's crumbling roads and bridges. What would that mean for the car sector, do you think, especially Ford?

SHANKS: Well, very specifically, what it probably means for us, if it - if it were to transpire, is opportunities particularly for our trucks, whether

it's F-150 Super Duty transit. So, I think there's opportunities on that front. But more broadly, you know, it could be one of the elements that

generates just broader economic growth in the U.S., which could have the positive effect on the broader economy, and therefore industry sales across

our portfolio.

ASHER: And just looking at some of the other sort of headlines from earnings for Ford -- strong profit from Europe. How do you think the

fallout from Brexit will affect business going forward, especially, given the lower value of the pound?

SHANKS: That's a good question. We did have a record profit in Europe, about $1.2 billion, and it was up very strongly from the year earlier.

What we're guiding to for 2017 is still a profit, but we do expect it to be down, and as you suggest, it's due to the effect of Brexit on the weakness

of the of the sterling, along with some investment we continue to make and the business across Europe for future growth. But mainly it's a - it's a

story around Brexit.

(END VIDEOTAPE)

ASHER: Theresa May has called for a renewal of the so-called special relationship between the U.S. and the U.K. In a moment, the former British

Ambassador to Washington tells me why Mrs. May's visit will be warmly received back home.

(COMMERCIAL BREAK)

[16:44:57] ASHER: Welcome back, everybody. The British Prime Minister says the U.S. and the U.K.. made the modern world, as she tries to rekindle

the partnership between the two nations. On Friday, Theresa May will become the first foreign leader to meet Donald Trump since his

inauguration. She addressed republican lawmakers in the past hour.

(BEGIN VIDEO CLIP)

MAY: As you renew your nation, just as we renew ours, we have the opportunity, indeed, the responsibility, to renew the special relationship

for this new age. We have the opportunity to lead together again.

(END VIDEO CLIP)

ASHER: Theresa May's meeting with Donald Trump will be closely followed on Friday, closely scrutinized by the respective audiences of both countries.

Before we went on air, the former U.K. ambassador to the U.S., Nigel Sheinwald, told me how important this visit is for Theresa May.

(BEGIN VIDEOTAPE)

NIGEL SHEINWALD, FORMER BRITISH AMBASSADOR TO THE U.S.: She has to balance a number of things. Broadly, I think people here will be pleased that she

is the first foreign leader that President Trump is seeing, that she's getting that access to him, that she is at the front of the line. That is

going to be broadly welcomed in the U.K. But there'll be some apprehension and concern about the sort of things he said. Obviously, they're not

different from the things he's said in the U.S., which are controversial there. Most recently, on torture. His attitudes to some of America's

neighbors, his attitude to China, his attitude to women and on social issues. There are big divergences between what he said over the months and

what our country's positions and interests would dictate.

So I think that that's why I think her approach will be one, where she undoubtedly wants to establish a friendly, business-like, productive

relationship with him, but not one where she doesn't express her views, express the U.K.'s national interests, and where there's a bit of reserve,

ultimately, at this first meeting, because she needs to assess whether there is the fundamental core to their relationship to the future.

ASHER: And given the fact that the U.K. hasn't formally left the European Union, there's only so much that can be discussed or negotiated when it

comes to some kind of bilateral trade agreement with the United States. So how will you know -- sort of what defines whether or not this meeting is

indeed successful?

SHEINWALD: Well, I think you'll know -- you will know from the press conference whether they've agreed certain things. Whether, I think, if you

- what would be successful from a U.K. perspective, and I think from the American perspective, is if there is a thumbs up given to the idea of a

trade deal, if instructions have been given to trade negotiators, to talk informally about that, and about the outline of that, even before we've

left the European Union, so that the negotiations, once we've left, can get going really in earnest and go quickly. I think that's number one. But

much more importantly, I think we'll be listening very closely here, for what President Trump says about the transatlantic alliance, about NATO,

about threats from Russia and elsewhere, and working together with allies and partners. And starting to see that as part of America's future

success, not some obstacle to it, not some hindrance. I believe that America's ability to win and to maintain friends and allies around the

world, has been one to have the great American assets of the last century. And I think an American President would really be crazy to throw that away.

(END VIDEOTAPE)

ASHER: Ambassador Nigel Sheinwald there. Let's talk about European markets, because it was a mixed finish. The SMI closed higher, boosted by

Johnson & Johnson's $30-billion deal to buy the Swiss biotech company, Actelion. The FTSE 100 dipped into the red. Yet the drinks giant, Diageo,

reported a major boost in yearly earnings. It's benefiting from a drop in the pound after, of course, the U.K.'s decision to leave the European

Union. So European markets there are mixed.

The Dow is behaving like London buses, if you know the saying. You wait and wait and wait and then two come at once. It's hit an all-time record

high for the second session in a row, yet the SMP and the NASDAQ closed in slightly negative territory after the bell. Good news for Microsoft, it's

posted better than expected quarterly results but bad news for Alphabet. Alphabet is, of course, the parent company of Google. Its latest results

have low expectations. The company says it lost around $1 billion in the fourth quarter from its so-called "moonshot projects". That's things like

self-driving cars and other scientific research, as well.

Well, Carnival Cruises is navigating in new direction. I'll be joined by the CEO to discuss the company's new horizons. That's next.

(COMMERCIAL BREAK)

[16:50:00] ASHER: Carnival Cruises is pushing for a major expansion. It's completed a multi-million dollar refurbishment of its cruise ship, "The

Ecstasy" and the company also just announced new routes across Europe for 2018, including its first visit to the historic Spanish town of Vigo.

Arnold Donald is CEO of Carnival Corporations and he joins me now. Thank you so much for being with us. So here's what I find interesting. The

company just reported its best year of earnings ever. It is an industry that is growing dramatically, but what is your secret, sir?

ARNOLD DONALD, CARNIVAL CORPORATION CEO: It's wonderful to be with you, Zain, thank you. Yes, we're having an extraordinary success. Our secret

is our 120,000 passionate, dedicated employees, who are totally committed, and our travel agent partners, who know how to represent our 10 very

differentiated, distinct world-leading cruise line brands. But the real key is exceeding guest expectations. And that's what we're all about.

ASHER: So the industry is obviously growing rapidly, but - and this is a big but, cruise vacations only make up about two percent of sort of regular

vacations. What is your secret to growing that? How can you get more people, especially millennials, to take more cruise ship vacations?

DONALD: Well, we just finished a study at CLIO, the industry association, and it shows that millennials are cruising. And not only are they

cruising, they're very loyal cruiser and they're very enthusiastic cruisers. And so, for us, we have large addressable markets, they're

under-penetrated everywhere in the world. And the key in the end is actually having the capacity and then continuing to tell people the truth,

which is, cruise is a great vacation value and it's the greatest vacation experience you could have.

ASHER: So we are about, what would I - what would I say, four or five days into Donald Trump's Presidency. About a week, just under a week into

Donald Trump's Presidency. How will his policies affect your industry, do you think? I mean, obviously, he's talked about lowering corporate taxes,

has talked about a lower regulation - a sort of lower regulatory environment. But how will his policies affect you guys?

DONALD: You know, as long for us - as long as people can travel, as long as they aren't afraid to travel and they're free to travel, our business

will do well. We are global. We've gone through all kinds of economic malaises, geopolitical tensions, disease scares --

ASHER: Don't take protection as rhetoric though. Some of his protection is rhetoric. What do you make of that?

DONALD: I don't know. We'll have to see what really happens. You know, a rhetoric and action are not always the same. We'll have to watch and see

what happens. But if it becomes restriction on travel, where people are unable to travel, obviously, that impacts us. You know, we think travel

brings people closer together, they discover what's common amongst themselves and then they fear it was different less.

ASHER: A lot of your ships are made by Italian companies. Fincantieri being one of them. So obviously Donald Trump has talked - you've seen some

of the warnings he has made to the car companies, he's talked about bringing American jobs back. Can you see any sort of realistic environment

whereby cruise ships are actually built more frequently in the U.S.?

DONALD: Well, in the main, cruise ships have not been a great return on investment for ship builders.

ASHER: It's so expensive.

[16:54:56] DONALD: For ship builders. You know, for us, it's been pretty -- we've doubled our return on invested capital over the last three years.

We've doubled our earnings in the last three years. But for the ship builders, it's been tough for them. They make more money on military and

oil service and other types of vessels. So I don't see in the near terms that huge capital investment, to get a shipyard set to build cruise ships.

And even with that, there's not a lot of optimism that there would be a great return on that investment. So I don't see in the near term, that

occurring in the United States.

ASHER: And one of your cruise ship lines, "The Fathom" is going to Cuba, which is a big deal, but are you worried that Donald Trump is going to

reverse a lot of President Obama's policies here? And how will that affect your business, if he does?

DONALD: I think what affects us most right now with Cuba is Cuba. You know, Cuba determines which ships can come and when and so on and how many

and what time of year.

ASHER: But the relationship between the U.S. and Cuba though, that must affect you?

DONALD: It could. The reality is that relationship has been strained for a while. It hasn't automatically, you know, suddenly changed. And what

has changed is an effort to normalize relations. If he slows that down, the question is, will he undo what's already been done? If he says, you

can't go to Cuba, that's restricting travel. And that's - anything that restricts travel hurts us. As long as we can go, then we're still in the

hands of Cubans in terms of how many ships they want to come in.

ASHER: All right. Arnold Donald, thank you so much! I appreciate you being with us.

DONALD: Thank you so much. Real pleasure to be with you. Thank you..

ASHER: And if you want - this is advice for you guys at home. If you want a daily digest of the top business stories delivered right to your inbox, I

can recommend this enough, subscribe to - subscribe to the QUEST MEANS BUSINESS newsletter, featuring Richard's PROFITABLE MOMENT and all the

headlines from the rest of the CNN money team. I read it every day myself. I recommend it highly. Just go to cnnmoney.com/quest to subscribe. And

that's QUEST MEANS BUSINESS. I'm Zain asher in New York. Thank you so much for watching. Richard will be back tomorrow. Have a great week.

END