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FAREED ZAKARIA GPS

Four Boys Rescued from Thai Cave; North Korea Slams U.S. for Gangster-like Mindset; Trump Prepares to Meet with NATO Leaders, Queen and Putin; Latest on Thailand Rescue Efforts; US-NATO Relations; US- China Trade War. Aired 10-11a ET

Aired July 8, 2018 - 10:00   ET

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


[10:00:00] DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: -- a rest, a reset and begin again tomorrow.

DANA BASH, CNN ANCHOR: David McKenzie, thank you so much. We are staying on this story. I want to go now to Fareed Zakaria. Thanks for watching.

FAREED ZAKARIA, HOST, FAREED ZAKARIA GPS: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria, coming to you live from New York.

There's a lot of news to tackle on today's show. President Trump is about to embark on a trip that will take him to a NATO summit, to a visit with the Queen, and a sit-down with Vladimir Putin.

There's also a trade war escalating with China. Now, because of the breaking news I won't have a take this week, instead we will go right to the dramatic rescue of some of those Thai soccer players stuck in a cave.

Twelve boys and their coach entered a cave in Thailand on June 22nd and when this day started none of them had seen daylight since. A Thai official called today D-day for the rescue operation.

CNN's David McKenzie is near the cave where the rescue operation has ended for the day with four of the boys rescued.

David, what is the update?

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Well, the update, Fareed, is that this incredibly hazardous and complicated rescue operation has finally had results. We believe positive results, though we won't know just yet what the health status of those four boys from that soccer team that have been held up in the cave system in the mountain in darkness behind me for so many days.

They had a 90-strong team working on getting these boys out through the day today in Thailand, Fareed, 40 of them Thai, 50 of them foreigners, working tirelessly. The specialist divers going in in teams, two boys came out, a few hours later two boys came out again in relatively quick succession. We've had ambulances passing by. The road behind me a helicopter took at least one boy to a hospital in Chiang Rai and the agonizing wait will continue for the others, into the coming days we expect as they get the remaining boys and their coach out of that cave after this extraordinary rescue attempt was started here in Thailand -- Fareed.

ZAKARIA: David, does it -- does this become more challenging with the monsoons? Because I know what that rain is like and you sort of imagine the heaviest rain you ever had and imagine it never ending. Is that going to complicate matters or do they now have this situation well under control?

MCKENZIE: I would say it's very far from well under control, Fareed. There is a few factors, including the monsoon rains which you described. Earlier today we were dumped on. As you know, Fareed, the rain kind of sweeps in and dumps an extraordinary amount in a short amount of time. That cave system is in a catchment area.

The big risk now is as they pump water out of the cave system, which they've been doing 24 hours a day for many days, if water flows in it will complicate and even scupper the entire plan. As one official said to me, they have to act now otherwise they will have to start the whole process again where they get another gap in the rain.

On some level they've been relatively lucky with the gap in the weather for a few days to allow them to prep both in terms of operationally how they're going to buddy dive with these young boys out of these very tightly squeezed spaces with a full facemask, hand them over into a relay team and then get them to the hospital, but also this kind of window closing because of the rain -- Fareed.

ZAKARIA: Usually in these kind of situations there is an extraordinary bravery of these rescue officials, but there is a mastermind. Is it your sense there is somebody directing this? Is that somebody you've been able to talk to, you know? Who is the genius behind the rescue?

MCKENZIE: That's a good question and I will give an answer in two ways. One, the command behind the rescue is their public face of this rescue, which is the governor of this area of Thailand. He's given regular press updates and also we've been in touch with them on a constant basis, getting information.

Who is the mastermind is a more interesting question perhaps, Fareed, because the British divers, the two divers who originally found those boys against all odds, all that time ago hunkered down on a beach when they rose up, and to their surprise found that soccer team that everyone thought had disappeared for good. Several military officials and Thai divers have said to me that they really have been a key to this operation because of their very specific level of experience of penetration diving in cave scenarios.

[10:05:12] You've got rescue divers and police divers all around the world diving in very unpleasant conditions. These cave divers have the kind of special skills, the calm and zero visibility conditions with a roof over their head to pull this off. So they're taking the world's expertise and the best -- and the best of the best out here to try and get these boys out -- Fareed. ZAKARIA: Fascinating, David. That sounds like there was some good

luck and God knows everybody needs it. Thank you, David. Real fascinating reporting.

Next on GPS, North Korea decried what they called America's gangster- like demands on its nuclear program. What is going on? This was meant to be a friendly negotiation. We'll examine it all when we come back.

(COMMERCIAL BREAK)

ZAKARIA: After the Singapore summit President Trump confidently tweeted, "There is no longer a nuclear threat from North Korea, and that President Obama said North Korea was our biggest and most dangerous problem. No longer. Sleep well tonight."

Well, Secretary of State Pompeo was just in North Korea for follow on meetings and judging by the reaction from the North Korean state media after he left, perhaps we shouldn't be sleeping soundly anymore.

[10:10:06] To tell us exactly what went down I want to bring in CNN's senior diplomatic correspondent Michelle Kosinski who joins us now from Washington.

Michelle, what exactly happened?

MICHELLE KOSINSKI, CNN SENIOR DIPLOMATIC CORRESPONDENT: Well, a lot happened. And I guess you could say a lot didn't happen. So Secretary of State Mike Pompeo was in North Korea for two days. This is his third trip there. He was going to have this high-level discussion over these days. And remember, this was supposed to be the time after the Trump-Kim summit to really put the cards on the table and show some concrete movement. Really show in an actionable way that North Korea is indeed committed to denuclearization on the terms that the U.S. views it.

What happened, though, after this first round of talks that were quite long, so secretary of State sits down for nearly three hours with Kim Jong-un's right-hand man. Again, this isn't the first time they've spoken together. They had this discussion. The next morning things seem a little tense when you hear what's coming from each side. They sit down and talk again.

Mike Pompeo leaves. He talks about there, having been progress in almost every area, that North Korea is indeed committed to these things, including complete denuclearization. Then all of a sudden we see this statement coming out of North Korean state TV with the same kind of fiery language that they've used in the past before all of this talking started. Talking about the U.S. having a gangster-like mindset. That there is unclear outcome to these talks. That it's worrisome.

That in their opinion it's just not working, whereas the U.S. side sees it otherwise, at least they want to put the best face forward that there is talking and that there is some progress. North Korea, though, seeming very offended by what they call the attitude, the gangster-like demands that the U.S. put out there.

Finally, there is a statement, a reaction from the U.S. on this. Secretary of State saying, well, if the U.S. is a gangster in this then the whole world is a gangster because there's unanimity among the nations of the world on what needs to happen here -- Fareed.

ZAKARIA: Fascinating update, Michelle. Thank you so much.

I want to bring in today's panel. Richard Haass is the president of the Council on Foreign Relations, and the author of "A World in Disarray: American Foreign Policy and the Crisis of the Old Order." Susan Glasser is a staff writer for "The New Yorker." She is the former editor in chief for "Foreign Policy" magazine and a former Moscow bureau chief for the "Washington Post." And in the Obama administration Tony Blinken was a deputy secretary of state and deputy national security adviser. He is a CNN global affairs analyst.

Tony, let me begin with you. North Korea's top official actually in some strange way perhaps intentionally or unintentionally referenced Donald Trump's tweet by saying to Mike Pompeo, I imagine you didn't sleep well last night, or something like that, suggesting that the North Koreans had given a pretty tough message to the Americans.

TONY BLINKEN, CNN GLOBAL AFFAIRS ANALYST: You know, Fareed, it's good that the administration is engaged in diplomacy. It's good that Mike Pompeo went to try and follow through on the president's meeting, but thus far at least the art of the deal is looking more like the art of the steal and not in President Trump's favor.

Everything to date has accrued to North Korea's benefit and Kim Jong- un's benefit. We've given a lot, we've gotten very little in return. And unfortunately North Korea is very practiced in the art of string, wring and walk. They string along talks, they wring out economic concessions and then they walk away from hard commitments. I hope the president is aware and focused on that history.

The danger now is that by talking up, by hyping the success that we actually haven't had today the president is undermining his own leverage, leverage that he built up effectively with economic pressure. It's been a green light to China talking up the benefits of these talks, a green light to China to lessen the pressure to let North Korea off the hook. So the challenge now is how to keep the pressure on, how to keep North Korea at the table but how to get effective results. To date we haven't seen any.

ZAKARIA: Richard Haass, it does seen as though North Korea has gotten the better of this situation where they have the president of the United States essentially taking the North Korean's side, trying to present this as going much better than his own secretary of State seems to think it's going.

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Yes, you're right, Fareed, and the president of the United States now has to essentially make a choice. Is he going to continue to peddle the argument that it's a success despite the facts to the contrary? Is he going to reintroduce the threat of war with all that that could mean? If that threat actually were ever made good upon it would be extraordinarily costly by any measure.

Is he going to claim that he was betrayed by Kim Jong-un?

[10:15:02] He's got a problem, though, where sanctions are going to begin to weaken in part because the rest of the world essentially ran with the president's depiction of all this as a success. South Korea doesn't want to see a movement towards war because they would pay a larger price than anybody.

For me the real -- you know, the administration hasn't tried diplomacy is what I would argue and the danger is they're going to say, Fareed, they tried it and it failed. The only real diplomacy here would be partial steps by North Korea in return for partial responses by the United States. But if we continue to make this all or nothing, we are going to have nothing.

ZAKARIA: Susan Glasser, you've reported that you think that Mike Pompeo was hard-headed about this all along. That privately he was telling people he thought this was doomed.

SUSAN GLASSER, STAFF WRITER, THE NEW YORKER: Well, it's very interesting. There are reports suggesting that the Secretary of State Pompeo has consulted with outside experts and been skeptical about the ability of North Koreans really to deliver on this maximalist promise that President Trump has offered and obviously John Bolton, the National Security adviser, has signaled his skepticism from the beginning.

So one question is if the talks don't pan out quickly, whether you might see the Trump administration veer back towards their original policy of maximum pressure, what they called it. Now I think everybody has breathed a sigh of relief that we've moved away from fire and fury rhetoric on the part of President Trump, but what I'm struck by is that, you know, this is a president who is learning once again it's a lot easier to break deals than it is to make them.

And despite his sort of grandiose claims for the summit they really did this backwards, right? I think it was Richard who tweeted yesterday they had dessert and now comes the rest of the meal. And we're seeing that it's difficult even if they're feeding Mike Pompeo nutritious rice or whatever in Pyongyang.

ZAKARIA: Richard Haass, we'll have to let you explain to our viewers, you described this negotiation with reference to a New York restaurant that I imagine you've gone to with your children, unless you have a bigger sweet tooth than I thought.

(LAUGHTER)

HAASS: It was probably 20 years ago, but, yes, it's called Serendipity and you begin with dessert. And that's what this was diplomatically. You began with what normally comes at the end of the process, instead you began with it, but now it's the spinach, now is the broccoli. And what we're finding is that the two sides can't agree on a timeline, they can't agree on what North Korea needs to do and what America might do in response. So we reversed it and the president again I think as both Susan and

Tony made clear, he has made it more difficult on himself because he said we had success. But that gives North Korea extraordinary leverage and what he's finding out is it's very hard to do what ought to have been the work done before, to do it afterwards.

ZAKARIA: Tony, in both your jobs you dealt with China a lot and I think the crucial piece here is the one you say which is the Chinese seem to recognize that they do not need to put the kind of hard pressure that they were being asked. The only country that has leverage with North Korea. 90 percent of North Korea's fuel comes from China, 50 percent of its food.

So in this situation if you were in North Korea's position and you have consolidated your situation with China, Kim has gone twice now to Beijing, they've had great meetings. Why would you -- why would you worry about the reintroduction of pressure since you've consolidated your Chinese flank?

BLINKEN: Fareed, you really put your finger on it. The administration has three problems now with China. It needs China to exert this pressure and leverage on North Korea for the reasons that everyone has cited. 90 percent of North Korea's trade is through or with China. But three things now. As we said, the president has undermined his own leverage by talking up success that isn't there. That's given the green light to China to ease up on the pressure.

But at the same time he's prosecuting a tariff war against China and China is retaliating. That's going to make it more difficult to get China to do more on North Korea. And three, we've also of course taken apart the Iran deal and as part of that in trying to re-impose sanctions, we're trying to get countries including China to buy less oil from Iran and not to send the proceeds back from the oil that it does buy to Tehran.

So on all of those fronts the president has made life more difficult for himself. North Korea, Kim Jong-un, they see that. Kim Jong-un has reestablished a better relationship with China. It was pretty much in the gutter a couple of years ago. The Chinese were deeply frustrated with Kim Jong-un. They saw him as the source of the instability they feared. Now he is back in the driver's seat with the Chinese. It makes it much harder to get to yes for the administration.

ZAKARIA: Stay with us. Next on GPS, President Trump has a wild week ahead in foreign policy. He'll be at the NATO summit. He has a meeting with the Queen, Prime Minister May in the United Kingdom, then mano-a-mano with Vladimir Putin in Helsinki.

When we come back I will ask my panel what to expect.

(COMMERCIAL BREAK)

[10:23:43] ZAKARIA: Just look at President Trump's upcoming travel. On Wednesday he is in Brussels for a NATO summit, then he goes to England and Scotland, where he'll meet with the Queen and the prime minister, then it's to Helsinki for the most awaited presidential summit, well, since Kim Jong-un sat down with Donald Trump, this one is with Russia's president Putin, alone or at least the two of them to talk about these crucial meetings.

My panel is back. Richard Haass, Susan Glasser and Tony Blinken.

Tony, let me start with regard to one oddity which is the president is going to the United Kingdom, but I think he would be the first president who was actually not visiting London.

BLINKEN: Fareed, it's quite extraordinary. He is not going to London, and the reason he is not going to London is for fear of being embarrassed by massive protests against his presence. That is extraordinary and I don't think we've seen that, an American president actually deterred from going to the capital of our closest partner and ally in the world.

And this gets at the larger fear that I think people have with the president going into this trip which is vitally important and that's basically a repeat of what we saw at the G7 and then after that the Kim Jong-un summit where he president goes -- has a bad relationship with our closest partners and allies, and then goes and embraces a dictator, in this case Mr. Putin. There is a very real fear of that between London, the NATO summit and then heading to the meeting with Putin.

[10:25:06] He has an opportunity to do just the opposite, to show real solidarity with our closest partners, to have a good NATO summit, to take credit for some of the progress that NATO has made in strengthening its capacity and putting more money into its efforts and then going with a united front to see Mr. Putin, to call him to account for the things that Russia is doing around the world including our elections.

Everything we've seen today suggests that he'll do the opposite but he really does have an opportunity to reverse the narrative.

ZAKARIA: Just to be clear, the president is going to sleep the night in London, he is just not doing anything during the day, no public appearances.

Susan, you wrote a -- you've written something extraordinary, which is in an odd way the Trump-Putin meeting is a meeting of minds because both of them seem determined to undermine in some way the Western alliance, NATO, the European Union and such.

GLASSER: Fareed, it's an extraordinary moment. This is in some ways the worst-case scenario that many even in President Trump's own party have been dreading ever since he was elected president. He had this fascination with Vladimir Putin. This summit meeting is coming about as a direct result of Donald Trump's initiative. People forget this, but this started back in March when the famous "do not congratulate" phone call when, in fact, President Trump called up President Putin, congratulated him for his reelection and invited him -- even invited him to the White House. And although his advisers didn't want it, there's no sense inside the

U.S. government or obviously on Capitol Hill to have a meeting with President Putin, nobody knows what the agenda of this summit meeting is, but President Trump personally has pursued this. The Russians have been very open to it. They have lobbied hard, in fact, to make this happen as well. There is a sense that the two presidents will somehow be acting in a way almost in opposition to the rest of the U.S. government.

My question is what is it exactly that President Trump plans to discuss with President Putin? You know, are we looking at the -- some kind of a deal that he envisions between Russia and the United States over, say, lifting sanctions on Crimea? Is there some sort of new arrangement in Syria that President Trump imagines?

What's extraordinary is that nobody knows. Why are we having this summit and what is its aim? And so people look at that in contrast with this very tough rhetoric towards our European allies and there is a sense that it could be disastrous really as Tony pointed out.

ZAKARIA: Richard, you have been around for a while. You were in the Reagan administration during that -- the summit at Reykjavik, Reagan and Gorbachev meeting alone, and that proved not to be such a good idea. Do you think it's fair for people to raise -- to have suspicions raised in their minds about why President Trump would want to meet alone with Vladimir Putin without an agenda, without, you know, aides? Or do you think it's actually -- you know, it's a refreshing way to try to break the ice and get something done?

HAASS: I wish it were refreshing, but it's actually more alarming. Singapore, the summit there, is not exactly reassuring. The entire U.S.-Russian relationship for the last 18 months is a mystery. Why the president has been so sanguine or benign towards Russia, unwilling to challenge them on our interference in our electoral process and so forth.

So the idea that you would have an unscripted, unstructured summit, I don't know what he might offer in the way of taking U.S. troops out of Syria, acknowledging what the Russians did in Ukraine. Again, there is not a lot of confidence, there's been no interagency process to prepare for it. And again, look at the backdrop, Fareed. Not just the U.S./Russian relationship, but a trade war with our closest allies, constant harangues over levels of effort in NATO.

The United States abdicating many of its international responsibilities and positions. So it's very hard to have confidence. Let's just be honest. Donald Trump is the most radical president of the modern era. He represents something of a fundamental departure from the line of presidents that began with Harry Truman all the way through Barack Obama including Ronald Reagan whom you mentioned.

It's very hard to have confidence because none of us can sit here and predict what he might do and that he might not on his own alter or undermine some of the fundamentals of U.S. foreign policy that has served us well now for some 70 years. ZAKARIA: Tony Blinken, that is the message I got when I was in Europe

about 10 days ago, that the great fear from very senior officials who were very pro-American is that Donald trump wants to do nothing less than rewrite or even destroy the Western alliance as it exists, you know, perhaps with the idea that it doesn't serve the United States, perhaps with the idea that it can be better done

[10:30:00]

But there was an enormous amount of nervousness that the fundamental stability and structure of the post-War era, which was built on things like NATO, you know, the international institutions, the Bretton Woods system, the free trade system -- all that was under attack, ironically not so much from Putin -- that they expected -- but from the -- the architect of this order, the United States, in the form of Donald Trump.

BLINKEN: Yeah, Fareed, that's exactly right, and I think Richard also has it exactly right.

Look, as has been said, those who forget history are condemned to re- tweet it. I think what the president needs to do in thinking about this trip is to think back to why we made these significant investments in Europe's security and prosperity after the Second World War. It wasn't a gift to Europe; it was enlightened self-interest. And the return on that investment came back many, many times over, new markets for our products, new partners to deal with global challenges and, yes, new allies to deter aggression and to fight when we had to. That's the context that the president is going into.

And the more he talks down our alliances, the more he sees them as a burden not a benefit, the worse we are going to be. These alliances are the envy of the world. Russia doesn't have voluntary alliances; China doesn't have them. We do. It would be a terrible thing to squander that kind of power. And this really is a moment when I hope the president reflects on why we did all of this and why it's been to our benefit, not to our detriment.

ZAKARIA: But meanwhile, Susan Glasser, it does seem as though he has been -- you know, if you think about the things that Donald Trump has said about America's closest allies, the things he's said about Germany under Merkel, "disaster," you know; he's cast it in the most negative terms. Justin Trudeau, you know, people in his administration have said "there's a special place in hell reserved for Justin Trudeau." And one can go on.

And contrast that with the kinds of things he's said about Vladimir Putin or about Xi in China, about, you know, congratulating him for becoming dictator for life, saying that Kim Jong-un, who runs probably the most repressive regime in the world, is dearly loved by his people. It does feel as though, you know, he's uncomfortable at NATO, an alliance of democratic allies, but would be much more comfortable with some kind of a -- not a G-7, but an S-7, a "strong-man seven," if you could construct, you know, all these guys and put them together; they seem to speak the same language? GLASSER: Well, you know, Fareed, I'm so glad you brought that up because that's exactly what I was thinking. Remember back to the NATO summit last year when President Trump shoved the poor Montenegrin leader out of the way in order to get into the very front ranks of the leaders as they were striding through NATO? The mindset he is entering into this meeting with is one of great disdain, even personal disdain for partners like German Chancellor Angela Merkel; Justin Trudeau, you pointed out, he said terrible things about.

This week he wasn't reflecting on the history of the post-War alliance; he was calling Americans "schmucks" for basically bearing the burden of NATO spending over these last seven decades and, again, suggesting he has very little understanding of what the whole concept of this -- this partnership has been for a long time. He's clearly not deeply invested in it.

Remember that last year it literally took months of lobbying by his top advisers even to get him to issue a ritual, you know, formulaic restatement of America's commitment to collective defense of our allies in NATO. And he doesn't really support it. Everybody understands that.

So the question now, there are no real illusions that Trump is deeply committed to this. What I think we're all asking is what -- how far is he prepared to go in blowing it up? And that's a very different question than we were asking last year.

ZAKARIA: Fascinating. And it's important to point out, as always, the facts. You know, he has threatened to pull out -- pull American troops out of Germany to save money. It wouldn't save money because, unless you actually are decommissioning those troops and cutting the defense budget, the opposite of what Donald Trump says, it would cost the United States more money to house them in the U.S. because Germany pays a third of those costs. Anyway, that's just the facts.

(LAUGHTER)

Thank you all very much.

Next on "GPS," the tit-for-tat between the U.S. and China over tariffs has now turned into an actual trade war, at least according to China. The question is who does this war benefit? I will talk to two great financial minds when we come back, Steve Rattner and Mohamed El-Erian. Back in a moment.

(COMMERCIAL BREAK)

ZAKARIA: On Friday China's ministry of commerce declared that the Trump administration had launched the biggest trade war in economic history. The declaration came just after the U.S. imposed another round of tariffs on Chinese goods, this time a 25 percent charge on more than 800 Chinese exports worth $34 billion.

And the Chinese responded in kind. The previous day President Trump warned that he could put tariffs on some $500 billion more of Chinese goods. The question remains whom is this benefiting? Is this the path to making America great again?

Joining me now, Steve Rattner and Mohamed El-Erian. Steve was the "car czar" in the Obama administration and is now the chair of the firm that invests Michael Bloomberg's assets. And Mohamed is one of the world's most famous and successful investors in the bond market. He is chief economic investor at Allianz.

Steve, are we in the beginning of an actual trade war?

STEVE RATTNER, CHAIRMAN & CEO, WILLETT ADVISORS: Well, as your previous guest, Richard Haass, said, predicting anything from this administration is exceedingly difficult. I think trade is even more difficult because, apart from the president's own peculiarities, you have two warring factions within the administration, the globalist, as he tries to, sort of, deprecatingly call them, and the protectionists. And right now the protectionists are winning.

There's also enormous pressure from the Hill, including and especially from Republicans on the Hill. There is enormous pressure from The Wall Street Journal, normally positive about the administration, to dial this back. So far there's no sign of them dialing it back, but I'm not brave enough to actually make a prediction, given all these uncertainties as to how this movie ends.

ZAKARIA: Mohamed, you've watched the Chinese very well, very closely over the years. They don't seem to be backing down, either. So what does your historical lens tell you? Could this just continue in this fashion, where it just keeps escalating?

EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: So history suggests it could continue, and the more you have the tit-for-tat, the greater the risk of an accident or policy mistake.

Having said that, Fareed, there's a few issues that economists agree on. One is there are genuine issues about the trading system and there are lots of countries, not just the U.S., that have grievances against China, about intellectual property theft, about non-tariff barriers.

Second, they also agree that tariffs are not the issue, but tariffs do focus minds on the bigger issue. So for me, it's still an open question whether this tit-for-tat leads to a still free but fairer trade system or, alternatively, we end up in a global trade war that means recession, financial disorder and makes politics and geopolitics a lot more complicated.

My gut feeling is that we're going to end up with free and fairer trade, but it is not a certainty.

ZAKARIA: Steve Rattner, though, wouldn't the best way to do this, if you were to -- if you were to -- and I think many people agree with Mohamed that China is the greatest outlier in a sense; it has taken advantage of the trading system in egregious ways. It has been -- I've described them as a trade cheat, fundamentally.

Wouldn't you want to use the Europeans as your allies, forge a common position with them, the Canadians, the Japanese, all of whom have the same grievances? Instead the Trump administration almost began this by alienating all the allies with a steel tariff against the Europeans?

RATTNER: Yes. First of all, I would agree completely with both you and Mohamed about the Chinese trading practices. I've seen this firsthand as an investor. I've spent a fair amount of time in China. We make investments in China and we can see very clearly their -- really their non-tariff barriers more than their tariff barriers. They live within the WTO rules on tariffs, for the most part, but all the non-tariff barriers, about joint ventures, about technology transfer, about favoring domestic companies, are really egregious and should be dealt with.

But to the second part of your question, you're 100 percent right about how we should have done this. It makes no sense to go to war, whether it's a trade war or a land war or any other kind of war, against your greatest allies. And whatever issues we may have from time to time with the Canadians or the Mexicans or the Europeans, they are our greatest allies and we should be marshaling them on our side because they have the same set of issues with China that we have. There are international processes for dealing with this and we could have done this in a far more intelligent way and gotten to a far better outcome than the path we're on now.

So I think Mohamed is right about the two possible outcomes, but this is no way to run a railroad.

ZAKARIA: Mohamed, when you look back, the Clinton administration got very tough on trade. The Reagan administration got very tough on trade. That was with Japan. Is the situation different now?

Because it is worth pointing out China is a much bigger economy than Japan is, also not a -- I mean, Japan was dependent on the United States for strategic survival. It lived within America's security umbrella. China does not.

So describe, you know, what lessons can we learn from those getting- tough-on-Japan strategies and what does it tell us about getting tough with China?

EL-ERIAN: I think you want to strike a delicate balance, Fareed, between, on the one hand getting tough to address what Steve and you and I have said are non-tariff barriers that really should come down; on the other hand, you want to maintain the rule-based trading system. But the reality is that the U.S. is better placed to win a tariff race. This is a little bit like Ronald Reagan, that you just cited, with the escalation of military spending versus the Soviet Union, the "Evil Empire," as he called it.

At the end of the day, the U.S. has a stronger economy, is in a better place. So while it may inflict damage on itself in the process, ultimately it will win a tariff race; it will win a trade war. And the hope is that other countries, China in particular, realize this and they try to de-escalate, that there are behind-closed-doors discussions to de-escalate this.

RATTNER: Steve, let me ask you how this ends because one of the theories that people have, and you alluded to it, is that right now the markets are not -- are pretty sanguine. Chinese markets have gone down, but U.S. markets have not so much, that at some point that will happen, that the CEOs whom Trump listens to for counsel will call him and say, "Knock this off." The Wall Street Journal will continue to editorialize against it and the Trump administration will back down.

Does that strike you as a likely scenario?

RATTNER: I think it's certainly a possible scenario. First, I would respectfully slightly disagree with Mohamed about who wins this trade war. He's right that our economy is certainly a lot stronger than Europe's. I'm not sure I would argue it's stronger than China's. And vis-a-vis China, they have a number of other levers to pull. For example, they own $1.2 trillion of our treasuries. Imagine if they suddenly decided they didn't want to own those anymore. So I'm not sure I would completely bet on the outcome here if it goes all the way to a full-scale war.

Secondly, with respect to the markets, you are right that the U.S. stock market, which is a reasonable arbiter of these kinds of situations, is quite sanguine at the moment. It's had a few bumps in the last few months as this has gone on, but generally quite sanguine. The long bond market, which is an indicator of our future economic strength, has actually been quite weak or strong. Interest rates have been coming down a bit in that market lately, which suggests that people are a bit worried about the long-term U.S. economic outlook.

Look, all in all, I tend to be an optimist. I tend to be a rational person. I have to believe that, in a rational world, we will all find a way through this, short of a full-scale trade war and going back to 16th Century trade policies. But as I said at the beginning, I can't sit here today and promise you that's going to happen, given the way this administration approaches every issue.

ZAKARIA: Fascinating situation, which is ongoing and developing. Thank you both for helping us.

Next on "GPS," we will go back to Thailand for the latest on the four boys rescued today, the eight boys and one coach still in that cave. We will be live at the hospital where the four boys have now arrived, when we come back.

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ZAKARIA: And we are back with the latest on today's dramatic rescue of four of those Thai soccer players. Joining me is Matt Rivers, who is outside the hospital in Chiang Rai, Thailand, where the four boys rescued today have arrived.

What do we know about the four boys who were rescued?

And they're right at the hospital near you, aren't they?

RIVERS: Yeah, that's exactly right, Fareed. We have seen, in the last hour or so, four different ambulances carrying four different boys arrive here to this hospital in Chiang Rai. That's the building there just over my shoulder. The first three came in one convoy surrounded by military and police vehicles. The fourth arrived on its own, again, also in a small convoy coming from the other side of the street. The first three passed us right by here.

We know that all four boys were met by doctors and nurses that had been preparing for this moment and really preparing for anything that those boys might be coming in with. In terms of their conditions, Fareed, we are not really sure as of this point. The initial reporting that we had was that the plan was to send out the healthiest boys first, but we are not sure if that's actually what happened. It was really the final call of the doctor that was actually inside the cave with these boys to decide who was going to be sent out.

So that's, kind of, the information that we're trying to figure out now, is what is the condition of the boys that have arrived at this hospital? But just a miraculous piece of progress here, Fareed. Fifteen hours ago I was doing live shots at the cave entrance and this was far from guaranteed. So major progress here that these boys are now safe in this hospital, even if there's nine more people left to go.

ZAKARIA: Matt, let me ask you a question that I've wondered about. You were at the cave. Why has that rescue operation stopped because it is night? It is dark in the cave anyway, so why not just continue? I mean, they have power; they have electricity. Why not just keep forging ahead?

RIVERS: Yeah, that's a good question and that's exactly what was asked at the press conference that was held by authorities not that long ago. And the answer to that question is oxygen supplies, Fareed.

Basically, what has happened over the last five, six days or so is that oxygen tanks have been set up along a guideline that the boys followed on their way out, those four boys, to make sure that oxygen supplies were available at every step of the way. This is four or five kilometers that they had to travel through this cave, and so they need to make sure their oxygen supplies are ready to go along the way. And what we're hearing from authorities is before they can begin the next round of operations, the divers that are on scene need to go back in and refuel those oxygen supplies, and those are going to be key.

The takeaway, though, from this -- at least this first step here -- is that it didn't take as long to get these boys out as they were initially expecting. They actually went faster by an hour or two than we were initially expecting. So that's a good sign, especially given that we are expecting more rain. So the faster they can get these boys out, especially the weaker ones that we believe are still inside the cave, the better. But for now, it's all about refilling those oxygen tanks.

ZAKARIA: We've got to go, Matt, but let me ask you very quickly, do you have a sense that they have a plan that tomorrow will be the real D-Day and it will be all done by tomorrow?

RIVERS: That's the hope, Fareed. The hope is that they can get those oxygen supplies re-fueled and they can get those kids out as fast as possible because the rains are coming, Fareed. And you know well this is July in Thailand; it's going to rain and it's going to rain a lot, so they have to get these boys out before the water levels start to rise.

ZAKARIA: Matt Rivers, fascinating reporting, outside the hospital in Chiang Rai. We will be back.

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ZAKARIA: Thanks to all of you for being part of my program this week. When I see you next week, President Trump will have been at the NATO summit; he will have met with the queen; he will be on the brink of his meeting with Vladimir Putin. There will be a lot to discuss. See you then.