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QUEST MEANS BUSINESS

A Joint News Conference That's Due To Take Place In The Rose Garden At The White House Between Jean-Claude Juncker, The European Commission President And Donald Trump; President Donald Trump Announces New Trade Measures with E.U.; NASDAQ Hits Record as Dow Rebounds; Facebook Earnings Miss Expectations on Revenue; AT&T Shares Down After Q2 Sales Fall; Ford Earnings Miss Analysts' Forecasts; Former Fiat-Chrysler CEO Sergio Marchionne Dies; Boeing Shares Lower After Defense Forecast; U.S. Airlines Give in to China's Demands Over Taiwan. Aired: 4-5p ET

Aired July 25, 2018 - 16:00:00   ET

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


MIKE POMPEO, SECRETARY OF STATE: And then I think the President --

RICHARD QUEST, CNN INTERNATIONAL HOST: So there, you are watching or had been watching the U.S. Secretary of State Mike Pompeo giving evidence to

the Senate Foreign Relations Committee. Sometimes, fractious testimony or evidence that he's been giving as they're questioning specifically of

course, about the Helsinki meeting between Presidents Trump and Putin, what was discussed and what was not. We'll get into that in a moment.

But I need to tell you, we are also waiting on a joint news conference that's due to take place in the Rose Garden at the White House between

Jean-Claude Juncker, the European Commission President and Donald Trump. Now, this is fascinating because in a busy hour of business and economics

that' we're going to bring you, we won't -- a few hours ago, we were not expecting the two men to actually give a news conference, but now it seems

that they will be.

So throughout the course of our hour together, you're going to hear firstly of course from the earnings from GM, Ford, Fiat-Chrysler, Boeing, Facebook

after the bell. We haven't got Facebook and our own parent company, AT&T.

So, we've got a hefty dose of earnings, but of course the earnings that we'll be talking about are greatly influenced by the trade tariffs and the

issue of trade, so you're going to hear from the former U.S. Trade Representative, Michael Froman. He is now the Vice Chairman and President

of Mastercard and our good friend, the Chief Economic Adviser at Allianz, Mohamed A. El-Erian will be with us as well.

We're going to make full sense on his attempt to make sense on what is going to be an extremely busy hour. And I need to point out one other

thing, look at the Dow Jones Industrials which is just coming to a close over the course of the session.

It's up 172 points, but I want you to focus on the far right of the graph, the chart, that sudden rocket when the market went so sharply higher. What

happened, all of a sudden, it's totaling at 20 or 50 or 10 points, and now suddenly, it's 140, 150, 170 points up. Well, the reason is, the $1

trillion in trade that exists between the European Union and the United States.

Donald Trump and his European counterpart may have reached some sort of deal that would avoid a trade war between the two. The European Commission

President Jean-Claude Juncker has in Washington, sat with the President a short while ago. And now, from the Oval Office to the Rose Garden, you're

going to see them have their news conference, which state, whether it takes place as a statement, answering questions, we just don't know.

But bearing in mind the reaction in the market that we have seen. It is abundantly clear that there's a lot riding upon this. Remember some

background just to put it into clarification for you, the E.U. and the U.S. currently are tariffing each other over steel and aluminum. It's about $30

odd billion or so, I seem to remember, I can't remember the exact number.

The Dow has spiked due to reports that there could be some sort of concessions, but earlier at the White House, both leaders said they wanted

to see tariffs go down, not up.

(BEGIN VIDEO CLIP)

JEAN CLAUDE JUNCKER, EUROPEAN COMMISSION PRESIDENT: We are close allies, not enemies. We have to work together as a team that we should focus on

reducing tariffs and decreasing them and that's what we have to do. That's our job.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Well, I agree and if we can have no tariffs and no barriers and no subsidies, the United States would

be extremely pleased.

(END VIDEO CLIP)

QUEST: But who else knows what will come out of that? They talked there about no subsidies, no barriers, no tariffs, but Jean-Claude Juncker was

not overly optimistic about the talks according to his Commission spokesman. For weeks, he has had to listen to Donald Trump tearing into

Europe's economic policies. For instance, the U.S. has $101 billion trade deficit with Europe. A number which Donald Trump has continually

exaggerated.

He has singled out car tariffs as being exceptionally unfair, although most U.S. cars are exempt, for those strange 20 percent on certain trucks, which

has been there for donkey's years. He also says that the E.U. makes it impossible for American farmers to do business there and last week, he

accused the E.U. of manipulating the single currency and interest rates and regularly complained about the defense spending.

It was no surprise that he called Donald Trump, Mr. Juncker said, Donald Trump called him a brutal killer in last month's G-7 summit. Jeremy,

Jeremy is in Washington. What are these rumors that we are hearing of some sort of deal. I mean, the market certainly has rocketed up on the back of

it, what can you tell me?

[16:05:05]

JEREMY DIAMOND, CNN WHITE HOUSE REPORTER: Nothing confirmed as of yet, Richard, as far as these reports we're seeing, but the Wall Street Journal"

was reporting according to a one European official that the European Union had made some -- was pledging to make some concessions to the President

increasing exports in certain ways, we'll see if what is the President wants to address. Certainly, the fact that he has set up this joint press

availability suddenly indicates that he probably has good news to tell the American people and certainly, that's the way that the markets are at least

taking it as of now.

But this could be an indication that we're seeing what the President and his administration have said over the last several weeks is true, which is

that the use of the tariffs that the President has imposed and has kind of tough hard line view on trade and the way that he's implemented it towards

the European Union was a negotiating strategy to try and eliminate these tariffs. We haven't seen that actually play out, yet.

QUEST: No, but Jeremy, I have no doubt, none whatsoever, you can take it to the bank that whatever has been agreed, it would be put forward as a

great success and a masterful piece of negotiation by the President. However, we saw similar with South Korea, we've seen similar with China

where some sort of fudge has been cobbled together that allows the President to say he's done wonders, but actually, when you look at it in

the colored light of day, it's denied what previously been agreed or wasn't very good to begin with.

DIAMOND: Right, that will be the big question coming out of this. Is this simply a bag of goodies that the President has been offered to try and

lower some of these tariff barriers and that's something that he can show the American public and try and tout as a great success, or is it actually

a great success and we'll have to wait and see that.

We know in the past that he has been had in this regard by China for example, which uses this strategy very often, of offering bags of goodies

to U.S. Presidents whether it's Donald Trump or some of his predecessors, only to then not make the kind of substantive changes that actually need to

be made to change these tariff imbalances, but the European Union of course is a little bit of a different animal as far as the U.S.-E.U. trading

relationship, but again, the President and the E.U. commissioner both stressing that the importance of this trading relationship, so we'll see

what it goes from here as we see these two men speaking.

QUEST: Because what we're really talking about here is not the existing tariffs. I can't remember how much they are, but I mean, whatever they are

between the E.U. and the U.S.. It's about the automobiles. The promise of the U.S. President to tariff European cars coming in to the U.S.. Now,

that's serious money and the E.U. has said they will retaliate.

DIAMOND: Right, and now we've seen so far from these initial reports about a possible agreement here is concessions from the E.U. side, the big

question will be will the President himself reverse that threat to impose those tariffs on automobiles, we'll have to wait and see if that's actually

the case.

So far, the President has only used this tough on trade rhetoric to try and get the E.U. to lower some of these barriers, but again, that is not the

only issue here as we see the President's widening trade feud with the rest of the world. The big animal here is really the President's feud with

China which is what is costing a lot of farmers a lot of money these days and prompted the administration yesterday to release this $12 billion aid

package to help these people from that damage.

QUEST: Let's talk about that. Let's talk about that because I was surprised to see how much vitriol and criticism from the President's own

party, though worse at it. Now, the Republicans don't like state aid or hand outs, but bearing in mind this $12 billion he's designed for farmers

who probably voted Trump in the first place. One might have thought, you don't bite the hand that feeds you.

DIAMOND: Well, the thought process among those Republican law makers who not only don't like subsidies and handouts but also don't like tariffs is

that if the President continues in the way that he's been going as far as increasing these protectionist measures, then it's not going to be just a

$12 billion cost, the $11 billion that it is currently estimated to cost U.S. farmers, but it's going to be far more than that in the long term, so

Republican lawmakers coming out strongly yesterday to tell the President, "We don't need this kind of stop gap financial back stop measure, we need

you to change the policies that you're implementing as far as free trade and these protectionist measures are concerned.

QUEST: Jeremy, good to see you, thank you, sir. Stay close by because as soon as this is over, you know what I mean, as soon as we've heard from

both Presidents in the Rose Garden, we're going to need you, too. So don't go too far, go and have a cup of tea. Send me the bill.

Mohamed A. El-Erian is Chief Economic Adviser at Allianz. He joins me from Irvine, California, and we're going to get a GDP number on Friday, or later

this week, that will be about four percent; might be a bit more, might be a bit less, most people seem to believe. If that is the case, and Donald

Trump has hit his 4 percent, all right, I agree, not annualized, but he has hit on a nominal quarterly basis, his 4 percent.

MOHAMED A. EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: Yes, he has, and he is going to point to three engines of growth, all kicking in at the same

time.

[16:10:12}

EL-ERIAN: The household sector because of continued strong job creation, capital spending by companies and third, the fiscal stimulus. So, I think

you're going to see some big numbers not just for the second quarter, but for a few more quarters.

QUEST: And if that is the case, is it your view that the economy can withstand this level of growth without serious interest rate rises from the

Federal which may be going to do another two before the end of the year?

EL-ERIAN: Yes, I suspect, they'll do one, not two, and I suspect that they'll do a couple more next year. I think the Fed has very delicate

balancing act. The U.S. economy is doing well. The rest of the world is slowing down. So, they have to find somehow strike the right balance. If

it were for the rest of the world, slowing down, they would do two with the next one as early as September, but I think that they have to pay attention

to what's happening to the rest of the world.

QUEST: And on this attention to the rest of the world, this trade talk, at the moment, the tariffs -- but the way, it's the Chinese tariffs or the

European ones or the whatever, they are manageable. I mean, they are not nice. Traditional economists like yourself bristle at the mere mention of

them in that sense, but they are economically manageable. What's your fear?

EL-ERIAN: So, I always make a distinction between the journey and the destination. And the real issue is the destination. And in the past, I've

shared with you three possibilities, the one that the market believes in most, which is that we end up with trade that is still free, but fair.

There's a second one which is we end up in a full-blown trade war that's the risk, but there's also a positive risk, it's what I've called the

Reagan moment for international trade that is that we get some durable improvements to the trading system.

And what the market is seeing today and the reason it reacted so much on simply indications of concessions is that that increases the baseline of

free but fairer trade and it increases the possibility of the Reagan moment.

QUEST: Oh, but the extent of a deal, you -- I mean, we'll be talking to Michael Froman later in the program and that the Ambassador to Trade from

(inaudible), who certainly is well aware that the devil is in the detail with all of these things, and you are familiar with these, too.

It's very easy for the E.U. and the U.S. to cobble together something to get over a tricky press conference on a hot, humid Wednesday afternoon in

Washington. Whether that holds ground, Mohamed A. El-Erian, that's going to be the key, is there real benefit from it?

EL-ERIAN: Yes, and I wouldn't -- I would look at two things, Richard. One is what are the details and I think that what we get today are just

beginning and one has to monitor this very carefully and two, importantly, does that allow the U.S. and Europe to come together and jointly put

pressure on China on grievances that both have. We're talking about non- tariff barriers, we're talking about joint venture requirements, we're talking about all sorts of things that China applies to both the U.S. and

Europe, including intellectual property. They'll look for two things, the details and whether they can come together.

QUEST: So, pulling the strands together as we come to an end and it's been lovely to have you for a bit longer, so we can really get to grips with

this matter, how fragile is the situation because I don't just mean the market volatility. We know that in these days of quantum computing and

algorithms, the market will have a knee jerk reaction and it could go a thousand points in any direction, but if you look at the underlying

economy, the global economy, how fragile is it against these trade wins?

EL-ERIAN: It's more fragile. The problem with tariff escalation, the tit for tat that we've seen is that you can get a policy mistake on accident

quite easily, and if you get an accident, remember, the global economy as a whole is slowing down, so this is not a great time, plus most people think

that asset prices are still elevated, so that is why it's really important to hope that while the journey is going to be bumpy, we get a good

destination.

Otherwise, we are going to end up with the risk of financial stability, recession and geopolitical risk, so it is fragile.

QUEST: Good to see you, sir. Thank you. Much appreciated.

EL-ERIAN: Thank you.

QUEST: As we wait for what's happening. Let me just show you what's happened with Europe. The markets closed mostly lower. The DAX was

dragged down by Deutsche Bank which had weak earnings and we all know the problems of that German bank, and everybody is keeping an eye on Washington

where --

[16:15:14]

QUEST: -- Jean-Claude Juncker is meeting the U.S. President about tariffs, so only the Zurich gained and of course, if you look at the U.S.,

if you look at the Dow and the way that went, that was extraordinary, a later afternoon spike in the Dow on the back of the possibility of some

sort of deal being cobbled together between the E.U. and the U.S.. And also, more news to bring you, Facebook has missed the earnings estimates.

It's going to be difficult on the share price, apparently in after hours, it's down. And if it wasn't enough, Michael Froman, good to see you.

MICHAEL FROMAN, FORMER U.S. TRADE REPRESENTATIVE: Good to see you.

QUEST: Well, it's a deal, potential deal, we need to get to grips with it and understand it and make some sense of it.

FROMAN: Thank you.

QUEST: Breaking news. We are awaiting and here they are, on time, Presidents Trump and Jean-Claude Juncker into the Rose Garden to reveal

what they have discussed and maybe agreed. This news conference wasn't planned. It was added later. Let's listen to the Presidents.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Thank you very much. Appreciate it. And I appreciate all of our great senators and so many of

our representatives for being here.

Senator John Boozman. John, you're here someplace. Hi, John. Thank you. Senator Mike Crapo. Thank you, Mike. Senator Steve Daines. Senator

Hoeven. Thank you. They're all here. Senator Cindy Hyde-Smith. Cindy, thank you very much. Senator James Lankford. James. Thank you, James.

Senator Pat Roberts. He loves those farms. He loves the farmers, like I do.

Representative Diane Black. Diane, thank you. Representative Kevin Brady, with our new tax bill. How's it coming, Kevin? Good? Representative Mike

Conaway. Mike. Thank you, Mike. Representative Dan Newhouse. Thank you, Dan. Representative Kristi Noem.

[16:20:04]

TRUMP: I have to call her "Governor" now. That was a great win. Thank you, Kristi. Representative David Reichert. David, thank you.

So we had a big day. Very big. We met right here at the White House to launch a new phase in the relationship between the United States and the

European Union -- a phase of close friendship; of strong trade relations in which both of us will win; of working better together for global security

and prosperity; and of fighting jointly against terrorism.

The United States and the European Union together count for more than 830 million citizens and more than 50 percent of the global GDP. In other

words, together, we're more than 50 percent of trade. If we team up, we can make our planet a better, more secure, and more prosperous place.

Already today, the United States and the European Union have a $1 trillion bilateral trade relationship -- the largest economic relationship anywhere

in the world. We want to further strengthen this trade relationship to the benefit of all American and European citizens.

This is why we agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto

industrial goods. Thank you. Thank you. Thank you.

We will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans.

Soybeans is a big deal. And the European Union is going to start, almost immediately, to buy a lot of soybeans -- they're a tremendous market -- buy

a lot of soybeans from our farmers in the Midwest, primarily. So I thank you for that, Jean-Claude.

This will open markets for farmers and workers, increase investment, and lead to greater prosperity in both the United States and the European

Union. It will also make trade fairer and more reciprocal. My favorite word: "reciprocal."

Secondly, we agreed today to a strengthened and strengthening of our strategic cooperation with respect to energy. The European Union wants to

import more liquefied natural gas -- LNG -- from the United States, and they're going to be a very, very big buyer. We're going to make it much

easier for them, but they're going to be a massive buyer of LNG, so they'll be able to diversify their energy supply, which they want very much to do.

And we have plenty of it.

Thirdly, we agreed today to launch a close dialogue on standards, in order to ease trade, reduce bureaucratic obstacles, and slash costs dramatically.

Fourthly, we agreed to join forces to protect American and European companies from better -- and really better than ever -- we've never done

like we're doing. I can say, from the standpoint of the United States, we've never done this well, but we're going to do a lot better after we do

this deal and other deals that we're currently working on.

Likewise, the European Union is going to do better, stronger, bigger. We will therefore work closely together with like-minded partners to reform

the WTO and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies,

distortions created by state-owned enterprises, and overcapacity.

We decided to set up immediately an Executive Working Group of very intelligent people on both sides. They'll be our closest advisors, and

they're going to carry out this joint agenda. In addition, it will identify short-term measures to facilitate commercial exchanges and assess

existing tariff measures and what we can do about that to the betterment of both.

While we are working on this, we will not go against the spirit of this agreement, unless either party terminates the negotiation. So we're

starting the negotiation right now, but we know very much where it's going.

[16:25:03]

TRUMP: We also will resolve the steel and aluminum tariff issues, and we will resolve retaliatory tariffs. We have some tariffs that are

retaliatory. And that will get resolved as part of what we're doing. And with that, Jean-Claude, please.

JUNCKER: Mr. President, ladies and gentlemen, when I was invited by the President to the White House, I had one intention: I had the intention to

make a deal today. And we made a deal today.

We have identified a number of areas on which to work together. Work towards zero tariffs on industrial goods. And that was my main intention,

to propose to come down to zero tariffs on industrial goods.

We've decided to strengthen our cooperation on energy. The E.U. will build more terminals to import liquefied natural gas from the U.S.. This is also

a message for others.

We agreed to establish a dialogue on standards. As far as agriculture is concerned, the European Union can import more soybeans from the U.S., and

it will be done. And we also agreed to work together on the reform of the WTO. This, of course, is on the understanding that as long as we are

negotiating, unless one party would stop the negotiations, we will hold off further tariffs, and we will reassess existing tariffs on steel and

aluminum.

This was a good, constructive meeting. Thank you, Donald.

TRUMP: Well, thank you very much, Jean-Claude. And I just want to conclude by saying this was a very big day for free and fair trade. A very

big day indeed. Thank you very much, everybody. Thank you. Thank you.

QUEST: So no questions being taken, and a very complicated agreement, luckily for us, we're joined by Michael Froman the former U.S. Trade

Representative who is now Vice Chairman and President of Mastercard. If there is one man who has sat in trade negotiations, and can now make sense

of what we have just heard. It is you, good ambassador. So, let's go through it bit by bit. What was agreed here?

FROMAN: Well, obviously, we still need to see some more of the details, but it sounded like that the E.U. successfully got the President to agree

not to proceed with the auto tariffs that he's been threatening while they continue to negotiate and they'll negotiate primarily on industrial tariffs

with the goal of getting them toward zero, not a commitment to zero, but towards zero. The question is, what will they do beyond that?

QUEST: Right, so let's take that point by point. We will work towards zero tariffs on non-auto industrial goods. Are there many tariffs on non-

auto industrial goods? We're aware of the autos, those anomalies.

FROMAN: Yes, no there are some on our chemical exports and some of our other manufactured products, the E.U. in general has tariffs that are about

twice as high as our tariffs, so there is benefit in eliminating tariffs, but the main obstacles to our trade with the E.U. are not the tariffs, they

are not the non tariff barriers, so you notice, the President and President Juncker had said nothing about agriculture for example, and the kinds of

regulations that the E.U. has to keep our agricultural products out of their markets whether it is non-science based regulations or regulations.

We can't sell parmesan cheese in Europe because it doesn't come from Parma, it comes from Wisconsin. Those kinds of regulations that keep out our

chicken, our pork, our beef as well as some of our dairy products.

QUEST: So the agreement that has been reached is very limited in that sense. Why would they not just get rid of these remaining faun in the side

auto tariffs that the E.U. keeps in place. They can't be that significant bearing in mind the sheer number of cars that the U.S. exports there

anyway, so why don't you just get rid of them?

FROMAN: Well, we only have a 2.5 percent tariff on imported cars.

QUEST: No, quite the other way.

FROMAN: And of course, they have 10 percent tariff. They may be very willing to open up their market because they're not terribly worried about

U.S. car exports but they are going to want something in return and we have 25 percent on trucks and so, query whether we're going to put our truck

tariff on the table. When you do a trade negotiation, you can't just pick one or two products. Under the WTO rules, you have to cover substantially

all trade or you have to offer those benefits to the whole world.

So, the E.U. could eliminate the 10 percent tariff on cars, but they have to offer that to Japan, to Korea, to China, wherever those cars come from.

[16:30:13] And while Germany might be willing to do that, France may have a problem.

QUEST: Right, more L&G to be exported from the U.S. to Europe, that's what Angela Merkel -- the attack against Angela Merkel and Germany buying

Russian was all about.

It was nothing to do with security, it was about selling more of the U.S. stuff.

FROMAN: Well, arguably, it's a bit about both, but clearly, we have good, cheap, natural gas, we've opened it after export. Our constraints are

usually how our export facilities. Whether we have the terminal is capable of pumping out more exports, so that's a good area for potential growth.

QUEST: And let's wrap into all of this, reform of the WTO, I mean, ain't going to happen.

FROMAN: It's a good area for the U.S. and the E.U. to cooperate on. So maybe the WTO could use updating. And you know, it's an example where the

U.S. and the E.U. had come together, whether it's WTO, whether it's vis-a- vis China to try and use our combined market power, if we can collaborate together and get beyond this tit for tat to have effects around the world.

QUEST: So just to conclude, we'll keep you here for a moment, to move it - - from what we heard today, progress has been made, but you wouldn't say this is a blindingly -- I mean, in the sense that the next round of tariffs

are suspended because of the negotiations, but you wouldn't say that what they've agreed is blinding.

FROMAN: Well, I think this is a pretty good win for the European Union because what --

QUEST: Really?

FROMAN: They managed to get -- like Juncker came with the goal of preventing the auto tariffs from being put in place. And what he got was a

commitment that they would not be put in place as long as they are negotiating.

Not as long as they agree, but as long as they are negotiating, and these negotiations can go on for years. And so I think he succeeded in kicking

can down the road at least and maybe preventing completely the imposition of the tariffs on autos and auto parts.

There's still the steel and aluminum tariffs and the retaliatory tariffs as the president mentioned that they'll have to work through, but the big

issue was really the autos and the auto parts, and there the E.U. succeeded in kicking that down the road.

QUEST: Buying time.

FROMAN: Buying time.

QUEST: Good to see you.

FROMAN: Thanks --

QUEST: Thank you very much indeed --

FROMAN: Good to be here.

QUEST: Now, automotive goods, we've just been talking there, they're excluded from today's deals, specifically non-auto industrial goods.

Joining me on the phone now, Roberto Vavassori; the president of the European automotive group CLEPA.

Can you hear me, sir?

ROBERTO VAVASSORI, PRESIDENT, CLEPA: Yes sir, yes, good afternoon to everybody.

QUEST: Good afternoon. So there's -- they're working towards zero tariffs for non-auto industrial goods. In other words, you're not included. How

do you feel about that?

VAVASSORI: Well, it was interesting solution towards just instating addition to soybean. Apart from this, it is interesting that on the two

sides of the ocean, association corporate workers of this sector are very much aligned against the end sort of tariff.

May I make this more comment, like more than two-thirds of U.S. built vehicles are non-former big three ones. So being built and they are built

in U.S., so thanks to huge investment done by companies from Europe, from Japan, from Korea, the same didn't happen so far in Europe for instance.

So we needed to take a broader picture when talking about the reason why to apply tariffs. And in any vehicle built today, 75 percent of the value is

coming from components.

QUEST: Right, but in your members --

VAVASSORI: But I -- million people working in the U.S. and generating lots of wellbeing to U.S. people. Thanks to European and Japanese and Korean

investments.

QUEST: Right, so as you look forward as a result of this, it still must be a relief that the auto tariffs or that the threats of automobile tariffs

that the U.S. had been saying is some several hundred billion dollars worth of European exported.

The fact that that has been put to one side at least gives you breathing room, sir.

VAVASSORI: Of course, as it took decades to grow the huge rival three, that is today the automotive bloc of supply chain. We invested huge amount

of money in fuller transparency and trust. And now we cannot be taken as hostage because of this.

It is totally unfair. I believe that it is good to work towards a very limited of zero tariff between the two --

QUEST: Right --

[16:35:00] VAVASSORI: Countries. For automotive sector has now big global supply chain. So it's so complex and relying one on each other. So it is

--

QUEST: OK --

VAVASSORI: Absolutely evident.

QUEST: Thank you, Roberto Vavassori joining me. Back with Michael Froman, and finally, this idea that Donald Trump does come up with every now and

again of zero tariffs, it's sexy as much as tariffs ever are, I mean, in the event of, you know -- people sort of say well, good idea, zero tariffs,

no trade barriers.

And people like you look -- if you were wearing glasses would look over your glasses and say to me, yes, nice idea it is, ain't going to work for a

thousand and one reasons, correct?

FROMAN: Well, it's a good starting point. You know, we were doing the Trans-Atlantic Trade and Investment Partnership, TATIP, we were sitting for

zero tariffs, but also should -- and to open up the services market in Europe, open up the agricultural market in Europe, make sure that the

regulatory process was open so that there could be public comments and accountability around the regulatory process, that's what you really need

to have free and fair trade.

QUEST: Who won today?

FROMAN: I think Juncker can feel pretty good about his results today because his number one goal was to prevent the auto tariffs from being put

into effect, he has succeeded in that goal.

QUEST: Good to see you, thank you.

FROMAN: Thank you.

QUEST: We'll continue on QUEST MEANS BUSINESS live from New York. Earnings -- what a day, what -- it was always about Ford earnings and we'll

see the results of the tariffs in the numbers tonight.

(COMMERCIAL BREAK)

QUEST: Well, it has been an extremely busy sort of day and that spike in the Dow because of the rumors of what was happening send the market up very

sharply towards the end of today. Earlier in the session has been pulled back by Boeing which had earnings, the forecast was weak.

But if you look over here, the Dow is up, the S&P is up, the NASDAQ -- and the NASDAQ hits a record -- so sir, good, let's have good -- hey, getting a

bit plea here, it's up there. Green across the board for that, and we have a record on the NASDAQ which means -- what was the number before?

[16:40:00] As you know, I have -- 21 always return, I think it was 22, but it might be 23, I didn't look and remember what the number was before. So

what number should it be?

UNIDENTIFIED MALE: Twenty-five.

QUEST: Number should be 25, and right. I was so busy being overwhelmed by the green lights. Google and Amazon have hit record highs as well.

Facebook shares are in the driving seat after hours trade, the company's second quarter results missed analysts expectations, quite considerably.

And the shares are sharply lower as a result. They had closed at a record high and now they're rolling back from what we saw during the Cambridge

Analytica scandal. Paul La Monica is with me. I got all the -- I got for how many -- how many -- what happened with Facebook?

PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: I think Facebook, the expectations were just simply too high. I mean, when you look at these

results, their ad revenues were up 42 percent from a year ago.

Name one media company including -- I hate to say it, ours, that wouldn't kill to have revenue growth like that. But Facebook is spending a lot of

money as well. Their expenses were up 50 percent from a year ago in the quarter as well.

So expectations were high, sales were a little bit light, they continued to spend and I think Wall Street always gets nervous when Mark Zuckerberg is

spending a lot on new initiatives, so that's why the stock is down.

Google, you know, a couple of days ago, they beat the Street and the stock went up, it really is that simple. If you can beat those lofty

expectations, you get rewarded.

QUEST: But we shouldn't perhaps take too much on just what happens today. It's because with mature reflection, people will see what you just said

about the 40 percent -- it is the number that most people, most companies would --

LA MONICA: Exactly, keep in mind that before the stocks fell in after- hours trading, it closed at a record high. So for all of the talk earlier this year about, oh, Mark Zuckerberg is having a tough year, Cambridge

Analytica this, Cambridge --

QUEST: Right --

LA MONICA: Analytica that --

QUEST: Why was --

LA MONICA: Record high.

QUEST: Why was AT&T down?

LA MONICA: AT&T was down despite some good growth from their newly acquired Time Warner/Warner Media business. But "DirecTV"; the satellite

TV business, that's an area that you're starting to see subscribers leave that service.

AT&T now has a cheaper "DirecTV" offering so people are --

QUEST: Yes --

LA MONICA: Signing up for that, that I think are a bit of a problem for (INAUDIBLE) right now. And the wireless side starting to slow a bit too.

QUEST: And of course, I am obliged to say AT&T; parent company of this network --

LA MONICA: They are indeed.

QUEST: We'll have a break, we'll be back in a moment.

[16:45:00] (COMMERCIAL BREAK)

QUEST: So breaking news in the last hour. The United States and the European Union have announced new measures on trade in an attempt to avoid

a fallout trade war between the two largest trade blocs in the world.

Speaking a few moments ago at the Rose Garden, President Trump said that he and Jean-Claude Juncker agreed to work towards zero tariffs on barriers on

many goods, non-auto industrial goods.

Mr. Trump called it a very big day for free and fair trade. We've had results from a variety of car companies, GM reported, Fiat-Chrysler

reported and Ford shares now are dropping after-hours. Q2 was 50 percent well below expectations, production is being disrupted for its popular F150

truck, Pickup truck partly to blame.

And as all the issues of tariffs that have been talked about where both GM and Fiat-Chrysler say that is a worry. So let's talk it all into

perspective. The car coach is Lauren Fix, she is with me now --

LAUREN FIX, AUTOMOTIVE EXPERT: Good to see you --

QUEST: We can dispense pretty quickly with Ford's results, they look kind of exciting.

FIX: No, but they're going to still sell the F150 like crazy, it's been the best-selling vehicle across the boards for 38 years.

QUEST: Now --

FIX: So --

QUEST: It looks tonight as if the auto tariffs against Europe are off the agenda.

FIX: Yes.

QUEST: Good news obviously from Europe, but we saw GM and Fiat-Chrysler both warning about the effects of these tariffs.

FIX: Right, because they're fearing right now that if they -- if we double the tariff, then the E.U. will double the tariff. And all that is just

going to cost us more for the cars. But you've got to remember, President Trump is not playing a political game that we've always played in the past.

He's playing a business game, and that's not what all of us are used to. We're used to the politics, and I'm not an expert on politics, I'm an

expert in automotives.

QUEST: Right --

FIX: So I will stick with the automotive area --

QUEST: Please do.

FIX: OK, so what you're going to see is the E.U. is going to bend and they're going to bend like, you know, we're going to do zero for zero.

That means they're going to have to eliminate that chicken tax which has been around since the '30s.

It's really interesting because when Mercedes brings in vehicles, they assemble and complete in Europe, but this is someone providing talent,

mark, they come to South Carolina, we assembled and then sold, that's ridiculous.

That's an expensive Mercedes, tier two(ph), freightliner as well. So we assume that if that goes aside, that means you're shipping in vehicles that

are assembled that will help fill the part of --

QUEST: How -- but how realistic is it to go to zero tariffs --

FIX: For automotives?

QUEST: For automotives.

FIX: I think it's a possibility, I think it's about -- all the ones that are possible, I know you're talking about soybeans and all the other

things, I think automotive is very likely, and if that happens, the E.U. needs it too because you've got Jaguar and Land Rover and Mini Coup are

built and the Rolls-Royce and Bentley.

And the last one who will bend is going to be China. They're going to wait until every single brand, every single manufacturer makes a deal, then

they'll go.

QUEST: Good to see you.

FIX: Good to see you as well --

QUEST: Thank you coach, thank you for coming and --

FIX: Any time, thank you.

QUEST: Now, at the New York Stock Exchange, portraits of Marchionne, Sergio Marchionne hang above the trading floor. It was a fitting tribute

for a man who towered over his industry and pulled a U.S. institution back from the brink.

CNN's Clare Sebastian looks back at the life of Sergio Marchionne.

(BEGIN VIDEOTAPE)

CLARE SEBASTIAN, CNN CORRESPONDENT: He's known as the man who saved an American icon. Fiat-Chrysler boss Sergio Marchionne dead at the age of 66

after complications from surgery. A relentless leader with a wit to match.

Marchionne pulled off what many have called a miracle, rescuing Chrysler from the brink of collapse.

SERGIO MARCHIONNE, FORMER CEO, FIAT CHRYSLER: Our moment is to go back, you know, start making cars that people like, and to make -- sell them with

a profit. I know it sounds incredibly trivial, so it's that simple.

SEBASTIAN: During the financial crisis, he struck a deal with the U.S. government to bail out car maker.

BARACK OBAMA, FORMER PRESIDENT OF THE UNITED STATES: This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's

revival.

MARCHIONNE: Five hundred million dollars --

SEBASTIAN: And the combined company, Fiat-Chrysler repaid its debt and emerged as a global powerhouse.

(BELL RINGING)

Marchionne was known for his bold initiatives with his trademark black sweater and a sharp tongue.

UNIDENTIFIED FEMALE: Do you think that Chrysler could have stood on its own two feet and come back without this government money?

MARCHIONNE: Whoever tells you that is smoking an illegal material.

SEBASTIAN: He came to the auto industry as an outsider, taking over Fiat in 2004 when the car maker was billions of dollars in debt. He cleaned

house and within two years, it was turning a profit.

MARCHIONNE: There's nothing worse for a leader than to sit here in people's faces.

SEBASTIAN: Marchionne was also the first of his peers to come out against the two tier wage system in the U.S. that would allow car makers to pay new

highest low wages to save money.

[16:50:00] MARCHIONNE: I think the world of American workers, what happened here at Chrysler would have been impossible and will not be

committing to this show, absolutely impossible.

SEBASTIAN: And Marchionne loved fast cars, he was also a chairman and CEO of Ferrari which spun off from Fiat-Chrysler in 2016.

MARCHIONNE: I'm delighted, I mean, because to be able to see a show-off. These cars and this organization with the capital markets and all that,

understand that from their own is a huge feat for us.

SEBASTIAN: Before his death, Marchionne had plans to retire in 2019. Despite the company's turnaround, Fiat-Chrysler is still a distant third in

U.S. sales and eighth globally.

MARCHIONNE: But we dare to dream big and we have begun delivering on that dream.

SEBASTIAN: More questions remain about Fiat-Chrysler's long-term future, Marchionne's legacy as the company's savior is not in doubt.

UNIDENTIFIED MALE: How are you doing?

MARCHIONNE: I'm doing good, dude.

(LAUGHTER)

SEBASTIAN: Clare Sebastian, CNN, New York.

(END VIDEOTAPE)

QUEST: Lauren Fix, the car coach, you knew Marchionne.

FIX: Yes, it's very sad though, we knew on Friday that there was something going wrong and Saturday morning, they had an emergency meeting and they

put Mike Manley in charge who is going to do a great job, 54 years old, he helped build the Ram and the Jeep, I think it's really going to help Fiat-

Chrysler.

QUEST: Has Fiat -- did Marchionne -- has he left Fiat-Chrysler in a strong position?

FIX: Yes, he has. I mean, think about what it was when he took it over. I mean, he is an accountant, a businessman, a lawyer, smart man and worked

crazy hours, slept on a plane, lived drinking Espresso and smoking heavily and then he gave that up a year ago.

And we were -- we were called in and told that sadly, he was in a coma on Saturday morning and we knew something was up, it was a stroke. And they

tried waking him up --

QUEST: And it was as a result -- I mean, he went in for surgery for other matters --

FIX: For a shoulder, yes --

QUEST: Yes, and suffered as a stroke --

FIX: We don't know the exact details --

QUEST: Sure --

FIX: But we know that he had a stroke and it is very sad. He was such a smart man and just --

QUEST: Yes --

FIX: Yes, very funny guy and so some of the people that hang out with him, he had a great time with the people at Fiat-Chrysler.

QUEST: Good to see you, thank you very much --

FIX: Good to see you too.

QUEST: Now, let's talk about one or two other matters. Investors are underwhelmed after Boeing revealed mountain cost of a troubled defense

program. Shares in the aerospace fell despite earnings showing better than expected profits.

The company cut the forecasts, citing defense unit and its attempt to build other aircrafts. The program is running more than two years behind

schedule. Three major U.S. airlines have removed any mention of Taiwan from their booking websites after China threatened them with sanctions.

America, United and Delta now lists flights going to the city of Taipei which doesn't have a TN after it. Delta has even left the comma as you

look closely, so it was there. Beijing views Taiwan as a renegade province.

CNN's Aviation Correspondent, Rene Marsh joins me. Rene, we can't be pole- faced about this, can we? In the sense that these companies can't afford to have -- that they don't enjoy the political luxury of doing what they want

when China is such a big, new burgeoning market.

RENE MARSH, CNN AVIATION CORRESPONDENT: Absolutely, Richard, you know, it always comes down to the bottom line, and as we saw here how this all

played out, U.S. Airlines essentially bowed to China. America, Delta and United all of them made those changes to their website just hours before

China's deadline for them to make the fifth of as you mentioned at the top.

Previously the airlines mentioned Taiwan as a destination that they fly to, that angered China, despite that -- you know, the fact that both areas,

both Taiwan and China are governed separately. China considers Taiwan to be a part of --

QUEST: Sure --

MARSH: Its territory.

QUEST: But the U.S. described it as nonsense when this whole -- China raised this issue. But we've seen how difficult China can be. For

example, Marriott, when it made the Taiwan mistake found its website was suddenly blocked until it made a full apology.

But did the airlines find this difficult to stomach?

MARSH: You know, yes, and for the main part that -- the main reason that you said earlier, which is because this is such a major market for them.

It's unclear exactly what the punishment would have been had they not obeyed.

But China is known as you point out for boycotting foreign companies, and it is a risk that these airlines clearly didn't want to take. China is a

booming market for the aviation industry. IATA, the International Air Transport Association, they actually predicted China would surpass the

United States as the world's hub aviation market in the next two years by 2020.

So that just goes to show just how important of a market China is. They certainly didn't want to be on their bad side because as you know for the

airline industry, it is all about the bottom line, and that's why we saw the airlines react in the way that they did.

[16:55:00] They obeyed, they obliged, they made the changes that China essentially asked for, and --

QUEST: Right --

MARSH: As you point out, the White House slammed China for this, saying that they were essentially imposing their --

QUEST: Right --

MARSH: Political views on private companies, but those companies are in a tight spot and they followed China's wishes.

QUEST: Rene, I loved the phrase you just used there, "they obeyed and they obliged", I think that sums it up perfectly. Have a good one, thank you.

Rene Marsh joining us from Washington. Before we go for a break, I do need to show you what happened in the market very briefly.

The way in which the Dow spiked just in the last hour of trade. The market have been -- barely been up, say, won a couple of points and then suddenly

rolls up as a result of this trade deal with the E.U. and the U.S. We'll need to analyze what that is after we have -- look at that, shares are down

30 -- oh, dear, what a surprise.

Verizon can't even manage to join in that either. The market is strong, those are the numbers, we'll have a profitable moment next.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, I promised you a busy program right at the beginning and that is what we delivered. The E.U. and the U.S. have

reached a trade agreement of sort, but who won? Who lost? Well, it would appear that they're moving towards non-auto industrial goods, zero tariffs.

Moving towards zero tariffs. So that's one thing. Secondly, they've agreed that there'll be no retribution or increase of tariffs whiles

negotiations take place. In other words, the auto tariffs threatened by President Trump are now off the table for the time being.

Again, the talk about reforming the WTO, well, good luck about that, you and I will have retired by the time anything happens on that front. Now,

if you ask who won and who lost? It would appear both the E.U. and the U.S. won.

The U.S. certainly, Donald Trump does certainly get a sight and sound victory as a result of all of this. He looks to have been firm and he's

got a concession from Europe. But the real winner is probably Europe and never forget trade talks take months, if not years.

What you have seen today is just a tip of the iceberg. I guarantee you, by the time it's all finished, it will look very different and we may have a

different appraisal on who really won or lost. Europe does not play nice when it comes to trade. And that's QUEST MEANS BUSINESS for tonight, I am

Richard Quest in New York.

Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you tomorrow.

END