Return to Transcripts main page

CNN Newsroom

Dow Tumbles As China Retaliates With Tariff Hike On U.S Goods; Trump Looks To Block Probes, Slams Constitutional Crisis Talk; Felicity Huffman Expected To Plead Guilty In College Scam. Aired 10- 10:30a ET

Aired May 13, 2019 - 10:00   ET

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


JIM SCIUTTO, CNN NEWSROOM: To steal U.S. military secrets in 2010.

[10:00:03]

At this point, Swedish prosecutors say that no formal charges have yet been filed.

Top of the hour here, and it's a busy one. I'm Jim Sciutto in New York.

A new escalation in the U.S.-China trade war is pushing U.S. stock prices down and down hard. The Dow toppling now over 500 points at the open, it's now nearly 2 percent down. This after being announced China is hiking tariffs on some $60 billion worth of U.S. imports, this from as low as 5 percent prior to as high as 25 percent effective on June 1st. That would seem to give the world's two largest economies one last chance to salvage a comprehensive deal, though President Trump is claiming that China, not the U.S., will suffer if a deal doesn't happen.

Earlier, he warned Beijing not to retaliate for the sharply higher U.S. tariffs that he imposed on Chinese goods last Friday. Let's begin now with CNN's Christine Romans. We are in the middle, Christine, of a sell-off here as we are in the middle of a game of chicken, really, when it comes to U.S.-China trade.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: You're absolutely right, and a 2 percent move. I mean, I get interested when it's a 2 percent move. And we saw losses last week, the worst week last week for stocks in months, really, and then a 2 percent loss again this morning.

Investors are sending a message here that they realize that consumers are going to pay the prices for higher tariffs, companies, it could hurt company profits, it hurts U.S.-China relations and they don't really see what the endgame is here.

The Friday tariffs we're talking about really set this whole ball really rolling. You're talking about all kinds of different products, network routers, seafood, metals, fruits. There are further tariffs the President can do. And we're told that he is preparing more tariffs, up to $300 billion more. And if you look carefully, these are items that consumers would feel right away. The first round of tariffs we had were things that are used to make other things, so it gave companies room to maybe absorb some of the cost if they could. This is the kind of stuff that these are prices that can be passed on right away.

The President is Tweeting about this, as you point out. He spoke directly to President Xi and said that China is going to be hurt. It will be China's. And he said they backed out of a deal. So the President reaching out to China but then also at the same time insulting essentially the leader saying that you guys are the ones who walked away here.

He's also trying -- the White House trying this interesting spin where they're trying to say the first quarter GDP was 3.2 percent because of Trump's tariffs. Virtually, every expert I've talked to so far today said first GDP quarter was 3.2 percent despite President Trump's tariffs. There might have even been some buying of goods ahead of time to try to get ahead of the tariffs, which juiced those numbers a little bit.

There's something else that's really important for me to mention, farmers. We're talking about investors, maybe investors being hurt. I think the biggest potential danger here is this could be very devastating for the farm sector. Already 30 days under water, it is planting season, and these farmers have to decide --these growers have to decide whether they're going to plant corn or soybeans and what's going to be the endgame in the U.S.-China trade war that has their storage bins full of last season's soybeans that the Chinese didn't buy, Jim.

SCIUTTO: So, Christine, to this point, markets have been -- everything is copacetic, we'll get through. And, crucially, they have priced into these recent rises, the U.S. and China making a deal prior to a trade war. That hasn't happened. So is this fall of 500 points, 550 points now, is this different?

ROMANS: Look, this is the reality setting in here, I think. And there is nothing but risk really going forward for the next month or so. You still have markets up nicely this year. You have markets up 30 percent, 40 percent since the election. And now, you have to decide if you're going to have a long protracted trade war, what that's going to look like for American consumers and for the American economy.

SCIUTTO: I mean, it would be fine, the market could be up, but the market has got to be based on underlying profits for U.S. companies. And if this tariffs hurt U.S. companies selling stuff in China and make it more expensive for Americans here to buy stuff, the markets have got to, at some point, reflect that.

ROMANS: And it's not just Americans buying stuff. It's these small businesses that rely so much on the China supply chain because, look, some of these industries left for China in the '80s and the '90s. We talked to one business owner last week who said, you know, these tariffs would have really helped us in 1991, but today they don't. There is no domestic manufacturing for his particular category. So they are the small manufacturers and the small importers in particular are really going to be hurt here.

SCIUTTO: Christine Romans, thanks very much. We're certainly going to stay on top of this.

So what is Beijing saying about all this? What are the pressures there? CNN International Correspondent Matt Rivers based in Beijing, of course, following the latest from China. So the President warned China against retaliating with tariffs, yet China is retaliating.

MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes. And that's not a surprise, Jim, given that, you know, China's government, as you well know, is not really known for its transparency.

[10:05:03]

But when it comes to the trade war and when it comes to doing what they say they will, they usually follow through. So after the Trump administration raised those tariff rates last Friday, China said we are going to retaliate. The question became not if they're going to retaliate, as you might have inferred from the President's Tweet morning, it was when they were going to retaliate and how. And what you saw tonight here in Beijing this morning, here in the U.S., is China picking out $60 billion roughly of U.S. goods that they're going to increase tariff rates on.

Now, there's a whole wide range of different American exports that come here to China. The new tariff rates are going to affect everything from China, from cotton to machinery, to optical instruments like telescopes.

But it's interesting that China only picked $60 billion. Remember that China has put tariffs on $110 billion in total of American imports here, yet China only chose to increase tariff rates on $60 billion of that 110. What that suggests to me is that this is a retaliation in kind, Jim, meaning that China was not trying to escalate beyond what the United States did there and the fact that they said this is not going to kick in until June 1st.

It does give negotiators a couple more weeks to maybe come up with some last-minute deal. Whether that happens, who knows, but that is China's kind of get out of jail free card, if you will, Jim.

SCIUTTO: No, and it's a good point, because you have to watch each of these responses very calibrated here. The timing and amount, does that provide an opening? Matt Rivers, thanks very much. And we continue to watch the markets there. Even as we were speaking, it's down nearly 600 points now, two and a third percent. We're going to stay on top of it.

No word yet from the White House on China's retaliation move to raise the U.S. tariffs -- raise those Chinese tariffs rather on U.S. goods despite President Trump Tweeting relentlessly this morning about his own tariff hike on Chinese goods. Let's go to Abby Phillip now. And I wonder, Abby, as the market falls here, and, of course, markets can bounce up again, but this is real now because both countries are imposing enormous costs on each other, which have effects on companies and consumers. Is there a concern in the White House about this getting out of hand?

ABBY PHILLIP, CNN WHITE HOUSE CORRESPONDENT: Well, there absolutely is a concern, Jim, among the President's economic aides that this tariff war is going to start having an impact on the American consumer. It's already been having an impact on farmers, as Christine pointed out.

But then you have President Trump who, I think, tries to take both views of this. He talks about how he thinks good tariffs are for the U.S. economy. He credited tariffs with the 3.2 percent GDP. He also suggested that tariffs are pouring money into U.S. coffers paid for by the Chinese government, even though even his economic aides understand that that is not how this works, that American consumers are the ones who end up paying these tariffs.

And President Trump at the same time that he's heralding tariffs also wants Beijing to come back to the negotiation table. He is trying to up the pressure on them, saying that the U.S. economy is doing so well it can withstand any damage that is incurred on the U.S. side by these tariffs.

And so I think the President's aides have been trying to keep him on the path toward a deal, but then he is always being lured in by the idea that tariffs, in his view, are ultimately a good thing. The problem is that Wall Street disagrees. I think American businesses disagree as well.

And right now, there is not much hope among the President's aides that things will start to go well in terms of the negotiations with China. They did not go well on Thursday and Friday. And there were no set dates for the President or negotiators to get back to the table again. So I think we are in a stalemate right now, and President Trump at the moment seems to be kind of spiking the football even as he tries to encourage Beijing to come back to the table, Jim.

SCIUTTO: Spiking the football. Abby Phillip, thanks very much.

Let's speak now to Jackie Kucinich. He is Washington Bureau Chief for The Daily Beast. And, Jackie, what's interesting here is this is a rare area of agreement between democrats and republicans, and that is that China is a bad trade actor and the facts are there. I mean, they take U.S. companies' technology. They restrict U.S. companies in China in a way that the U.S. does not restrict Chinese companies operating here and selling here. With that said, the President taking quite a gamble here. Explain the politics of this.

JACKIE KUCINICH, CNN POLITICAL ANALYST: So right now, in terms of China, what you're hearing on the Hill is there's some frustration among Republican Senators who represent farm states, someone like Joni Ernst in Iowa, John Thune from South Dakota, Pat Roberts from Kansas. And they are saying that farmers right now are hanging with the President. I think John Thune told Politico maybe because they think they're doing the right thing.

However, that patience will only last so long as they're seeing their bottom line dip. I mean, Christine Romans pointed out what's happening in Iowa, not only the trade war but also this flooding. There's already been $10 billion in subsidies for pork, soybeans, corn, dairy, because of trade wars and disagreements in China as well as Mexico and Canada.

[10:10:06]

So farmers are really taking the brunt of this right now.

And, politically, that not only affects the President but also on down, republicans who are up for re-election in these states that typically would be a pretty good state for the President. So it really does -- go ahead, Jim.

SCIUTTO: Can the President continue to buy off farm -- I mean, that's been the strategy so far, provide -- hey, and we had a farmer on the broadcast last week said he was counting on that. Can President do that? I mean, is there enough money to buy off the economic damage from this, specifically to farmers.

KUCINICH: That's an open question, and that would be a question for Congress, of course, because they would have to approve any subsidies that were going to farmers. But, you know, farmers will also tell you that they don't want -- they don't necessarily want subsidies. They want to be able to sell what they grow and earn it themselves. And, you know, that is going to be -- that's an open question, Jim, how far they will go and how they will tolerate.

The President hasn't really had much of a trade win going into 2020 as much as he talks of a big gain. He has a trade bill that, in theory, would replace NAFTA, the USMCA. And there is not even agreement on the republican side particularly because of the aluminum and steel tariffs. So the President really is in a position here where he needs a win. And right now, it doesn't look like it's headed that way, but we'll have to wait and see.

SCIUTTO: And how do democrats play this going into 2020? How do they appeal to voters affected by this?

KUCINICH: You know, it's interesting. trade is something not the whole democratic field don't agree on, but this is something that could unite them. It could -- you already hear Kamala Harris hitting the President on this. But trade is one of those tricky things. It depends on where you're from and who you're appealing to as to what you think about various trade agreements.

With that said, if they can all get behind what the President's doing is wrong and how he's doing it is wrong, that could be really good for democrats going into 2020.

SCIUTTO: We'll see. A lot of time.

KUCINICH: We'll see. Lots of time. SCIUTTO: Jackie Kucinich, I know we're going to talk to you about it again. Thanks very much.

KUCINICH: Thanks, Jim.

SCIUTTO: Still to come, the President and his allies are working to block more than a dozen separate congressional investigations. This is House Democrats are frustrated by what they call an unprecedented and some say illegal lack of cooperation from the White House.

Plus, from in front of the camera to potentially behind bars, Felicity Huffman expected to plead guilty today's for her role in the college admissions scandal. Could that mean less jail time for the T.V. star? Do other people follow her lead?

And former Vice President Joe Biden is set to make his first visit to New Hampshire as a presidential candidate. That's an important state, you might say. Can he build on his momentum in this key early voting state?

(COMMERCIAL BREAK)

[10:15:00]

SCIUTTO: This morning, democrats are putting their plans in place as President Trump ramps up his fight against any and all of their investigations. Get this, according to The Washington Post, the White House is right now blocking more than 20 probes. Look at them there, the tax returns, the Mueller report, Saudi nuclear transfer.

Manu Raju is on Capitol Hill with the latest. Manu, I spoke to a Democratic Congressman last hour, asked them the question, what do you do if the White House continues to say no. They say they're going to keep pursuing this. But I just wonder what's the real plan that has any potential positive outcome because the President just clearly is sticking to saying no?

MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, democrats are not sure about that, Jim. They're locked in an internal debate about how hard to go. Some democrats want to go as far as impeachment. Others say it's time to find individuals who defy contempt citations, defy subpoena requests. Others say fight this out in court and let's get the documents we're demanding.

What we're seeing on Capitol Hill is a new phase in this fight between the White House and House Democrats. Initially, there were a number of letters that Committee Chairmen had sent to the administration. Those letters were ignored. We have seen subpoenas sent, deadlines sent by those subpoenas, their subpoenas now ignored. Now, we're moving in the contempt citation push by the House Democrats. Bill Barr is one person facing contempt by the Full House. The House Judiciary Committee voted last week to hold him in contempt.

The House Intelligence Committee could also move to hold Bill Barr in contempt if he does not turn over information that Adam Schiff demanded via subpoena, counterintelligence information related to the Mueller probe. And then on Friday, there's a deadline to turn over six years of the President's tax returns under a subpoena set by Richard Neal, the Chairman of the House Ways and Means Committee. We're not expecting to get compliance from the administration on that. So the democrats will have to pursue what to do next.

They're talking about holding Steven Mnuchin, the Treasury Secretary, in contempt as well as the IRS Commissioner, setting the stage for what could be a long protracted fight in court over a number of fronts. The question is what else do democrats do, fines and the like, some even throwing up the notion of jailing people who do not comply with subpoenas. That's not something democratic leadership is behind at the moment, but just goes to show you some democrats acknowledge their hands are largely tied until the courts step in.

[10:20:03]

Jim?

SCIUTTO: Meanwhile, a lot of contempt floating around on Capitol Hill, imagine that, fitting. Manu Raju right in the middle of it, thanks very much.

Joining me now is CNN Legal Analyst and former federal prosecutor, Jennifer Rodgers. So, Jennifer, looks like this is going to the courts, right, and like 47 million cases and 47 million courts, I guess, over time. I mean, how long does this take? Does it go past 2020? Would a court rule fast on some of these issues?

JENNIFER RODGERS, CNN POLITICAL ANALYST: It really depends. That's the problem with the courts, right? A case is wield down to an individual judge and then that judge will set the schedule. We have one judge, Judge Mehta in the D.C. District Court already saying that he's ready to decide the issue of the subpoena to the accounting firm. So Judge Mehta is moving very quickly. We'll see when these others get wheeled out if other judges move fast.

SCIUTTO: Wouldn't the White House have an appeal? Because the President keeps raising this, I'll appeal it only to the Supreme Court, and my pals in the Supreme Court will take care of me. I mean, they would have to agree to take it up.

RODGERS: Well, the Supreme Court, right, only takes the cases it wants to take, but they will get an appeal as of right to the circuit court. And you're right, that takes a lot of time too and there's a panel of judges and there has to decide, that has to be oral arguments. So even if the judge below moves quickly, which you hope that they would, you're still looking at a long road ahead.

SCIUTTO: Okay. So I had a Democratic Congressman on earlier today. He brought this up and others have on the question of impeachment, that the possibilities of opening impeachment proceedings, not proceeding to a vote to impeach the President, in fact, indict him for high crimes and misdemeanors but just proceedings to give Congress additional powers. How would that work? And what powers would they gain by opening such proceedings? RODGERS: Well, the House is empowered to investigate and then present the evidence in an impeachment inquiry. And in order to do their job, to do that, they have to figure out what evidence there is. So this is why they're trying to get the evidence underlying the Mueller report so that they can look at it, call witnesses in, look at that evidence and see whether there is enough to bring an impeachment proceeding. So they are entitled to do that as part of their constitutional impeachment powers.

SCIUTTO: But the White House presumably also could refuse to comply with those powers, right?

RODGERS: Well, they can in the sense of you can say whatever you want. I mean, ultimately, if it's all hashed out in the courts, I don't think they will win those fights. But, again, now, we're getting back to the issue of how long it takes and whether we bump up against the election before the results (ph).

SCIUTTO: People throw around this phrase, constitutional crisis, a lot and I wonder where you stand on that, because our constitution does empower Congress to check and balance the executive branch, and part of that power is to demand documents and testimony, subpoena those documents. The White House is saying I ain't going to do it. I mean, in your view -- I mean, it may sound like hyperbole there to say, crisis, but is this not a crisis in terms of the way the constitution works?

RODGERS: Well, the problem is we're not there yet, I don't think, for two reasons. One, we haven't yet reached a full impasse. There's still arguably some negotiations going on, there may be accommodations made between the legislative branch and the executive branch, and we haven't involved the third branch yet really, the judicial branch. So that's where you really have the solution to a constitutional crisis because our third branch is supposed to come in and settle those stalemates. The problem is I don't know that the founders knew that it would take so long to make that happen.

SCIUTTO: And, of course, the courts stepped in in the Nixon case as well on the issue of tapes and so on, lots of parallels. Jennifer Rodgers, thanks very much.

RODGERS: Thanks, Jim.

SCIUTTO: From that very public fight with democrats to ongoing battles across the globe, behind the scenes, I'm speaking about everything from disinformation campaigns to weapons in space. Yes, they're in space. It's happening right now. In my new book, The Shadow War, I dive into the dangers most Americans have no idea are a threat. They're coming from China and Russia every day. My colleague, Dana Bash, and I, we're going to be here in New York City. If you're around, you're very welcome to join us for a discussion on all of this. That's tomorrow night, 7:00 P.M., at the Barnes and Noble on the Upper West Side, 82nd Broadway. We'd love to see you there.

Oscar nominee, actress Felicity Huffman set to plead guilty in the college admissions scandal today. It's a remarkable stake. Will inmate be her next role?

(COMMERCIAL BREAK)

[10:25:00]

SCIUTTO: Actress Felicity Huffman is expected in federal court later today to plead guilty for her role in that massive college admissions scandal. Huffman admitted to paying $15,000 to have someone correct SAT answers for her daughter. 50 people including parents, college coaches and test proctors are accused of taking part in the scam, that's only so far.

CNN's Brynn Gingras joins me now. So, Brynn, Huffman's fate, including the possibility of real jail time, now in the hands of a judge?

BRYNN GINGRAS, CNN NATIONAL CORRESPONDENT: Exactly right. And today is an important day for Huffman. This is when she's formally going to plead guilty to this one count, one federal count of conspiracy to commit fraud. And I will say, Jim, we kind of have our head on a swivel right now because last time when Felicity Huffman appeared in this courthouse, she came very early for her initial arraignment.

So we might see her a little earlier than usual. Her hearing is at 2:30 -- or her hearing is at 2:30 this afternoon. She also came last time with her brother. We did not see her husband, actor William H. Macy. So we're waiting to see if he arrives with her as well.

But, yes, this is a big deal because she admitted guilt to this, right? And this is what prosecutors have been going after, all 50 people who have been charged thus far in the case.

[10:30:00]

And she admits, as you said, to paying $15, 000 to this sham nonprofit started by Rick Singer to help get her daughter's SAT scores boosted.