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QUEST MEANS BUSINESS
Trump Says He'll Meet with Xi Jinping at the G20 Summit as Trade War Escalates; Swedish Prosecutors Reopen Assange Rape Investigation; Hollywood Legend Doris Day Dies at 97. Aired 3-4p ET
Aired May 13, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We are an hour away from the close of Wall Street. Pretty horrible day in terms of
the numbers. Let me show you what's happening. It's been down all session. The low point is over 700 points down. We're seeing -- I would
hesitate to call it a rally, but I suppose it is actually coming back a bit, which is why the last hour could be so crucial.
There isn't a stock in the Dow 30 that is positive. Verizon every now and again, pops its head above the parapet, otherwise everything is down.
Those are the markets. And these are the reasons why.
Beijing is fighting back -- vows new tariffs. And Donald Trump says he will meet with his Chinese counterpart, but not until the G-20, which is
many weeks away.
Uber shares are down almost 12 percent. It's the second day of trading. Things look grim. And the U.S. Supreme Court has ruled against Apple. We
will explain what the ruling means. The shares though are down some 5 percent.
We are live in the world's financial capital, New York City on Monday. It's the 13th of May. I am Richard Quest, I mean business.
Good evening, the U.S. President has been speaking about trade and tariffs and has injected a tiny note of optimism in what has been a brutal day for
the market. President Trump says fruitful talks with China are still possible. He was responding to China's decision to raise tariffs tit-for-
tat tariffs on $60 billion worth of American goods. It's a major escalation in a trade war.
With an hour left to go, the Dow is off the day's lows. The day's lows by the way had been off more than just looking -- the Dow was off, if I can
get you the exact numbers -- 719 points. It's still the worst performance since January the third.
The momentum has shifted an hour ago. President Trump spoke. He said the US and China 95 percent of the way to do a trade deal and that talks
between the two at the G-20 Summit could yield results.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We are dealing with them. We have a very good relationship, maybe something will happen. We're going
to be meeting as you know at the G-20 in Japan and that'll be I think, probably a very fruitful meeting.
(END VIDEO CLIP)
QUEST: Cristina is at the New York Stock Exchange, Abby is at the White House. We've got two sides of the story, two sides of the same coin, the
politics and the economics. Abby, let's come to you first, so we can -- the politics of this. The markets are down heavily. What did you make of
what the President said in the Oval Office?
ABBY PHILLIP, CNN WHITE HOUSE CORRESPONDENT: Well, as you noted, the President indicated that he was going to meet with President Xi which is
potentially a positive sign in past talks, when the two leaders have been able to either meet face to face or speak directly, they've been able to,
in some cases reset the conversation push through some of the log jams that have occurred over the last year and more of negotiations.
However, he also said he loves the position that the United States is in right now. The President said he likes the idea of where tariffs are.
They are open to a conversation about more than $300 billion in additional tariffs potentially down the road but he said he hasn't made a final
determination about that.
And he even urged consumers and manufacturers to have their products made in the United States, purchase products made in other parts of the world
where there are not these tariffs to avoid the tariffs. So this did not sound like a President who was eager to lift the tariffs on China.
President Trump sounded very comfortable with where they were at he even mused and he could use the proceeds from tariffs about $15 billion to
redirect that money to American farmers who have been hurt by where the tariffs have been over the last year or so.
QUEST: Abby, thank you for bringing this up today on the political side to the market. The market has rallied Cristina Alesci, marginally on the back
of those comments.
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: Marginally, but there's still this uncertainty as to whether or not Trump
will go ahead and put tariffs on $300 billion worth of Chinese goods that again can create more uncertainty.
Look, the markets are sending a clear signal to the President. They are telling the President they do not believe tariffs are in the best interest
of economic growth, both here and globally. There's no disputing that.
Look, as we get closer to the 2020 election cycle, could President Trump feel the pressure? Could the U.S. lose leverage with China? Potentially.
And that could bring the two sides back to the table, but at this point, there are just too many outstanding issues.
[15:05:10] ALESCI: But at this point, there are just too many outstanding issues, both on the tariff side of things, and on the substantive side of
things to really see a deal move forward and it is making investors very unhappy because they know it'll have a negative impact on consumer
spending, on business confidence and measures that really matter.
QUEST: Abby Phillip at the White House, Cristina Alesci, Thank you. Now, China and the United States are each using their own strategy, not
surprisingly, that plays to their strengths.
Look at the volume of tariffs that we are talking about here. The United States is going for volume. So China exports to the United States, $253
billion is currently subject to tariffs, it was done in various tranches. We don't need to go into too much detail on that.
But $253 billion is all ready, and then under threat, or just about all the rest of it, about $550 billion in total, but the rest of it, this is what
the President is threatening to tariff in the future.
Now, as for the other way around, quite simply, China cannot compete on volume. The imported volume last year was $179
Billion; however, the editor of state-owned "Global Times" warns that you are going to have a targeted approach.
For example, you can have tariffs on agriculture, energy, Boeing planes, that's one of the reasons why Boeing is down some 4 percent. There are
others as well, but that's one of the reasons, the U.S. Treasuries. That's the biggie. That is the big one.
If they start messing around with the U.S. Treasuries -- and remember, they've got $2 trillion worth of them -- if they start messing around with
that, then you are in deep trouble.
David Dollar served as the U.S. Treasuries Economic Emissary to China. He is now a senior fellow at the Brookings Institution. The Chinese, the U.S.
has a blunt instrument upon which to hit the -- sorry, the U.S. has a blunt instrument to hit the Chinese: tariffs, tariffs, tariffs.
The Chinese have these very rapier-like sophisticated tools of nontariff barriers, would you agree?
DAVID DOLLAR, FORMER U.S. TREASURIES ECONOMIC EMISSARY TO CHINA: I would agree China has more instruments, as you say, they're going to hit the U.S.
with tariffs of probably up to about that $180 billion level, which would be all of their imports from the United States.
I doubt they use this tool of selling Treasuries, to be honest. They bought them for their own purposes and it's not a large enough amount to
really disrupt the market. But they have lots of other tools, they can make life difficult for U.S. companies, a lot of our sophisticated
companies, they need various approvals in China. So you'll find they'll be throwing sand in the wheel of U.S. commerce in China.
QUEST: David, I just need us to understand as each side tariffs the other, it is the domestic importer on each side that pays, which is passed on to
the consumer -- the U.S. consumer, the Chinese consumer -- but who will suffer most? Which side economically stands to lose the most?
DOLLAR: Well, both sides are going to suffer. You're absolutely right, Richard, that the tariffs that the U.S. administration is putting on those
are going to be paid by American companies that import. And so far, the evidence is there passed on fully to consumers.
So it's American consumers that are paying these taxes that are coming in and so American consumers are hurt. Plus, a lot of U.S. firms use parts
and components from China. But in the other direction, you know, we are going to be buying fewer products from China. So that's going to hurt some
of their producers, and then the tariffs that they're putting on, that's going to be symmetric. That's going to make things more expensive for
So an irony here is both sides really lose out. That's why you see stock markets on both sides of the Pacific dropping pretty significantly.
QUEST: Right. But humor me if you will, net-net, who loses out more overall, do you think? And the reason I raise this is, the U.S. President
is insistent that the tariffs are a good thing for the U.S. economy and that they are hurting China more. Who is losing out net-net?
DOLLAR: I think net-net, you have to argue that it's going to be quite similar. The amounts are going to be quite similar on both sides. You
could argue that because the U.S. economy is bigger, you know, it's proportionately less important, but definitely, it is hurting the U.S.
economy. It's not helping the U.S. economy.
QUEST: As we look forward, the President says unlikely -- I mean, he is seeing President Xi at the G-20. I mean, can the economics -- the global
economic -- withstand another three -- two to three months of this sort of intensity, this sort of damage being done to the global trading structure?
DOLLAR: Yes, I think our system can sustain this. This will take a few percentage points of global growth, which is significant for the whole
world economy. It doesn't necessarily cause a recession, it's more like throwing a lot of sand in the wheels of these two big economies.
[15:10:22] DOLLAR: IMF estimates that the Chinese economy might slow down by a percentage point, the U.S. by probably more like half a percentage
point. On the other hand, these kind of estimates are hard to make.
If people if people really get spooked by this and they pull back on investment and consumption, then you can get a big multiplier that's very
hard to estimate.
QUEST: David, we will need you in the future as this wears on. Thank you, sir. I appreciate your time.
Its QUEST MEANS BUSINESS tonight. We're going to explore even more this question of who suffers most. After the break.
QUEST: Donald Trump is insistent that China alone will pay for the tariffs imposed by Washington. In an interview though with Fox News, the
President's top economic adviser, Larry Kudlow acknowledged both sides will pay.
(BEGIN VIDEO CLIP)
CHRIS WALLACE, FOX NEWS HOST: It's not China that pays tariffs. It's the American importers, the American companies that pay what in effect is a tax
increase and oftentimes, passes it on to U.S. consumers.
LARRY KUDLOW, DIRECTOR OF THE UNITED STATES NATIONAL ECONOMIC COUNCIL: Fair enough. In fact, both sides will pay -- both sides will pay in these
(END VIDEO CLIP)
QUEST: Now American consumers are set to suffer because of the tariffs, tariffs that consumers may have reason to worry about these Chinese
Patrick Chovanec is the chief strategist with Silvercrest Asset Management. Good to see you, as always. So the Chinese obviously, I mean, as tariffs
go up on the U.S. side, the thinking is that U.S. importers buy less from the Chinese. Is there evidence that that is happening?
PATRICK CHOVANEC, CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT: It's possible that they lose market share, but I think what you're really asking
about who has the upper hand and who is going to suffer most is as much a political question as it is an economic question.
[15:15:13] CHOVANEC: It's really, who has the leverage and who can make the other side blink. And both sides right now believe that they have the
leverage. There's a lot of chest pumping right now -- pounding right now - - in the United States saying, China is on the ropes. If you go to China, you'll hear exactly the same thing, although you --
QUEST: Do you?
CHOVANEC: Yes, you will. Although you'll also hear in both camps, criticism of the leader and their approach that they're taking.
(BEGIN VIDEO CLIP)
QUEST: Listen to President Trump, this is what we're getting to. Listen to him.
(BEGIN VIDEO CLIP)
TRUMP: We're taking in right now hundreds of billions of dollars, we're taking in billions of dollars of tariffs, and those tariffs are going to be
tremendously -- if you look at what we've done thus far with China, we've never taken in 10 cents until I got elected. Now we're taking in billions
Now, it went up as of Friday, very substantially. It's 25 percent of $200 billion. So now the total is 25 percent on $250 billion. In addition to
that, we have another $325 billion that we can do if we decide to do it.
So we are taking in tens of billions of dollars. We've never done that before with China, we've never done that before with anybody.
(END VIDEO CLIP)
QUEST: Explain the rationale of that.
CHOVANEC: So the argument that President Trump is making, and we've heard him make it many times is one that the market disagrees with, almost every
economist will disagree with, so we can dispense with it except for the fact that it's motivating him, and it's motivating his behavior. And so
that's why I think markets are a little bit concerned.
QUEST: He is basically sounding like a small businessman, who is delighted at what thinks he has found is a new source of revenue.
CHOVANEC: So economies are not just about producers and he is thinking from the point of view of a producer who is getting rid of competition or
keeping them fenced in. It's also about consumers, people and trying to get the most for their dollar. And this hurts consumers.
QUEST: But it also hurts the Chinese consumer, who will not be able to buy American goods as cheap, admittedly, there are many of them. So I'm going
to come back -- I'm going to push you back to that question, who net-net, on an economic front, net-net who is losing most at the moment?
CHOVANEC: It is lose-lose, and although if it remains simply tariffs, there's probably China as an exporter that gets hit in terms of growth.
But there are a lot of things that China could potentially do, such as devalue its currency that could both negate the effect of those tariffs and
also create significant headwinds for the U.S. economy on a much broader scale.
And this comes at a time when the U.S. economy -- yes, China is vulnerable in certain ways. Its economy isn't doing that well. It's a little bit
shaky, and some of the things that we've done could cause it to become shakier. But the U.S. economy even though President Trump keeps on
highlighting, the administration keeps on highlighting the fact that the economy grew 3.2% in the first quarter.
In fact, that masked a lot of softness in the economy, where domestic demand actually declined, growth declined to about 1.5 percent.
QUEST: And it was inventory buildup of course.
CHOVANEC: That's right.
QUEST: That played a huge element of that. And what's your fear here? I mean, you obviously know Mike Froman and his view is that tariffs are very
easy to put on and extremely difficult to get rid of once they're there. Would you agree?
CHOVANEC: I have two fears. The first is that I think that if we just measured the direct effect of tariffs, I think that underestimates the
potential impact that it has on the economy, the global economy, including the U.S. economy, where businesses and consumers have to decide about what
to do in the future.
And the second fear I have is that the United States is not just taking on China, it is taking on Europe, it is taking on Japan. Instead of
organizing the world to put pressure on China, we are the ones fighting the war on multiple fronts, and in the process, we are disassembling the global
order, the global economic order that we helped establish that is actually in our benefit.
QUEST: Good to see you, sir. Thank you much, much appreciated. Thank you.
There is still no claim of responsibility after two Saudi Arabian oil tankers were damaged near the UAE. The attacks that Riyadh are calling
sabotage. It comes only days after the U.S. warned Iran or its proxies could target commercial vessels in the region.
And it was a volatility for oil prices. Initially they spiked 2 percent, and then they fell back again. Nic Robertson has spent the day in Fujairah
where these suspected attacks took place. He joins me now from Abu Dhabi. Nic, what happened? Who did it?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, the world is asking, aren't they and then I've been out there and I've looked to those
ships, two Saudi tankers, as you say, an Emirati vessel that was clearly listing and had a couple of other vessels at the side of it, a big tug,
another ship, trying to sort of get it sorted out.
[15:20:13] ROBERTSON: I mean, to me that looked like, it had a lot of additional water that it shouldn't have somewhere in the bottom of the ship
pulling the back end of it down and pulling it to one side.
And then of course, the picture, we've all been looking at that, that gaping gash of a hole right at the waterline in the back of that Norwegian
You know, when you look at that, you think, gosh, golly, something hit that at speed and went inside. I didn't see evidence of an explosion. But you
know, unless that was a large chunk of metal traveling at high speed, it looks like it was a small sort of rocket type thing that's hit the back
there. I can't tell.
And certainly the Emiratis are not staying at the moment and that's the problem. They are leaving the investigation. They say the right
authorities are dealing with it. Trust us, we'll come up with an answer. But at the moment, they are keeping quiet.
Look, I think people want to keep a lid for the reasons you've just said spike in oil prices for what this could mean. It's a subtle message, if it
is a subtle message.
QUEST: All right, we don't often get into too much detail, so it is an opportunity for us to understand the regional tensions here that could have
led to all that or that did lead to this, and could get a great deal worse in the future.
ROBERTSON: Two sides -- Iran and Russia, Iran and the United States on those two sides. The United States with its allies in the region, the
United Arab Emirates, the Emirates, Saudi Arabia, other countries in this region are on its side, particularly when it comes to -- and obviously
Israel as well, when it comes to Iran.
Iran has been suffering economically because the U.S. has pulled out of the Joint International Nuclear Agreement with them. They've slacked back on
the sanctions that were taken off in 2015. They've called Iran's Revolutionary Guard Corps a terrorist organization.
They've sought -- they've now said that there can be no waivers on oil sales from Iran. So Iran is having its means of making money taken away
from it by the United States, as the United States brings in heavy warships into the region.
So tensions are ratcheting up and it all focuses on this choke point where one fifth of the world's oil -- one fifth of the total of the world's oil
passes through -- it's a choke point, a 140 vessels out there. And it was four of the vessels parked up at that choke point that were hit here.
QUEST: Nic, thank you. That takes us very nicely onto that choke point. I'm grateful you did, because this, as Nic was saying the Straits of Hormuz
is to the north of where this suspected incident occurred. It is the most important choke point for oil.
A third of oil tankers go through the passage. Disruption would choke off Asia's biggest economies -- China, India, Japan, South Korea, and
Singapore. Now, look at the impact of these volatiles incidents on oil prices.
Antoine Halff is the former chief oil analyst for the IEA - International Energy Agency, senior research scholar at Columbia joins me now from Paris.
The oil rose about 2 percent and then drifted back. Was the drift back because it didn't seem as serious as first thought or is it a fool's dawn?
ANTOINE HALFF, FORMER CHIEF OIL ANALYST FOR INTERNATIONAL ENERGY AGENCY: It's a combination of different things, I think. You know, there's lots of
question marks about what exactly happened, it's a bit murky.
Second, you had the China-U.S. trade war, which is a downside risk. So you have a lot of risk and uncertainty in the market, some of the upside, the
escalation in the Persian Gulf and in the tensions between the U.S. and Iran, but also the trade war, its impact on trade on economic growth, and
therefore no demand.
And then I think the third factor, which is not a factor that's easily seen, but you can see it with satellites, is that there's a lot of
inventories of oil that have built up in recent months.
So there's a huge safety cushion that has been accumulated, particularly in China, but all over the world. So the world is in a pretty good position
to withstand a disruption if a disruption occurs, comparatively speaking.
QUEST: Right, but if we think back to some months ago, you had Brent up in the high 70s, early 80s, you've seen the oil mark, you've seen the prices
come down. And as John Defterios was telling me earlier, the market is currently in something approaching price equilibrium -- supply and demand
equilibrium -- it wouldn't take much to disrupt that.
HALFF: True, true and indeed, the Strait of Hormuz is the most critical choke point in the world. But if you if you look at the stocks, and this
company, I work with, Kayross, who measures those stocks. The last time they were that high, the old price was about $12.00 lower, and the second
last time they were that high, the old price was also $12.00 lower.
So there's like $12.00 Premium built in the market, which perhaps explains why the reaction to the news from the Strait of Hormuz has been fairly
[15:25:11] QUEST: What should I keep an eye on as we look at oil moving out? I mean, one advantage, of course is, you know, the Northern
Hemisphere is going into the summer, so less demand for oil. But at the same time, the U.S. and European driving season is also getting underway.
So it's six of one, half a dozen of the other.
HALFF: Very true? I mean, there's really being so many risk factors and uncertainties. You have a lot of countries that are struggling, petrol
states in turmoil -- Venezuela, Nigeria, Iran, obviously, Libya -- but Libya has been producing above expectations.
There's a lot of uncertainty about the political outlook in Libya, but the supply outlook is looking great. Libya hasn't produced as much in years,
as it did over the last few weeks.
The U.S. produces a lot, shale production is not letting down. There were some concerns and some rumors, some reports that you know, Wall Street was
demanding now on shale producers budget discipline, less production growth.
We haven't seen any decline in production growth. There was a bit of a decline in completions of works at the end of last year, but a big rebound
and near record highs now.
So there's a sense that the U.S. is insulated from the turmoil outside.
QUEST: Good to see you, sir. Thank you. Much appreciate it you joining us tonight from Paris.
There are a few bright spots today. It's a down market. I'm not sure we should be to encouraged that Bitcoin has rallied a thousand dollars over
the last few days. When Bitcoin becomes your safe haven, we need to understand why.
It's QUEST MEANS BUSINESS live from New York.
QUEST: Hello, I'm Richard Quest, there is more QUEST MEANS BUSINESS in just a moment. As we continue, this is CNN, and on this network, the facts
always come first.
The Dow is deep in the red and could be headed for one of its worst losses of the entire year after China announced it is retaliating over new U.S.
tariffs. Beijing said they will raise tariffs on $60 billion worth of U.S. goods starting on June the first.
President Trump is downplaying the tit-for-tat. He says he plans to talk to the Chinese President Xi Jinping on the sidelines of the G-20 Summit
next month predicting that meeting could be fruitful.
[15:30:00] Mr. Trump spoke a short-time ago again alongside the Hungarian Prime Minister who was visiting Washington. Sweden has reopened a rape
case against WikiLeaks founder Julian Assange.
Two Swedish women accused him of sexual assault and rape in 2010. Those allegations had prompted Assange to seek asylum in Ecuador's embassy back
in 2012. The British police removed him from the embassy last month and is currently in jail on a bail violation.
She was known as America's sweetheart and she captured hearts around the world.
(BEGIN VIDEO CLIP)
DORIS DAY, LATE ACTRESS: Que sera, sera. Whatever will be, will be. The future is not --
(END VIDEO CLIP)
QUEST: Doris Day, one of Hollywood's biggest stars has died. She catapulted to fame with her wholesome girl next door image and a silky
smooth voice. Doris Day was 97. Half an hour to go, just 29 minutes, to be precise and the trade war is ratcheting up.
The stock market is stumbling, 719 points was the low of the day. Biggest news so far, Apple, Caterpillar, Boeing, all those companies who have
exposure to China, we need to understand, is there anybody gaining and who is losing most? Clare Sebastian how lovely to have you back.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Thank you --
QUEST: Thank you. OK, who's won? Who's lost?
SEBASTIAN: Well, let's take Boeing initially, because this is a big one. This is the U.S.' biggest export to China is a huge market for them. And
they've got a catalogue of problems at the moment. Richard, it's not just in China where the tariffs -- the tariffs could hit them and especially if
the tariffs hurt the Chinese economy, that could hurt demand.
Boeing expects that China will become the biggest market for airplanes over the next 20 years, $1.2 trillion. But they've also got the 737 Max crisis
going on at the same time, and all of that is intertwined. Don't forget the planes are also grounded in China. So they've got a lot of worries
QUEST: I mean, that's extraordinary. The -- I'm just looking at the 52- week high of the stock is 446, and now you're down at 332. And this is a major stock to be wiped off like this.
SEBASTIAN: Yes, as I said, the U.S.' biggest exporter dragging down the Dow significantly, Richard, but it's not just Boeing. You've got the likes
of Caterpillar, you've got tech stocks, Apple in particular, they've got a supply and a demand issue. Don't forget that a lot of their iPhones, most
of them in fact are assembled in China.
So if the tariffs are expanded to the next 325 billion, they could be hit by the import tariffs into the U.S. But also, there's a demand issue,
Apple is already won the demand for iPhones in China. So if the Chinese economy gets hit by these tariffs, that could accelerate that.
QUEST: And Apple -- you know, each of these stocks has their individual problems, Boeing is the 737 Max, Apple is the --
SEBASTIAN: Right --
QUEST: Supreme court decision on anti-trust activity for the app store.
SEBASTIAN: Right, and so there's multiple angles for all of these. And don't forget, we also got potential, you know, tariffs on European cars
from the U.S. as well at the end of this week.
SEBASTIAN: It's a little mystery, Richard, it's up about 40 percent in the last 7 days, it's more than doubled since its December low. And you
know, there's many elements of speculation here. The one thing I find absolutely fascinating is that when the markets went down in December,
bitcoin also stayed low.
Now, the markets have been down and bitcoin is moving up. This is something that bitcoins enthusiasts are really going to cheer, they
desperately want to be seen as a safe haven. But we've got other elements of this moving into the mainstream. Fidelity maybe launching a product --
QUEST: But a --
SEBASTIAN: A crypto products for investors, Facebook with its own coin, perhaps.
QUEST: Just a few weeks, last week, I think it was, we reported another bitcoin depository exchange.
SEBASTIAN: Right --
QUEST: Had lost thousands of bitcoins.
SEBASTIAN: Doesn't seem to have made a dent, they forget it's also a Blockchain week here in New York City, Richard, this week. And that
sometimes does lift sentiment in the market as well. But there's lots of different things going on here. It's hard to pinpoint one of them even
among the top analysts.
QUEST: It's a truly dreadful day in the markets, I mean, the Dow is coming back --
SEBASTIAN: Yes --
QUEST: But that's not telling the full story, is it? Because the full story is the way these individual stocks, I'm just looking down. And Apple
down 6 percent, you've got Facebook down 3 and three quarter percent. You've got Netflix today, Netflix is all 4 and Nvidia --
SEBASTIAN: All right --
QUEST: Six and a quarter.
SEBASTIAN: So when it comes to the tech stores in particular, it's Apple and the chipmakers like in video, like Intel that are particularly exposed.
Intel made about --
QUEST: True --
SEBASTIAN: Twenty five percent of its sales in China last year --
QUEST: But is this off the back of what's happening with trade talks alone? Because the U.S. economy remains pretty fundamentally strong.
SEBASTIAN: I think this is a measure of how little risk was priced in when it came into this trade deal throughout the course of this year so far.
People had basically taken the possibility of a no deal off the table. And now obviously, it's very much back on the table.
[15:35:00] People are grappling, investors are grappling with the prospects that these higher tariffs may be here to stay and how that's
going to impact the economy.
QUEST: Clare, thank you, Clare Sebastian. The broader market woes didn't help Wall Street's newest high stock -- profile stock Uber. Down more than
12 percent on Monday after a dismal performance at the open of -- opens at 45, closes at 41 on Friday -- sorry, the IPO price is 45, and now we're
Paul La Monica is with me. This is very -- I mean, it's bad enough to lose on day one, but to have the selling accelerate, what's gone wrong?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, obviously, Richard, I think that the underwriters here had the misfortune of taking Uber public at a
time when there are heightened concerns about the broader market with all the U.S.-China trade tensions.
But Uber also didn't benefit from the fact that Lyft earlier last week reported earnings that weren't earnings obviously. They lost a lot of
money, continued concerns about the two of these companies really going toe-to-toe and beating each other up.
A lot of marketing expenses, a lot of expenses to try and steal market share from one another. They are both losing a lot of money, Uber is
losing more money to Lyft, so you add all that up, and I think investors have caught wise and have realized that there's no reason to think that
Uber is -- should deserve this lofty valuation at a time when there are a great revenue growth opportunities, but no profits in sight.
QUEST: All right, but I'm just looking in front of me here at a chart of Facebook. And when Facebook launched, launches up to 40 or 30 as everyone
else, it drops as low as 17, it drops into the teens and then it comes back. Is Uber another Facebook?
LA MONICA: I'm not so sure I'd go so far just yet in that regard, Richard. I think it's true, yes, that Facebook also went public and stumbled. Its
stock didn't fall on its first day, but it came pretty close and then it did drop dramatically losing more than 50 percent of its value in the first
couple of months.
I think the key difference though, was, with Facebook, I think investors were nervous about whether the company had a mobile strategy even though it
was profitable at the time. Facebook really on a dime went from being a PC centric platform to one that we now all use on our smartphones, and once
they made that transition, painful as it was, the ad revenue came --
QUEST: All right --
LA MONICA: Back, and users obviously didn't go away. I don't know if Uber has a growth opportunity, I'm not sure if Uber eats is the Instagram to,
you know, what Facebook had, so to speak.
QUEST: Well, stay with that thought of food and Beyond Meat. That went from 60 to -- 65 to -- sorry, 60 to 85. And in a down market, it's -- I
mean, the last week, it lost some ground. But now it's putting that back on again. To be seriously positive going up in this market, what is it
telling us about Beyond Meat?
LA MONICA: Yes, it's a little weird, Richard, to think that plant-based foods all of a sudden is now a safe haven in the market as awful as it is
today. I think that one of the reasons why Beyond Meat is probably rallying today is that its top rival Impossible Foods just got a new round
of financing, $300 million, it values them at about $2 billion.
Impossible Foods is the big deal with Burger King for the Impossible Whopper. So I think again, people are looking at plant-based foods as a
definitely business that's growing in popularity. People love the burgers and the revenue is growing dramatically. But again, I think people are
going to have to grapple with the notion of can these companies make money, will there be too much competition?
I mean, Beyond Meat --
QUEST: Right --
LA MONICA: You look at that price, and I think people are discounting the fact that impossible foods is going to be a very formidable competitor for
years to come.
QUEST: Paul La Monica, Paul, thank you. We alluded earlier with Clare Sebastian about the lawsuit that Apple is now facing. The Supreme Court
has allowed the move to go forward, the iPhone maker stock is lower, the Supreme Court and a live report from Washington after the break.
[15:40:00] (COMMERCIAL BREAK)
QUEST: Apple is down 5 percent, one of the biggest drags on the Dow. It's after the highest court in the U.S. gave the go ahead for a lawsuit by
consumers. Now the lawsuit is accusing Apple of monopolizing the market for iPhone software apps. The conservative Supreme Court Justice Brett
Kavanaugh joined the High Courts for liberal justices in the 5-4 decision.
Brian Fung, our tech reporter in Washington joins me now. To be clear, this isn't actually a decision against Apple on the substantive issue, it
just allows the case to go ahead?
BRIAN FUNG, CNN TECH REPORTER: That's right, this is basically a procedural decision allowing these iPhone owners to allege in court that
Apple is a monopolist. It doesn't say that Apple is in fact a monopolist, it just simply --
QUEST: Right --
FUNG: Gives these plaintiffs ability to move forward.
QUEST: And this is all about the idea that you only can -- you only can get your apps from the iPhone if you're in the Apple ecosystem?
FUNG: Right, the only idea here that the iPhone owners are putting forward is that because Apple takes a 30 percent cut of all app sales, and because
app developers in response tend to increase their prices and because iPhone owners don't have any other app store to go to in order to get iPhone apps,
that's why Apple is allegedly a monopolist.
QUEST: Do you buy this argument, Brian? I mean, fine, so if you want an iPhone, you're going to have to go to the app store. Get over it. And I
don't understand -- I mean, it's not like Standard Oil or IBM or Microsoft in 1990s. There are -- I mean, if you don't like the Apple ecosystem,
don't use it.
FUNG: That's right, you know, you can come -- sort of compare this to the Android ecosystem where it's much easier for people to use app stores that
are not owned or run by Google. Whereas with Apple, you're kind of forced to use Apple's ecosystem and you can't download apps anywhere else.
And that, you know, goes to the heart of this lawsuit where you have the iPhone owners saying that this is anti-competitive. Now, Apple put out a
statement today in which it said it doesn't believe that the app store is a monopoly by any metrics, and it also said we're confident that we will
QUEST: Right --
FUNG: When we're given the opportunity to present all the facts.
QUEST: Brian, good to have you with us, thank you.
FUNG: My pleasure.
QUEST: Facebook is pushing back against calls to break up the company including from one of its co-founders Chris Hughes asked the court to break
it up. The CEO Mark Zuckerberg says Facebook is in a unique position to help protect democracy. His Vice President of Communications is Nick
Clegg. You should now think or two, he used to be the deputy Prime Minister of the United Kingdom. Well, Clegg told Brian Stelter that
breaking up Facebook won't fix any problems.
(BEGIN VIDEO CLIP)
NICK CLEGG, FACEBOOK VICE PRESIDENT OF GLOBAL AFFAIRS & COMMUNICATIONS: I don't think dismantling companies all together is the way to deal with some
of the complex issues which he quite rightly highlighted. Data use, privacy, the attempt by folk from elsewhere to try and interfere in our
These are -- I'm not -- I don't in any way want to diminish the importance of those and the heavy responsibility that Facebook bears to play a
prominent role in solving those problems. But chopping a great American success story into bits is not suddenly going to make those problems go
away, they won't suddenly evaporate.
[15:45:00] Of course, Facebook is and continues and must continue to do more, but equally, but this is not something that any company can do on its
own. We're dealing with a very profound ethical and political issues. We do also need regulators, politicians and legislators to -- how can I put
it? Sort of move beyond the sort of phase of just throwing rocks at each other or where politicians throw rocks at tech and tech throws rocks back,
and actually try and sit down and come up with new rules of the internet.
(END VIDEO CLIP)
QUEST: What did you make of Nick Clegg in that role?
BRIAN STELTER, CNN ANCHOR, RELIABLE SOURCES: He is meeting people about three-fourths of the way. He's saying we do have a lot of problems at
Facebook. Facebook is dealing with all sorts of troubles. It's just not the right answer to break up the company.
You know, this is his first U.S. TV, and ever since joining Facebook late last year --
QUEST: Congratulations --
STELTER: He seems to have changed -- well, thanks, he seems to have changed his tune a bit about anti-trust. When he was -- when he was in the
U.K., when he was deputy Prime Minister, he seemed to have a different view of anti-trust. And now I think he's changed his tune. He doesn't think he
But I do think he delivers a strong case for the Facebook company line. He says he wants to be there now at this pivotal moment in the company's
future because he wants to help set the new roles of the internet.
QUEST: Is he to the best of your understanding a player within Facebook? The Sandberg, the Zuckerberg, the others who have been there for a long
time, not Sheryl Sandberg, but long time or have they just bought a name and a bit of political power?
STELTER: Right, you're saying does he have Zuckerberg's ears? Does he have Sandberg's ear? Well, my request last week was for any Facebook executive.
And they were the -- he was the one they decided to provide. They -- Facebook decided --
QUEST: Right --
STELTER: To provide him, he's also taken the public leadership --
QUEST: Right --
STELTER: Role in response to Chris Hughes and the "New York Times". So it is notable, he is the new voice, maybe they think he's a more polished
voice than someone like Mark Zuckerberg because he has more experience in the public domain.
QUEST: But is he -- can you see a situation where you're going to -- I mean, you'll always ask for Zuckerberg, but you're never going to get it.
STELTER: Right --
QUEST: So your call is going to be, is Clegg available next Thursday?
STELTER: Right, and the point is, is he going to actually have influence within Facebook --
QUEST: Yes --
STELTER: And I think it's too soon to know the answer --
QUEST: Right --
STELTER: To that question. But it does show that Facebook believes it needs political pros on the inside as it fights these battles.
QUEST: And those battles -- stay with me, listen to --
STELTER: Yes --
QUEST: Kamala Harris on "State of the Union" yesterday. This shows what Clegg is up against.
(BEGIN VIDEO CLIP)
SEN. KAMALA HARRIS (D-CA), PRESIDENTIAL CANDIDATE: We have to recognize it for what it is. It is essentially utility that has gone unregulated. And
as far as I'm concerned, that's got to stop.
(END VIDEO CLIP)
QUEST: So is Facebook facing an existential crisis from people like Kamala Harris who say a utility, it has to stop.
STELTER: Yes, there's a spectrum of Democratic candidates on this issue with Elizabeth Warren taking the strongest position against Facebook,
saying it's got to be broken up, Kamala Harris in the middle right now, there's Cory Booker are closer to the pro-Facebook position I think.
But all of them are having to stake out some place on this spectrum, and of course, it's not just happening in the U.S. as you know, it's happening in
Europe and elsewhere. Clegg has been brought in to manage, I think a lot of these political relationships and do this political battle.
And it's interesting to hear her say this, there's no regulation of Facebook because we're about to see a $5 billion fine by the U.S. Federal
Trade Commission. There's some action from some government agencies, but I think there's a sense widespread that it's not enough, and that there's so
many different problems Facebook has, so many different fires that it has to put out, and there aren't enough firefighters on the beat. There aren't
enough people mending the store.
QUEST: All right, so Facebook, the stock has come back from the worst points, say, 18 months ago, two years ago when it was -- I mean, it's down
today, but everybody is down today --
STELTER: Right --
QUEST: But the stock has come back. The feeling that -- you know, after all of the privacy issues, Facebook --
STELTER: Right --
QUEST: May be broken up, whatever, the market is telling me that that's not likely.
STELTER: And I think that's because users are sticking with the product. Yes, it's hard to post growth when you have 2 billion users, but people are
so addicted to Facebook and Instagram and WhatsApp, there aren't people leaving in mass numbers.
And did you notice what Facebook did recently? They changed the color to be a little bluer, it's a little brighter on your phone now, it stands out a
little more, it's almost tempting you'd come back every day and most people do --
QUEST: Do you?
STELTER: Despite all the problems.
QUEST: Do you?
STELTER: I was on Facebook during your commercial break -- sorry advertisers, I was checking my Facebook status. We're all addicted to this
site, aren't we?
QUEST: You speak for yourself, all right --
STELTER: OK --
QUEST: Good to see you. Well, an actress is facing prison time, Felicity Huffman is taking responsibility for her part in the college admissions
scandal in the United States. We'll hear more about that in just a moment. It is QUEST MEANS BUSINESS with or without Stelter during the break.
[15:50:00] (COMMERCIAL BREAK)
QUEST: In the last few minutes, the actress Felicity Huffman has pleaded guilty for paying $15,000 to a fake charity that facilitated cheating when
her daughter took the college admissions test. Prosecutors are recommending four months prison time.
Brynn Gingras is outside the courtroom in Boston. Felicity Huffman, she cried when she pled guilty, but it was a full mea culpa, I was wrong, I
take the blame.
BRYNN GINGRAS, CNN NATIONAL CORRESPONDENT: Yes, absolutely, Richard. And we actually just saw her leave the courthouse. There was a big media crush
around her car. She did get emotional in court, really saying that she didn't know about the payments, Rick Singer, the master mind behind this
big college admissions scheme paid to other people as part of his big plan.
But she said everything else the prosecutors said she did, she did. So, she took full admittance right there of what prosecutors said she did.
Which was pay $15,000 into Rick Singer's sham, non-profit to help boost her daughter's SAT scores. And she also got emotional when she talked about
how a neuropsychologist said ever since the age of eight, that her daughter would need extra time in school.
So thinking about her daughter there, she got emotional. But yes, admitting to guilt for that one federal charge, we should see her back in
September for sentencing, right --
QUEST: What purpose does it serve to send her to prison, bearing in mind all that's happened so far. She's disgraced, she -- you know, why is the
GINGRAS: Yes --
QUEST: Going so heavily for jail time?
GINGRAS: You know, she was facing up to 20 years in prison for this one charge, if you think about that, that is incredible. They are actually in
court today, we had heard they were going to recommend anywhere from four months to ten months.
And then in court today, they said that they were going to recommend the low end of that, four months. So you know, it's maybe just you make a
point. But again, there are 50 people in all charged in this case and they vary in degrees as to their alleged culpability.
Some parents used the services allegedly for multiple children. Some parents allegedly paid millions of dollars. So it will be interesting to
see as we move forward here, how the judge sort of differentiates each parent or each person charged --
QUEST: Right --
GINGRAS: And what sort of punishment they'll receive.
QUEST: Thank you. We need to check on the markets, so thank you for pointing that to us, thank you. The markets -- I need to point this out to
you, look at them, in red! Apple and Boeing, two heavyweights of the Dow, the two biggest losers, Caterpillar down as well.
These two and always good, old, safe, defense, Verizon and P&G. We are off the lows, the lowest about here, down about 719. But this market is down
2.5 percent, the Nasdaq is off nearly 3 percent, S&P is down the same, FANG has been off some 4 percent.
[15:55:00] There is a deep unease which is not going to be remedied or easily recovered from. We'll have our profitable moment after the break.
QUEST: Tonight's profitable moment. There's no easy way to say this, but what the president has been doing with tweeting about trade talks is simply
irresponsible and unnecessary. Unnecessary is the important bit. The market is down very heavily today.
There's red right across the screen wherever you look, and it's all because of the tweeting over diplomatic -- when there should be diplomacy. There's
shouting about what might happen next. If you are going to add tariffs, that I guarantee you tit for tat, the other side will follow. That is not
a threat, it's a promise.
And once you start this, it will continue. Now, there's a reason why tariffs have only been used in very specific, distinct, very -- occasions
before. But this broad-based tariffing on top of shouting through Twitter and making further threats. As I say, it's unnecessary.
This market did not have to fall over these trade talks, and they're doing so because of a tweet or two. 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. Now to Jake Tapper and "THE LEAD".
JAKE TAPPER, HOST, THE LEAD: He's building a wall of tariffs and you're the one paying for it. THE LEAD starts right now. The Dow on a nose-dive
after China strikes back, defying President Trump's warning in a battle with Beijing that's already starting to sting.
Chasing Joe Biden; the Democratic front-runner makes his first trip to a crucial stay while playing it safe and avoiding big interviews as those
behind him in the pulse plan media blitzes to try to break through. Plus, breaking news right now, the fight over Donald Trump Jr.'s testimony on
Capitol Hill, CNN now learning what's leading to this clash that is tearing Republicans apart.
Welcome to THE LEAD, I'm Jake Tapper. We'll start with breaking news in the money lead. President Trump's trade war with China having a chilling
effect on Wall Street.
The Dow plunging just under 600 points on the news that --