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QUEST MEANS BUSINESS
The U.S. Has Just Announced A Deal On Metals With Canada And Mexico; Cross Party Talks On Brexit Has Collapsed; Luckin Coffee Takes Wall Street By Storm; Bitcoin Prices Sink to End Volatile Week; Internet World Mourns Death of Grumpy Cat; White House Lifts Steel Tariffs, Delays Auto Tariffs. Aired: 3-4p ET
Aired May 17, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: As you can see, there's been a bit of a choppy day on Wall Street. The Dow just barely clinging on to gains,
down to about 26 points after some pretty dramatic developments when it comes to trade. We did get a report that consumer sentiment actually rose
to the highest level in 15 years, and also that the United States is going to be removing steel and aluminum tariffs from Mexico and Canada.
These are the top stories on Friday, the 17th of May. The tariff man takes his tariffs away. The U.S. has just announced a deal on metals with Canada
and Mexico. And the British Pound has its worst week of the year as Brexit talks collapse without a deal. And wake up and smell the coffee, China's
answer to Starbucks goes public on Wall Street.
Hello, everyone, I'm Zain Asher and this is QUEST MEANS BUSINESS.
All right, after weeks of ramping up the rhetoric threatening and imposing fresh tariffs on foreign goods, the White House now seems to be taking its
foot off the gas ever so slightly.
In a move that's very good news for Canada and Mexico, the U.S. will now lift steel and aluminum tariffs on their products and delay a decision on
E.U. and Japanese auto tariffs while negotiations continue.
Now, you would think that that would be some pretty welcome news to the markets after weeks of rising trade tensions with China. The Dow is pulled
back from an early 200 point drop. To what's been a volatile day on Wall Street.
Just a few hours ago, U.S. President Donald Trump talked up the scrapping of metal tariffs with America's neighbors. Take listen.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Before I begin, I'm pleased to announce that we've just reached an agreement with Canada and
Mexico and we will be selling our product into those countries without the imposition of tariffs or major tariffs -- big difference.
As you know, Canada has been for years and we have a great relationship with Canada and the Prime Minister, we have a great relationship, but
they've been charging us extremely high tariffs as much as 285 percent or more for our agricultural products, which is an absolute barrier. It is
essentially a barrier, in other words. When you pay 285, guess what, you know what they're saying? We don't want your business.
(END VIDEO CLIP)
ASHER: The President there speaking about lifting metals tariffs. We've got Jeremy Diamond in Washington for us. Paula Newton covering this from
Ottawa in Canada. So Paula, what does this mean in terms of ratifying the new NAFTA deal?
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Yes, bingo, Zain. Good to see you. You hit the nail on the head there. As you see the President was
talking up the USMCA, the deal that still has to be ratified, and wasn't really talking too much of the fact that he did have to compromise and
capitulate and lift those tariffs on steel and aluminum if he wanted Canada and Mexico to actually ratify that deal.
So at the end of the day, as you said, taking the brakes off a little bit, tariff man did, but again, it is a little bit of a reset -- a wholesale
reset on trade for the Trump administration as they look to take on China.
In the meantime, Canada will take this as a win, saying that there was no breakthrough. Apparently, it took a lot of time on the phone with the
President himself to try and convince him to lift these tariffs.
But right now, they're ready to go on ratifying that new trade deal. Take a listen.
(BEGIN VIDEO CLIP)
JUSTIN TRUDEAU, CANADIAN PRIME MINISTER: Obviously, these continued tariffs on steel and aluminum and our countermeasures represented
significant barriers to moving forward with the new NAFTA agreement.
Now that we've had a full lift on these tariffs, we are going to work with the United States on timing for ratification, but we're very optimistic
we're going to be able to move forward -- move forward well in the coming weeks.
(END VIDEO CLIP)
NEWTON: Notice that he said "weeks." Listen, Zain, this is very important for the Trump administration to get that deal done. There are a lot of
people still opposing the deal, even in Congress. But here in Canada, now that those tariffs are lifted, and it's crucial, Zain. Those tariffs were
lifted without the imposition of quotas, meaning trade can basically go on freely between the two countries and Mexico, as long as there isn't any
signs of dumping by China.
Meaning, a lot of the questions with the Trump administration was whether or not China was getting its steel products into the backdoor through
Mexico and Canada. Canada and Mexico both pledging to really make sure that doesn't happen anymore.
But this is a change, make no mistake, Zain, going into the weekend as those China-U.S. talks on trade continue to be a problem.
ASHER: Yes, as you mentioned, this allows the President -- the United States President to really focus on China going forward. But just in terms
of Canada's political landscape, how much of a win is this politically, just the fact that Justin Trudeau managed to convince the President to lift
these metal tariffs. How much of a win is that for Justin Trudeau?
[15:05:12] NEWTON: It is a big win. It's a big win for him and a big win for his team, especially going into a reelection in the fall of this year.
The polls are down for Prime Minister Trudeau. He had been involved in a scandal involving one of his Cabinet Ministers, and for so many reasons,
this is definitely a piece of good news.
You know, the Canadian economy like the American one has been on a tear, but it's really interesting, Zain. He chose to go and tell the
steelworkers, the Union people about this deal first before he told the general public and there's something to be read into that.
As these political pressures continue to mount, whether it's in Canada or in Mexico, they need to be proving that they can deal with the United
States. And I think the Prime Minister felt here especially since he was on the phone three times just in one week with the President, something
that doesn't happen every week, Zain, he really wanted to get this win both for himself, and for Canadian workers.
ASHER: All right, Paula, stand by. I want to bring in Jeremy Diamond. So Jeremy, another aspect of this whole issue with trade today is the fact
that the United States is actually delaying a decision on E.U. auto tariffs. I mean, just walk us through that. Why did President Trump
decide to delay them by six months?
JEREMY DIAMOND, CNN WHITE HOUSE REPORTER: Well, it seems to be part of this broader pattern that we're seeing, not only with this decision, but
also with the steel and aluminum tariffs on Canada and Mexico, for the President to kind of take his foot off the gas here a little bit and de-
escalate the various trade tiffs that he's been having across the world.
You know, there was at one point, a number of countries that the President was engaging in so-called trade wars with, not only the United States'
closest neighbors, but also talking about imposing those auto tariffs on Europe, on Japan and on several other countries as well.
So the President at least on that aspect seems to be stepping back a little bit and it is notable that it comes as these tensions with China still
So the President perhaps is looking at the map here and seeing you know, there is this uncertainty with China that is really roiling the markets and
perhaps he is also seeing an opportunity here to deescalate the situation on the other fronts in which the U.S. is involved with when it comes to
ASHER: All right, Jeremy Diamond, Paula Newton, thank you both so much. Appreciate that.
Okay, as those trade talks continue, it has been a bit of a seesaw day as I mentioned, at the top of the show, the U.S. stocks -- the Dow started deep
in the red as you see there before turning positive, it went negative again, then positive and now it's down, ever so slightly down about 50
points or so.
Shares of farm equipment maker, Deere & Company have fallen about over 7 percent there. Deere reported weak earnings. It blamed the impact of the
trade war on soybean farmers as Paul La Monica is following also.
Paul, yet another company is suffering because of this trade war. Walk us through it.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, Deere, as a result missing forecasts and Zain, it's that outlook that's really disappointing Wall
Street. It really hammers home the point that U.S. companies doing big business in China are being hurt by this trade war.
The back and forth tit-for-tat tariffs between the U.S. and China and Deere suggesting that soybean -- the issue of soybean tariffs is going to be a
problem for Deere going forward.
There are other issues in China as well. There's a swine flu outbreak that's affecting certain hogs that have also led to some concerns that
China will not need as much farm equipment, and that's a big problem as well.
There's competition from Brazil and Argentina, the U.S. dollar is strong. So there's a lot of things that aren't in Deere's favor right now.
ASHER: And when you look at the broader market, if we could just pull up the big board on the screen, I mean, we're down 50 points or so. Does that
strike you as a little bit strange, especially given some of the good news we got on trade today? The lifting of metal tariffs from Canada and Mexico
and also the delay in auto tariffs from Europe?
LA MONICA: Yes, I think that clearly, investors are maybe getting a little bit of whiplash from all the trade headlines and it is good news, Zain,
definitely that some of the trade tension that the U.S. has with key economic allies like Canada, Mexico and Europe, maybe easing a little bit,
but at the end of the day, we're really needing President Trump, his administration and Xi and China to come to the table and work out a deal
for a U.S.-China trade agreement because these are the two largest economies in the world that's really what's going to move the needle for
the financial markets.
I expect a lot more volatility until the trade tension between the U.S. and China is settled at some point.
ASHER: Okay, so putting our seatbelts on. Okay, Paul La Monica live for us there. Thank you so much. Appreciate that.
I did want to turn now to Brexit uncertainty. It is back big time. Cross party talks have collapsed, the Pound is down. One business leader warned
the whole process was a crushing disaster for industry even before the latest breakdown.
[15:10:07] ASHER: The opposition leader Jeremy Corbyn called off the talks. He said the two sides were simply unable to overcome their policy
differences. I want you to listen to this.
(BEGIN VIDEO CLIP)
JEREMY CORBYN, MEMBER OF BRITISH PARLIAMENT, LABOUR PARTY: The government has not moved its position fundamentally. There were fundamental
disagreements. We want to have a Customs arrangement with the European Union that protects jobs and trade and we want to have a dynamic
relationship on rights.
We've put those views very strongly to the government and the withdrawal agreement bill will brought forward. I don't know what the contents of
that bill. We haven't seen it.
(END VIDEO CLIP)
ASHER: Jeremy Corbyn called them fundamental disagreements. Here are the sticking points in the talks between the government and the Labour Party.
The Customs Union with the E.U., Labour said Theresa May would only guarantee a temporary Customs Union trade standards, including
environmental food and animal protections and the willingness of the government and the Conservative Party to support any agreement with Labour.
Phil Black is standing by for us in London. So, Phil, given all the sticking points there, was it really a surprise that these talks between
Corbyn and May broke down in the end?
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: No, not really, Zain. Expectations were never high for these talks, as you've touched on. The
distrust was simply too great, the differences too vast and even within each Party, there was really strong opposition to the whole idea.
But the Parties decided or the Party leaders decided to pursue the talks anyway. For Theresa May, well, she's been running out of options. She
didn't have a lot of choice. It had long been blindingly clear that she simply didn't have enough support among her own Conservative MPs to pass a
So this was a late, desperate attempt to secure a compromise with people who are clearly not her natural political allies.
In the end, they lasted around six weeks, longer than many predicted, but still fell apart, collapsed with each leader blaming disunity and
inflexibility in the other's Party.
So you're right, uncertainty has returned with no obvious solution as we enter what appears to be the final chapter of Theresa May's Premiership.
She has acknowledged that she will imminently outline her timetable for leaving office. But first, she wants Parliament to have one more vote on a
Now, we know that the agreements in its current form has been rejected soundly three times and there's simply no reason to believe that suddenly
going to change on a fourth.
So Theresa May's challenge still looks beyond just beyond reach really, or significantly beyond reach you can even say because she has to try and find
changes that somehow secure a parliamentary majority, and in doing so, also secure her legacy as the Prime Minister who delivered Britain's exit from
the European Union.
But now, time is really running out. She has just a couple of weeks to make that happen.
ASHER: And what is all the uncertainty meaning right now for British businesses, Phil?
BLACK: Well, we've been hearing about this for a long time now. Depending on the business, the sector, the industry leader -- some have been patient,
others less so. We've heard a lot about a lack of investment. We've heard a lot about major businesses, particularly for example, in the automotive
industry winding back future plans.
The reality is that British businesses, many of them simply say they had been unable to plan and get ready for a future because they simply don't
know what that future is going to be.
The result ultimately has been that many would argue an impact on the British economy, slower growth and just continued uncertainty. Of course,
we know that businesses really hate uncertainty. The terrible news for them today is there's simply no end in sight to that uncertainty going
forward, as both the British government and the major opposition, Labour Party have called off these talks and essentially said they don't know
where to go next -- Zain.
ASHER: All right, Phil Black live for us there. Thank you so much. Appreciate that. And the British pound has lost a lot of ground against
the U.S. dollar this Friday falling well below, one and a quarter. Brexit has caused the pound to take some wild swings in 2019 and this week has
been the worst of the year so far.
The Federation of British Industry has criticized politicians for taking too long to resolve the impasse. The head of the CBI warned the Brexit
process is, a quote, "crushing disaster for British businesses."
With the Prime Minister's days in Downing Street numbered, the Labour Party isn't sure that any agreement they make with Theresa May will even last,
after hard thought, the Prime Minister stuck to her position. She repeated her warning that MPs can vote for a deal which would bring certainty or
risk the unknown.
(BEGIN VIDEO CLIP)
THERESA MAY, BRITISH PRIME MINISTER: So when we come to bring the legislation forward, we will think carefully about what we've had with
these talks -- the outcome of these talks. We will also consider whether we have some votes to see if the ideas that have come through command the
majority in the House of Commons.
But when MPs come to vote on the bill, they will be faced with a stark choice. That is to vote to deliver on the referendum, to vote to deliver
Brexit or to shy away again from delivering Brexit with all the uncertainty that that would leave. Thank you.
(END VIDEO CLIP)
[15:15:13] ASHER: John Rentoul is chief political commentator at "The Independent" and a visiting Professor at King's College London. John,
thank you so much for being with us. The fact that Prime Minister Theresa May tried to reach across the aisle and ultimately failed, what will the
hardliner Brexiteers in the Conservative Party make of that?
JOHN RENTOUL IS CHIEF POLITICAL COMMENTATOR AT "THE INDEPENDENT":" They'll say it's time for a new Prime Minister. And I think that is pretty much
the way we're heading now. The only question is when Theresa May is going to go. Will it be by the end of July? Will we get a new Prime Minister
then? Or will it be by the end of September?
So there's a sort of two-month gray area, but it's become pretty clear that Theresa May is not going to be Prime Minister for much longer and she is
likely to be replaced by Boris Johnson, the former Foreign Secretary. He is the bookies favorite, although, you know, he's still quite long odds.
I mean, there are a lot of people who think that he may yet stumble before he inherits the crown.
ASHER: So Theresa May has one foot out the door. So was there ever really any sort of real motivation to Jeremy Corbyn to strike up a deal with her?
RENTOUL: No, there was a there was a strong motivation for him to make it look as if he was being constructive and statesman-like, because when he
refused to talk to her at the beginning of this year about Brexit, there was quite a sharp backlash in British public opinion that felt politicians
ought to be trying to achieve some kind of consensus.
So he went along with the idea of talks for quite a long time, six weeks, but I don't think he ever had any serious intention of reaching a deal.
And, you know, as he said today, there still was a slight gap between the government position and the opposition. The Labour Party did want a
permanent Customs Union with the European Union. It shouldn't -- that shouldn't have been an obstacle to an agreement, but it was enough to give
him an excuse to pull out.
ASHER: Is Jeremy Corbyn still under a significant amount of pressure to ask for a second referendum?
RENTOUL: Yes, but he's not going to do that. He is certainly not going to get to do that until after next Thursday when we have the European
Parliament elections, which is a rather peculiar event for a country that's supposed to have left the European Union some time ago.
But he doesn't want to commit himself to that because he doesn't want to lose Labour voters who voted to leave the E.U. So he's going to -- he is
going to try to ride both horses, the leave and remain horses until at least until Thursday, and then worry about what Labour's position --
incoherent position -- is going to be after that.
ASHER: Right. John Rentoul live for us there. Thank you so much. Appreciate that.
It's like Starbucks, only cheaper. Luckin Coffee takes Wall Street by storm. We're joined by Mr. IPO. We will talk about the recent spate of
companies turning public.
And Amazon takes a bite out of the British food delivery business by leading a multimillion dollar investment in Deliveroo pittingh it directly
against Uber, that's next.
[15:20:53] ASHER: China's Starbucks now has ascended on Wall Street with a double shot of espresso. This was the scene as Luckin Coffee opened
trading in the NASDAQ Friday in New York. Take a look.
ASHER: Luckin has exploded in China by offering cheaper drinks than Starbucks even after pricing at the high end of its IPO range, the stock is
soaring about 12% on its first day.
The company has only lost money and promises to keep losing money in the name of rapid expansion. Luckin's CFO says the company is in a prime place
to go public. Reinout Schakel told our Julia Chatterley he is confident in the company's low cost business model and that he is not worried about
short term volatility. Take a listen to this.
(BEGIN VIDEO CLIP)
REINOUT SCHAKEL, CEO, LUCKIN: I think we are in a very good position today. I think we've had very strong sort of demand from the investor
community which is always very encouraging. I think where we are today is in a very good place.
I guess what we are trying to do here is obviously try and build a model that can sort of help people save money by having a much lower cost
structure and I think that's kind of taking off very well in China.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: I'll come back to you on that point in just a moment, but what we have seen from recent IPOs, whether
it's Uber, whether it's Lyft, is that they've gone to market and then we've seen the share price plunge. Are you nervous about the short-term
volatility that we could see in the share price? Or are you confident that you've priced this right?
SCHAKEL: No, I think the way we look at this, we are obviously very confident about our model and we're very focused on sort of the long term.
For us, this is just the beginning of a long journey.
I guess volatility and market volatility will be always something that is going to be an external factor. But we're very confident about sort of the
long term path of our business and we're not sort of measuring this success by short-term volatility.
CHATTERLEY: So you talked about the business model and a sort of cheaper price point models. Starbucks' CEO says that you're making such incredible
discounts you're losing money. The model that you guys are using right now and the aggressive extent expansion plan is not viable? What's your
response to that?
SCHAKEL: Look, what we're trying to do is effectively, we've sort of developed a new retail model that's kind of changed the transaction
structure in China's retail market. And I think if you look at what we're doing, one obviously, is we use our app to kind of connect with customers,
we use a very differentiated approach on locations, and we save money by using technology.
So if you think about sort of our per cup cost today, that is very, very low. So we are changing the cost structure. If you think about sort of
what we want to try and do is really be able to provide a high-quality coffee for a much more affordable price and still become profitable.
And I think what we've done in the past year, we've made very, very good progress on our unit economics. I think our unit economics are very clear.
And I think the way sort of this will continue to go going forward is we'll sort of get to that breakeven point, hopefully relatively quickly, and I
think we're very confident about sort of the strength of our model.
(END VIDEO CLIP)
ASHER: Companies have been turning public at an incredible pace with impressive booms and notable busts as well. Fastly, a Cloud software
company that went public on the New York Stock Exchange this Friday is surging up 44% there. Uber and Lyft had IPOs that are widely considered to
Lyft is down 24 percent since going public. Uber is down about 5 percent. On the other side of the coin, Pinterest is actually up 44 percent and
Beyond Meat is up a whopping 266 percent.
Jay Ritter is a Professor of Finance at the University of Florida. He is known as Mr. IPO for his work studying initial public offerings.
Jay, thank you so much for being with us. So companies like Fastly, Zoom, Beyond Mat have done incredibly well. So, you know, given that obviously,
Uber and Lyft haven't done well, it seems as though there is still room to do well as a unicorn company going public.
JAY RITTER, PROFESSOR OF FINANCE, UNIVERSITY OF FLORIDA: Yes, the IPO market in the U.S. and in recent years has had relatively few big tech
companies until this year. But there have been a lot of biotechs.
[15:25:08] RITTER: In fact about one-third of the companies in recent years have been biotechs and the market has been well receiving those not
only money losing companies, but in most cases, companies with no revenue.
ASHER: So what can companies like Airbnb, for example, WeWork learn from the stumbles of Lyft and Uber, do you think?
RITTER: Well with Uber, we've got to remember it's still got a valuation of about $75 billion. A couple of years ago, it was at $20 billion. If it
had gone in a straight line from 20 to 75, it would be viewed as a phenomenal success.
But in private markets and discussions last year, people were banding about even bigger numbers and it's a disappointment relative to those numbers
where it overshot, but it's still you know, a $75 billion money losing company.
ASHER: So as well, the expectations -- so with these unicorn IPOs, how important is a very clear strategy and path to profitability?
RITTER: It depends upon the specific industry. For a company like WeWork renting out office space or Luckin Coffee, you'd have to think that they
ought to be making money on renting out offices and selling coffee in the pretty near future.
On the other hand, companies like Uber and Lyft, their big potential is when autonomous driving dramatically reduces their labor costs, and so
losses in the next few years aren't as troublesome for those companies.
ASHER: So for companies like Uber that obviously didn't do too well out of the gate, how important is timing with an IPO? Obviously, Uber went public
pretty much during the rising tensions in terms of the U.S.-China trade war, so how important is timing as a factor?
RITTER: It's important, but, you know, Uber went public at close to an all-time high in the market and Uber has got a stake in DiDi. Uber is
well-hedged in that regard.
But you know, surprisingly, DiDi and Uber are competing in Brazil and South America and other places and engaged in price wars, reducing profits for
both of them.
ASHER: So how did companies like Zoom and particularly Beyond Meat get it so right?
RITTER: Well, in one regard, they got it wrong in terms of the company could have raised a lot more money than they did. They priced the offering
too low. But with all of these companies, whether it's Zoom Video or Beyond Meat or Uber or Lyft trying to figure out the fundamental value of
the company relies on a bunch of assumptions, where they're widely different opinions and what the future holds for those companies.
ASHER: Professor Jay Ritter, thank you so much. Appreciate that.
Okay, still to come here, Huawei holds its nerve. A top exec of Chinese tech giant strikes a defiant tone in a memo to stop saying they will
weather U.S. hostility. We'll have more in this after the break.
[15:30:00] ZAIN ASHER, HOST, QUEST MEANS BUSINESS: Hello everyone, I'm Zain Asher, coming up in the next half hour of QUEST MEANS BUSINESS, it
could be a rough weekend for bitcoin holders. What looked like a safe haven earlier this week suddenly turns downright dangerous. And the
internet, well, bids farewell to a true pioneer, we'll talk about the business empire of the dearly departed Grumpy Cat. Before that though,
these are the headlines we are following at this hour.
Six weeks of compromise, Brexit talks ended Friday with no agreement. Labor Party leader Jeremy Corbyn said gaps with Prime Minister Theresa May
couldn't be bridged, and his no confidence as he says so would carry out in the accord. The deadline for the U.K. to withdraw from the EU is now
U.S. President Donald Trump has hailed an agreement to lift tariffs on metal products from Canada and Mexico as a fantastic deal for our country.
The decision formally announced in the last few hours follows news that White House will delay imposing tariffs on cars and car parts from Japan
and the European Union.
Gay right supporters are celebrating a big win in Taiwan. The island is now the first place in Asia to legalize same-sex marriage. Taiwan has a
large gay community, but has been divided on the issue of marriage equality. The new law goes into effect May 24th.
A neo-Nazi who plotted to murder his local member of parliament with a sword was sentenced to life in prison in London on Friday. Jack Renshaw
pleaded guilty to planning to commit a terrorist attack. Renshaw raised his arm to the public gallery in what appeared to be a Nazi salute as he
was taken out of the courtroom.
And Germany is set to return a 15th century artifact it took from Namibia known as the Stone Cross. This historical landmark was erected on
Namibia's coast in 1498 and taken to Germany in 1893. Officials say it will be returned in August as Germany accounts for its colonial past.
Huawei's top exec remains defiant in the face of a U.S. ban on its products. In an internal memo passed onto CNN by a company's spokesperson,
the rotating boss; one of the Chinese tech giants Ken Hu said business will not be greatly affected as the Trump administration wages a war on Huawei
for political reasons.
He added "no hardships or difficulties can stop us from forging ahead. After every storm, there is a rainbow." Michael Hirson leads the Eurasia
Group of Coverage for China, he joins us live now. Michael, thank you so much for being with us. So Huawei has actually planned for this scenario
for quite some time. They've actually been hoarding or stockpiling, if you will.
MICHAEL HIRSON, PRACTICE HEAD OF CHINA, EURASIA GROUP: That's right, they've been loading up on the chips from U.S. suppliers, in particular
that won't be available to them potentially because of this action that the U.S. took this week. So they probably have some time to go, but that is
I mean, it's not just chips we're talking about that would potentially be impacted by this U.S. action, it's also software. And you can't stockpile
ASHER: Right --
HIRSON: So this is a lifeline for Huawei, but they need to resolve the situation or they're going to face serious business consequences.
ASHER: So how important just overall in the global scale is the U.S. market to Huawei?
[15:35:00] HIRSON: The U.S. market is not very important to Huawei and it's basically because one of the actions that the U.S. took this week
denying Huawei access to the market essentially was symbolic. It was already in place. So Huawei is not -- the U.S. is not a large market for
The much more serious action was the action that just now people are starting to register, which is the U.S. placing Huawei on the so-called
entity list. That means that U.S. parts that go into Huawei equipment and Huawei phones will not be allowed unless the U.S. issues a license to those
U.S. suppliers. So that means Huawei can't get the parts that it needs to do business globally.
So it's not just about the U.S. --
ASHER: Right --
HIRSON: Market, it is their global operation --
ASHER: OK, so everything is about good. And what will this mean for the U.S.' race to 5G, then?
HIRSON: Well, the problem with the U.S. race to 5G is the U.S. doesn't really have the counterpart to Huawei. So this is not so much about
positioning the U.S. over say Huawei. But it's about limiting Huawei's role to some extent. And so, the other companies that would really fill in
for Huawei when it comes to 5G would be more like Ericsson and Nokia.
It's not necessarily about the U.S. stepping in, it's not wanting Huawei to be the sole -- single source supplier around the world. It's the U.S.
ASHER: OK, and so what does all of this mean, the drama if you will with Huawei mean for the trade war with China especially with negotiations?
HIRSON: Well, we have to see how the U.S. is going to implement this action. So we just got this announcement this week, the messaging was very
unclear. And the U.S. can issue licenses to firms that would allow U.S. companies to continue supplying Huawei.
We don't know yet how they're going to do that. We'll know in the next few days, probably. I think the worst-case scenario is no licenses and Huawei
starts to really get crippled. In which case, I think the prospect for a truce between Trump and Xi Jinping is very low. Even in short of a worst-
case scenario, this is just going to make the atmosphere very difficult.
You've got China's leading telecom company basically in the penalty box --
ASHER: Yes --
HIRSON: Right now with a gun to its head that the U.S. could revoke at any time. So even in that situation where Huawei gets a license and can
continue operating, the atmosphere in China has been very much affected by this --
ASHER: So obviously this worsens tensions between the U.S. and China. But politically speaking for President Trump, especially even as 2020 is around
the corner, it is in his best interest to eventually reach a deal with China. So much depends on it.
HIRSON: One might think so.
ASHER: Especially when you know his negotiation tactics as well. When you understand how he operates through the art of the deal and putting
pressure, et cetera, you would think that there should be a deal somewhere at the on the cards.
HIRSON: Well, this is the choice that the president faces. Is a bit of a balancing act. On the one -- on the one hand, I think he would like a
deal, but it has to be a good deal. If it's not a good deal, he will be vulnerable to attacks from his critics. And so, you increasingly say --
see him saying, I'm fine with no deal, tariffs are good in and of themselves.
Tariffs on China brings us money, now I don't know really the extent to which his political base is fully behind that, in the sense that you've got
farmers, for example, U.S. farmers, who are now very worried about the loss of market access to China potentially for years to come.
So from the president's perspective, as he looks ahead to the election, he has to make this decision, does he want to showcase a deal with China or
does he want us to stick to his guns and say no deal is fine with me, I am -- you know, I am sticking to my guns and being tough on China. And we
don't know yet which way he's going to go.
ASHER: We had a few earnings this week where companies actually issued guidance, saying that they probably would be affected by the trade war in
China. If the trade war comes to a halt and is reserved, I mean, a lot of companies are saying that they will have to raise prices, Wal-Mart said
that, for example. If the trade war comes to a halt, how easy is it for companies to end up reversing their positions?
HIRSON: I think at this point in time it's reversible. If the U.S. withdraws tariffs then, you know, it will be back to business as normal.
Now, when it comes to technology, I think there's some of this that's not going to be reversible in the sense that, you know, now you have Chinese
tech companies, U.S. tech companies realizing that they're in the middle of this contest that's going to continue for years, no matter what happens
And so the technology ecosystems in the U.S. and China, I think are in real danger of fragmenting even if there's a deal on tariffs. Because the
geopolitical risk is now fully visible to tech companies in both countries, and there's really no going back to that, I think.
ASHER: All right, Michael Hirson live for us, thank you so much, appreciate that.
HIRSON: All right, so just when things are starting to look up for bitcoin, a sudden $1,000 drop results in its worst day in years, we'll try
to make sense of the wild cryptocurrency market, that's next.
[15:40:00] (COMMERCIAL BREAK)
ASHER: After hitting its highest level in nearly a year, earlier this week, bitcoin is proving to be just as volatile as ever. Bitcoin is worth
around $7,000 right now, down 11 percent this Friday. It's a far-cry from its all-time high we saw back in 2017. You remember, it was once worth
Matt Egan joins us live now. So Matt, you know, it's no secret, bitcoin is obviously extremely volatile, but what explains this $1,000 drop?
MATT EGAN, CNN BUSINESS SENIOR WRITER: That's right, Zain. So, you know, that's the thing about cryptocurrencies and bitcoin in particular. You
know, unlike stocks and bonds where we can point to an obvious earnings report or economic report or even a presidential tweet to explain major
moves with bitcoin.
You know, often it is a little bit of a mystery. It's more about swings and momentum and technical factors. And right now, when you look at it,
those charts show that bitcoin prices were probably due for a little bit of a pull-back. I mean, they almost tripled over the last six months.
And so what happened last night was, there was basically a flash crash, bitcoin fell about 10 percent in the span of just about 20 minutes. And so
whereas 24 hours ago, it was safely trading around $8,000, right now, it's about $7,000. So, I do think it's another reminder that this is a very
risky and volatile place to be.
And it also kind of hurts that case that bitcoin bulls try to make that, you know, this is a digital gold because this sell-off is occurring during,
you know, a risk-off period for financial markets. U.S. stocks are down, Chinese stocks fell overnight, and the CNN business fear and greed index
actually tipped deeper into fear mode. And so right now, it does not really appear to be a safe haven.
ASHER: So how does this impact other cryptocurrencies? When you have a 10 percent drop in one day, what does that do to other cryptocurrencies as
EGAN: You know, so that's a great question. So we're seeing today Ripple and Ethereum, they're also down sharply. At last checked, they were
actually down more than bitcoin. And I think that kind of makes some sense because often times, people who are investing in crypto, they have their
money in different cryptocurrencies.
And so when they wake up and they see that their investment is suddenly down 10 percent, just as they went to bed, they may take some money off the
table in other cryptocurrencies. And so we're seeing them down across the board right now, Zain.
[15:45:00] ASHER: Right, Matt Egan live for us, thank you.
EGAN: Thanks, Zain.
ASHER: Amazon has taken a big bite of the international food business. The e-commerce giant picked up a stake in one of the U.K.'s top food
delivery services Deliveroo. Amazon's backing will heat up the competition in an already tough market with players like Uber Eats and Just Eat.
I want bring in Clare Sebastian, she's joining us live now. So why is Deliveroo such an attractive investment for Amazon?
CLARE SEBASTIAN, CNN REPORTER: Well, Amazon clearly sees an opportunity in the food-delivery market. This is only growing, one analyst described it
to me today as a $50 billion market opportunity. Over the next decade, people are, you know, I think you and I can relate -- they're looking more
and more to get food delivered --
ASHER: Pick up --
SEBASTIAN: But this isn't just about Amazon and delivery. This is about Uber as you hinted at in that lead in. Uber with Uber Eats is
aggressively, you know, expanding in this area with food delivery, especially after the disappointing start to its life as a public company.
People are increasingly looking to Uber as part of a profit engine for the company moving forward. So this really does up the ante, now that Amazon
backs delivery, it can expand, it really ups the competition in this space. So it really throws down the gauntlet to Uber.
ASHER: So Amazon actually tried its hand in the food delivery service in the U.K. --
SEBASTIAN: Yes --
ASHER: It didn't work out, why?
SEBASTIAN: Well, see, they have a restaurant section to their website and they started doing, you know, food delivery in the U.K. and they had to
shut it down after just a couple of years. I think it's just because of the competition in the area. They weren't able to build the kind of market
share, so it became more, you know, interesting for them to either acquire someone or as they've now done, take a stake in delivery.
There are actually rumors that they were looking originally and may still look to acquire the company. Overall, but this is really interesting as
part of Amazon's overall strategy. Food is absolutely critical. You know what they're doing in the U.S., trying to expand into food delivery,
acquiring Whole Foods and all that.
They want to be in every part of your everyday life. I mean, if they ended up acquiring Deliveroo, could you then say, Alexa, deliver me something
ASHER: Interesting --
SEBASTIAN: This restaurant. It's all part of the kind of world, garden around your everyday life that they're trying to build.
ASHER: Has Deliveroo said what they will use the investment from Amazon towards how they will spend that money?
SEBASTIAN: So they say they're going to try and expand. They're already in 14 including countries including the U.K., the U.K. is obviously their
biggest market. But they have another offering that they've been doing called Dark Kitchens(ph) which is where it's not restaurant, it's
essentially kind of almost like pots to cabins in different parts of the U.K. kind of anywhere where people who don't have the funds to start up
restaurants can just make their food and Deliveroo will deliver it.
So that is certainly an interesting offering that kind of personalizes the experience, even beyond the partnerships with restaurants. And obviously,
the competition for partnerships with restaurants, now that you have all these different players, Just Eat, Deliveroo, Uber Eats is very high.
And if you look at the share prices from today, Uber has dropped Just Eat competitor and the U.K. has dropped sharply. And so, you know, just like
in every area that Amazon moves into, it sets --
ASHER: Of course. So why is Amazon so interested in the food business. You mention acquiring Whole Foods --
SEBASTIAN: Yes --
ASHER: A few years ago, Deliveroo, it tried its hand at a restaurant business or rather delivery -- food delivery business in the U.K. So why
is it so keen to get a foothold in the food business do you think?
SEBASTIAN: Because well, no one has dominated it yet especially not in the U.S. You know, a lot of people are doing it, Wal-Mart is a really big
potential competitor for Amazon here with its 5,000 stores. It already essentially has a built-in fulfillment network for food.
Amazon hasn't been able to do it to kind of -- to its full potential, not the way it does the rest of the e-commerce. And I think that's partly
because the supply chain is different for food. You've got to have, you know, cold storage and all of that, it's much more difficult in many ways.
So they haven't been able to do it yet. But it is -- it is again, as I said, part of the kind of the push into your everyday life --
ASHER: Yes --
SEBASTIAN: An effort to become so necessary, so addictive to you that you just use them for everything, every day.
ASHER: Right, Clare Sebastian, thank you so much. OK, after the break, there's no cat like Grumpy Cat. We'll pay tribute to one of the internet's
biggest stars whose sour face made the world a better place.
[15:50:00] (COMMERCIAL BREAK)
SEBASTIAN: A moment of remembrance here on QUEST MEANS BUSINESS for a famous frown-faced fur-ball. Internet sensation Grumpy Cat died this week
at the age of seven. She made waves in 2012 on "Reddit(ph)" and has since boxed memes, appeared on TV shows and inspired merchandise in hot topic and
There's a decent argument for her being the first true internet celebrity from the animal kingdom. The business savvy surfaced feline whose real
name is Tardar Sauce was the official spokes-cat for Friskies. She published her own books including a "New York Times" bestseller and starred
in a lifetime movie called "Grumpy Cat's Worst Christmas Ever". Grumpy Cat's exact net worth is unclear, but her family did actually earn $700,000
in a copyright infringement lawsuit last year.
Angela Watercutter is senior editor at "WIRED" and wrote a tribute to Grump Cat. She joins me now. So Angela, thank you so much for being with us.
So they've been so many cats that have had you know, their 15 minutes of fame on the internet. What makes -- why was Grumpy Cat just so -- just
have such an important place in our hearts?
ANGELA WATERCUTTER, SENIOR EDITOR, WIRED: I mean, I think Grumpy Cat kind of came at this moment that was sort of peak internet cat. We had had
keyboard cat and I think little bumbles around the same time. But there was something about Grumpy Cat's expression kind of always down-turned and
sour but also extremely funny that people that sort of fell in love with, but also sort of identified with.
It was like the -- you know, the peak hang-in-there cat that we all sort of really loved and could either way relate to and easily share with our
friends as you know, as somebody that sort of was expressing what we were feeling inside from time to time.
ASHER: And what's funny about this is that, apparently, according to her owners, the cat wasn't actually grumpy at all. Apparently, it had a great
WATERCUTTER: No --
ASHER: Positive, happy disposition.
WATERCUTTER: Right, yes, the cat actually had feline dwarfism which kind of -- and a little bit of a -- under bay, which kind of caused her to have
that expression, but otherwise was always docile. I mean, you would see Grumpy Cat go to these events to be handled by lots of people and pet by
lots of people and never seemed, you know, bothered aside from her expressions, so yes.
ASHER: So why did we all fall in love with Grumpy Cat?
WATERCUTTER: Like I said, I think she just really had that demeanor that was sort of cute and you wanted to care for her at a certain point, but
also felt like she was speaking to you in a certain way --
ASHER: Yes --
WATERCUTTER: She just was the perfect thing for internet memes. You know, it was easily shared, everybody recognized her, it was perfect.
ASHER: Did she play an important role in popularizing animal internet memes?
WATERCUTTER: I think -- oh, yes, a 100 percent. I mean, there was -- there were like I said, lots of other internet cats before, but that was
the one I think, you know, even your grandmother at the holidays would recognize a grumpy cat at a certain --
ASHER: Of course --
WATERCUTTER: Point. I mean, because of what you were saying with the merchandize and with, you know, T-shirts and getting, you know, a lifetime
movie and all these things in, like the -- she was just everywhere. And so everyone knew what she looked like and yes, it was definitely the top of
the -- the top of the heap.
ASHER: So you mentioned merchandizing -- you mentioned a movie. I mean, how -- you know, how much was this -- right, you talked about money, but
how much was Grumpy Cat actually worth to her owners? Just how were they able to step-by-step actually monetize this?
WATERCUTTER: I mean, she had to have been priceless in a certain regard because I mean, it was, you know, like the Frisky's spokes-cat, had
calendars, had books, had T-shirts, had mugs, you know, had all of these things.
[15:55:00] I mean, but I believe that the owners, you know, pretty much ended up devoting a lot of their life and time to managing her career in a
ASHER: Yes --
WATERCUTTER: Much the way like, you know, a stage parent would or something. So, you know, I think it was -- became the -- you know, the cat
was pretty invaluable to -- pretty invaluable to them.
ASHER: And is there any -- is there anyone or any other animal that it is quite like Grumpy Cat out there today just in terms of popularity and
WATERCUTTER: Not that I can think of. Like I said, I mean, there were other peers from her time, like Little Bub who was also another cute,
adorable cat, that the internet fell for at a certain point. But I feel like, you know, I mean, it's only been four years since Grumpy Cat came
around in 2012, but things on the internet have changed so much.
I don't think that we have the sort of love affair with animals on the internet that we do anymore because, you know, things have changed so much
and the internet has become, you know, a much different place and the discourse has changed a lot in terms of memes and in terms of things that
happen on Twitter and Facebook and other social media. So it may -- we may never have that sort of right moment for a grumpy cat again.
ASHER: Yes, you're absolutely right, the internet is a much different place. I mean, just looking at all these images --
WATERCUTTER: Yes --
ASHER: Of Grumpy Cat, it just reminds you of a time when the internet was a much more I guess, more happy, sort of positive place. And it just isn't
that way anymore.
WATERCUTTER: Yes --
ASHER: Angela Watercutter, we have to leave it there, thank you so much, appreciate that. OK --
WATERCUTTER: Thanks for having me.
ASHER: You're welcome. We are almost at the end of the trading week, we'll have the closing bell for you after this quick break.
QUEST: There are just moments left before markets close on Wall Street. And even though we did get some positive news when it comes to lifting
metal tariffs from Mexico and Canada and also delaying auto tariffs from the EU, the Dow has actually taken a bit of a stumble as you can see behind
me over the past hour, and that's on reports that trade talks between the U.S. and China have actually stalled.
You can actually see we're down 100 points there. Speaking last hour, U.S. President Donald Trump said that the Chinese government had reneged on
promises made during the negotiations. So that's why the market is down about a 100 points.
Those developments in the last hour have pushed down shares of companies with significant business in China. So for example Intel, 3M,
Caterpillar, Dow Chemical are the biggest losers in terms of Dow Industrials. United Health and Verizon are actually in the green, they're
And that is QUEST MEANS BUSINESS, I am Zain Asher in New York, "THE LEAD" with Jake Tapper is next.