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QUEST MEANS BUSINESS

Boeing Tries To Win Back Trust And Win Back Orders At This Year's Paris Air Show; India Has Slapped New Tariffs On American Goods; Sotheby's Has Been Sold; U.S. Companies Plead Their Case on Tariffs; Former Egyptian President Mohamed Morsi Dies at 67; Fashion Icon and Artist Gloria Vanderbilt Dies at 95. Aired 3-4p ET

Aired June 17, 2019 - 15:00   ET

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


PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Markets in a holding pattern really here. To be expected before the Fed makes its decision

midweek.

As you can see here, the Dow better, up about 40 percent. The S&P around the same level. Few more gains to be had in the tech sector. Those are

the markets. And these are the reasons why.

Boeing tries to win back trust and win back orders at this year's Paris Air Show. Top U.S. companies bring their arguments on tariffs straight to

Washington. And what does the billionaire art collector do once he is tired of paintings? He buys the auction house, of course, Sotheby's has

been sold.

Live from the world's financial capital, New York City. It's Monday, June the 17th. I'm Paula Newton, in for Richard Quest. And this is QUEST MEANS

BUSINESS.

Good evening. Tonight, Boeing faces a defining moment at one of the world's largest aviation shows. After a turbulent few months, the plane

maker seems to be winning back support from some top CEOs and executives. But airlines are not yet putting money crucially where their mouths are.

Boeing hasn't announced a new order in two months.

Meantime, European rival, Airbus just secured 100 new orders and unveiled a new jet. Now Boeing investors, though still seem optimistic. Take a look

at this. The stock is leading the Dow thanks to some words of praise from airline CEOs. Among them, the Chief Executive of Qatar Airways, he told us

that despite two fatal crashes, it is still flying a 737 MAX.

(BEGIN VIDEO CLIP)

AKBAR AL BAKER, CEO, QATAR AIRWAYS: If I am given the choice today, to get into a MAX and take a flight, I will do it because I have confidence in the

regulators, and I have confidence in Boeing that once they have got to the bottom of what happened to the two very sad incidents, my thoughts are

always with their families, thatthings will get back to normal.

(END VIDEO CLIP)

NEWTON: And the key is they haven't really gotten to the bottom of those yet. Boeing is still at it. Meantime, the annual Paris Airshow is usually

what we've come to know is a fierce neck and neck competition between Boeing and Airbus to secure the most orders.

But as our Melissa Bell reports this year, the plane makers seem to be traveling in some very different directions.

(BEGIN VIDEOTAPE)

MELISSA BELL, CNN PARIS CORRESPONDENT: The Paris Air Show kicked off today at Le Bourget just outside of Paris with the usual collection of Airbuses

and Boeing's lined up here on the tarmac.

Normally, this event is all about which of those two aviation giants will get the most orders in this show. How many firm orders will they get and

how will that compared to the competition.

This year, of course, things are very different for Boeing given the crashes involving the 737 MAX both in March and Ethiopia and in Indonesia

last October. The loss of the lives of more than 300 people was of course, what Boeing chose to address when its leaders spoke at a press conference

this morning.

(BEGIN VIDEO CLIP)

KEVIN MCALLISTER, EXECUTIVE VICE PRESIDENT, BOEING: Bottom line, we will employ every resource across Boeing in a comprehensive effort to make sure

we get this airplane safely return to service and when it does, the MAX will be one of the safest airplanes ever to fly.

(END VIDEO CLIP)

BELL: Boeing there trying to inspire confidence once again in the future and its commitment to safety. Of course, in the meantime, the figures are

not so good for Boeing. They announced on Tuesday that in May, the numbers of deliveries of Boeing were down 50 percent on the same month last year.

Still though they retain the confidence of a number of the key players that they're hoping to sell their planes to. We spoke today to the CEO of Qatar

Airways.

(BEGIN VIDEO CLIP)

AL BAKER: We have full confidence in Boeing. We have full confidence in the machines that we have bought from them which we fly, and our passengers

love their airplanes. And they love this airplane, too.

So we will continue to do business with both of them. We will not sacrifice one for the sake of the other.

(END VIDEO CLIP)

BELL: Some hope there for Boeing, but the more profound problem is the longer term. Airbus really exploiting its competitions, moment of weakness

by announcing here today, this new A321XLR, so a new version of its older plane that can go further from say the middle of the United States to

Europe, really capturing that part of the middle market that Boeing had been hoping to take with a new airplane that it was going to spend $15

billion developing and hoped to deliver by 2025.

[15:05:05] BELL: Airbus announced today it has sold a hundred planes including 27 of those newA321 really using this moment of weakness in

Boeing to try and get ahead in what is an incredibly competitive market.

The trouble for Boeing is going to be catching up that time that's been lost. Melissa Bell, CNN, Le Bourget.

(END VIDEOTAPE)

NEWTON: You know, and as we were just hearing as if Boeing's troubles weren't enough, one of the world's largest airlines is sending chills

through Europe's aviation sector.

Lufthansa just issued a shock profit warning to investors, blaming that fierce competition from low cost rivals. Now, as you can see here, the

airline's stock plunged to more than 11 percent.

Shares in many of its European rivals also suffered. Now, speaking to Richard at AITA Conference in Seoul earlier this month, Lufthansa's CEO

offered some clues about the struggles, the very serious struggles the airline is facing.

(BEGIN VIDEO CLIP)

RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: The competitive environment in Europe is brutal. And you're competing against

airlines that are prepared to sell tickets at a loss. Is that fair?

CARSTEN SPOHR, CHIEF EXECUTIVE OFFICER, LUFTHANSA: Well, as long as the environment is a level playing field, it's a fair competition.

QUEST: So you all lose money on those tickets --

SPOHR: We all lose money, and the healthy ones will survive, the unhealthy ones will not. It's another question if it is responsible to do this from

an economic point of view, from an environmental point of view, even from a political point of view.

There I have big doubts, I think is hurting our industry.

QUEST: Right, answer that question. You've been tactful in saying big doubts, you're saying it's irresponsible.

SPOHR: I think it is, and it hurts the industry, it hurts politician's perspective of our industry, it hurts our image in public. So I think this

is something which in the end, the industry is taking some harm from.

(END VIDEO CLIP)

NEWTON: Brian Sumersis a senior aviation business editor at Skift. He joins me now from Los Angeles. You know, Brian, you've been writing for

several months about the impact of Boeing, not from a manufacturing point of view, but from the fact that the airlines are really taking a hit.

That's one of the things they really didn't need to hear about that737MAX.

Where do you think that's going in terms of the ripple down effect over the next several months?

BRIAN SUMERS, SENIOR AVIATION BUSINESS EDITOR, SKIFT: Well, it's going to be a while before we know exactly. The airlines had said they expect to be

flying this aircraft by about mid-August.

We now know that that's not going to happen. I think everybody in the industry thinks that would be great news if this airplane is flying again

with passengers by the end of the year. And even that might be kind of a bold prediction.

Expect we'll see the airplanes flying in the United States first, because regulators have been a little bit friendlier to Boeing here, and maybe the

rest of the world afterward. But nothing is imminent.

NEWTON: And the point is they're going to take some hits for that financially. They already have.

SUMERS: Yes, the airlines are going to take hits from that financially. The good news is long term, Boeing should make them whole. Airlines are

expecting to get compensation from Boeing. It's going to take a while. They will probably get it.

One of the bigger problems that airlines have in the short term is consumer confidence. Right? So regulators can clear the airplane, you know, as

soon as they want, but people do not want to fly in this airplane. They're skittish. They're scared.

I found it very interesting at the Paris Air Show today to see Boeing actually come out and say, you know, we're humbled by this. We're

surprised. You may remember a couple of months ago, they took a very hard stance.

NEWTON: I do.

SUMERS: So it's been a big change for them.

NEWTON: Yes, it has been a big change, and I have to say you're absolutely right. I think any one of us flying even though we're not flying the 737

MAX, we are looking a little bit more closely at what we are flying and making inferences from that.

Going on to Lufthansa. We just had that profit warning. What's at work there? I know they say it's a low cost environment, but it's not like they

don't -- they haven't played in that playground for a long time. It seems that they have forgotten the rules somehow. Why? Why so much pressure?

SUMERS: Perhaps they have forgotten the rules a little bit but it is a very harsh competitive environment right now in Europe. Lufthansa has a

low-cost subsidiary called Eurowings.

Eurowings attempts to compete with EasyJet, with Ryanair, but Eurowings has not been very successful at that. So they're all out there chasing the

same customers, with like these 39 year old flights between major cities, and it is really hurting Lufthansa Group.

The interesting thing is despite the profit warning today, Lufthansa group came out and said long haul routes to the United States to Europe, they're

doing just fine. You know, Frankfurt to London. That is a disaster right now.

NEWTON: We will remember that. Very quickly, Brian, I know that you look at both markets carefully. That whole low cost carrier thing has settled

out in the United States. Does Europe has something to learn from that?

SUMERS: Europe probably does have something to learn from that. You'll know that there are no low cost airlines in the United States owned by big

airlines.

So United Airlines had an airline maybe 15 years ago called Ted. It was United's spunky, low-cost airline. It did not work. The U.S. carriers got

out of that game. Now they're just discounting some seats in the backof the aircraft. They're calling it Basic Economy. Europe didn't learn from

that.

[15:10:12] SUMERS: So Lufthansa didn't say, "We're just going to have Basic Economy. We're going to have some cheap seats in the back."They

said, "No, we need our own airline to compete with Ryanair and EasyJet. We're going to call it Eurowings," and Eurowings is going to lose a lot of

money this year. It is not a good situation.

NEWTON: Yes, as you said, London, Frankfurt for 50 bucks is a reality in Europe, you are not going to get any flight in that distance in the United

States for 50 bucks. That is a long conjure.

SUMERS: Not very many certainly.

NEWTON: Not very many. Brian, thanks so much. Really appreciate it.

SUMERS: Thank you.

NEWTON: Turning now to trade. India has slapped new tariffs on American goods, yes, taking on the U.S., this includes almonds, apples and some

chemicals. The Indian government says it's retaliation for U.S. tariffs on steel and aluminum.

Now all of this comes as China is lowering barriers, I said lowering barriers towards just about everyone else, except the United States.

Now, I want you to have a look at this chart from researchers at the Peterson Institute. It is incredibly interesting, because as the trade war

with the U.S. has picked up, the average Chinese tariff on American goods has more than doubled. You have to compare that though with the average

tariffs on goods coming from anywhere else that has actually come down.

Joining me now is ChadBown, he is one of the researchers behind those numbers. He is a senior fellow at the Peterson Institute. I really

appreciate you being with us, Chad. This study was fascinating, strategic on China's part.

CHAD BOWN, SENIOR RESEARCHER, PETERSON INSTITUTE: Yes. And to be honest, we were a little bit surprised by the numbers as well. You know, we'd

heard the story last year that the headline was, you know, in instances China was cutting its tariff on uncertain products, automobiles in the

middle of the year was the big example.

But it wasn't really until we looked at the data that we saw just how widespread and deliberate China's actions here really, really were.

NEWTON: And that's the key there. I don't mean to interrupt, but that's the key there. It was deliberate. They thought we're going to keep --

yes, go ahead.

BOWN: Yes, it really is deliberate. You know, it's as if the Chinese have recognized that when they retaliate against United States, this is going to

be them imposing costs on themselves.

And one way that they can seek to minimize those costs is by cutting their tariffs toward everybody else, creating opportunities for their consumers,

to go out and find other trading relationships with Canada or with Europe or Japan, and make it a little bit easier now that they're going to be

facing tariffs from stuff coming in from the United States.

NEWTON: Yes. And you make very clear, this is all within the WTO umbrella. I have to ask you, though, in terms of how much legs this new

strategymaybe. Let's say in a couple of months, we do get a trade deal, between China and the U.S.?

I keep arguing that look, the hangover could last years, maybe even decades, meaning the Chinese won't forget this. Do you see that perhaps

even trickling down to -- we were just talking about aviation? Take them. You know, it is essentially a duopoly. You've got Boeing and Airbus.

Could the Chinese -- one of the fastest growing aviation markets in the world -- say, "Yes, we're never going to order a Boeing plane again."

BOWN: Yes, Boeing and Airbus, I think are probably a little bit different. You know, they have so many Boeing in their fleetthat they're going to need

to service those and get parts for those and have an ongoing relationship with Boeing for years and probably decades to come.

But for a lot of other products, that's really not the case, and once Chinese consumers get the taste of, you know, say Canadian lobster or or

Japanese salmon and move away from the American products, they may never go back.

So I agree with you. There may be some long term hangover effects of all these tariffs, even if we were to get a deal sometime soon.

NEWTON: So interesting. Okay, we talked about the Chinese consumers, let's go to those American consumers. It has been a point of contention at

the White House, and yet would you say that basically, it's the American consumer that's going to suffer through this trade war?

BOWN: So far, that's what the evidence has found. So we do have a couple of academic studies that have looked at this question. Obviously,

President Trump denies it. He says that the foreigners are paying the costs of his tariffs. But it doesn't seem to be true in the data.

And this next round of tariffs that he has on tap, he's got $300 billion of more imports from China lined up with 25 percent tariffs that are going to

be coming on, it's really going to hit the consumer products -- the shoes, the clothes, the toys, the iPhone products.

So I think for the American consumer, the impact of President Trump's trade wars is actually only going to get worse.

NEWTON: Yes, and that is not good news for American consumers, especially as the Trump administration says that yes, that's a good likelihood these

new tariffs will be a reality check.

Thanks so much. Really important research. We will come back to you because I'm sure you guys will have more on this out in the next few weeks.

Appreciate it.

Now catching up to a crisis, Google CEO says YouTube must do more to police hate. SundarPichai is speaking exclusively to CNN.

(COMMERCIAL BREAK)

[15:17:33] NEWTON: Apple's CEO is calling out Silicon Valley's social media companies and warning the next generation of engineers, they'll be

judged by what they build.

Now it was a commencement address at Stanford. Tim Cook made some not so subtle references to the misinformation and hate speech scandals at

Facebook and YouTube.

Now, he warned the graduates before you take credit for any innovation, be prepared take full responsibility for what he calls unintended

consequences.

(BEGIN VIDEO CLIP)

TIM COOK, CEO, APPLE: Too many seem to think that good intentions excuse away harmful outcomes. It feels

a bit crazy that anyone should have to say this. But if you've built a chaos factory, you can't dodge responsibility for the chaos.

(END VIDEO CLIP)

NEWTON: Okay, he was talking about YouTube there and interesting that the CEO of Google also agrees that big tech needs to take more responsibility.

You know, funny he also used the word unintended consequences. Now, that includes him saying Google's own service as we were saying, YouTube, which

has struggled to define what is the line between free expression and hate speech.

SundarPichai says YouTube must do better to police hate. he spoke exclusively with CNN's Poppy Harlow.

(BEGIN VIDEOTAPE)

POPPY HARLOW, CNN ANCHOR: From anti-Semitism to harassment of LGBTQ individuals, conspiracy theory videos about the Parkland shooting or Sandy

Hook. I mean, fundamentally, Sundar, where do you draw the line with YouTube between hate and free speech.

SUNDARPICHAI, CEO, GOOGLE: You know it's a -- it's a line we -- you know, we work hard to get right and, you know, and every few years we feel the

need to evolve them because we see changes in how the platform is getting used.

Just last week, we have significant revisions to our hate speech policy. At YouTube, we are very focused on removing harmful content and reducing

the spread of what we think of as borderline content.

Just last quarter, we removed over nine million videos. And -- so it's an ongoing process. But there's more we need to do and we acknowledge that.

HARLOW: Because, in America, right, you can't yell fire in a crowded theater. And YouTube has really become our theater.

PICHAI: It is. It is the equal end of, you know, in the real world people getting together and talking. That can happen in YouTube as well. But it

also allows us an opportunity to enforce rules of the road in a way we haven't being able to before as well.

[15:20:10] PICHAI: So we can use the forces underlying in YouTube and take them in a positive direction as well, which we are committed to doing.

HARLOW: So when YouTube announced these new rules, that it would take down these videos, that included taking down all of those horrible conspiracy

theory videos denying the Sandy Hook massacre.

But an attorney representing 10 of the families who have family members who were killed in that said that it's too late to undo the harm and talked

about the undue harassment and threat that they had sustained.

I just wonder why it took seven years to realize that those videos shouldn't be up and ads shouldn't be running next to those videos?

PICHAI: You know, I mean, it's heartbreaking for sure. And, you know, all of us, you know, would look back and, you know, be -- we wish we had gotten

to the problems sooner than we did.

And, you know, there's an acknowledgement we didn't get it right. And -- but I think we became aware, collectively, of some of the pitfalls here.

And, you know, since then we've been working hard. We have changed our priorities. And, you know, we have put in a lot of effort there and we'll

continue to do that.

HARLOW: Tim Cook recently said, privacy in itself has become a crisis. Do you agree?

PICHAI: I think it's very, very -- you know, given the scale at which information is flowing, I don't think users have a good sense for how their

data is being used.

And so I think we have put the burden on users to a large extent, and I think we need better frameworks where users get the comfort that they --

that they are in control of their data, how it's used, and they feel like they have agency over it. And so I think it's an important moment for all

of us to do better here.

HARLOW: Is Google currently considering reopening search in China?

PICHAI: We have no plans to relaunch search in China.

HARLOW: You were thinking about it. You did do work inside of Google to map out what restarting search in China would look like. Are those

conversations going on at all now or is there a zero percent chance that Google will restart search in China in the near term?

PICHAI: There are no plans for us to consider relaunching our search service in China. You know, we've always looked at, in a way, think about

serving the next billion users.

So, as a company, you know, we -- you know, our mission compass is to provide information. So we evaluate that. You know, but, you know, we would

need the right conditions to exist and so, you know, we would do it on a set of principles that matter to us.

HARLOW: And you mentioned conditions. And look at the reason Google pulled out of China in 2010 was the hack and the human rights violations that were

found as a result.

But I ask because in 2016 you said, I've also thought Google was for everyone, and that applies to China, too. And you talked about serving

Chinese users.

Has something shifted in you, your calculation on your willingness to even explore search in China? Is it the fact that you have, you know, according

to the State Department, two million ethnic -- Muslim ethnic minorities held in camps in China, the Hong Kong protest going on? Is it -- has that

shifted, fundamentally, in your view?

PICHAI: I mean there are often, you know, competing values. So, you know, we see the benefits we get when we provide information to users. But we

don't want information presented in a wrong way to our users as well.

And so these are issues we grapple with, you know, across the world to be honest. You know, we comply with laws and regulations. And so, you know,

it's always a set of continued conversations we have at Google.

HARLOW: But when you say conditions, it sounds like you're talking about the human rights issues in China, right?

PICHAI: You know, for us, you know, our ability to present ourselves in a way that, you know, users can see as the right provider --

HARLOW: Without censorship?

PICHAI: Without censorship, is an important condition there.

HARLOW: So is any level of censorship okay with Google if there were search in China or are you saying it would have to be uncensored by the

government?

PICHAI: You know, I don't want to speculate on a hypothetical situation. We have no plans and, you know, we are not spending time on it -- time on

it today.

(END VIDEOTAPE)

NEWTON: Okay, now you can hear much more from Poppy's exclusive interview with the Google CEO on her podcast, "Boss Files." Just go to

cnn.com/podcast to find it.

Now, we're going to be continuing with our business agenda. We will begin the bidding. We have an iconic auction house on the block today, 275 years

old, the world's oldest, largest Sotheby's biggest sale ever. Itself.

Yes, the winning bid $3.7 billion. The producers are agreed today they gave me this. This is from the gentleman in black over there. Billionaire

art collector and telecoms entrepreneur, PatrickDrahi and with our sale today, we mark the end of Sotheby's three decades -- count them three -- as

a public company apparently Matt Egan, it could not happen soon enough for Sotheby's.

[15:25:10] NEWTON: Patrick Drahi, this is so interesting, he paid a 60 percent premium for this company, what does he know that the rest of us are

missing in this market?

MATT EGAN, CNN BUSINESS LEAD WRITER: That's right. You know, I think rather than this being an acquisition of what it is like an undervalued

property, which is like what you normally think about in a go-private deal, this is really a trophy asset that Patrick Drahiis buying.

If you look at what he said, he said that this is something that he wants him and his family to own for many years to come, the CEO of Sotheby's

talks about how he thinks that Patrick Drahi is going to own this for decades. Drahisaid that he's not going to make any changes to the

management or to the company's strategy.

So this is not a type of situation where we think that this is going to get flipped over in a couple of years, and they are going to add on, you know,

are they going to cut cost or anything like that.

This seems more like a legacy play for Patrick Drahi.

NEWTON: That's such a good way to put it right, that trophyasset and from Sotheby's reaction, you kind of got the sense that, thank goodness,

finally, we're out of this public market, right?

EGAN: That's right. I mean, the stock is up almost 60 percent and, you know, we saw the company say that the reason why they want to go private is

because this will give them the flexibility to accelerate their turnaround plan.

And in other words, they just want to kind of get away from the harsh scrutiny of the Wall Street analysts and journalists and the shareholders.

And so they think that their life, their long-term success will be better as a private company.

NEWTON: It's interesting, and I'm sure a lot of our viewers have heard a lot about the art market in the last little while. I mean, even people

like David Bowie, who you would never think of had a prolific art collection. And I hate to tell you, he made tons of money on it over the

years. Does this thing say something more though, about art as an investment as we go through the decades?

EGAN: I think it might be. I mean, if you look at how much the value on some of these pieces of art have increased in just a short amount of time,

it really is pretty stunning.

In some ways. It is a reflection of this low and zero and even negative interest rate environment where people are forced to kind of go out on the

risk spectrum in order to get returns and Patrick Drahi is figuring rather than just going out and buying another piece of art, I'm going to just go

acquire an art house itself.

NEWTON: Yes, it might be a very good move. You want to do the gavel the last time. The producers will never let me have it again. It's only

because, you know, Richard -- they felt sorry for me because Richard won't let me touch the bell. So there you go.

Matt, thanks so much. Really fascinating story.

EGAN: Thank you.

NEWTON: Up next, public hearings about tariff pain. U.S. companies are telling lawmakers on Capitol Hill that they are the ones feeling the heat

in the Trump administration's ongoing tariff war.

(COMMERCIAL BREAK)

[15:30:00] PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton, coming up on the next half hour of QUEST MEANS BUSINESS, main

street is heading to Capitol Hill, some of America's largest companies are taking their tariff case to Washington. And we'll pay tribute to the

heiress who made a new fortune on her own terms. Gloria Vanderbilt who died today.

First though, these are the headlines on CNN at this hour. Egypt's first democratically elected president has died. State media say 67-year-old

Mohamed Morsi had a heart attack during a court appearance today. Morsi had been in prison since 2013 when he was overthrown in a military coup.

Human rights watch is accusing the government of denying him adequate medical attention.

At least 30 people were killed and 39 others injured in three suicide bombings in Nigeria. Two bombers were boys and one girl. No one has

claimed responsibility, but Boko Haram terrorists have carried out deadly attacks in Borno State where Sunday's blasts occurred. The EU says it

expects Iran to continue to comply with an international nuclear agreement despite a new ultimatum.

Iran says it will exceed its stockpile of enriched low-grade uranium in 10 days if European powers don't help Tehran side-step those crippling U.S.

sanctions. Corporate America is having its say on the prospect of more tariffs against China.

Hundreds of company executives and trade groups are set to testify this week in Washington. Best Buy and New Balance are among the companies

testifying Monday, questioning the wisdom of new U.S. tariffs on Chinese exports. Now, as that trade war escalates, more and more American

importers are taking decisive action to avoid paying the higher cost. Our Clare Sebastian went to meet one of them.

(BEGIN VIDEOTAPE)

ARNOLD KAMLER, CEO & CHAIRMAN, KENT INTERNATIONAL: Aluminum handle bar, aluminum handle bar stem, aluminum suspension fork, this is all from China.

CLARE SEBASTIAN, CNN BUSINESS REPORTER (voice-over): For Arnold Kamler, this is no longer just an eight-speed mountain bike. It's a reminder

almost every part of his business is caught up in the U.S.-China trade war.

(on camera): Would these have all been subject to tariffs?

KAMLER: These -- everything in this building.

SEBASTIAN: Kent International is one of the largest bicycle and bike part wholesalers in the U.S., supplying Wal-Mart, Amazon and other major

retailers.

KAMLER: So on a million-dollar shipment which is a normal shipment for us, where a year ago, we would have paid $110,000 of import duties, this year

it'd be $360,000 of import duties. So, it's quite expensive to handle.

SEBASTIAN (voice-over): So expensive that after more than three decades of manufacturing and sourcing in China, he's shifting gears.

KAMLER: We don't want to move away from our main suppliers, and so we're working together to build a fairly substantial factory in Cambodia, it's

their money, it's a little bit of our help and advice.

SEBASTIAN: Kent is part-owned by its Chinese manufacturing partner. Last year, they purchased this plot of land in Cambodia and when hopes of a

trade deal fell apart in early May, construction plans were fast-tracked. They now hope to have the factory completed by early next year. Kent is

just a small part of what experts say is one of the biggest shifts in global supply chains in years accelerated by tariffs.

PETE GUARRAIA, PARTNER, BAIN & COMPANY: For the last decade or practically two decades, China has been the factory of the world, and we've seen

everything shift there from nails to cell phones. What's happening now is people are stepping back and saying his labor rates are increasing and

there's uncertainty with tariffs, we need to rethink the sort of nature of the totality of our supply chain.

SEBASTIAN: Shoe designer Steve Madden, GoPro, even iPhone maker Foxconn are all shifting or considering shifting some production away from China to

avoid the tariffs.

KAMLER: It's a beautiful front suspension mountain bike.

SEBASTIAN: Arnold Kamler says the irony is before the tariffs hit, he wanted to move more production back to the U.S., expanding this assembly

plant he set up in South Carolina in 2014. The tariffs on parts have made that too expensive.

[15:35:00] KAMLER: We believe that we have the opportunity to bring back the American bicycle industry which was decimated by China 25 and 30 years

ago, and bring it all back here, but we need some help from the government.

SEBASTIAN: So, for now, this century-old family business is heading into uncharted ground. Clare Sebastian, CNN, Parsippany, New Jersey.

(END VIDEOTAPE)

NEWTON: Now, the consumer tech association is a group that promotes innovation to spur economic growth and create those all-important jobs.

Gary Shapiro is the CEO and he joins me now live from Washington. I mean, look, we've been battling this back and forth for a while. How

catastrophic would this be at this point if it becomes a reality, the extra 25 percent?

GARY SHAPIRO, CHIEF EXECUTIVE OFFICER, CONSUMER TECH ASSOCIATION: Well, it's very harmful not only to U.S. businesses, but also to American

consumers. It will cost the average family of four about $2,300 a year extra, it would hurt GDP growth by about 1 percent, and it would put taxes

or tariffs and all sorts of products we buy and use for back to school like laptops, tablets, computers, and also TV sets.

And 25 percent tariffs is a lot of money for each of those products.

NEWTON: You know, Gary, the White House knows all that. Why do you think they persist in going through this way? And I mean, the administration is

saying that the 25 percent -- get used to it. it could be a reality, it might happen.

SHAPIRO: Well, part of me likes to think this is just a negotiating tactic to clean up some of the practices that China has had which we all agree are

a real problem for American companies trying to do business. The other just might be something where we just want to isolate China.

But ironically, even if that's the case, we're forcing China to develop their own businesses rather quickly. Look at what we're doing to our chip

companies. We have several chip companies leading the world, dominating, selling to all sorts of Chinese companies and we're forcing basically China

to start replicating what they're doing, figuring it out much quicker than they would have otherwise and becoming even more economically powerful.

So, if we go forward in July with these 25 percent tariffs, we will see a harmful impact on our major American companies for American consumers and

of course, for all sorts of consumer technology, footwear, so many different types of companies --

NEWTON: Sure --

SHAPIRO: And industries will be affected.

NEWTON: And I think many people believe that, Gary, but I think some are wondering, will it work? I mean, I know in the letter to the president,

that you know, you guys clearly stated that tariffs are not an effective tool to change China's unfair trade practices.

But is that really true? Because even if we go back to what happened in Mexico the other week, some would argue if you don't play hard ball, you

are never going to change -- you'll never have a change in the game.

SHAPIRO: Well, CNN had the first story about this letter that's literally hundreds of groups and companies signed. We're trying to -- we're asking

our government to preserve our businesses, basically. There are business models set up where you have final assembly somewhere, you're importing

components or you're doing something where you need these products.

And if you're going to do something like this, as harsh as this, don't do it so suddenly. And it's one thing that threatens something which we

didn't -- we wouldn't advocate, there're other tools. There's so many different trade agreements that we could be involved with that will help

the situation where there's the World Trade Organization where we've slowed down the process by resolving disputes where we -- U.S. usually wins them

to the group of countries which were competing with China which got together the Trans-Pacific Partnership --

NEWTON: Right --

SHAPIRO: And we pulled out of it, and we shouldn't be doing that, we should be approaching this much more logically rather than burdening

businesses, burdening Americans, affecting GDP, affecting almost 1 million American jobs, putting them at risk and adding all sorts of new costs

because tariffs are taxes, that's what they are, and this is going to hurt the economy.

So, you're saying perhaps that it's a great thing to threaten. But my dad taught me, if you're going to threaten something, you have to be willing to

carry it out. And President Trump has shown, he's willing to carry it out. We already have 25 percent tariffs --

NEWTON: Right --

SHAPIRO: Unlimited group of products who closed the government down. This is not a guy that just threatens without something behind it, and I think

China knows it and hopefully there'll be an agreement.

NEWTON: And very quickly, I've got to go, Gary. But do you think, speaking out this week will make a difference?

SHAPIRO: It has to make a difference. We have an ad campaign, we're filing today with the United States Trade Representative, we're testifying

next week, of course, along with hundreds of others. But the fact there are so many people in businesses are affected by this.

This could cause what we might call the Trump recession because it is such a powerful impact on a major --

NEWTON: Right --

SHAPIRO: Part of the economy.

NEWTON: OK, we'll see if it works from your point of view, Gary, thanks so much, we'll check back in with you.

SHAPIRO: Now, once a staple of many traders worked days, it seems the lunch time temple, we should call it a temple was on the way out. I'll

speak to the CEO of the London Metal Exchange about his company's decision -- yes, extraordinary, revolutionary, to ban drinking on the job. Yes, you

all drink here, don't you?

[15:40:00] (COMMERCIAL BREAK)

NEWTON: All right, really hard to measure, but the U.S. markets are starting off a big week on a positive note. Of course, they are waiting on

that big Fed watch. The policy statement comes out on Wednesday, but this is the issue many people believe that Jerome Powell has already opened the

door to rate cuts.

Now, amid all the uncertainty, investors are fleeing to safety. What is safety, of course? Gold. Gold prices are trading near their highest levels

in a year. Matthew Chamberlain is the CEO of London Metal Exchange and he joins me now live from London. Thanks so much for joining us. OK, true or

false, volatility is my friend?

MATTHEW CHAMBERLAIN, CHIEF EXECUTIVE OFFICER, LONDON METAL EXCHANGE: True.

NEWTON: Guilty as charged. Listen, in terms of developing this market, and really, I think you wanted it to evolve into what it should be. What

should it be? Because I think if you talk to a lot of investors, they are very skittish about this market in general.

CHAMBERLAIN: Yes, I think across the metals' complex, particularly the base metals which are the core of what we do, but also our new precious

initiative. I think there are three big drivers that we're seeing. So, there is the fundamental demand which for many of our metals, copper,

aluminum still seems quite robust.

There are the technical signals and particularly driven by global trade flows and a number of the issues you covered in your previous segment

around the impact of tariffs. And then there is the macro-economic impact because we shouldn't forget, I mean, you talked about gold, but also copper

as well, tend to be macro-economic bellwethers where there is a lot of signals coming in from other markets into metals so they take on a

significant beyond their pure commodity status.

And so, I think a combination of those three factors have certainly driven volatility over the past months, and have made it a very exciting market to

trade.

NEWTON: Yes, and exciting because that volatility obviously comes with a lot of opportunities. I want to get specifically to this precious market

that you were telling us about. We are used to in this new tech age about hearing this or that metal is in short supply.

That one country or the other company controls the full supply or something or the other. What do you think your market will do in terms of really

impacting what we have come to know as that rare or precious metals market?

[15:45:00] CHAMBERLAIN: Well, so with the core precious metals, so gold and silver that they tend to have significant sources of supply across the

world. I think where it gets quite interesting is the rare earths which I think may be -- may be what you're discussing there as well. Where there

are more limited sources of supply.

Now, most of the rare earths don't really trade on exchange at the moment. So, they tend to be priced more in the OTC market. But I think a number of

the concerns that we have seen around potential supply shortage, perhaps the impact of broader national political actions on the availability of

those metals will make their pricing environment more -- put it more into focus over the coming years and certainly a number of those metals we're

actively looking at whether it would be possible to help -- to help the market price and risk manage those materials.

NEWTON: And we will definitely see the evolution of that. The other thing that has evolved apparently is the drinking policy. It came as a surprise

to many of us that you actually had to explain to people that they shouldn't be drinking. I want to take away all the cultural moral, is I

mean, of course, in Europe, a glass of wine was lunch, is you know, it's a normal thing to do. But why did you actually have to change the policy and

tell them?

CHAMBERLAIN: Yes, so I think it's important to see this as the culmination of several years of evolution of behavioral and conduct standards in our

market. And that's not just something the exchange has driven. It's also something that our members have driven and they're very much partners in

this endeavor.

So I think over the past few years, there has been a change in attitude and you're right. You know, people will go and have a glass of wine with

lunch, perhaps when entertaining clients, et cetera, and people will go and have beers with colleagues in the evening. And the last thing that we want

to do is to impact people's personal freedom, their personal liberty to go and enjoy themselves in the way they'd like.

But there are certain functions on our market that are so important, they have to be done well, and they have to be done in an environment that

everybody can look at and say they're comfortable with the conduct --

NEWTON: Right --

CHAMBERLAIN: And trading on our ring, which is the last open outcry trading floor in Europe is one of those things.

NEWTON: Yes.

CHAMBERLAIN: So what we've said is, we'd like to formalize the rule that you shouldn't drink before conducting trade?

NEWTON: Yes, and in that environment you could see how things could get out of hand, I hope all that evolution goes with perhaps having some more

women there trading as well. We'll wait to hear back from you on that one.

CHAMBERLAIN: Absolutely --

NEWTON: OK --

CHAMBERLAIN: Diversity is very important --

NEWTON: We'll have to leave it there, thanks so much. We now turn to India where farming forms a crucial part of the economy, but current

irrigation methods are expensive and difficult to maintain all year round. A start-up called Khethworks is stepping in with a sun-powered solution.

CNN's John Defterios has our report.

(BEGIN VIDEOTAPE)

JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR (voice-over): Agriculture is vital to the Indian economy, 70 percent of the billion-plus population

lives in rural areas, reliant upon farming to survive. For farmers to maximize their capacity to earn a living, water is crucial. Right now,

rural farmers rely on expensive diesel pumps, but MIT graduates behind company Khethworks have engineered a solar solution here in Pune, India.

(on-camera): How did the idea of a solar-driven pumping system actually come to the fore?

KATIE TAYLOR, CEO & CO-FOUNDER, KHETHWORKS: People were saying we need to irrigate year-round, and we can't afford to do it with diesel fuel or

kerosene fuel.

DEFTERIOS: What would you say is the primary motivation of what you're trying to do here?

TAYLOR: Our number one motive is simply to enable small-holder farmers to grow more, earn more and provide more for their families and their

communities.

DEFTERIOS (voice-over): It's not just the cost of energy, but access to water all year long, during the dry season, many of the farmers leave and

actually seek jobs in manufacturing and mining instead.

UNIDENTIFIED MALE: I think this place looks good?

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Let's fix it here.

UNIDENTIFIED MALE: We can get the pump connect it.

UNIDENTIFIED MALE: Yes --

UNIDENTIFIED MALE: Right.

DEFTERIOS: This solar pump is small, clean and easier to install. Retail cost about $540. Khethworks and the NGOs they partner with want to help

farmers microfinance the equipment over time.

(on camera): Is it time to think differently and get away from diesel and kerosene?

UNIDENTIFIED MALE: If they're using diesel and kerosene pump, then it is worse. It's the era of solar and renewable energies. It's a sustainable

way for the farming, it's a one-time cost and there's no maintenance occurs in the solar pump basically.

[15:50:00] You know, money problems --

DEFTERIOS: Plans for expansion are in play.

UNIDENTIFIED MALE: These are the potential areas for installation of solar pumps.

DEFTERIOS: Today, grain and sugar cane farmers are beneficiaries, but there is potential for the fish and dairy industries as well. John

Defterios, CNN, Pune, India.

(END VIDEOTAPE)

NEWTON: "Be glorious." That was Gloria Vanderbilt's advice to women everywhere. Now they are remembering and celebrating her life.

(COMMERCIAL BREAK)

NEWTON: From poor little rich girl to fashion designer and business woman. The world is remembering and celebrating the life of Gloria Vanderbilt.

She died Monday at the age of 95. She was diagnosed with advanced stomach cancer earlier this month. Now, her son, CNN's Anderson Cooper, says she

was determined to make a name for herself on her own terms.

Famous from childhood, she came from one of America's wealthiest and most storied families. Not only a socialite and heiress, Gloria Vanderbilt was

a pioneer in designer jeans, yes she invented that, it was a market in the late '70s and the early '80s. Booth Moore is the executive editor of

"Women's Wear Daily" and she joins me now live from Los Angeles.

I am more than old enough to remember those ads, and I have to say in thinking about her, I still remember her still as a woman whose life you

wanted, and that's an interesting thing because when you think this was before Martha Stewart, this was before Tory Burch.

BOOTH MOORE, EXECUTIVE EDITOR, WOMEN'S WEAR DAILY: Yes, it was before the Beverly Hills "House Wives" going on TV and selling skinny girl margarita

mix and shape-wear. She really was a visionary marketer, and used that in a bunch of different categories, but most famously in Denim.

She was a key pioneer in the designer Denim market in the U.S. and even Calvin Klein kind of tips his hat to her and says she was the first. She

had the foresight to know that she could use her famous name on the most basic of American garments. The humble blue jean and elevate it to a

status symbol.

NEWTON: Yes, and I think most people don't realize to actually brand the blue jean back then. Yes, you had the Wrangler and the Levi's, but no,

this was different, this was high-end, then for that reason, it was much different. You know, Sheila Evans who did the documentary about her life

called her a disruptor, a disruptor. Do you think that's true?

MOORE: I do. I think that, you know, she had become a tabloid fixture at a very young age, and she was determined to kind of turn that around and to

make herself a successful businesswoman.

[15:55:00] And you know, let's not forget that this was the 1970s. That was still somewhat pioneering then. And you know, she saw that she could

fund her artistic endeavors by having this huge empire by making money off of her name, and certainly her approach to Denim was interesting because it

was kind of this -- creating this aspirational luxury that now we talk about so much in fashion where you kind of have a little bit of the park

avenue gloss of her on your own derriere, she used to say.

NEWTON: Quintessential. You know, she was quite an artist in her own right and certainly appreciated that kind of a thing in terms of actually

that culture and appreciating something beautiful for what it was. Do you think it was feminist in a way because certainly as many people point out,

she had enough money, there was no reason she had to go out and make a name for herself and yet, she was a businesswoman before you could even coin the

term.

MOORE: Absolutely. I think that, you know, she wanted to have success on her own terms, as you said, and also you know, we heard her make comments

like, you know, there's something to be said for money that you make on your own. And at one time she was making millions of dollars off of her

clothing, and that way she was able to do things like paint and write books and all these other things that made her such a renaissance woman.

And I really think she was a woman of her time and as time changed, she changed. I think it's remarkable that she -- you know, in the 1950s was

linked to a number of famous men, and including, you know, Gordon Parks who was --

NEWTON: Right --

MOORE: An African-American photographer. I think it's amazing that she wrote an erotic novel at age 85, I mean, talking --

NEWTON: Yes, she broke a lot -- yes --

MOORE: Talking about breaking boundaries, yes --

NEWTON: She broke a lot of boundaries, that is for sure. Thanks so much, I really appreciate it and of course --

MOORE: Thank you --

NEWTON: We know that our colleague and friend Anderson Cooper will of course miss her as well. She will be remembered as an artist, a designer

and a mother. Gloria Vanderbilt was 95 years old.

(COMMERCIAL BREAK)

NEWTON: We are moments away from the closing bell. As you can see there, Wall Street losing a little bit of momentum today, the Dow has come off the

highs and we'll call it flat. So that's it for now, this is QUEST MEANS BUSINESS, I am Paula Newton in for Richard Quest, "THE LEAD" with Jake

Tapper is next.

(BELL RINGING)

END