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QUEST MEANS BUSINESS
Trump Escalates Trade War By Announcing New China Tariffs; U.S. Officials Say Osama bin Laden's Son and Heir is Dead; Trump Offers to Help Putin with Siberian Wildfires. Aired 3-4p ET
Aired August 1, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: The last hour of trade on Wall Street, 60 minutes to go, and today has been simply
strange. I'll go into the details and show you the map.
But all you need to know as we go into the last hour is a sea of green, a wall of green became a sea of red. The markets -- all three indices are
down. And these are the reasons why.
President Trump is ordering new tariffs on China. The timing is curious, coming one day after the Fed cut rates. The Bank of England is holding
interest rates in one place and cutting growth forecasts as Brexit uncertainty is driving down the pound. And in the non-meat was, Impossible
Meat is striking back in a deal with Burger King.
We are alive in the world's financial capital, New York City, glorious day. Absolutely beautiful. It is the first of August. I am Richard Quest, of
course, I mean business.
Good evening. Just look at it. How did a wall of green suddenly turn into a sea of red? A market that had been up 300 points plus, is now down 252
and had been lower, and the reason, new U.S. tariffs on China that has completely rocked the stock market.
President Trump says a 10 percent levy on $300 billion worth of Chinese goods will go into effect next month, and the reaction to the market was
violent. Let's just show you. You do not see this everyday. Come over here.
All right. You do not see a market like that, hitting a tweet, and then going straight the way down. It is extraordinary. The optimism of the day
on the back of the possibility of more Fed cuts because of a weak manufacturing data was outweighed completely by an escalation in the trade
The Dow has now shed 500 points and is falling in the red in a matter of minutes. The volatility has spiked to two-month highs and U.S. oil prices
down some eight percent.
We need to understand exactly why. By the way, the NASDAQ had been up 1.5 percent, now that's just simply gone. It is the most remarkable move and
all because of a presidential tweet.
Cristina Alesci has been following the events of the day, what happened?
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: What happened is everyone thought at the conclusion of the trade talks between
the U.S. and China yesterday that the talks were constructive and that's because the administration signaled as much to the business community.
They said, okay talks are constructive. We didn't make much progress, but we didn't go in the other direction.
Today, it looks like we went in the other direction with the President tweeting that he is going to implement tariffs on $300 billion of Chinese
goods, which by the way, are consumer facing goods. These will hit the U.S. consumer directly.
QUEST: Right now, these are the $300 billion, just to be -- I'm trying to understand. This is a $300 billion remaining that were going to be
tariffed at 25 percent, but then he backed off right after he did a deal with Xi.
ALESCI: Right, at the G-20.
QUEST: The truce.
ALESCI: You're right. Exactly. That was the headline of the G-20. The two leaders met. Trump and Xi. They agreed to call a truce. Everyone
kind of calmed down and said, okay, maybe the deal is not going to be as aggressive as the U.S. would like, but at least it's not escalating. The
tensions aren't escalating, and we're just going to put things on hold, potentially until the election when Trump will feel a need -- a real
political need to get a deal done.
QUEST: Okay. But there is a very perverse view out there today that says -- follow the logic of this -- that says, the President has done this,
because he knows the Fed is most concerned about trade tensions.
So, he is ratcheting up the trade tensions. So the President will cut interest rates in September. Is there is a runner?
ALESCI: It's not an entirely crazy thing to think, given the way that this President kind of tries to manipulate the Fed. But I will say this, the
Federal Reserve is really concerned about the low inflation numbers that we've seen, the persistently low inflation and arguably that is a bigger
concern for the Fed and a much longer term concern for the Fed than this trade war is.
[15:05:05] ALESCI: However, you could hypothetically line up when the President started pressuring the Fed and the Fed reversing course on
interest rates and see that there's a correlation there.
But I do think that this risks when he puts pressure on the Fed like this, it does risk backfiring. For example, yesterday, perhaps we could have had
a 50 basis point cut, but because he was so aggressively attacking Powell, perhaps Powell and others felt like they couldn't give the President 50
QUEST: Good to see you. Thank you.
ALESCI: Thank you for having me. Now, the President's threat of new tariffs, they put extra pressure on the Fed to cut rates again as Cristina
Joining me now, Ben Phillips, the Chief Investment Officer at EventShares. Before we talk about the Fed, let's just factoring this rather
extraordinary development this afternoon, the possibility of another --or a 10 percent tariff and the market. I mean, it took you by surprise -- it
took everybody by surprise. How significant is it?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Well, it matters and I think China is looking to the U.S. just to see some policy clarity. And
you know, I think when there's so much volatility and erraticism in the trade policy, it makes us question whether or not we're going to get a deal
done between now and the 2020 election, even.
So, China, we've seen reports that China is waiting there. They think the longer they wait, the better the deal they get. And this is, you know,
giving them more reasons to buy their time.
QUEST: Right. But the last thing this market needed, a market that was already febrile and somewhat nervous, was gasoline poured on it with the
sort of thing that we got from the President this afternoon.
PHILLIPS: Yes, I mean, the market is, I guess they were a little encouraged by the Fed rate cut and the Fed came out and said, "Maybe we're
one and done.' And now we have trade back on the table.
So it feels like the same things we're talking about, you know, month in month out, it's trade, it's the Fed. That's what's driving markets right
now. It's these big, you know, exogenous factors that are very hard for investors like us to really price in.
QUEST: So how do you? I'm glad you took me there, because that's why you're here. Tell me, I mean, in terms of an investment strategy, what
does one do when, you know, the Fed might cuts again and it might not? And they were quite open about that. It's not necessarily one and done. It
could be a several, and you've got a President doing what he is doing. What's your strategy?
PHILLIPS: Yes, well, I mean, the strategy -- if a personal investor, you know, I think about just owning just a diversified grouping of assets, you
know, and think about having some alternative exposure, having some commodities like gold and precious metals, you know, having some things
that can offset some inflation, and not also think about just having more bonds.
I mean, where are we going with rates next time, when we have a recession? There's not much room, but we're probably going negative in the U.S. And I
know, that's a controversial thing to say, but it's probably where we're going. And that's actually going to be good for U.S. Treasuries.
You know, stocks, I'm still in the camp that over time, people should probably be trimming. People seem to be too exposed to tech stocks, in my
opinion. And that's -- those are still cyclical and I think people forget that. Those are going to do worse than the market most likely in the next
So I just think, you know, being diversified, being cautious and having a lot of dry powder, like cash and short term securities is a good stance
right now when there's so much volatility and uncertainty.
QUEST: Good to see you, sir. Thank you. I appreciate it.
QUEST: Going from the Fed to the Bank of England, which kept rates on hold and lowered its forecast for U.K. growth. The Bank of England says
uncertainty of a Brexit is entrenched and is slowing the British economy. The pound again, fell below $1.21. It recovered marginally.
Anna Stewart is in London. The Bank of England has the unfortunate task of managing this. But from what Mark Carney -- and I know we're going to hear
from him in a moment -- from what Mark Carney was saying, there was -- there are undercurrents that make this situation unique.
ANNA STEWART, CNN REPORTER: Absolutely. So, what he is saying today is that he is taking the government at their word and he is assuming that
there will be a smooth transition after Brexit. There will be a deal and they still expect to raise interest rates in the coming months. That's
despite the negative picture they painted up of a weak pound.
Business investment stalling a one in three chance of GDP potentially going negative in the beginning of next year. But it's a very complex picture.
And it's completely out of step with what the markets priced in.
So here is Mark Carney. You can explain his opinions on this far better than I can.
(BEGIN VIDEO CLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: No deal would very unusually for an economic shock, be an instantaneous shock not just to demand which is
what everybody is used to seeing, but a shock to supply.
(END VIDEO CLIP)
QUEST: Right. So, the instant -- he is referring to the fact that companies will not have goods, they will not be able to get raw materials,
which is what makes this different to other occasions, but how can the Bank of England, how can the BoE be on a rate raising mission if the economy is
going to be weakened, and there's a recession at the prospect of a no deal Brexit?
STEWART: Because in the event of a no deal Brexit, and that's not their assumption, he is saying that he is very concerned about the issue of both
supply and demand and the opposite effects those could have on inflation.
And ultimately, the Bank of England always maintains that it will try and target inflation at two percent. So, he is not promising anything. But he
recognized throughout this press conference that the market has sadly priced in and are expecting rate cuts, the exact opposite to what the bank
is actually guiding here.
QUEST: And in that guidance -- in that guidance, it just shows the complexity, almost to a level of impossibility for analysts.
STEWART: Absolutely. And it also reflects, Richard, the complexity of being the Governor of the Bank of England right now, because he doesn't
speak for the government. They are independent. But of course, he has to take the government at their word.
STEWART: And if Boris Johnson says there is a one to a million chance that there will be a no deal Brexit, they will get a deal. They may have to
base their assumptions on that.
QUEST: And we don't know who is replacing Carney yet, in case I've missed that. We don't know.
STEWART: Not yet, Richard. Job is up for grabs if you wants it.
QUEST: No, thank you. No, I'll take a pass. Anna Stewart in London. A U.S. bank regulator says cybersecurity is the biggest risk to the industry.
The Chairwoman of the FDIC is warning banks, if they don't follow the regulator's cybersecurity recommendations, they could get fined. She was
talking to Matt Egan. Matt joins me now. I got -- when I watched the interview, the Chair is extremely concerned. This is their biggest fear.
MATT EGAN, CNN BUSINESS LEAD WRITER: That's right, Richard. Financial regulators are not messing around when it comes to hacks, nor should they.
All right, banks have just this huge target on their backs. They have all of this confidential, really sensitive information about all of us. The
Capital One hack that we just learned about should really be a big wake up call.
And so I asked the FDIC Chief about this growing problem, and also about how banks in farm states in the United States are being impacted by the
trade war. Let's listen to what she had to say.
JELENA MCWILLIAMS, CHAIR, FEDERAL DEPOSIT INSURANCE CORPORATION: Protecting the banks and protecting consumer data is prohibitively
expensive. If you take a look, some of the banks have spent billions of dollars in IT space. And most of that goes to cybersecurity and anti-money
laundering efforts. And not a lot of banks have that much money to invest.
So it's something that we're monitoring, making sure that the risk profile of the bank is measured to how much money they're spending, and how good
their defenses are.
EGAN: The FTC recently fined Facebook $5 billion dollars. Would you be in favor of fining an FDIC regulated bank that suffers a major breach if you
find that the cyber defenses were weak?
MCWILLIAMS: So frankly, we would have to take a look. The way we would approach this is we will take a look at their cybersecurity and the
structure during the exam. If we find deficiencies in the exam, we will note that the bank. We issue anything from the matters requesting --
requiring board attention to matters requiring attention. We will give them a list of those issues to fix.
And then we would monitor progress to make sure that they have fixed them between that exam and the next exam. And we may do like a spontaneous exam
in the meantime, just to make sure we understand how they're doing on progress.
EGAN: But if a bank did not fix those deficiencies that you found and then suffered a breach, would you be in favor of the FDIC fining?
MCWILLIAMS: We could certainly have an enforcement action against that banking.
EGAN: Including a fine?
MCWILLIAMS: Including a fine. Yes. And their management rating and their CAMELS ratings would go down, because they are not continually working on
complying with our requests. And it's something we take very seriously.
EGAN: Is cyber the biggest risk facing banks right now?
MCWILLIAMS: It depends on what banks you're looking at. For the large banks and the banking ecosystem as a whole, yes, I would say that's the
EGAN: The delinquency rate on agricultural loans is at an eight-year high according to the St. Louis Fed. How concerned are you about that? Do you
worry that if the trade war continues for much longer, it'll cause some problems for banks?
MCWILLIAMS: That's certainly something we're monitoring very closely. Farm land prices remain high and so long as the farmers have some equity in
their land, there's a way to secure those loans even when delinquencies happen.
Having said that, we have to monitor this very closely because at any point in time, that tide will turn further and we may experience more
delinquencies, which then become very difficult for those communities and our Ag sector.
QUEST: Interesting thing about that, isn't it? The FDIC is well and truly in the heartland of America, I mean, obviously for your savings and loans,
but you know, they ensure the accounts. They know what's going on in those rural areas.
[15:15:02] EGAN: That's right. That's what they're there for. And you know, what's interesting is the trade war is a dark patch in really what is
an otherwise bright backdrop for the American banking industry. Right? Profits are up. They are near record highs and there's very few problem
banks. There's very few banks that have failed, none in the first quarter.
But we do have to watch out for this impact on the trade war, which is seemingly on again and off again and as we found out today, it's on again.
QUEST: Good to see you. Thank you. Coming up, as we continue, the British government says it is turbocharging its work and preparing for a no
deal Brexit, as a contingency, cash pile grows nearly $8 billion.
And refugee women could give the world's economy a massive shot in the arm if they just had a level playing field. The former British Foreign
Secretary, David Miliband will be here to explain.
QUEST: The British government is to spend an extra $2.5 billion to prepare for the disruption of a possible no deal Brexit. The new Finance
Secretary, Chancellor of the Exchequer, Sajid Javid said the funding will ensure the country's wealth and ready to leave the E.U. on October 31st
with or without a deal.
It will be used for border preparations to support businesses and to ensure their supply of critical medicines.
David Miliband was Britain's Foreign Secretary under Prime Minister Gordon Brown, now President and CEO of the International Rescue Committee. He
joins me now and Mr. Miliband, as always, we will be getting as I think, you know, to your report on refugees in just a moment, as well. But we
have plenty of time to talk about that.
But before we do, let us just spend a moment or so talking about these preparations that are being made for the no deal Brexit and the money
that's being spent.
Does it seem to you from what you're hearing that there is now an almost acceptance that no deal will be the way forward?
DAVID MILIBAND, PRESIDENT AND CEO OF THE INTERNATIONAL RESCUE COMMITTEE: Good afternoon, Richard, it's good to be on your show. I think that the
British government is giving every impression of driving headlong towards the cliff edge.
Now there are two explanations about why they're doing that. One is that they actually intend to drive off the cliff come hell or high water because
they're so convinced that leaving the European Union will be so good for the country and that it is worth all the cost.
[15:20:02 ] MILIBAND: There's a second school of thought, which says that they are really trying to increase their leverage over the European Union
and that they are trying to get the European Union to make a compromise.
My own view is that they're stuck between those two. They've got a fanciful view that the European Union is going to shift on its absolute
commitment to maintain the integrity of the single market, and on the other hand, a rather Panglossian view of the damage that no deal would do, they
are rather sanguine about the dangers.
And one thing that your viewers should know is that the phrase no deal doesn't really conjure up what Britain leaving the European Union on the
31st of October without any agreement with Europe would mean. It would be no relations with the European Union of any kind on the economic front, nor
on the political or the security front.
QUEST: So in relation to that, though, I guess, there's nothing wrong now though with Boris Johnson -- Prime Minister Johnson saying, "Look, there's
a new government. We couldn't get that deal through Parliament three times," not once, not twice, but three times.
So no matter what they did before, the required ratification process of which you are very familiar was unable to, we've got to go back and
renegotiate. That's a perfectly valid position for him to take vis-a-vis the E.C. and E.U.
MILIBAND: Well, I would say very humbly submit to you that if he wants to renegotiate with the European Union, he needs to change his own red lines.
The European Union has been absolutely clear that as soon as Britain drops its insistence, for example, on leaving the single market, leaving the
Customs Union, it will be able to move.
But given the commitments that Britain has made under the previous government and under the current Johnson government, that it wants nothing
to do with a single market and nothing to do with the Customs Union, but does want to avoid a hard border in Northern Ireland, there's a very clear
consequence for the European negotiating position.
QUEST: Is it your view that this circle cannot be squared. It is Northern Ireland, Good Friday Agreement -- as Foreign Secretary, you've dealt with
these matters many times and in extraordinary detail. Can you see a way short of just saying you can stay in everything while you negotiate the
Free Trade Agreement, you could have all the benefits until the new Free Trade Agreement is put in place and signed and sealed. Is there any other
way around this?
MILIBAND: Well, there's no way around the Bermuda Triangle that the last British government and the current government have created, which is to
say, out of the Customs Union, out of the single market and no to the backstop. There isn't a way around that because the backstop is an
insurance policy against the failure to conclude a Free Trade Agreement, and thereby ensure that there is maintenance of the integrity of the single
market and avoidance of a hard border in Northern Ireland.
QUEST: Let's turn to other matters. Now, your organization, the refugee women could contribute an additional $1.4 trillion to global GDP if the
discrimination and the various scourges they face were removed. That's according to a new report by the IRC and the Georgetown Institute for
Women, Peace and Security.
Mr. Miliband, I can see the logic that says if women were able to play a full role in the economy, but the obstacles, David, the obstacles to being
able to do so as refugees are simply enormous.
MILIBAND: Well, you're right that in countries as diverse as Lebanon and Germany; one, a developing country that has taken on about one and a half
million refugees in the case of Lebanon; the other highly advanced economy Germany with also with one and a half million asylum seekers.
In both those countries, the female employment rate is only six percent and there is a large level of gender pay inequality. In Turkey, which is the
country that has more refugees than any other country in the world, about three and a half million from Syria, there is a 94 percent gap between men
and women in their pay rates.
And what we're saying is that there are two problems; one, the gender pay gap, and second, the underemployment of refugees when they arrive in
countries and we're arguing that there is a package that could tackle both those problems and turn these people into net contributors to the societies
that they're arriving in.
QUEST: But what is that package? Because these people arrive with not known skills or in many cases, provable skills, in terms of certificates or
whatever it might be. So by definition, they will not be necessarily practicing the professions or careers for which they have been trained, so
what needs to be done?
MILIBAND: I think there are three or four key elements first, in some countries, refugees are simply not allowed to work, so you have to lift the
ban on them working. Secondly, you have to recognize the qualifications of those who haven't got them.
[15:25:10] MILIBAND: I mean, there are people coming out of Syria, which, after all, was a middle income country who do have qualifications and you
have to recognize them.
Third, the refugees have to be able to integrate into the societies that they live in. I think I'm right in saying that about two thirds of the
Syrian refugees in Germany have now learned German, that's important, they have to be part of the training system.
There's one other point that is absolutely critical. The countries like Lebanon, or Jordan, Uganda or Ethiopia, that are hosting large numbers of
refugees, they need to be given international macroeconomic support to ensure that they're able to support their own populations, as well as the
refugees who are arriving. This has to be a win-win, because if it's only for the refugees, and not for the host populations, you're storing up huge
trouble for the future.
QUEST: And that you see most clearly in Jordan, which has a disproportionately large number of refugees, it has an economy that is
seriously struggling. We've had the Finance Ministers from Jordan on over many years, all saying the same thing. How are we expected to create an
economy for our own people and feed these million people that are over the border?
MILIBAND: That's a really good point. Jordan's debt to GDP ratio has gone up from about 54 percent to 55 percent in 2010, just before the Syrian
Civil War to about 95 percent today. And so you can see that there is a stark correlation between the pressure -- the macroeconomic pressure --
that exists in the country and this extra caseload of between 650,000 and a million people who've arrived in the country.
Our argument is that if you give the right macroeconomic support, and at a micro economic level, if you were to ensure that employees can find the
jobs, if refugees can get to jobs, we work in Jordan extensively as an international aid agency. And so we've shown how at a local level, you can
make the links that get the refugees into work, you can get a win-win, but it requires the international community to step up as well as the local
QUEST: David, good to see you, sir. I appreciate you taking time this afternoon. It is much appreciated.
MILIBAND: Thanks for your time, Richard, I appreciate it. Thank you.
QUEST: Thank you very much. And the markets, we need to attend to at the moment. Well, we're holding our own. Things aren't getting any worse, but
they're not getting any better either. As you can hear, I think it's almost no chance of a positive outcome today. I'd be very, very surprised
if that --
But that's the way the markets are in New York at the moment. And it is absolutely because of the President's tweet, which took the market down
just shortly after half past one.
The Chair of the Fed, Jerome Powell says the trade war is the greatest current threat to economic expansion in the U.S. Donald Trump adds more
tariffs and risks bringing these tensions to a boil.
QUEST: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS in a moment, as you might expect. There are more on President Trump's new
tariffs on China. Why now? Why on this random Thursday in August should he suddenly decide to announce a 10 percent, not even the original 25 percent
or 20 percent that was going to be done.
And Impossible Foods is tying up with Burger King. We're going to hear from the CFO of the company, as you and I continue our conversation
tonight, this is CNN and on this network, the facts always come first.
Donald Trump is escalating the trade war between the U.S. and China. The U.S. president says he'll impose an additional 10 percent tariff on $300
billion worth of Chinese goods to start on the 1st of September, that effectively would put a tax on all Chinese imports entering the United
The U.S. now believes Osama bin Laden's son, Hamza bin Laden is dead. A U.S. official who says the assessment was based on recent evidence. It's
not known when, where or how bin Laden died. The official says the U.S. played a role. Hamza bin Laden was believed to be an emerging leader in al
President Trump has offered to helping controlling the wildfires burning in Siberia during a call with the Russian President Vladimir Putin. The
Russian military planes have been mobilized to try and control the damage, an area roughly the size of Belgium is still on fire.
In Sweden, a new video has emerged showing the street fight that's landed the U.S. rapper ASAP Rocky in jail. Now the footage is from his Instagram
account. Rocky and other men faced assault charges over the June incident. A Swedish prosecutor says they kicked another man and beat him with a
bottle. The rapper says he was defending himself.
The Trump administration's internal debate over what to do with Iran is now playing out in real-time. The State Department's extending waivers for
countries still in the Iran nuclear deal after they serve the 90 days. Russia, China, the other signatories can continue working with Tehran
without fear of retribution from Washington. That's on the one side.
Hours earlier, the Treasury Department followed through on weeks of threatening to place sanctions on the Iranian Foreign Minister Javad Zarif.
The Treasury says Zarif's property and interests in the U.S. will be blocked, but he says no matter, he has no property or interests outside of
Kylie Atwood is at the State Department. Let's do Zarif first. It is a very strange business, isn't it? This man travels the world in pursuit of
the diplomacy for Iran, he's highly respected. How will this effectively - - how will this hit him?
KYLIE ATWOOD, CNN NATIONAL SECURITY REPORTER: Right, so he is their primary interlocker that are with the world, and especially traditionally
with the U.S., he was one of the primary points of contact for the Obama administration when they were going through and creating the JCPOA.
But the Trump administration is now saying that they want to deal with someone who is more of a significant decision-maker. Now, the president of
Iran just tweeting out today, well, who better to deal with than the Foreign Minister? And that's a question that we don't really know the
The Trump administration has been upping the ante on Iran with sanctions, time and time --
QUEST: Right --
ATWOOD: Again over the last two years in exiting the Iran nuclear deal. But the Trump White House still saying that they would be open to
negotiations with Iran. So, the question is, who are they looking to negotiate with now?
QUEST: All right, and this idea of extending the waivers on the other JCPOA countries, I mean, the rest of those countries would arguably say
we're sovereign, we can do what we like anyway.
[15:35:00] But that's also sending a very strange message or a mixed message, isn't it?
ATWOOD: It is. I mean, it's a question here of how hard the administration is going to go on these policies, and how hard they really
can go. Of course, they've been saying time and time again that any entity or country that is importing Iranian oil for example is going to be subject
to U.S. sanctions.
But they have only sanctioned one Chinese entity for importing that oil, and we know that other entities are importing Iranian oil --
QUEST: Right --
ATWOOD: And not following U.S. sanctions. So, there is a bit of a divide there between what they're saying and what they're doing, and then again,
this comes up today as they continue to put these waivers forward then allow certain activity that was allowed under the JCPOA, but the U.S. --
QUEST: Right, Kylie --
ATWOOD: Administration, the Trump administration isn't part of it.
QUEST: Kylie, thank you, come back when you've got more on details. Tariff man is back at it the day after the U.S. Fed cut interest rates and
warned trade tensions are a threat to the economy, Donald Trump says starting September the 1st, he'll put a small tariff on the 10 percent of
the remaining $300 billion of goods and products coming from China. The Fed board meets amid next September. Clare Sebastian is here, Clare, why
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: I mean, I think, Richard, you just hinted at it in the introduction there. We just had a rate cut
yesterday, now we get this additional tariff, the president has been very cool about the fact that he wanted a bigger rate cut than the one he got.
He thinks the Fed hasn't acted fast enough -- look, I'm not making a direct connection here. We know that the talks between the U.S. and China ended
this week without much of a breakthrough with mud-slinging continuing between the two sides, but the timing is significant.
QUEST: Let me pull this apart and question you. Did the Fed yesterday say that trade tensions were part of the reason why they were cutting rates?
QUEST: Did the Fed go on to say that one of their principle concerns -- in fact, it was in the statement was global development?
QUEST: Did the president continue to say last night, they hadn't done enough?
SEBASTIAN: He did. All of these things are true, Richard, and you know, looking ahead of the timeline, September 1st is when these tariffs are due
to come into force, and that's just a couple of weeks before the next Fed meeting in September, 17th and 18th, September 18th will be the decision.
So, I think, you know, this does certainly ramp up the pressure on them, and Jerome Powell was actually really interesting what he was saying
yesterday. He made it very clear that they're in unchartered territory. That this is having to be handled, this whole trade uncertainty an entirely
And that we talk about these new tariffs in a way they're going to be a direct hit on consumers, but it's not just about the direct hit. There's
uncertainty that's been corrosive to businesses and the economy. Jerome Powell talked about it, they're holding back on investments, it's already
QUEST: You see that's something I think we need to talk more about. This -- we know that there's a global slowdown under way, the IMF, the OECD,
they've all talked about it. It is the biggest single problem at the moment. But I think it comes with global economics --
SEBASTIAN: Right --
QUEST: But the trade -- the trade war cancer is hitting where?
SEBASTIAN: I mean, all across the economy, Richard. I think we can pull up some of the stocks that are most affected today. We see the retailers,
for example, we know that they haven't had so much of a direct hit yet because we know the consumer products have been insulated, but a lot of
them have been saying -- Hasbro for example in their recent earnings report that they've had to stockpile products, they've been bringing extra
inventory in over the Summer in preparation for something --
QUEST: There you go, look, Dow --
SEBASTIAN: That costs money --
QUEST: Nike, Caterpillar, Boeing, everything, the market is down overall. So, well, of course, it's down so everybody will fall --
SEBASTIAN: Right, and Caterpillar brings me to the third aspect of this, which is of course the global slowdown, the slowdown in China which has
been made worse by this trade war. Caterpillar saw its sales in China fall off a cliff in the last earnings report, that hit them.
So, American companies don't want China to slow down, they rely on that market. This is got so many different strands to it, Richard.
QUEST: Good to see you, thank you. Now, imagine, we're all under 26 and you're not earning a fortune, you're not a high earner, but you've got
about $25,000 a year as you're income. In Poland, as of today, you won't pay any income tax. I speak to the Polish Prime Minister about this
unusual initiative in a moment.
[15:40:00] (COMMERCIAL BREAK)
QUEST: The Prime Minister of Poland tells me his country must stop the unprecedented brain-drain it's experienced since joining the EU in 2004.
And to do that, they're going with a novel economic initiative, scrapping income tax for all workers under the age of 26 whose salaries fall below
relatively a high threshold.
The exemption takes effect today and the Prime Minister told me why it was necessary.
(BEGIN VIDEO CLIP)
MATEUSZ MORAWIECKI, PRIME MINISTER, POLAND: We want them to stay in Poland, we want them to find jobs to quickly gather some experience and not
to immigrate. We don't want to be an aging state, a dying state. We want to be a state with future, and this is why we have introduced this.
It is at some cost to our budget, but our budget is very close to being, you know, balanced. So, we will manage to accommodate this cost. But this
is for me a great investment into the future of our country.
QUEST: The country has lost effectively the population of Warsaw since it joined the European Union, which is a startling number. But will just a
tax benefit on its own do the trick? Don't you need to create opportunities and careers for people as well?
MORAWIECKI: Of course, it's not only tax cuts. It's, in particular, creating new jobs, welcoming all the investors from all over the world. We
have actually been very successful in attracting newer green-field projects, green-field investment from all over the world. It was a great
loss. You are right, actually, 1.5 million to 2 million people left Poland after we have joined the European Union in 2004, and this is the size of
So, we had to stop it, we had to somehow manage to reverse this trend and this is what we have done.
QUEST: How are you going to prevent employers, just lowering wages? Because obviously, if you were going to pay a certain amount in tax, and a
scrupulous employer might just simply say, well, I'll just pay the person 18 percent less, there will be no different after or there will be no worse
off, and I'll save money on the wage bill.
MORAWIECKI: But we have several tools to actually accommodate this or to fight this behavior. One of them is increasing minimum wage. Minimum
wage, just 15 years ago was on the level of $200 only, and this was one of the reasons why younger generation so easily got the free --
QUEST: Right --
MORAWIECKI: Education in Poland because university education is free in Poland, and then they went abroad. So, Poland paid for richer England,
richer Germany and richer France. We, of course -- we didn't like that it was a waste from economic point of view, it was a waste of resources and
human resources are the most vulnerable resources.
[15:45:00] So, we are increasing the minimum wage and through this, we are indicating to our employers that, you know, we -- they have to invest in
skills, they have to invest in education, in qualifications, and this is what they do.
QUEST: Thank you, Prime Minister, now, all you have to do is raise the tax free limit and age to 57 or 58, and I'll move to Poland for a tax-free
salary. How does that sound?
MORAWIECKI: Richard, it sounds very good. I can already tell you, we are reducing our personal income tax from 18 to 17, which is way close to 6
percent, so, it's quite likely that many people from abroad, many experts, specialists and great journalists will come to Poland to work. All are
(END VIDEO CLIP)
QUEST: There we go, a cut in salary. Just go to Poland, I'll do the program from there. Get a tax-free salary. Well, it's not a bad idea. As
you and I continue together tonight, first, it was the cola wars, now it's fake meat wars. Impossible Foods gets a sizable major boost from Burger
King with its new meatless whopper. We'll talk about that, so stay with me -- after the break. Try it and don't taste the difference. Impossible.
QUEST: The Burger King slogan is well known. It is "have it your way." And starting next week, vegetarians can too. Burger King will begin
selling meatless whopper, and it will be doing so using the Impossible Foods patty. This is what it will look like with all of its accoutrements.
Now, it's a major victory for Impossible which is fake meat competition growing absolutely intense.
We've talked about it a lot on this program, you and I, we've done many taste tests. But if you actually look and see on the commercial side just
how it's going, never mind in supermarkets, just look at it. Impossible Foods is now in Little Caesar's, White Castle, Red Robin, and of course,
The competition, they will necessarily disagree when I say the main competition, but Beyond Meat is in Dunkin', Tim Horton's, some of them are
in both, as you can see there, and in TGI Friday's. Impossible now plans to be in grocery stores by the end of this year.
[15:50:00] Which, of course, is where Beyond already is. David Lee is the CFO of Impossible Foods. David, good to see you.
DAVID LEE, CHIEF FINANCIAL OFFICER, IMPOSSIBLE FOODS: Good to see you --
QUEST: Thank you --
LEE: Thanks for having me.
QUEST: Now, all this is meat laden because --
LEE: Yes --
QUEST: Your food isn't there for a bit longer.
LEE: Oh, a week, you know, by next Thursday on the 8th of August, soon, everyone can enjoy an Impossible whopper across the U.S.
QUEST: How significant is it to get into somewhere like Burger King? Because with thousands of stores.
LEE: Yes, 7,200 locations in the U.S. alone. I think it's incredibly significant. Not just because the number one complaint had been, when is
the Impossible burger coming to my city? We can now say, we have a great partner in making it as close to every city as possible. It's also
important because the fans of a great whopper really appreciate great meat.
They're meat eaters. They're not the vegans or the vegetarians of the world. They're ones who really appreciate a meaty delicious whopper. And
that's why it's important.
QUEST: Right, so you're very much banking or Burger King is banking on people saying that given the choice with my whopper, with fries, I will
have an Impossible plant-based versus the real McCoy.
LEE: Well, why not? I mean, it tastes great, it has no cholesterol, it's better for the world. It makes people feel a little bit like they're not
compromising, and we found that it actually helps the overall ring of the story. It doesn't cannibalize as much as you might think.
QUEST: The closest we can get to the understanding of the market values of this of course is your competitor Beyond because they are quoted, and look,
600 percent, 700 percent since they IPO-ed -- let's forget the whopper this week because of their discounted listing. But it does tell us that you and
Beyond are going head-to-head. What's the difference between the two of you as you said?
LEE: Well, I feel we go head-to-head with beef, and the way we compete with beef is on the same ways that the meat eaters want us to compete on
taste. It's the number one reason why meat eaters pick what they pick. And often, people have asked me about this Coke versus Pepsi notion --
listen, meat is desired in every meal; breakfast, lunch and dinner.
And while Pepsi and Coke are phenomenal brands, I don't know that everyone wakes up in the morning, asking which one they're going to pick for --
QUEST: But does between yourselves and Beyond, and I do understand that you -- you know, you probably spent most of your waking time when doing
interviews, trying to answer questions about what's the difference between you and Beyond. And do you think ultimately, though, this will be between
you and Beyond or will the really large food processors and manufacturers, they're going to come in sweeping and steal your lunch?
LEE: Well, hopefully, no one will steal my lunch. I'm a meat eater, by the way, and we meat eaters, we want products that hit the spot, that are
craveable. I think in the end, I'm in --
QUEST: But who else are you frightened of? Who else are you frightened of in terms of the mills companies, the large agri-country companies that
could absolutely cream you?
LEE: We obsess about how well we perform versus providers of meat from animals, because we know that is the predominant market for us. Ninety
five percent of our consumers raise their hand and say, I'm a self-avowed meat eater. So, we worry, we obsess, we out-compete on a level-playing
field, the providers of meat from animals today.
That's the real market. It's a rising tide for anyone who offers a better product in our view, and that's why we really don't see Beyond Meat as our
QUEST: OK, so, let's take Beyond Meat off --
LEE: Sure --
QUEST: But there are vast conglomerates, General Mills for example, who could get into this. Look, I mean, I'm not saying Krafts of this world,
but the packaged goods companies that could decide to get into this.
LEE: You know, it's so interesting, everyone talks about getting into this business or a new category that's been created. And candidly, our view is
there's no new category, Meat eaters forever have been looking for something better, something that hits the spot, but has no cholesterol or
is better --
QUEST: I don't doubt that, I'm talking about the provider of this meat or this artificial meat.
LEE: And despite having all of these very large companies --
QUEST: Right --
LEE: So, for decades, have been serving the meat eater, no one has, until us, brought something better. We will compete on innovation. We will
compete, betting that the meat eater, the consumer will make the choice they want. All we got to do is give them a better product.
QUEST: Fascinating, you're going into stores because that was -- that was obviously what Beyond started off with, and they -- I mean, you literally
got in sort of opposite directions to meet in the middle. You're in stores, they're now in more -- in restaurants. Which will be -- do they
feed -- pardon the pun, do they feed on each other?
[15:55:00] They buy in the store, you try in the restaurant, you try in the restaurant, you buy in the store?
LEE: Well, what's incredible about the meat eater is when a meat eater goes into a restaurant, they want something new. They look for the special
of the day and they can know within an instant, everything they can purchase because they look at the menu, whether it's a counter menu or it's
a sit-down menu. That same meat eater in a grocery store, they have a bias against plant-based products because up until now, no one has really
delivered on taste.
We think both are important. We think the retail channel and the food service channel are important.
QUEST: Good to see you, sir --
LEE: Good to see you --
QUEST: All I know is that if there's one thing I could ask more about when we do this story, it is the meat. Thank you very much.
LEE: Thank you.
QUEST: I need to look at the markets and I do need to look at the markets because whilst we've been talking, it has been a particularly grim -- look
at this. Goldman is now down 4 percent, Cat is off 3.75 percent, Boeing is down 2.2 percent, horrible day. And we're off 303 -- 309 points, and this
is -- I'm going to call it for what it is.
We are down this amount because the U.S. president tweeted two and a half hours ago that he was going to impose tariffs on China, 10 percent tariff,
it comes on top of a 300-point fall. Today's range has been 600 points. I'll give you a profitable moment after the break.
QUEST: Tonight's profitable moment -- it's such a disgrace. The president tweets two and a half hours ago that tariffs are going to go up on China
and the market literally turns turtle. We've been through 600 points, and there is no reason why on August the 1st, the president should suddenly
decide to announce he's raising tariffs just because the talks have come to an end.
Talks, by the way, which they described as constructive, and with the next set of talks taking place in September. But no, this is purely and simply
to put pressure on the Fed because the president knows that the Fed is watching global developments, particularly, the trade tensions, and that's
their biggest worry at the moment.
So, let's turn up the heat, let's turn on the pressure cooker, and see what the Fed has to do about whether they cut rates in September. That's what
today's tweet is all about. And the market will be paying the price for days ahead. And that's QUEST MEANS BUSINESS for tonight, I am Richard
Quest in New York.
Whatever you're up to in the hours ahead, I hope it's profitable. The Dow is down, the bell is ringing, the day is done.