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Putin Orders Military to Prepare Response to U.S. Missile Test; World Leaders Hope for No Drama as Trump Heads to G7 Tonight; China to Impose New Tariffs on $75 Billion of U.S. Goods. Aired 9- 9:30a ET

Aired August 23, 2019 - 09:00   ET

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

[09:00:06] ANNOUNCER: This is CNN Breaking News.

JIM SCIUTTO, CNN ANCHOR: Good morning. I'm Jim Sciutto, in Washington. Poppy Harlow is off today.

We begin this morning with breaking news. The U.S.-China trade war reaching a new level. Just moments ago, China announcing it will impose $75 billion in new tariffs on U.S. goods. It comes as President Trump is set to depart later today for the G7 summit in France with some major economic questions here at home.

Let's get straight to CNN's Alison Kosik with more on those tariffs. And Alison, crucially how the markets are reacting to them?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes. This latest escalation, Jim, in the trade war is pushing U.S. futures down. We did seem them in the green but we saw them virtually do a U-turn. So it looks like the Dow could open as much as 140 points lower once the opening bell rings in about an hour.

What the Chinese said was they have to impose these counter measures because of the Trump trade war. And what they're going to do is beginning September 1st and December 15th they're going to impose a 5 percent to 10 percent tariff on $75 billion of goods that they import from the U.S. Now if you remember those dates, they pretty much mirror the dates that President Trump has on the tariffs that are imposed on Chinese imports on those $300 billion of Chinese goods and that 10 percent tariff.

So, this is clearly yet another step, another escalation in this tit- for-tat tariff war. And what's interesting is the timing of this. This is happening on a day that kind of -- this kind of stole the show, meaning what's happening in Jackson Hole, Wyoming. We've got a meeting of central bankers of the Fed at this big conference where Wall Street is keeping its eyes on because it wants to kind of get an idea about whether or not Jay Powell, the head of the Fed, is going to go ahead and cuts rates again at its next meeting in September.

And this comes of course on the backdrop, Jim, of the economy showing cracks. We did learn yesterday that the manufacturing sector contracted for the first time in a decade -- Jim.

SCIUTTO: Those numbers indicative. Alison Kosik, thanks very much.

Joining me now from the White House CNN's Sarah Westwood.

Any reaction from the White House yet to these new tariffs by China?

SARAH WESTWOOD, CNN WHITE HOUSE CORRESPONDENT: Well, Jim, this is another wrinkle in the president's trade strategy. It's coming as he is trying to assure the public that his trade approach is working as there are fears of an economic downturn.

Now, we've asked the White House. We haven't yet gotten a response to this specific escalation in the China trade war. But it comes after a period this summer of relative calm between China and the U.S. after the president sat down with Chinese President Xi Jinping in Japan at the G-20 Summit. There was something of a cease-fire, he had delayed a new round of tariffs, but changed earlier this month.

We were not seeing a lot of progress in the U.S.-China trade negotiations and the president threatened to reimpose some of the tariffs that he had delayed ahead of that meeting with President Xi. Now last week the president delayed some of those tariffs amid fears, according to sources who spoke with CNN, that those tariffs could affect the Christmas shopping season, but still we are seeing these retaliatory tariffs from China just as President Trump and his advisers are working to assure the public that the tariffs won't affect economic growth.

There is anxiety within the White House, Jim, that an economic downturn could affect the president's re-election prospects next year.

SCIUTTO: Sarah Westwood at the White House, thanks very much.

Joining me now is one of the president's advisers, Peter Navarro. He's the director of the Office of Trade and Manufacturing Policy in the White House and directly involved in the U.S.-China trade talks.

PETER NAVARRO, DIRECTOR, OFFICE OF TRADE AND MANUFACTURING POLICY: No anxiety in the White House about the economy. What we see --

SCIUTTO: Well, I do want to get to that.

NAVARRO: Yes.

SCIUTTO: But first I want to get your reaction to $75 billion in tariffs.

NAVARRO: Sure.

SCIUTTO: Will the U.S. retaliate to these tariffs?

NAVARRO: So, this was a move that's well signaled. I think what's important here, looking at the chessboard, is that you have a president in 2 1/2 years who's united this country and Capitol Hill against a China which is stealing our intellectual property, forcing technology transfer, dumping fentanyl -- SCIUTTO: Well, I'm aware of that. And I've done a lot of --

(CROSSTALK)

NAVARRO: We got to stipulate that.

SCIUTTO: I've done a lot of reporting on that. I do want to get your reaction to this, though.

NAVARRO: My reaction is this.

SCIUTTO: Because this is a significant move by China.

NAVARRO: It's -- my reaction to this is when China reacts like this what they simply do is strengthen the resolve of this president and they signal once again to the American public that China wants to buckle our knees so that they can keep having their way with us. So, this was a move that was well-signaled. It's not -- it's breaking news I guess, but it was well anticipated. And I can assure you this. If in Jackson Hole today Jay Powell announces rate cuts or that he simply says the Fed has America's back, we'll see the Dow go up by 300, 400 points.

This is what's more important here. What's happened --

SCIUTTO: Well, I know you and the administration want to focus on the Fed, but that's not where the --

NAVARRO: We're more focused on the economy.

[09:05:03] SCIUTTO: It's not where the business world is. The "Wall Street Journal" piece yesterday, in markets and boardrooms, the trade war leaves a bigger mark than the Fed. As my colleague Alison Kosik mentioned, the manufacturers purchasing index for August fell just below 50. That indicates a contraction. That's a 119-month low.

NAVARRO: So, yes, let me respond to those two things. First of all, the "Wall Street Journal," it's when the main street journal starts criticizing this administration, that's when I worry. We've created over 500 manufacturing jobs and the "Wall Street Journal" has been on record that manufacturing would never come back to America. So they're just flat-wrong about that.

SCIUTTO: But they're talking to business leaders --

NAVARRO: In terms of the PMI, this manufacturing index, we saw the Q2 numbers very clearly that instead of having 3 percent growth we were down at 2.1 percent. And if you unpack those numbers the biggest problem, Jim, was the Fed with the high interest rates driving up the currency and taking away our exports.

SCIUTTO: That's your view. But that's not the view of businesses --

NAVARRO: Well, those are the numbers.

SCIUTTO: Businesses are talking about trade uncertainty because they can't make -- they're delaying purchases because of uncertainty about Chinese markets.

NAVARRO: Let's just agree on this. If we lose two-thirds of a point of growth in our GDP equation in Q2, all right? Would we agree that a higher currency because of the Fed's interest rate policy might have had something to do with that?

SCIUTTO: Well, listen. I'm not --

NAVARRO: Can we agree to that?

SCIUTTO: I'm not an economist.

NAVARRO: Well, I am.

SCIUTTO: And I'm sure that's part of the --

NAVARRO: And I'm telling you --

SCIUTTO: I'm sure that's part of the piece.

NAVARRO: I'm telling you flat-out that here's the problem and this is why Jackson --

SCIUTTO: Well, what business leaders are saying is they can't make investments because they don't know if they have the -- if they have markets in China to buy this stuff.

NAVARRO: They can't make investments because the Fed has interest rates, they raised them too far, too fast. I mean, look.

SCIUTTO: That's not what the business leaders say.

NAVARRO: That policy -- you know, central banking 101, Fed policy is, if you raise interest rates, you cut down investment and you cut down exports with currency effect. So what's important today -- look, this is big day, tomorrow is a big day. It's a big day today because we're going to get better signals from the Federal Reserve as to whether they're going to get in line with over 30 central banks around the world that have been cutting rates.

Think about, Jim, over 30 central banks. OK. Are they going to keep raising rates or keep them up there? And then the other thing this weekend which is really important, here's what's bullish for me, the European Central Bank has announced that they're going to be cutting rates. A stronger Europe is going to be more export demand. There's top --

SCIUTTO: Germany is in recession already and Britain had --

NAVARRO: Yes. Glad you mentioned that.

SCIUTTO: Britain had a quarter in recession already.

NAVARRO: I'm glad you mentioned those two countries. There's talk now of Germany abandoning its so-called black zero policy.

SCIUTTO: OK.

NAVARRO: Which is -- meaning that they're going to engage in fiscal stimulus. That could be the biggest thing to help Europe go up. And by the way, Brexit is going to be resolved by October 30th with Great Britain. We're going to get a trade deal with them.

SCIUTTO: Well, we'll see.

NAVARRO: And --

SCIUTTO: The markets have more uncertainty about that.

NAVARRO: And we're going to see more investment like that.

SCIUTTO: Let's talk about the U.S. economy. You say the White House is not concerned. Why --

NAVARRO: I'm saying that -- I didn't say that.

SCIUTTO: Why is the administration then preparing options to respond?

NAVARRO: I said that we don't run around the West Wing with anxiety.

SCIUTTO: OK.

NAVARRO: We look at the chessboard and we see basically a strong Trump economy growing at 2 percent because of tax cuts, deregulation, cheap energy and trade. We think we can get --

SCIUTTO: Are you seeing indications of that growth slowing?

NAVARRO: We can get to -- well, we went from 3 percent to 2 percent, and our read of that is it's a pure Federal Reserve effect on higher interest rates and higher (INAUDIBLE).

SCIUTTO: But that's your read but that's not what business leaders are saying.

NAVARRO: Well --

SCIUTTO: Business leaders -- I've talked to farmers, too. Farmers have lost markets in China.

NAVARRO: I can't -- all I can do is come here and have this conversation and have your viewers think about what's going on here. If the Federal Reserve raises rates 100 basis points and our currency goes up by 10 percent, we have to agree that our exports are going to go down. And if they do, we lose our growth. We're seeing that in the data.

SCIUTTO: Well --

NAVARRO: So the biggest news today --

SCIUTTO: Let's talk about China, if I can. NAVARRO: -- is going to be what Jay Powell says. And if he says he's

got America's back and they're going to cut rates, that Dow is going to go (INAUDIBLE).

SCIUTTO: I know that's where the administration wants to focus. But the president recently delayed additional tariffs on China, concerned about the effect on the Christmas shopping season. Now that China has imposed these $75 billion, will that make the president reconsider that delay?

NAVARRO: So -- so let's --

SCIUTTO: Will he reconsider?

NAVARRO: Let me simply explain why the delay happened. We have executives come in to places like Best Buy. They said they bought all their Christmas stuff already in dollar contracts, which meant they didn't have any bargaining power to shift the burden back. That's unlike what we've seen before so --

SCIUTTO: Because they're going to shift the burden to consumers.

NAVARRO: No, they were going to shift the burden -- yes, they couldn't shift it to China so we might have seen a little higher prices. OK. But --

SCIUTTO: Right. In other words, granting the consumers would pay the cost of the tariffs.

NAVARRO: Yes. Yes. But think about this. After 90 days they're not going to be doing dollar contracts anymore. They're going to be able to shift it back. And look, if we can agree on anything, we have seen zero inflation from the China tariffs.

[09:10:05] China has been slashing their prices --

SCIUTTO: So far. But the president delayed tariffs --

NAVARRO: So far. Yes.

SCIUTTO: -- because of concern about prices rising during the Christmas season.

NAVARRO: The president made a wise decision listening -- that's one of his best qualities is listening to business leaders. They said, hey, look, give us 90 days, we're locked into these dollar contracts, let's have a good Christmas, and by the way, after that we're not buying stuff from China. We're moving our supply chain back home here or over to Vietnam or Thailand. And that's how China is feeling the pain on this.

SCIUTTO: So the president will not reconsider --

NAVARRO: China is feeling all the pain.

SCIUTTO: -- imposing those tariffs? NAVARRO: It's up to the president. We'll have conversations about

this as we have been doing, but what I can tell you this is this news today is not breaking news. This is well-signaled. Breaking news is going to be Jay Powell telling us the Fed is going to engage in more rate cutting because maybe China raised tariffs and because maybe the ECP is lowering their rates, but we can grow at 3 percent instead of 2 percent but we need help.

SCIUTTO: Is the U.S. economy slowing today?

NAVARRO: Well, we went from 3 percent in Q1 to 2 percent in Q2.

SCIUTTO: So it is.

NAVARRO: But the reason why it slowed based on my read of the data is it's a pure Federal Reserve raising rates too fast. Here's the thing, you can't play checkers in a chess world. The Fed cannot be raising rates when every central bank in the rest of the world is lowering their rates. That only leads to a widespread between interest rates, between us and them, and this thing called a carry trade where you --

SCIUTTO: Right.

NAVARRO: You borrow euros and you buy dollars and a small handful of rich people make a bunch of money and hurt American workers and manufacturers.

SCIUTTO: Final question before I let you go, just quickly.

NAVARRO: That's not -- sure.

SCIUTTO: Will U.S. and Chinese trade negotiators be back at the table next month?

NAVARRO: Everything is on schedule. This is why I think it's important for people to not get too excited about what was a well- signaled event. We've been having these negotiations and tariffs have been put in place. The economy has been strong. Consumers have seen no impact whatsoever so far, and we're committed to making sure that they bear the pain, not us.

SCIUTTO: Peter Navarro, always appreciate having you on the program. Thanks very much for taking the time.

Still to come this hour, as President Trump prepares to head to the G7 summit after saying Russia should be allowed to rejoin the group, the Russian president Vladimir Putin commands his military to respond to the recent U.S. missile test. We're going to be live from Moscow.

Plus, this just into CNN. The billionaire businessman, conservative GOP donor David Koch, he's died. We're going to have more on that including reaction from his brother Charles after the break.

And is this the summer of Elizabeth Warren? New polls show her in a battle for second place among Democrats. Could she be the candidate to take on and defeat President Trump? (COMMERCIAL BREAK)

[09:15:00] JIM SCIUTTO, ANCHOR, NEWSROOM: Welcome back. Russian President Vladimir Putin is ordering his military to respond to the recent U.S. cruise missile test. He blamed a weapons build-up on the U.S. withdrawing from the Anti-Ballistic Missile Treaty. Of course, Russia, it is the U.S. says that first broke that treaty.

This is coming as world leaders is set to gather at the G7 Summit this weekend which until 2014 it was the G8 when other members kicked Russia out, this for the invasion and annexation of Crimea in a sovereign European country, Ukraine. CNN senior international correspondent Frederik Pleitgen, he is live in Moscow. So, how serious do we expect this Russian response to be to the U.S. test?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, I think it's going to be quite serious. And I think some of the things that folks are saying not just here in Moscow, but internationally is that the U.S. and Russia really seems to be ever closer, Jim, to -- or to being on the cusp of a new nuclear arms race.

You could certainly see that the Kremlin was extremely angry at that missile test, that took place earlier this week, that of course being a land-based tomahawk cruise missile.

Now, Vladimir Putin then went on a national televised address here on Russian state TV and he essentially ripped into the U.S. and said the fact that this test took place only 16 days after the U.S. officially left the INF Treaty, the treaty run intermediate range nuclear forces showed that this was something that the U.S. had been planning for a long time, and that the U.S. was essentially already preparing to get out of the treaty and blame all of it on Russia.

Now, then came that really key line that we heard from Vladimir Putin where he said that he was ordering all the relevant ministries, that of course, first and foremost Russia's defense ministry, but then also the foreign ministry and other ministries as well to take what he called a comprehensive and also symmetrical action in response to this.

Now, he didn't say what exactly what that was, whether or not there were going to be any additional Russian deployments. But as you said, the U.S. has been saying for a long time that it believes Russia is the one that's been violating this treaty by deploying the Iskander M- nes(ph) which Russia says violates that -- which the U.S. says violates that treaty.

So, certainly some pretty dire signs here coming out of Moscow today. We're going to wait and see the next couple of days, the next couple of weeks what exactly that Russian response is going to be. But certainly, I can tell you from having witnessed the way this unfolded today in Moscow, the Kremlin definitely, extremely angry. And Vladimir Putin making a point to go on national TV and announce this, Jim.

SCIUTTO: Fred Pleitgen in Moscow, thanks very much. Joining me now, Elaina Plott is White House correspondent for "The Atlantic", and Kim Dozier; she's a contributor for "The Daily Beast". Kim, if I can begin with you. President after the G7 tonight, it is promising not to be a particularly warm and friendly one from what we can see, and even though joint communique.

KIMBERLEY DOZIER, CONTRIBUTOR, THE DAILY BEAST: That's because the last time they had a G7 communique --

SCIUTTO: Yes --

DOZIER: President Trump tweeted that he was pulling out of that which he had just signed in a fit of pique with the Canadian Prime Minister. Look, this is set to be a bit of a confrontational on a number of different levels.

[09:20:00] Senior administration officials have told us that they plan to lecture the Europeans on the success of the U.S. economy, the success of deregulation, cutting taxes, and it's going to be a lecture to the EU that they could stop their stagnation if only they would be like United States.

That's going to go completely opposite to the message of the EU and of Macron who is pushing this pro-environment -- the U.S. --

SCIUTTO: Right --

DOZIER: Needs to rein in its trade war with China because it's pulling everyone else down. But Macron has done various things like the environment communique or discussions could be on Monday when they bring other members, not just G7 members --

SCIUTTO: Right --

DOZIER: Into the conversation because they're expecting the U.S. will not go along.

SCIUTTO: Right, well, this is the Brazilian rainforest is literally burning. Elaina, I just had Peter Navarro; White House trade adviser on the air here, and he said, yes, the economy is slowing, he of course blames the Fed, but it is. And today, we have China imposing $75 billion in new tariffs on U.S. goods to China. How does the U.S. make the argument Kim just described there to its European partners, be more like us when the trade war clearly is impacting not just the global economy but the U.S. economy?

ELAINA PLOTT, WHITE HOUSE CORRESPONDENT, THE ATLANTIC: Well, in a rational sense, it's difficult to say how they do make that argument, but this is the sort of playbook we've seen time and time again from this administration. I mean, this president last night tweeted, probably upwards of I think ten times about how strong this economy is.

SCIUTTO: Yes --

PLOTT: I mean, the response out of this White House when they feel that the facts are not on their side is to double-down on their own narrative. So, I think it's, you know, entirely expected that they would go to the G7 Summit with this narrative in mind. And as Kim pointed out, they don't -- you know, they don't want to go there and talk about climate change.

I mean, this is -- their whole idea has been to take the G7 back to its roots, which was to collaborate on economic discussions. They have wanted to pull it back to that. Without that, I mean, this president is not ready to talk about climate change. He has --

SCIUTTO: Yes --

PLOTT: No desire to --

SCIUTTO: No --

PLOTT: Whatsoever --

SCIUTTO: Not at all. In fact, he doesn't even believe apparently --

PLOTT: Chinese knows --

SCIUTTO: That it's happening --

PLOTT: Yes --

SCIUTTO: With U.S. -- with human participation. On the G7 and this issue of Russia, the president offering up an unconditional return to the G7 despite the fact that it was Russia's illegal annexation and invasion of a sovereign European country that led to its exposure in 2014.

You see Macron who seemed to have been on the same page with Trump in terms of at least inviting them to participate, but his position was, they've got to make progress on Ukraine. Where is this going to end up?

DOZIER: I think we're going to see another agreement to disagree behind closed doors that might be exposed through tweet, et cetera. Look, the other thing we're seeing right now is the split in U.S. policy on Russia. You have missile defense, a missile test that's very provocative and intended to be provocative.

Intended to send a message to Russia that the U.S. won't be pushed around. But then you have President Trump saying, hey, we really don't care about the fact that you annexed Crimea, we think you need to be back in this G7 body because we think you're important --

SCIUTTO: Right --

DOZIER: I think the world leaders just aren't going to take him seriously on this, and they're going to ignore him.

SCIUTTO: Yes, OK, let's get to the economy here in the U.S. "Washington Post" reporting that top White House economic advisors, they present to the president -- first of all, they said that the economy is slowing, second of all, they're presenting the president with options to try to lessen that. What are those options and how quickly could the administration move on them?

PLOTT: The biggest one that, of course, the White House denied was even being discussed was the payroll tax.

SCIUTTO: Right --

PLOTT: I think that this would --

SCIUTTO: Denied and admitted and denied, yes --

PLOTT: Yes, with so many issues this week with background checks for gun purchases with Greenland -- I mean, this week really has been emblematic of what it means to cover the Trump administration, which is to say they had been quite seriously discussing a payroll tax as "The Washington Post" first reported and others confirmed.

Stephanie Grissom; White House Press Secretary been denied and then Trump said, no, it's top of mine. It wouldn't surprise me at all if going into next week, this is something that we see, you know, bubbling up in more and more White House conversations.

SCIUTTO: In the midst of this, there has been a noticeable down-tick in the president's approval rating. The "AP" poll has the lowest so far of recognized national polls approval rating at 36 percent, even more indicative there might be the disapproval rating of 62 percent.

The CNN poll showed 40, even the "Fox News" poll showed the president as you know behind the top Democratic frontrunners. The president claims it's higher despite the numbers. Is there nervousness about that in the White House?

[09:25:00] PLOTT: Not really actually, and not even among the campaign. They actually do really follow Trump's heed when he says these are fake polls, and they say, you know, the poll --

SCIUTTO: But do they believe that? I mean, because they do their own internal polling. It's --

PLOTT: But then they fire pollsters when they don't quite get them the results that they want. I mean, they're really -- I think to a certain extent to work for this president there, you have to drink the Kool-Aid and really, you know, believe it deep down that the polls are fake, and if there's not a message that you appreciate, then that person can get gone.

SCIUTTO: Kimberly, this is -- I know, it's not the first time we've been down this path and recognize that, that is the nature of this president, and this White House. Again, the president is going to hop on a plane and go meet with decades old U.S. allies and discuss. How do they see the way he operates as a leader?

DOZIER: And they're going to be talking about major problems like terrorism, what's happening in Syria, things that require a joint and united front to solve. What --

SCIUTTO: Yes -- DOZIER: You hear from foreign diplomats is they are increasingly

concerned about what they see as President Trump's increasing erratic behavior.

SCIUTTO: Yes --

DOZIER: They used to rely on -- they used to say, yes --

SCIUTTO: Yes --

DOZIER: The tweets are the tweets, but we rely on what the national security professionals --

SCIUTTO: Yes --

DOZIER: And the State Department folks tell us is the policy. Now, they don't know what to trust --

SCIUTTO: Yes --

DOZIER: Because it changes from minute to minute.

SCIUTTO: Has consequences? Kim, Elaina, thanks so much.

PLOTT: Thank you, Jim.

SCIUTTO: Breaking news this morning. The conservative billionaire and mega donor to the GOP, David Koch has died, he was 79 years old. I don't think you can underestimate their influence on the Republican Party, he and his older brother Charles, two of the most powerful men in American politics.

David Koch retired as executive vice president of Koch Industries in 2019, citing ill health. Suzanne Malveaux joins me now with more. Suzanne, tell us what you're hearing including from his brother.

SUZANNE MALVEAUX, CNN NATIONAL CORRESPONDENT: So, Jim, well, David Koch passed away at 79 years old, his other -- his older brother Charles Koch announcing that earlier today. The two brothers arguably one of the most influential donors in conservative and Republican causes.

We have a statement released from Koch Industries Chairman, CEO, Charles Koch, his brother saying, "it is with a heavy heart that I announce the passing of my brother, David. Anyone who worked with David surely experienced his giant personality and passion for life. Twenty seven years ago, David was diagnosed with advanced prostate cancer and given a grim prognosis of a few years to live.

David liked to say that a combination of brilliant doctors, state-of- the-art -- stubbornness kept the cancer at bay. We can all be grateful that it did because he was able to touch so many more lives as a result." Well, Koch retired as the executive vice president of Koch Industries back in 2018. He leaves behind his wife Julia Koch, three beloved children. He was a billionaire, a philanthropist, political activist as well as

a chemical engineer. As you said, he is best known as one of the pair of the Koch Brothers. His older brother, Charles, he was born in Wichita, Kansas, May 3rd in 1940, he was the son of a chemical engineer and the grandson of Dutch immigrants.

He is the third of four sons, a graduate of Deerfield Academy, prep school in Massachusetts, receiving a Bachelors and Masters in chemical engineering at MIT, a record-scoring basketball player as well. But of course, famous because of Koch Industries that he joined in 1970 with his brother Charles working his way up, and known largely for -- massive contributions to Republican candidates -- together crediting -- helping -- that helped Republicans re-claim the house in 2010. They were not Trump supporters, but certainly, big-time Republican supporters, Jim?

SCIUTTO: Suzanne Malveaux, thanks very much. Several staffers at the jail where Jeffrey Epstein committed suicide have now been subpoenaed. According to a source, what does this mean for the investigation into his death? We'll have more coming up.

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