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QUEST MEANS BUSINESS

Dow Tumbles After Trump Tweets On China And Federal Reserve Chief; E.U. Leaders Holding Jair Bolsonaro's Feet To The Fire Threatening To Block A Trade Deal Unless He Takes Action To Protect The Amazon; Stocks Tumble as President Trump Lashes Out at China; Hasbro Strikes Deal to Buy Peppa Pig; Justice Ruth Bader Ginsburg Treated for Pancreatic Cancer. Aired 3-4p ET

Aired August 23, 2019 - 15:00   ET

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


ZAIN ASHER, CNN INTERNATIONAL HOST: The market has been on a downward slide ever since around 11:00 a.m. this morning after China and now $75

billion worth of tariffs on American cars and also you now have the U.S. President asking American companies to look for alternatives to China.

Stocks are deep in the red. The Dow is off 550 points near the lows of the day. This is what investors on watching. A major escalation in the trade

war. President Trump is pledging to respond to new Chinese tariffs this afternoon. And an extraordinary Twitter assault on the Fed Chief,

President Trump asks if Jerome Powell, his own Fed Chair is a bigger enemy to the U.S. than Chinese President Xi Jinping.

And taking action on the Amazon. European leaders threaten to block a trade deal with South Americans unless Brazil protects the rain forest.

Live from the world's financial capital here in New York City. It is Friday, August 23rd. I'm Zain Asher in for my colleague Richard Quest and

this is QUEST MEANS BUSINESS.

Hello, everyone. I'm Zain Asher. We are in the final hour of trading, a day full of market moving events. The losses are accelerating as I speak.

The Dow is off more than two percent. Volatility is way, way up and market sentiment is firmly in extreme fear mode.

A look at the broader markets, the NASDAQ is the worst of the three major indices right now. Every single sector -- every single sector is in the

red. Tech shares are suffering the biggest losses. Intel shares are down four percent. Apple down five percent. Investors are reacting to some

pretty extraordinary tweets by U.S. present Donald Trump.

He has pledged to respond today to new tariffs imposed just a few hours earlier by China on $75 billion worth of American goods in the latest

escalation of this ongoing trade war between the U.S. and China.

President Trump is now ordering U.S. companies to find alternative to production in China. That is something American retailers say simply isn't

practical. It's not practical, even if the President were empowered to issue such an order. The President's tweet on trade came just minutes

after another with President Trump launching a blistering attack on his own Fed Chair, Jerome Powell. Mr. Trump writing, "My only question is, who is

our bigger enemy? Jay Powell or Chairman Xi?"

Sarah Westwood is joining us live now from the White House. So the fact that the U.S. President is referring to Jerome Powell as an enemy of this

country, what does that tell you about the sorts of pressure President Trump is facing in terms of his belief that a recession in this country

could be underway, and he needs Jerome Powell's help them that?

SARAH WESTWOOD, CNN WHITE HOUSE REPORTER: Well, Zain, today was another major complication in the White House's efforts to project confidence in

the face of a potential economic downturn. That's something that White House aides and allies have been doing all week.

They've been working overtime to try to downplay these fears that the incredible growth that the President has seen in the economy for the first

two years of his presidency, could be slowing down.

Of course, the President's favorite economic scapegoat here is Chairman of the Federal Reserve, Jerome Powell. He has repeatedly taken shots at

Powell. He thinks that the Fed did not cut interest rates quickly enough. That they didn't cut them by enough margin, and he has been putting

pressure on the Fed to do everything it can to grease the wheels of the economy.

Of course, many analysts, investors, consumers, they believe that the tensions we've seen in the economy over the past couple of weeks are due to

the President's trade war with China.

And so today, China imposing these retaliatory tariffs are not going to do much to boost confidence in the economy at a time when the President and

his advisers, Zain, are really trying to push this message that everything is fine.

ASHER: And obviously Donald Trump issuing quote, unquote, "an order" to American companies to look for alternatives to China. Can the U.S.

President really issue such an order?

WESTWOOD: Zain, it's not clear what authority the President believes he has to tell private companies where and how to do business, but that is

really all we've seen of the reaction from President Trump was that series of tweets that he fired off this morning.

Also, he issued a decree to mail carriers that might accidentally end up receiving shipments of fentanyl from China. Fentanyl, an aspect of the

U.S.-China trade relationship that President Trump has focused heavily on, as he has ramped up these talks with China, but keep in mind, the President

imposing these tariffs, the President delayed the implementation of tariffs last week on goods to December.

[15:05:13] WESTWOOD: But that was not necessarily an olive branch to China. Even though he delayed the implementation of some of those tariffs,

that was really to take the pressure off American consumers heading into the Christmas shopping season.

There had been a relative ceasefire between China and the U.S. over the summer following President Xi and Trump sitting down at the G20. But

earlier this month, Trump threatened to impose those very tariffs that he had suspended and that is what got started this latest round of back and

forth with China that culminated in China retaliating this morning -- Zain.

ASHER: All right, Sarah Westwood live for us there. Thank you so much. The U.S. Chamber of Commerce has reacted to new tariffs imposed by --

imposed rather on U.S. goods by China saying the move is quote, "unfortunate," but not unexpected.

The business group is calling once again for both sides to return to the negotiating table. The fresh tariffs are between five and ten percent. It

will hit $75 billion worth of U.S. goods from September 1st. There will be duties of 25 percent placed on U.S. car imports. President Trump has

promised a response this afternoon.

Daniel Russel is a former Assistant U.S. Secretary of State for East Asian and Pacific Affairs and Vice President of International Security and

Diplomacy at the Asia Society. Mr. Russel, thank you so much for being with us.

So when you have China announcing these tariffs on $75 billion worth of American goods, what sort of effect do you anticipate that will have on the

U.S. economy?

DANIEL RUSSEL, FORMER ASSISTANT U.S. SECRETARY OF STATE FOR EAST ASIAN AND PACIFIC AFFAIRS: Well, this is clearly going to hit consumers, hit

retailers, and also hit farmers and commodity producers in the United States.

There's a geography to the Chinese application of tariffs also. They're pretty experienced in the U.S. political calendar, the U.S. political

system, so they know that they can hit Michigan, they can hit Ohio, they can hit Iowa. And that these are important states in terms of the

Electoral College. So it's a combination of, of trade and politics in their calculation.

ASHER: So there was supposed to be a Chinese delegation coming to Washington, D.C. next month. Given all of the sort of tit-for-tat

announcements we've seen today, I mean, is any kind of truce on the horizon completely off the table?

RUSSEL: No, the Chinese very much want a truce, albeit not on any terms. And in fact, the terms that the U.S. could perhaps get from the Chinese

have worsened significantly in the last two or three months as a result of the tough tactics that President Trump has pursued.

The Chinese would like to send their Vice Premier, Liu He to Washington sometime in September, and in a way this imposition of tariffs is a way of

creating some leverage in support, in advance of those talks.

From the Chinese point of view, this is a pretty measured, pretty balanced form of retaliation. It's non-escalatory or so they think. They're

matching what --

ASHER: That's not what Peter Navarro believes.

RUSSEL: Well, what Peter Navarro believe is not always rooted in reality. The reality is that the Chinese are saying, "Okay, you hit me, we will hit

you," but they're not just using a poker metaphor, they're seeing Donald Trump but they're not raising him. They're not trying to escalate.

September 1 tariffs from the U.S., okay, September 1 tariffs from China, December 15th from the U.S., December 15th from China.

ASHER: Okay, so when President Trump quote unquote, "orders" American companies not to do business with China anymore, or look for alternatives,

I mean, it's unclear the President could even order American companies do anything in terms of that, but how -- that is supposed to, I assume, beat

China into submission. Clearly, that's not going to work?

RUSSEL: Well, it kind of makes you wonder if he realizes, who is the head of a democracy, and who is the head of a one-party authoritarian system?

The President can't just decree to U.S. companies that they may not trade or manufacturer in China. It's delusional.

It certainly is alarming, as we see in the markets already to U.S. businesses because President Trump has injected a really wild note of

uncertainty and inconsistency into the equation.

And I know that it makes it very hard not only for American companies, but for businesses and nations throughout the world and in particular, the Asia

Pacific to calculate what comes next. The impact of a U.S.-China trade war, which is really like a mutual infliction of pain, neither side is big

enough and strong enough to completely force the other aside into submission. It has very negative consequences for the third countries that

are impacted by this battle.

[15:10:17] ASHER: Right. Mr. Russel, thank you so much for being with us. Appreciate it.

RUSSEL: Glad to join you.

ASHER: Investors had expected today would be dominated by Jerome Powell's annual speech in Jackson Hole. Let's take a look at what the Fed Chairman

said specifically.

The key takeaway is that he did not -- not -- give any indication about what might happen at the next rate setting meeting in September. He did

acknowledge, quote, "significant risks" from a global slowdown and the trade war. He also promised to take quote, "appropriate steps" to support

the U.S. economy.

Lindsey Piegza is the Chief Economist at Stifel Financial Services firm. She joins us live now from Minneapolis. So, Lindsey, how did you interpret

Fed Chair Jerome Powell's comments today?

LINDSEY PIEGZA, CHIEF ECONOMIST, STIFEL: Well, it was pretty much as expected. The Chairman continued to reiterate a generally positive and

upbeat assessment of the U.S. economy, but he also tempered that expectation by acknowledging increased risk, particularly from abroad,

stemming from uncertainties regarding policy issues, including trade, Brexit and more recently, policy protests in Hong Kong.

So he did say that while things were still on moderate footing here at home, the risks of contagion to the U.S. outlook continue to ramp higher

since meeting last month at the July FOMC meeting.

So really setting the tone for potential additional policy adjustments if in fact, the committee continues to see these risks weighing on the

outlook.

ASHER: How does the Fed Chair go about sort of juggling, supporting the economy here without looking as though the Fed is capitulating to what the

market wants?

PIEGZA: Well, I think the Fed is doing a pretty good job of doing that. They did meet the markets demands to be fair in terms of a near term policy

adjustment at the July meeting, but they also offered just a very minimal rate reduction, 25 basis points.

The market would have been much more pleased with a 50 basis point cut. And certainly the administration was looking for 75 or 100 basis points.

And by continuing to maintain this very middle of the road rhetoric, acknowledging the positives, but also reiterating a willingness to step up

to the plate, they're continuing to walk that fine line really not cowing to either side of the administration or the market pressures that are very

clearly weighing out there in the marketplace. So I do think the Fed is doing a pretty good job of walking that fine line.

ASHER: Okay, so maybe a good job of walking the fine line, but given the sort of volatility in the markets, given the fears about a possible

recession on the horizon in the U.S. economy, given fears about global slowdown, given you know, what President Trump is saying. I mean, is it

all but certain at this point that there will indeed be a rate cut in September?

PIEGZA: Well, I do think we will see a rate cut in September, but I do think that's going to be entirely based on the evolution of the data. We

are seeing, as you pointed out, mounting evidence of weakness abroad, as well as further evidence of deteriorating activity here in the U.S.

We see a slowdown in manufacturing, housing, business investment, even confidence has peaked and had begun to trend down suggesting the consumer

will be on increasingly fragile footing in the second half of the year.

So right there, there's enough support for the Fed to take action, which has nothing to do with the pressure from the White House.

ASHER: So is the U.S. economy though resilient enough to withstand this escalating trade war between the U.S. and China, do you think?

PIEGZA: I think unfortunately, it's going to put some a serious downward pressure on an already extended expansionary period. So the U.S. economy

at this point has been going through the longest expansion in history, but it's also been the weakest with an average growth rate of just 2.3 percent.

Typically, when the U.S. economy is coming out of recessionary times, we talk about a sustained growth rate of four or five, even six percent. So

this time around, we were already on relatively moderate footing. Now, you layer on the fact that we are seeing a number of these uncertainties and

risks stemming from a policy front and I think that will simply exacerbate that downward trend that we're already seeing in some of the fundamentals

here in the U.S.

ASHER: All right, Lindsey Piegza live for us there. Thank you so much. E.U. leaders holding Jair Bolsonaro's feet to the fire threatening to block

a trade deal unless he takes action to protect the Amazon.

(COMMERCIAL BREAK)

[15:17:20] ASHER: Ireland and France are threatening to block a trade deal between the E.U. and the South American block Mercosur unless Brazil takes

action on the Amazon.

Ireland's Prime Minister calling it Orwellian of Brazilian President Jair Bolsonaro to blame green groups for setting the fires. Meantime, French

President Macron accuses Mr. Bolsonaro of lying to him about his climate commitments. Finland has also come out saying it's considering a ban on

Brazilian beef.

The E.U.'s Mercosur deal is an agreement with the South American economic bloc made up of Argentina, Brazil, Paraguay, and Uruguay, 20 years in the

making. It removes trade tarifffs on both sides and has been described as the E.U.'s biggest deal ever.

John Defterios joins us live now from London. So John, before we get to the Amazon, just walk us through how much this deal actually means to

Brazil right now.

JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, it's about $45 billion of trade with Mercosur and Brazil is the biggest player within that

trade bloc. So to answer that Zain, I would say quite a bit and as you suggest, they worked on this for two decades.

I think the headline here tonight, though, this is a shift from Europe, taking a stand on the environment. I would suggest even growing a pretty

firm spine going forward.

They have been working on this thing, as you suggested for a long, long time, and made four proclamations, all kind of singing from the same hymn

sheet, with two -- Ireland and France -- willing to tear up this agreement which just quite extraordinary.

I think also Europe feels that it has a half a billion consumers, if it's not going to be the United States taking a stand behind -- on behalf of

climate control, then the European Union should do so. It could be an effort also to isolate Jair Bolsonaro because Mercosur has a market

population of about 260 million consumers, more than 200 million is from Brazil.

So somebody who has such a nationalist tone in Bolsonaro, can you really move him? Do you see him shifting and saying, "I made a mistake in the

Amazon," and the offer from the German Environmental Minister saying "We're willing to help if you come to us," I don't see Bolsonaro doing so despite

the calamity we're witnessing through the pictures and what we're reading here in Brazil taking place.

ASHER: So overall though, will international pressure force Brazil at this point to really take deforestation of the Amazon seriously and protecting

the Amazon seriously. Jair Bolsonaro has said in the past that protecting the Amazon hurts economic development in Brazil.

DEFTERIOS: Well, let's remember Zain, Jair Bolsonaro came into power promising two things. One was to root out corruption and the other is to

get Brazil growing again. We don't see any major moves on corruption and this will not help growth having a trade agreement with Mercosur torn up

with Brazil at its core. So this is not good for his reputation.

The other question is he likes being an outlier. Will he get the support from the other outlier in the globe today, and that being Donald Trump in

north end Washington? We have not heard from him. And it raises the question of the power of the G7.

You remember, Emmanuel Macron coming into the media saying we won't have a communique because we differ on so many issues right now, what is the power

of the G7, and the context of the G 20 where Brazil is also a member?

[15:20:42] DEFTERIOS: We have to keep this in mind. It's a lot of noise from Europe, perhaps a lot of noise with this on the agenda in Biarritz in

France during the G7. But will it really move the needle in the context of Jair Bolsonaro and his nationalist agenda? I don't think so. And I think

he is going to be eager to see if it gets any support from Donald Trump, who has isolated the United States from the Paris Agreement as you well

know.

ASHER: All right, John Defterios live for us there. Thank you. With environmental issues likely to be front and center at the G7 this weekend,

32 of the world's Fashion Houses have signed a pact ahead of the Summit calling for three objectives: To stop global warming, restore biodiversity,

and protect the planet's oceans. Recognizing the toll the fashion industry takes on the environment.

One world leader not on board with the environment dominating the G7 agenda is President Trump. He is reportedly irked that previous Summits focused

so heavily on climate change and he is apparently now questioning why he has to attend the Summit at all.

Jim Bittermann joins us live now from France. Jim, set the scene for us?

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Zain, I'll tell you one of the reasons we're here by the ocean is because in fact,

Emmanuel Macron wanted this summer to at least emphasize that whole idea of climate change and the oceans, the importance of the ocean.

But there are so many other issues out there that Mr. Trump could very well trump were at the table. In Canada, if you will remember, he didn't --

this was a year ago -- he didn't sign off on the final communique. And that's why Macron said there will not even going to be a final communique

this time.

But there are so many issues out there that are likely to come up. The two issues involving Russia, whether or not Russia should be in the G7 or not,

whether or not this new testing of missiles is going to lead to another nuclear arms race. What about climate change? What about Iran? The

European differing from the United States on Iran. The economy, as John was just mentioning there, the whole idea of Trump's approach to the

economy, as well as the tariffs which he has threatened continuously against both Germany and France.

These are all issues that are very, very thorny issues that these leaders are not going to be able to agree on. So it really does beg the question

on why this Summit is coming together at all. Some people say and some of the observers here have said that the expectations are lower than they even

were for Canada a year ago because they just cannot seem to see common ground developing, especially in a short period of time between these

leaders -- Zain.

ASHER: All right, Jim Bittermann live for us there. Thank you so much. The wife of Carlos Ghosn is asking French President Emmanuel Macron to help

her husband. He was one of the top figures in the auto industry before his spectacular downfall. Ghosn led the alliance between France's Renault and

Japan's Mitsubishi and Nissan.

When he was on the cusp of a full blown merger between Nissan and Renault, he got arrested by Japanese authority in November last year. He has spent

more than 100 days in jail, was released, rearrested, released again and now remains under house arrest.

Ghosn has been accused of financial misconduct using company funds for personal use and underreporting his salary -- all of which he denies. We

asked Carole Ghosn when she last spoke with her husband.

(BEGIN VIDEO CLIP)

CAROLE GHOSN, WIFE OF CARLOS GHOSN: The last time I saw and communicated with Carlos was the day he got rearrested on April 4th, when the

prosecutors barged in at 5:50 in the morning and rearrested him and I was left alone in the apartment with 20 prosecutors. And it was a horrific

day. And they searched the whole apartment and they followed me into the shower and they humiliated me.

And then they took my Lebanese passport and I don't know why. I'm not -- you know, I have nothing to do with the case. I'm not accused of anything.

And that was the last time I saw Carlos.

RICHARD QUEST, CNN INTERNATIONAL HOST: And every time -- every time you have tried to get permission to see him or to speak to him, the Japanese

courts have refused you. Why?

GHOSN: The Japanese courts have refused me because they want to punish Carlos, they want to break him. You know they have this hostage justice

system where they coerce confessions and they're trying to use this for Carlos to confess. And that's the only reason legally. They have no

reason to do this. I have nothing to do with the case. And we've applied five times and ended -- they don't give you a reason why. They just tell

you no, I can't see him.

QUEST: The prosecutor says that you have criticized the Japanese judicial system. And that that in itself could intimidate witnesses. You merely

criticizing the judicial system? If so, why do you continue to criticize, Carole?

GHOSN: You know, I don't call it criticizing, I call it telling the facts, telling what happened to me and telling how my husband was treated when he

was in detention. I don't think that's criticizing and as a woman trying to defend her husband, I would do anything to help him out.

QUEST: But Carole, you must be aware that even talking to me, could be making things more difficult for you.

GHOSN: Well, you know, at the beginning, Richard, we kept quiet. We had this first lawyer, the Japanese lawyer, and they told us you don't open

your mouth. You respect our ways, you respect our rules. And you will see it's going to help Carlos and he did not get out.

He was detained for so long, and we could do nothing to help him. As soon as I wrote to the Human Rights Watch and we started talking about it. I

think there was enough awareness, we should have, you know -- an awareness on this hostage justice system and things changed and Carlos was released.

At the end of the day, I would do anything to help my husband out and I think people need to know what is happening to him that he is being treated

unfairly that they haven't set a trial date until now. We're just waiting, and I don't know how long this is going to take. So yes, I'm going to

speak out.

(END VIDEOTAPE)

ASHER: Richard Quest speaking with Carlos Ghosn's wife. Okay, when we come back, we'll be live at the New York Stock Exchange, the Dow currently

off more than 550 points. There has been a whole host of news weighing on the market. We will explain after the break.

(COMMERCIAL BREAK)

[15:30:00] ASHER: Hello everyone, I'm Zain Asher, there's more QUEST MEANS BUSINESS in a moment. When President Trump lashes out at China and

the Fed, market sentiment is in extreme fear. And a Hasbro picks up a new toy. It's paying $4 billion for Peppa Pig. Before that though, these are

the headlines we are following for you at this hour.

U.S. markets are taking a tumble after President Trump told companies to find alternatives to China. His tweet came after China announced

retaliatory tariffs on $75 billion worth of U.S. imports. Mr. Trump also blasted the Federal Reserve Chairman Jay Powell.

U.S. Supreme Court Justice Ruth Bader Ginsburg has been treated for pancreatic cancer. A statement from the Supreme Court says Ginsburg

completed radiation treatment at New York's Memorial Sloan Kettering Cancer Center Friday. The court says there's no remaining signs of the disease.

Pro democracy demonstrators formed a human chain across Hong Kong on the 30th anniversary of the Baltic Wave protest. At that time, millions of

people formed a human chain to protest Soviet rule. Meantime, China is putting pressure on companies in Hong Kong to stop the city's protest

movement.

American business magnate David Koch has died age 79. His death was announced in a statement by his brother Charles, the chairman of Koch

Industries. As one of the richest people in the world, David Koch used his vast wealth for philanthropy and conservative political activism.

Let us return now to markets for you. The Dow is at the lows of the day, off some 600 points, it's been on a downward spiral since mid-afternoon.

All sectors are in the red, the tech stocks being hit the hardest. Alison Kosik is joining us live now from the New York Stock Exchange.

So, Alison, how on earth do investors trade in an environment where the president's tweets are more impactful than the fundamentals of the U.S.

economy?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, how do they trade? They sell clearly -- that's what we've seen happen today since President Trump

went on his tweet tirade. First about Fed Chief Jay Powell, actually, first about China and then Fed Chief Jay Powell. I couldn't figure out

what came first or second because it seemed like it was a simultaneous burst of tweets.

You're seeing a lot of anxiety in the market, simply because one part of Trump's tweet involved Trump saying that he would respond to China's

retaliatory tariffs, that he would respond this afternoon. That response has yet to come.

We're about 30 minutes to go before the closing bell, and I think that investors have been waiting for that response as they haven't gotten it.

Zain?

ASHER: So normally, on a day like this where the Fed Chair is speaking at Jackson Hole, that would have been what really the markets were focused on,

but clearly, these are unusual times.

KOSIK: Absolutely, this is no slow Summer Friday in August. No, it is not. And you know, it is interesting how it wasn't even just that China's

retaliatory tariffs, the announcement of that. That didn't even steal the Fed's show happening in Jackson Hole, Wyoming. No, it was -- it was

President Trump himself who really stole the show.

But Fed Chief Jay Powell, he made news of his own, you know, he did acknowledge that the economy here in the U.S. is more turbulent in the

three weeks since rates were cut, so he did acknowledge that. But he did not give really any indication what the Fed would do in September and

that's really got -- that really is what got President Trump so upset that there was no decision or there was no indication.

Mind you that there isn't supposed to be a decision at the conference in Jackson Hole, Wyoming. It's simply that a conference that's outside the

Fed's normal meeting, those rate decisions usually and only happen during those usual meeting times.

The next one happening in September, and only when you see a Fed make a rate decision outside of those normal meetings, it's when there's an

emergency. And last time I checked, Zain, were not in a financial emergency at the moment. Zain?

[15:35:00] ASHER: All right, Alison Kosik, breaking everything down for us, thank you so much, appreciate it, have a great weekend.

KOSIK: You too.

ASHER: The president's tweets have rocked the market. Moments ago, the president was back on Twitter, here's what he wrote, "the Dow is down 573

points perhaps on the news that Representative Seth Moulton, whoever that may be, has dropped out of the presidential race."

Larry Sabato is director of the Center for Politics at the University of Virginia, he joins us live now. So, the president obviously trying to make

a joke there, but what is no laughing matter, Larry, is how the president attacked Fed Chief Jerome Powell today, referring to him as an enemy of the

United States. How unprecedented is that?

LARRY SABATO, DIRECTOR, CENTER FOR POLITICS, UNIVERSITY OF VIRGINIA: Totally unprecedented. There's nothing like it. Of course, we're used to

saying this, we say it almost every day of the Trump presidency, but to equate the Fed Chair -- and Trump appointed him, by the way -- to equate

the Trump-appointed Fed chair to a chairman Z and call both of them enemies of the United States, I wouldn't even apply that to Chairman Xi, but I

certainly would object to it in terms of the Fed Chair.

It's -- not only is it unprecedented, it's outrageous and outlandish.

ASHER: The fact that you have the U.S. president just basically, you know, blasting Jerome Powell on Twitter, does that tell you that he is nervous?

That, you know, the U.S. could see a recession on the horizon?

SABATO: Well, I don't know whether he sees a recession on the horizon. He spends half of every day denying that it's true and saying that the

American economy is the greatest in history. But yes, I think he and his top campaign people are very fearful about what might happen next year

because a recession for Donald Trump will probably be too much to handle.

It's difficult to imagine him winning re-election with a recession. That's his major talking point. So many other things that he does are so

controversial and repel voters. He can sell himself on the basis of the economy, but not during a recession.

ASHER: So, if that's the case, why not just, you know, end this trade war with China? Wouldn't that make more sense if he's so focused on re-election

and a recession could ruin his chances?

SABATO: Well, really, what would have made sense was not to start it, but of course, that's true. It should be stopped and that's what even

Republican friends of the president have been telling him, find a way to get out of it, it's hurting you. If you want to go back into it, once

you're safely in the White House for a second term, fine, but this makes no sense. But I think we all know by now, President Trump is very stubborn.

ASHER: You know what? There are -- there are a core group of Trump voters. I mean, CNN has sent reporters out to talk to farmers in places like Iowa,

and yes, obviously, there are some that are a bit concerned about what the president is doing and how the trade war is impacting them.

But there is a core base, as we always talk about here on CNN that will vote for this president no matter what. My question to you is that, do you

think that would still apply in a recession?

SABATO: I think it would test it and it would probably cost him at least 2 or 3 points, and that would probably be the election right there. He's got

most of his base, will always have most of his base. But even under ideal conditions in 2016, it only got him to 46 percent, and he barely won the

key states that he needs to win the electoral college.

So, he can't afford a lot of erosion and his political aides knows that. They will tell you that privately even though of course, publicly, he's

headed for a landslide according to them.

ASHER: All right, Larry Sabato, live for us there, thank you so much.

SABATO: Thank you, Zain.

ASHER: The Fed's chief speech at Jackson Hole is just one of many things bothering President Trump today. But the job of the Fed isn't just about

setting policy, communication is also key, particularly in a climate where market and the president hang on to the Fed's every word. Here's our Clare

Sebastian with more.

(BEGIN VIDEOTAPE)

ALAN GREENSPAN, FORMER CHAIRMAN, FEDERAL RESERVE, UNITED STATES: I think the question may be moot.

CLARE SEBASTIAN, CNN BUSINESS REPORTER (voice-over): There was a time when central bankers said as little as possible.

UNIDENTIFIED MALE: Forecast of a range of uncertainty.

SEBASTIAN: In the early 20th century, never explain, never excuse was said to be the motto of Montague Norman; governor of the Bank of England. And

several generations later, Fed Chair Alan Greenspan famously gave it a name in a "CNBC" interview -- Fed Speak.

GREENSPAN: It's a language of purposeful obfuscation.

SEBASTIAN (on camera): And yet, over the past two decades, the Fed has been getting more and more transparent. They not only now have a statement

after every meeting where they explain their policy decisions, they're also given forward guidance and they're given not only four, but now eight press

conferences every year.

[15:40:00] (voice-over): There are also economic projections under the dot plot of (INAUDIBLE) individual policy makers see rates evolving over

time.

NARAYANA KOCHERLAKOTA, FORMER PRESIDENT, FEDERAL RESERVE BANK OF MINNEAPOLIS: You know, with respect for Chairman Greenspan, I thought what

he said was completely disconnected from the role of the Fed as an agent of the public, and his job is to communicate to the public what its policy

vision is, what his policy choices are, why it's making the choices that it is.

JEROME POWELL, CHAIRMAN, FEDERAL RESERVE, UNITED STATES: Their independence springs with it, an obligation for transparency.

SEBASTIAN: All that transparency though comes with risks. Over the past few months, small utterances from Fed officials, especially Chairman Jerome

Powell.

POWELL: Essentially in the nature of a mid-cycle adjustment --

SEBASTIAN: Have sparked big market moves.

UNIDENTIFIED MALE: I think it's added to volatility, certainly a lot more critics because in the past, if you really didn't know what was being done,

you couldn't criticize it.

SEBASTIAN: And that criticism coming not just from the markets.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Jay Powell and the Federal Reserve have totally missed the call. We don't have a Fed that knows what

they're doing.

SEBASTIAN: Powell now facing the double challenge of having to communicate his policies and his independence.

POWELL: We don't think about short-term political considerations, we don't discuss them, and we don't consider them in making our decisions.

KOCHERLAKOTA: I think the Fed is complete just -- is responding to economic conditions. There are certainly those out there who think the Fed

is responding to the president. And that could become a problem if we actually saw inflationary pressures pick up because then people might doubt

the willingness and the credibility of the Fed to go after those inflationary pressures.

SEBASTIAN: Still, there's more to transparency than just talk. For central bankers worried about running out of room to act on interest rates.

POWELL: Ensure against downside risks.

SEBASTIAN: Words are powerful tools.

POWELL: Will act as appropriate to sustain the expansion --

SEBASTIAN: Clare Sebastian, CNN, New York.

(END VIDEOTAPE)

ASHER: All right, when we come back here, the trade dispute between South Korea and Japan has turned into a diplomatic crisis. That story next.

(COMMERCIAL BREAK)

ASHER: South Korea says it will share intelligence with Japan through a three-way channel involving the United States. This despite a decision

earlier this week to scrap a pact with its neighbor. What started as a trade dispute between two neighbors has escalated. David Culver reports

from Seoul.

(BEGIN VIDEOTAPE)

DAVID CULVER, CNN CORRESPONDENT (voice-over): A recent series of short- range missile test launches from North Korea escalating the potential threat to neighboring South Korea and across the sea to Japan. Well,

instead of working closer to ease the tensions, Japan and South Korea are drifting further apart.

[15:45:00] South Korea's National Security Council and President Moon Jae- in ending their intelligence-sharing pact with Japan Thursday, putting the United States in-between two of its most important Asian allies.

MIKE POMPEO, SECRETARY OF STATE, UNITED STATES: They're both great partners and friends of the United States and we are hopeful they can make

progress together.

CULVER: It's disappointing for the man who up until November commanded the joint U.S.-South Korean forces, retired Army General Vincent Brooks by

phone, he explained how Intel sharing played out prior to the agreement.

VINCENT BROOKS, RETIRED ARMY GENERAL: And so if there was something that Japan knew about a missile launch, the United States would asked Japan if

that could be relayed to South Korea. Even if the threat was against South Korea, but the data came up in Japan, that was very inefficient militarily.

CULVER: The move comes amid a heated trade dispute between Japan and South Korea, it's fueled weeks at outrage in Seoul. Some residents refusing to

buy or use Japanese products, dumping out Japanese beer and sports drinks, tearing up images of Japanese brands. This South Korean supermarket

proudly displaying a sign boycotting goods made in Japan.

LEE YE-JI, SOUTH KOREAN RESIDENT: I'm very angry as a South Korean and I don't want to use anything from Japan.

CULVER: One Seoul resident even smashing his Japanese made-car to prove a point.

(on camera): If it seems extreme, it's because this trade dispute here in South Korea is deeply personal. It's rooted in a painful past when Japan

colonized South Korea and forced many Koreans into harsh labor.

(voice-over): Last year, South Korea's Supreme Court ruled in favor of the Korean victims, allowing them to sue Japanese companies for compensation.

Japan angered by the decision, believing the matter was settled in a 1965 treaty.

SHINZO ABE, PRIME MINISTER, JAPAN (through translator): Unfortunately, South Korea has been continuing its response, that damages the trust

between our two countries.

CULVER: But some Japanese residents feeling the South Korean government is going too far.

UNIDENTIFIED FEMALE: I think the political matter in our life have to be separated. I think it is not a right thing to do.

CULVER: Japan denies its recent restrictions on trade were motivated by the Supreme Court decision, citing instead national security concerns. In

early August, they removed South Korea as a preferred trading partner. South Korea doing the same days later.

An economic rift rooted at least in part in cultural hurt, dating back a century. Today, threatening the security in an already tense region.

David Culver, CNN, Seoul, South Korea.

(END VIDEOTAPE)

ASHER: All right, when we come back, Peppa Pig joins Mr. Potato Head on the Hasbro shelf, the company spending big to own a children's cartoon.

[15:50:00] (COMMERCIAL BREAK)

ASHER: Hasbro is making some serious additions to its toy box. It struck a deal with one entertainment, that's the parent company of the beloved

Peppa Pig. The price tag though, a whopping -- check this out, $4 billion. They're also going to be bringing home some other animated brands as well.

For example, PJ Masks, those shows are going to be joining Hasbro's legacy toys, for example, over here, Mr. Potato Head, Play-Doh and Monopoly

proving to investors that Hasbro isn't playing around. Anna Stewart has more.

ANNA STEWART, CNN REPORTER: Zain, whether a toy brand starts as a TV series like Peppa Pig and then spreads its tentacles into a broader

franchise or whether a toy brand starts out as a toy like my little pony or transformers, both legacy Hasbro brands before then gaining a TV or movie

presence, it's all about TV content for the success of a children's toy brand.

So, toy maker Hasbro is joining the media consolidation bandwagon and snapping up a content maker, an entertainment one. It doesn't just make

Peppa Pig, it makes lots and lots of other series as well like PJ Masks and Ricky Zoom, and it may help Hasbro make and distribute more of its own

content.

Because despite owning a production and distribution company, Hasbro still has to license some of its characters to match bigger Hollywood studios.

Plus, of course, Hasbro is buying up some very successful brands here, the best known Peppa Pig.

And while I can't say I've ever got the lure of Peppa and her little piggy family myself, I think I'm in the minority because this franchise is

massive. Is present in 180 territories, it's particularly big in attractive markets like China. And in fact, it's such an attractive

business, Zain, analysts today were saying we could see a rival bid and that's perhaps why you look at the E-1 share price today, it was up well

over 30 percent on the London Stock Exchange.

And this deal is the latest in a whole flurry of M&A activity in the U.K., the pound is of course very weak on Brexit fears. And as a result, assets

are looking cheap for foreign investors. British Brewer Greene King has been snapped up by the Hong Kong billionaire Li Ka-shing.

Just Eat; the food delivery company, that was bought by a Dutch rival. Cobham; the aerospace and defense supplier is being bought by an American

private equity group, and that is all this Summer. In the last few weeks, clearly, investors seeing a big for sale sign over British PLC. Zain?

ASHER: Anna Stewart, thanks for that. The CEO of Overstock.com has resigned days after claiming he helped the FBI carry out political

espionage. Shares rallied on Thursday on the news of Patrick Byrne's departure. They slid last week on his initial comments.

Now, Byrne is saying that the FBI told him to pursue a romantic relationship with an accused Russian agent. Here's what he told our Chris

Cuomo.

(BEGIN VIDEO CLIP)

PATRICK BYRNE, FORMER CHIEF EXECUTIVE OFFICER, OVERSTOCK.COM: They said, and the very honorable men and women, the men in black, they said, we want

to be clear, this never happened to the United States. We are the good guys -- oh, we're not -- we don't work like the bad guys, but we need to

ask you to rekindle a romantic relationship with Maria Butina and discover --

CHRIS CUOMO, CNN ANCHOR: Members of the FBI that you're sure were members of the FBI asked you to do this. And you know their names?

BYRNE: And I know their names, I was specifically told this request is coming from Jim Comey at the request of somebody who I'm not going to name.

Do not assume it's the president. Do not assume it was President Obama, do not assume that.

(END VIDEO CLIP)

ASHER: So much to talk about here, Sara Murray joins us live now from Washington. So, Sara, a lot of people find Patrick Byrne's comments

somewhat bizarre. Has the FBI corroborated any of what he said?

SARA MURRAY, CNN POLITICAL CORRESPONDENT: Well, you know, I think people find them bizarre because it does sound like, you know, a pretty jaw-

dropping story. And Patrick Byrne, while he certainly did a lengthy and if what -- sometimes rambling interview with Chris Cuomo, didn't actually

offer any evidence to support this story that he, you know, had this romantic relationship with Maria Butina and then it fizzled out and then it

was the FBI who told him to rekindle it and pass along information.

It's also worth noting that former FBI officials James Comey who is the head of the FBI at the time that you saw Patrick Byrne mentioned there are

denying that this ever happened, Comey said this is ridiculous, the FBI doesn't work that way.

Andy McCabe who is the deputy director under James Comey also denied that there are any conversations among FBI leadership. Now, the one thing that

does give an ounce of credibility to what Patrick Byrne is saying, I guess, is that earlier this year, he did meet with the Justice Department

officials and they both -- they said that some of what he was saying seemed to be believable.

[15:55:00] It's unclear what parts they felt were believable and what parts they maybe didn't think were quite so believable, but it is a very

bizarre story and obviously, you know, his sort of re-telling of this and his belief that it was some kind of deep-stake conspiracy spooked investors

as you pointed out and ultimately he resigned from the company.

And as for Maria Butina, she's spending 18 months behind bars for, you know, failing to register as a foreign agent.

ASHER: So, we know that Maria Butina did try to make in-roads with sort of prominent political groups in the United States, but you know, what would

she have wanted with someone like Patrick Byrne?

MURRAY: You know, that is a great question, and we don't know if this was something that she was pursuing as part of her effort to sort of meet

politically powerful people or other kinds of prominent individuals and make these in-roads and then try to promote Russian interests or if this

truly was just kind, you know, a romantic love affair that these two met at a freedom fest, which is a libertarian political conference, that's when

she first saddled up to him. So, it's very unclear what her motives were there.

ASHER: Right, Sara Murray live for us there, thank you so much.

MURRAY: Thanks.

ASHER: OK, so there are moments left to trade on Wall Street, we've got about five minutes left, the Dow is down as you can see here, 750 points or

so, 2.5 percent near session lows. Tech stocks continue to be among the biggest losers. Apple is down more than 4 percent, all sectors across the

board as you can see behind me are in the red apart from Boeing, that is in the green.

Market sentiment is still in extreme fear. And that is QUEST MEANS BUSINESS, I am Zain Asher in New York, "THE LEAD" begins after a short

break.

(COMMERCIAL BREAK)

[16:00:00]

END