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QUEST MEANS BUSINESS
New Jersey Man Indicted for Hezbollah Terrorist Activities; Benny Gantz Declares Victory in Israeli Elections Despite Deadlock; President Trump Sues New York District Attorney Over Tax Returns; Canadian Prime Minister Trudeau Speaks Amid Darkface Scandal; Trump Says Federal Chief's Job Is Safe; OECD Now Sounding The Alarm Downgrading Its Forecast For Global Growth. Aired 3-4p ET
Aired September 19, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL HOST: And good evening, we have been following Breaking News here. Prime Minister Justin Trudeau has been
talking to reporters in Winnipeg. Here are some of what he had to say and again, offering more apologies about the dark face that have been exposed
earlier in his life. Take a listen.
(BEGIN VIDEO CLIP)
JUSTIN TRUDEAU, CANADIAN PRIME MINISTER: ... something absolutely unacceptable to do, and I appreciate calling it makeup, but it was
blackface and that is just not right.
It is something that people who live with the kind of discrimination that far too many people do because of the color of their skin, or their history
or their origins or their language or their religion face on a regular basis, and I didn't see that from the layers of privilege that I have.
(END VIDEO CLIP)
NEWTON: He didn't see that from the layers of privilege that he had. And Athena Jones is here -- of Hunan. I'm glad you're here because I think
that's one of the discussions that's ongoing here.
He is the Prime Minister of a country. He was the political brand of someone who was inclusive. He told me once that he didn't believe in
tolerance. He thought it was too reductive. And how do we put together the reaction to this right now, especially given that in his own admission,
it brings up such hurtful feelings in people?
ATHENA JONES, CNN U.S. NATIONAL CORRESPONDENT: Well, I think there's two layers here. One is that there's a lot of surprise. I mean, I saw that
picture. I was stunned.
NEWTON: I am sure.
JONES: Momentarily speechless. I mean, it is our job to talk about this sort of thing. So you find the words, but at first I looked, you know,
"The Arabian Nights" picture we're talking about. The first one that was revealed when he was a 29-year-old teacher.
In 2001, we are talking about brown face, black face, it's dark makeup. It's all, you know, sort of akin to blackface. I don't think it matters
the terminology here. But I think what's shocking is that the son of a politician in 2001, would not know that this would be potentially
And now we will learn that there are these two other instances, as you see in that press conference that is still going on. He was asked, you know,
you said last night when your first press conference apologizing about this, that you remembered one other instance of being in high school,
putting on dark makeup and Afro wig, but now we see another one has been revealed.
And he just now was asked, so how many times have you done this? And he said, I don't want to say, I don't remember. And he is saying, you know --
we've heard him say repeatedly.
You know, I come from a place of privilege. I wasn't aware of this. I should have known better. I didn't know better. I'm disappointed in
myself. I'm pissed off.
I mean, I lost count of the number of times he said some version of I'm sorry or I regret this. So he is certainly hoping that people will give
NEWTON: And you make such a good point. The son of a Prime Minister and I will say to a Prime Minister, his father who counted Nelson Mandela, no
less as a personal friend, which brings us back to today's context, when in general, you have these mea culpas, these acts of contrition, in terms of
how our community is supposed to take that because I know there will be this ambivalence, right?
Do we take him at his word? People make mistakes? Or is there more that has to be done? Because I can tell you from the reaction from a lot of
groups in Canada already, they're saying, no, more needs to be done here. The apology is not enough.
JONES: Well, I think, certainly, he is apologizing. And you mentioned he is known as someone who has been an inclusive figure, embracing multi-
cultures, and embracing immigrants. He has a relatively diverse Cabinet, as far as I know, so there's that side of it.
But at the same time, I also think that -- you know, I've talked to a few people anecdotally in Canada, you know, parents who have small children,
just people of various races who say this was a dumb mistake. He is not the first person to have made it. I may have issues with him politically,
but it's not so much about this as it is about some other specific policy.
So I don't know that a lot of folks especially minorities are going to say, oh, you know, you are racist for having done that. They say that the act -
- the action is racist, but they may not apply that label to the Prime Minister himself.
NEWTON: We're going to hold it right there because he is talking again. Let's listen in.
TRUDEAU: ... privilege that you talk about, the opportunities that I've had in my life, to put them in service of people who didn't have the kinds
of opportunities that I have. That's the kind of leader, the kind of Prime Minister I've tried to be, the kind of man I've tried to be. Certainly,
the kind of parent I tried to be.
And in my conversations with my kids, the difficult conversation I had this morning about taking responsibility for your actions and learning from your
mistakes. This is certainly something I think my father wouldn't be pleased with how I behaved, but perhaps would feel that taking
responsibility for things is important.
TRUDEAU: When I think of the conversations I had with my kids this morning, I also recognize that there are far too many Canadians who this
morning had to explain to their kids, what those pictures were of their Prime Minister, and what kind of society we live in, and what kind of world
we need to live in and how things have evolved.
But at the same time, I regret deeply. Parents who had to have difficult conversations with their kids that were uncomfortable and hurtful because
of my actions.
MICHELLE ZILIO, REPORTER, THE GLOBE AND MAIL: Michelle Zilio with "The Globe and Mail." In 2001, students were being expelled for wearing
blackface and brown face in schools. There was also a Spike Lee movie about it in 2001. When did you realize that blackface was racist?
NEWTON: And you have been listening to a press conference with Justin Trudeau there in Winnipeg. He has offered yet more apologies for having
worn dark face several times now. And he has been taking questions.
But one thing he has not answered, which doesn't seem to be a question right now is his political future. He will continue campaigning and will
have events tonight. A reminder that that Canadian election is October 21st.
And we are going to turn now to our business agenda. We are in of course that final hour of trading. It's been a choppy day in the markets. The
Dow is moving between gains and losses. You see it there, now down about 16 points.
The Dow and the S&P, though are both within one percentage point putting this in perspective of a record closing highs. Investors are trying to
figure out exactly what the Fed will do next. Good luck on that one. And reacting to a new round of trade talks between the U.S. and China. Those
do indeed begin today.
Now meantime, the Fed Chair, Jerome Powell had reason to share in the day's early optimism, just hours after President Trump said Powell had no guts
and no vision, the President then even him this, I'll say tepid endorsement.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: ... with the Fed, but despite that, we have an incredible economy and we don't have inflation.
ED HENRY, FOX NEWS CHIEF NATIONAL CORRESPONDENT: Jerome's Powell is safe?
TRUMP: It is safe, yes. It is safe. I mean --
(END VIDEO CLIP)
NEWTON: Sarah Westwood is here from the White House. You know, I wonder if that is the last word on this, Sarah and I wonder if even Jay Powell
believes it'll be the last word on this from the President.
SARAH WESTWOOD, CNN WHITE HOUSE REPORTER: Paula, it almost certainly will not be the last word from the President on the Federal Reserve Chairman
Jerome Powell, someone the President loves to attack. He is his favorite economic scapegoat.
The President doesn't like to blame his China trade war or any of his own policies for the market turmoil that we've seen over the summer. He likes
to blame Fed Chairman Jerome Powell, and you saw sort of the lukewarm endorsement from the President there saying why not when asked whether
Jerome Powell's job is safe.
But he also in that same interview with Fox News continued to criticize the Chair of the Fed, saying that other countries have done more, their Central
Banks have done more to cut interest rates, pointing to for example, the European Central Bank, others that have moved interest rates down more than
He has criticized them for raising interest rates too quickly and now bringing them down to slowly on Wednesday. The Fed lowered rates by a
quarter percentage point. President Trump saying in that interview with Fox News that he had hoped that somehow, that Powell would lower them by a
whole half of a percentage point.
But there, President Trump saying, dispelling the reports at least for now that he is considering removing Powell from that position -- Paula.
NEWTON: I like the answer to that question, right? Like as if, what do you mean? Of course his job is safe. Sarah Westwood continuing to follow
these stories from the White House. Appreciate it.
Meantime, the OECD is now sounding the alarm downgrading its forecast for global growth to the weakest since the financial crisis. Now I spoke
earlier to Laurence Boone, she is the OECD's Chief Economist. She said the trade war is jeopardizing the world's economic future and I want you to
listen carefully because she uses the words freefall.
LAURENCE BOONE, CHIEF ECONOMIST, OECD: The main factor is all the uncertainty created by the trade tensions, which have led to a very
freefall of investment growth.
NEWTON: Freefall of investment growth that is quite disturbing. And I guess the issue here as well as that it's impossible to know, when those
trade tensions will ease up.
BOONE: Well, it's very difficult to say when the trade tension we resolve because as you know, they are between the U.S. and China, but also between
the U.S. and E.U. and other parts of the world.
But what we are basically saying is that the multiplicity of the trade restriction that we have seen is really undermining the fundamental of GDP
growth. And what we urgently need is a hold to that and more transparent discussion and less uncertainty around all the trade issues which are
NEWTON: And I understand that they are trying to reorder things and yet then again, we also have Brexit, another stark prediction there, three
percent possibly lower GDP growth over the same amount of years about three years? Do you think that that picture has changed somewhat because, of
course, you know, the criticism in the U.K. and in Europe that it was project fear that it was overestimated.
BOONE: As you rightly highlight, Brexit is another massive source of uncertainty, and because the negotiations and the discussions have been
going on for now, more than two years, we can also see the impact it has had on investment.
Investment in the U.K. has barely grown at all over the past couple of years. Now, I would be careful to put a number on what would happen in
case of no deal because there's so much uncertainty, especially today around the policies that could be put in place, you know, the trade
tariffs, the non-tariff measure.
But what we're trying to say here is that, it is adding a layer of uncertainty to already where that very much lacks confidence in the future.
And again, the closer, the quicker we get to a resolution and the closer the final relationship between the U.K. and the E.U., the better for
NEWTON: And in terms of highlighting, you know what can go wrong in the global economies in the coming year, you also point out something that you
would like to see governments do. And one of the things you talk about is infrastructure. You know, it's unlikely right now to have that kind of
spending even in the United States, but even also in Europe, where there's been some reluctance.
I want to take the U.S. picture first, does it worry you with the United States carrying such a high deficit in debt that again, you believe that
spending in this area would still be worthwhile?
BOONE: In the U.S., monetary policy still has quite some room and what we're saying there is, you know, that depending on how the data evolves,
it's good that monetary policy remains accommodative forward looking.
But in terms of infrastructure and fiscal space, I mean, how much there is, then what we recommended is to look at the composition of government
spending and make sure that it's more efficient in terms of being directed at investment.
Now, this is slightly different from Europe and certain countries in Europe, which sometimes have very low debt, and a very large investment
backlog, as well as being very sensitive to what's happening with world trade.
So for those countries, especially in Europe, when we know that we're going to have very low rates for a long time, then there's an urgent need to
start investing in the infrastructure for boosting demand today, but also making sure that growth rebounds and we may -- and gets more elevated
NEWTON: U.S. Secretary of State Mike Pompeo is declaring drone strikes on Saudi Arabia oil facility facilities an Iranian attack that amounts to in
his words, an act of war.
Tonight the Iranian Foreign Minister, Javad Zarif is speaking exclusively to CNN. He told our Nick Paton Walsh that the accusation is a lie and Iran
won't be talking with the Trump administration unless sanctions are lifted.
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: In the immediate days ahead, but you yourself say there is a risk of all-out war. What are
you willing to do in terms of a negotiation? What does the United States have to do to get to talk to Iran?
MOHAMMAD JAVAD ZARIF, IRANIAN FOREIGN MINISTER: We're willing to talk to our neighbors.
PATON WALSH: Your neighbors.
PATON WALSH: Which means Iraq, Afghanistan?
ZARIF: Saudi Arabia.
PATON WALSH: Right.
PATON WALSH: But not the United States directly.
ZARIF: We don't see any reason.
PATON WALSH: Okay, apart from the fact that they've declared an act of war by you.
ZARIF: Whereas it wasn't an act of war against the United States. And it was, as I said, an agitation for war because it's based on a lie.
PATON WALSH: If they drop some sanctions, would that encourage you to speak?
PATON WALSH: So even if all sanctions were lifted tomorrow, there still be no negotiations?
ZARIF: If they lift the sanctions that they re-imposed illegally, then that's a different situation.
PATON WALSH: You would then talk?
ZARIF: Then we would consider it.
(END VIDEO CLIP)
NEWTON: A hard line there from Iran. Our Nick Paton Walsh joins us now live from Tehran. In the interim, you know, he has been granted a visa to
come to the United States for the UN meeting next week.
Nick, some people would say, okay, this is a good crisis, do not waste it. Is there any kind of common ground here that you could see where there
would be any discussion not just with the United States, but with others that would try and broker something here where they could de-escalate the
PATON WALSH: Well, we understand that the Foreign Minister will travel to Iran in the early hours of tomorrow morning, just a few hours away from
now. You say is there any common ground?
Well, we've heard some vaguely sympathetic noises. For example, Japan who had been intermediary between the United States and Iran during this crisis
at times suggested they thought it was highly probable that the Iranian explanation for the attacks on the Saudi oil fields that Houthi rebels in
Yemen were behind it, that that may actually have been highly probable based on the evidence behind it.
PATON WALSH: They just didn't want to go along with the Iranian supposition. We spoke to Mr. Zarif himself, he didn't have much proof he
was willing to offer. He just said that the Houthis made that statement and he believed that they were capable of conducting that attack.
Now, if they indeed go in sufficient number or stayed long enough for the UNGA, it is possible you heard there that he will be willing to speak to
Saudi Arabia, his neighbors, the United Arab Emirates possibly, it doesn't sound like the Saudis now are particularly keen to hold one-on-ones with
But it does also sound like the Saudi Arabian government is trying to deflate the situation, keep it diplomatic, and is trying to perhaps also
stop the more volatile parts of the American administration maybe taking this to what you might call in Pentagon speak a kinetic level.
But to be honest, we don't really at this point and it was clear in this interview, that certainly in the mind of I think Dr. Zarif that Trump is
the main interlocutor, he is the main decision maker, and much of his interview, I felt was designed to send the message to Donald Trump, which
was, if you start a war with us, it won't be as simple overnight tit-for- tat, it will go on, it will be messy. Don't do that.
But at the same time, too, saying those people around you who have been giving you bad advice, and he at one point said to me, he didn't believe
that President Trump was gun shy more that he had people around him trying to get him to make a bad decision and launch military interventions against
Iran, and he believed that Donald Trump was smarter than that.
So I paraphrase here, but essentially, the thrust of the message was to say Iran will be very tough in defending its own interest, but doesn't want to
fight, but at the same time, too, seize very slim grounds on which it might be willing to take up negotiations with the United States, again.
I think the overall picture of this from people possibly observing this from 30,000 feet would be that whoever was behind these attacks, Iran has
possibly pushed the U.S. to see how it will bond.
The U.S. has not gone down the military path as yet, and perhaps Iran may be seeing this as a test through which it's probably persevered, regardless
of the dispute over who was behind this. Iran saying it wasn't them. The U.S. and Saudi Arabia pointing towards some evidence they say, which says
that Iran was.
NEWTON: And yet we have yet to see conclusive proof really, and especially conclusive proof that's going to satisfy that international community.
Nick, thanks so much for the interview. It has really added a lot, especially in the lead up to the Iranian officials coming here to New York
next week. Appreciate it.
Now, we are entering into a new era, perhaps of geopolitical risk. And for that reason, oil prices are rising again on fears of that escalation that
Nick was talking about. Now, Brent crude is up more than one percent today. Oil has had quite a wild week though. Take a look at that on the
heels of those Aramco attacks, and the largest ever disruption in global supply. John Defterios is in Jeddah in Saudi Arabia and john, I think in
terms of you being our armchair quarterback on this, I can't think of no one better.
Where do you see the turmoil with those energy prices stabilizing now and as a backup to that, where do you think Saudi Arabia will take this given
their energy interests right now?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, let's talk about the risk first there that you were in dialogue there with Nick Paton
Walsh. If you're going to measure risk with the level of rhetoric and you had a needle on an audio board, it's over modulating in a very big way from
Foreign Minister Zarif to Secretary of State Mike Pompeo saying it's an act of war, even Donald Trump, Paula leaving this option on the table for
And as a result, we have very high volatility in the market today. We were swinging around two percent, and we've had a 15 percent swing as you were
suggesting in less than a week.
We were kind of lulled for the last couple of days thinking that Saudi Arabia is on the march back to nearly 10 million barrels and they want to
rebuild their capacity in November to 12 million barrels a day. But the actual fact is, the spare capacity in the world right now is less than two
million barrels. We knocked out 5.7 million barrels over the weekend.
So you can see the vulnerability that's taking place at this stage. There's even a report in "The Wall Street Journal" that Saudi Arabia is
importing crude from Iraq. And I talked to sources in the Ministry of Energy and they didn't refute it saying that we need a couple of different
blends for some of our customers right now. But it's wise that we have good relations with Iraq to build up the stockpile, even though we have our
own reserves, suggesting that the march back may not be that simple, and that the market should pay attention to that at the same time.
NEWTON: And in terms of where this goes from here as far as Saudi Arabia is concerned. I mean, they -- you can't overstate really, how much they
have at stake here. Do you get the sense that they do want some kind of a hard and fast reaction to Iran here?
DEFTERIOS: Well, I started getting a hint of this, Paula, the other night when we sat with Abdulaziz bin Salman, His Royal Highness, who is now the
Minister of Energy when he stated emphatically that Saudi Arabia is the exporter to the world, but it cannot protect itself.
DEFTERIOS: The spokesman's press conferences for the Minister of Defense, it was the same narrative and even the transcripts we saw from Mohammad bin
Salman, the Crown Prince, in his conversations with the leaders of both South Korea and Japan, suggesting that the world needs to stand up.
So if they want to get a victory out of this in their eyes, Paula, it is to go to the UN General Assembly suggesting we're not going to go at it alone.
And then after I spoke to you a few hours ago, we see at the Pentagon, that there's conversations through the Central Command here in the Middle East,
that they're in dialogue with Saudi Arabia and ways to quote-unquote, "mitigate" future risk.
So there is a coalition formed around the Strait of Hormuz with the U.K. and the U.S., perhaps adding the French, perhaps adding the other Asian
importers of the Middle Eastern crude and now they're looking at the hard assets. The eastern province of Saudi Arabia in Dhahran where they
actually had that violence strike over the weekend.
But I'm even thinking here on the west coast, north of Jeddah, you go to Yanbu, very large installations, and I think Saudi Arabia needs the
political support, but they actually want the security support, something that Donald Trump said they didn't want to provide anymore a year ago, that
narrative is changing really fast as a result.
NEWTON: Yes. So interesting to see how it all comes together, especially ahead of that UN meeting here in New York next week. John Defterios,
thanks so much.
Still to come, President Trump says the Fed Chair's job is safe. Yes, he did say that. The question is, for how long?
NEWTON: Okay, although the Fed Chair is keeping his job for now, he is still under pressure from President Trump to cut rates. Joining me now
from Washington is Binyamin Appelbaum. He is a member of "The New York Times" Editorial Board. He has also written a new book, "The Economists'
Hour: False Prophets, Free Markets, and the Fracture of Society."
As much as I am tempted to go back to my Economics class of 30 years ago, let's deal first with, you know, no sooner do you pen a fresh book that the
President is actually interfering politically with the Fed, and this also serves I think, in things that you discussed about changes for economists.
Let's deal with the here and now first. In terms of this interference, the President is going to continue, I mean, we know that. It is kind of a fait
accompli. Is it relatively easy, do you think, for the Fed to kind of keep its head through all of this?
BINYAMIN APPELBAUM, EDITORIAL BOARD MEMBER, "THE NEW YORK TIMES": I think it makes a tough job harder for the Fed. I think Jerome cow the Fed
Chairman already has one of the harder jobs in Washington managing monetary policy in an uncertain economic environment, and the political pressure
that the President continues to heap on the Fed is certainly not helping.
President Trump continues to insist that Powell is steering the economy toward a recession. That is not -- that is not what people would like the
President to be doing.
NEWTON: There's a lot of discussion about, you know, Jay Powell and in terms of his economic chops. I mean, as far as you're concerned, I mean,
you've looked at the history of this. And this goes back to your narrative in your book, I mean, how much do you have to be into the micro and the
macro to actually dictate monetary policy the way it should be?
APPELBAUM: Yes, you know, so the book is basically a history of a revolution that begins in the late 60s and the early 70s, where economists
begin to play a prominent and decisive role in shaping economic policy, and basically, ever since then, the Fed has been run by economists.
Jerome Powell is the first Chairman in a long time who doesn't have a PhD in Economics. That makes him very different from his predecessors. But
listen, he is a deeply experienced guy. He has spent time at Treasury. He has been in financial markets. He has been at the Fed for a bunch of years
He understands how the system works. He has a lot of experience to draw on, and he is surrounded by a lot of smart people. I don't think this job
is easy for anyone to do. But, you know, I think he is qualified for it.
NEWTON: Yes. And for those of us who has only taken Economics courses at Masters level, let me tell you, you really divide people between if you're
doing a PhD in Economics, and that's why people pointed out and going back to that economic theory, you know, some people would think that behavior
economics was quackery a little while ago.
Now, you know, obviously, people see it for the revolution that it can be. You know, I will ask you a question that I asked Robert Shiller yesterday
on this program. This new data, this data revolution that is going to be open to the Fed and open to everyone else, including you, will it confound
us or do you believe it will give us clarity going forward on the basic economics?
APPELBAUM: I think it gives us the opportunity to understand economics better. A lot of the theories that prevailed in the mid-century and that,
frankly continue to structure our economic policies were rooted in very sort of 20,000 feet theories of how the economy works based on a lot of
assumptions and broad characterizations.
And as we've accumulated this massive quantity of data, it really allows us to develop a much richer, finer grained understanding of how the economy
Data can be overwhelming, and it can be confusing, but if it's used well, it can be clarifying, and I think we're seeing a growing number of areas
where economic researchers have been able to use that data to bring clarity to the way that we understand the world.
NEWTON: Using the trite and overused cliche of hindsight is 2020, you did decades of hindsight on economics, what do you think -- what can we take
from the lessons from today, which really, even if you look at a yield curve right now, everything is completely unorthodox in terms of what you
and I may have learned at school?
APPELBAUM: You know, I think the biggest lesson really is that economists asserted that inequality was not going to be a problem. That economic
growth needed to be the focus, and that if you tried to increase equality, it would come at the expense of growth that really shaped and informed
policy over the last half century. And I think it was fundamentally wrong.
We're learning that in all sorts of interesting ways, inequality is a big economic problem and a big political problem, too. And it is one of the
main reasons that we're now experiencing this period of lackluster growth, uncertainty, turbulence in the global economy and in global trade. A lot
of factors that are coming to the fore have at their core, this period of rising inequality.
And I think we're hearing a new generation of economists reconsidering that basic assertion that inequality is not a problem.
NEWTON: It should be so interesting to see what their work gives us in the future, especially as it brings it back full circle to the populism that we
see around the world, including in the United States. Binyamin, thank you so much. Really appreciate it.
APPELBAUM: Thank you.
NEWTON: The book again, is "The Economists' Hour: False Prophets, Free Markets, and the Fracture of Society."
Now, we are going to be getting back down to business. Nearly two months, talks are resuming on the U.S. and China trade dispute. We speak with the
President of the Asia Society and former Australian Prime Minister, Kevin Rudd.
PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton, and there's more QUEST MEANS BUSINESS in a moment. But before that, the
headlines at this hour. Breaking news just into CNN. A New Jersey man has been charged with carrying out terrorist activities on behalf of Hezbollah.
Now, authorities allege he was scouting possible targets in New York City for the terror group's attack planning efforts. He was also indicted on
separate marriage fraud offenses.
In an exclusive interview with CNN, Iran's Foreign Minister warns a U.S. or Saudi attack on his country would lead to -- in his words, all-out war.
Mohammed Javad Zarif spoke a day after Saudi Arabia presented evidence that it says implicates Iran in the attack on Saudi oil facilities.
Zarif insists Iran had nothing to do with the attack. Opposition leader Benny Gantz is declaring victory in Israel's elections despite a political
deadlock. And our projections show his Blue and White Party edged out Prime Minister Benjamin Netanyahu's Likud, but neither won enough support
to rule on their own.
Both Gantz and Mr. Netanyahu want to lead what they call a unity government, Gantz is rejecting Mr. Netanyahu's suggestion that they could
share power. Canadian Prime Minister Justin Trudeau is apologizing after at least three images surfaced of him in racist makeup. Mr. Trudeau spoke
a short time ago, saying darkening your face is always unacceptable. The image surfaced a month before the next election in Canada.
U.S. President Donald Trump is suing New York District Attorney Cyrus Vance. Vance subpoenaed the president's long-time accounting firm for
eight years of his tax records. Mr. Trump said he would disclose his taxes during his 2016 presidential campaign, but has since refused.
And stocks are close to their lows of the day as we enter the last half hour of trade. Now stocks earlier were boosted after the Fed cut interest
rates by a quarter point and forecast no further cut this year there, as you say, down almost 50 points now. Now, this is Chinese trade deputies
engaging two days of talks in Washington, let's hope they can in fact lay the ground work at least for further discussions next month.
We want to get more on those talks and a wider picture in Asia. Former Australian Prime Minister Kevin Rudd is now the president of the Asia
Society and has just returned from China, and that is why we really want to talk to you. A lot of speculation that in the next few weeks, so going
into the talks this week and into October, that this is the last chance for a U.S.-China trade deal. Is that true?
KEVIN RUDD, PRESIDENT, ASIA SOCIETY: I think basically it is. And I think plan A in Beijing, and I hope in Washington is to try and get this thing
done. The reason that, that's pretty simple, despite all the public history on us, at the end of the day, both presidents know that this
unresolved trade war is starting to tank markets, and therefore runs the risk of throwing this economy in the United States in the direction of
recession in 2020, and to really undermine China's growth as well.
So, they want to get it done, but plan B, I think, kicks in towards the end of the year if plan A doesn't work. And plan B is to frankly double-down
in a much more protectionist and nationalist direction and play the politics of that both in Washington and Beijing next year.
And frankly, that starts to get very ugly to the economy, but frankly for geopolitics too.
NEWTON: Let's -- leaving plan B aside for a second, if we stick with plan A, what do you believe China would accept as a deal right now? Because many
people have said that materially, it needs to be significant or the Trump administration just cannot accept it?
RUDD: Well, I think that analysis is right. You need to have a substantive agreement, otherwise people will ask what's this shadow played
in Iraq --
NEWTON: Well, and politically, that won't work for the president.
RUDD: Yes, so, I mean, it's got to be something which has meat in it. So, I think what the guts of it are is probably like this. America has a
position on the retention of tariffs after an agreement is signed. The Chinese have said no way, they're not going to take that. They've
published three red lines.
If we have an agreement, no American tariffs after the date of that agreement, secondly, the agreement can't specify that America can
unilaterally impose punitive tariffs later on if Washington says now judgment that China is not honoring the deal, and thirdly, we want the --
agreement to stipulate when and how China will legislate, regulate and enforce this stuff.
And the Chinese have said no, and no, and the latter one, that is telling us how to legislate -- they say, is it an intrusion on their own national
sovereignty. My bottom-line, judgment, is because that's all been in the public domain and put on the front page of every Chinese newspaper.
It will be too much of a loss of face for Chinese leaders to back away from all that. But on the other hand, China, I think, there's a real prospect
of having relatively robust provisions on intellectual property protection. Relatively robust provisions on forced technology transfer. Some
provisions on market access, greater market access for American firms.
I think the sticking point will be in two areas. And that is the American, and I think legitimate global concern is too much state subsidy of Chinese
firms and what can be agreed on that, and the second one is Donald Trump's bottom-line is how many dollars are we going to agree on that you, Chinese,
will buy every American goods through a national purchasing agreement --
NEWTON: So --
RUDD: To narrow the actual size of a trade deficit --
NEWTON: So important going into that campaign cycle, I don't have a lot of time left, but let's get to the plan B, doubling-down on the nationalism.
RUDD: Yes, I think plan A is doable, and I'm on balance an optimist that we'll get there. I'm not an irrational optimist, I've been in Beijing,
I've been in Washington yesterday, and kind of know how the feelings are on these questions.
But plan B is easy politics but lousy economics. Easy politics because there are nationalist constituencies in both these countries. You can rip
that up, and what Xi Jinping can do -- can say any weaknesses we have in the Chinese economy next year, that's all Donald Trump's fault.
And the flip side can be played here going to the presidential election year, it's very easy politics, except you run the real risk of shaving off
1 percent, 2 percent, 3 percent of each points of growth from the Chinese economy.
NEWTON: But it's significant for everyone by the way, not just China.
RUDD: It goes worldwide. It goes worldwide. And the role on effects in Asia, and in Europe will be huge. Now, the impact on the importation for
example of European cars into China would be affected, simply if the economy starts to turn down consumer sentiment crashes, business investment
crashes as well.
And so -- but the politics would be, in this country as well, Donald Trump could go into the presidential primaries and the election campaign saying,
I'm being tough on China, the first U.S. president who's ever been that way. We're not just going to be kicked around by these guys anymore. As I
said, great sound-bites, but for the actual substantive health of the economy, and living standards and prices for working families, growth at
also some improvement on the actual structural changes we need to see in the Chinese economy playing the nationalist card doesn't get you anywhere.
NEWTON: Have the Chinese asked for your advice and have you given it?
RUDD: Well, if they did, I wouldn't tell you.
NEWTON: I love the blunt answers, that's fantastic. Well, thank you for coming in, we will continue to watch this trade develop and we'll have you
back though when you can give us the answers that perhaps you would --
RUDD: I love to be back on the program, thank you --
NEWTON: Thank you, appreciate it. Amid the trade battle with the U.S., China is addressing another major challenge in its economy, you know so
much about this. It is pork, the country has just released 10,000 tons from state reserves after an outbreak of swine flu -- fever, rather, wiped
out about a third of its pigs. David Culver has more now on that.
DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT (voice-over): Inside Beijing's Home Plate restaurant, American barbecue is king. Their
specialty, pork ribs.
(on camera): How long will this take?
BILL CHEN, GENERAL MANAGER, HOME PLATE RESTAURANT: It will take six to eight hours to smoke.
CULVER (voice-over): General Manager Bill Chen touring us through the kitchen. He says China's growing pork crisis has had him paying about 20
percent more for the meat. He's about to bring new menus to help ease the burden.
(on camera): Are you worried by raising the prices that, you might push customers away?
CHEN: I'm a little bit worried about that, yes.
CULVER (voice-over): The Chinese pork market, the world's largest has been ravaged by an outbreak of African swine fever. Demand is strong as ever,
sending prices up nearly 90 percent in some places. It's a reality, felt in small towns too. Despite the chill in the air, this inner Mongolian
market bustling midweek. Among the world offerings, pork.
Butchers are eager to make a sale.
UNIDENTIFIED MALE: Compared to previous years, business is worse.
CULVER (on camera): The locals whom we've spoken with in the small town market tell us they have noticed the price of pork going up. But their
consumption has stayed the same. They're willing to pay more.
UNIDENTIFIED MALE: I need to eat pork, it's a big part of our life.
CULVER (voice-over): Chinese people consume more pork than the U.S. and Europe combined. It is also the biggest supplier of pork which explains
why the swine fever outbreak is so devastating. Since late last year, a third of China's pigs, more than a 100 million have been wiped out.
To help replenish the supply, China has suggested they will ease tariffs on U.S. pork imports in the midst of the trade war. They're also trying to
regulate the domestic market from within.
(on camera): The Chinese government has just released some 10,000 metric tons of pork. Is that going to help you guys at all?
CHEN: I think it's good for the common people and the restaurant like us.
CULVER (voice-over): But Bill is hesitant about the long-term impacts.
CHEN: The trade war between the two countries, the politics, I don't know.
CULVER: For now, Home Plate keep dishing up, bringing American customers a taste of home and serving local Chinese, their staple meat with a Texas
twist and a soaring price tag. David Culver, CNN, Beijing, China.
NEWTON: Now in a moment, from lodging to listing, Airbnb gets ready for a stay on Wall Street.
NEWTON: Airbnb is finding a new home on Wall Street. The rental firm says it plans to go public. In 2020, now, it's widely expected to offer what
they call a direct listing. Airbnb says it made more than a billion dollars in revenue in Q2. It has not said though whether it was profitable
during that time. Our Paul La Monica joins me right now. Let's deal with the profitable part first. How much tolerance does Wall Street have right
now for companies that cannot make money?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think you've seen, Paula, with the violent reaction to Uber and Slack recently. You know, two
companies that went public and there were lots of hopes and hype, and they've since come down pretty sharply, Lyft as well, and then the drama
about WeWork, the We company, they may not even go public any time soon.
You know, now delaying it to later this year because of questions about all the money that they're losing and some weird just, you know, kind of a
weird corporate culture in general. I think the one thing Airbnb has going forward is that, even though they're not profitable on the net income basis
probably, there have been reports that they are EBITDA positive.
So, that at least, probably means that they're closer to being profitable in a real way, and that could be something, I think, that, you know, people
on Wall Street would like. I think, you know, Airbnb has always been one of the unicorns that people got the story a lot more than some of these
other companies, and they are a market leader. They don't have as much competition as some of the other firms.
NEWTON: I wonder though, they're market leader for her so long, and they may be leaders. But of what kind of pie, right? What kind of the piece of
the pie are they going to be dealing with? The direct listing here, we've seen other companies do this before.
LA MONICA: Yes, direct listing, I think it's too soon to say whether or not, you know, listing your shares directly on an exchange instead of going
through a traditional IPO route, if that's a mistake or not. It seemed to work for Spotify, for Slack, maybe not so much because, you know, Slack has
really struggled to convince investors that it is a company that can make money any time soon.
So, I think that obviously, a lot of companies are looking at this direct listing, process as a way to be able to go public on their own terms, and
that is appealing, I think, to a lot of these founder-like unicorns whether or not will see other big companies do it, I think still remains to be
NEWTON: You know, we saw we were -- you know, cut out its IPO earlier this week, maybe to October or the end of the year. You know, did some of these
IPO timings -- I mean, they're just not timing right on some of these IPOs because they almost seems to me like even Airbnb, when you see so many
other companies now trying to get in on their space including Expedia. You wonder, did you guys just miss the timing here --
LA MONICA: Yes --
NEWTON: Amid the sweet spot --
LA MONICA: Yes, I think part of it is the timing. I think the big issue, Paula, is that, to the credit of these giant unicorns that are going public
now, many of them are leaders in their markets and they have legitimately sizable revenue streams. That's a big difference than 20 years ago when a
lot of dot-coms went public "with nothing more than just a dollar and a dream", to quote the old New York lotto logan -- slogan.
But now, these companies because they stayed powered for so long and they were insulated from the public market pressure, you had VCs and private
investors that were willing to accept this growth and worry about profits later --
NEWTON: So, you were touting companies --
LA MONICA: They nurtured that and they're just still not profitable. And now they're going public, so, yes, they have giant revenue streams, but
they have giant losses as well. That's not a great match right now.
NEWTON: Yes, and trying to make that transition to getting that bottom- line right or getting any kind of a bottom number at all that looks good is going to be a struggle even for Airbnb. Paul, thanks so much --
LA MONICA: Thank you --
NEWTON: Just remember to watch closely. How is life without Google? Huawei is about to find out.
NEWTON: OK, Huawei is bracing for life without Google. The Chinese tech giant is launching its first smartphone since it was put on a trade
blacklist by the United States, which is why its new glossy 5G phone, the May 30, will not come preloaded with Google apps like YouTube, Gmail and
Now, the smartphone will still run on Google's open-source Android operating system. Hadas Gold is in London, it was a mouthful for me to
say, something tells me that we've had a lot of people complaining when they're trying to use it on their phone as well. Listen, this is a
departure for me in terms of what I know Huawei to be because I know a lot of times, they've been seen as the person that competes on price, but not
necessarily on the bells and whistles. And then on top of that, it's now dealing with the blacklist issue.
HADAS GOLD, CNN BUSINESS CORRESPONDENT: Yes, well, Paula, this has all the bells and whistles. It has four cameras on its back, that's one up being
the iPhone which its newest phone only has 3 cameras on the back, it's sporting the latest in the 5G capabilities, has space for two SIM cards.
You can be on two networks at the same time, has the screen that goes over the edges, has a better battery life, they say it's going to go for two
whole days, and that you can even charge the battery with a fast charger within 30 minutes, you can get it up to 70 percent.
But for the price point, it's starting at $800 -- around $800 U.S. for that price point, which is about almost as expensive as some of these iPhones.
You can't have any of the Google apps because of that blacklist. So, Google had to yank their Android license, and now, they're using this open-
source Android, but they can't have any Google apps.
No Gmail, no Google Maps, but not only that, Paula, not only can you just have your normal Google apps, you also won't be able to use apps that might
rely on Google services like a ride-sharing app that uses Google Maps. There's a lot of issues there. Now, Huawei says there might be some sort
of side-door abilities, you can still download some of these apps and sort of this back-door way.
But I've already seen reviews from technology reporters who have been holding the phones in their hands and it's shaky. It's not working.
They're trying to open a YouTube, but it immediately crashes. That's not something Huawei probably wants to see on the first day of this big fancy
new phone that they're hoping will launch them to be the biggest smartphone maker in the world right now, they're number two.
But the big question is, will consumers want to buy this phone? Consumers that aren't just the Huawei die-hard fans. Are all of those bells and
whistles enough to convince the average consumer when they're looking at the marketplace of all those phones out there. Do I want to spend at
minimum $800 U.S. on this phone if I can't even for example maybe get my Gmail on the phone.
And a lot of analysts are questioning whether that will actually happen.
NEWTON: And now, in terms of trying to fix this problem, Huawei is going to U.S. court, right?
GOLD: Yes, so, actually, just today, ironically, the same day they're launching this phone in Munich, they were in federal court in Texas today,
trying to argue to a judge there that the way that this ban was handed down was unfair and it doesn't -- it's not actually about security risks.
They're trying to actually -- they're going to be using some of Trump's own words.
And we've seen this in other cases as well. Some of Trump's own words, possibly against the U.S. administration, saying that the way this was
handed down was not fair. Now, it's not clear exactly how well they will be able to convince the judge in this case, but this is sort of a hail Mary
you could say, for them just to try to get this ban overturned.
But it's not clear that it will do anything at least, especially in time for them to get some of these sales up on this new phone.
NEWTON: Yes, because just imagine even the appeals process, even if they do win, I can only imagine. Hadas, thanks for following this story for us,
it's a phone that a lot of people are watching, appreciate it.
Now, there are just moments left to trade on Wall Street. We'll have the final numbers and that closing bell when we come back.
NEWTON: There are just moments left of trade on Wall Street. And as you can see, the market -- the Dow at least is down about 60 points. The Dow
has given up on those early gains, we were up about as much as a 100 points earlier in the sessions.
But you know, investors are sobering up, they're reacting to comments from one of Donald Trump's top advisors who says tariffs on Chinese goods could
go as high as 100 percent if China doesn't agree to a trade deal. There's a lot of pressure on this, on this program, you heard former Australian
Prime Minister Kevin Rudd say that it really will come down to the next few weeks.
Meantime, the editor of a Chinese state-owned tabloid added to all of this negative sentiment, tweeting that China isn't as eager to make a deal as
the United States believes. This will be a continuing story that we will follow obviously over the coming days. We want to look at some of those
Dow components now.
Microsoft of course, the largest gainer there. Shares hit an all-time high after the company raised its dividend and authorized a plan to buy back as
much as $40 billion of its own stock. We'll take a quick look at Europe though as well, the major indices all ended the day up around one-half of a
percent, bank stocks were among -- although the biggest gainers as hopes for increased global stimulus continued.
We will continue to obviously watch those oil markets as well, they were edging up as well on the increase geopolitical risk as we continue to watch
the reaction from both Saudi Arabia and Iran. That is QUEST MEANS BUSINESS, I am Paula Newton in New York, "THE LEAD" with Jake Tapper starts