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The Lead with Jake Tapper

New Details About CIA Drone Strike In Venezuela; Flu Activity Sharply Increases Across U.S.; Louisiana Governor Says, Let's Fix College Football; Family-Owned Coffee Shop Rocked By Trump Tariffs; Times Square Ball To Drop Twice After Midnight. Aired 6-7p ET

Aired December 30, 2025 - 18:00   ET

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

[18:00:00]

PHIL MATTINGLY, CNN HOST: Welcome to The Lead. I'm Phil Mattingly in for Jake Tapper.

This hour, new details on the first known U.S. attack inside Venezuela. Sources tell CNN that the CIA carried out a drone strike on a port facility earlier this month. The strike could significantly escalate tensions between the White House and the Venezuelan president the U.S. has been pressuring to step down. One of the reporters who broke this news joins me live in just moments.

Plus, new data out today shows most states are experiencing high or very high flu activity, and those levels continuing to rise. Flu hospitalizations alone just doubling in the last week. What you can do to lower your risk as the virus sweeps through the U.S.

And the next round of the college football playoff kicks off tomorrow, go Buckeyes, but there are already calls for major changes ahead of next season. Among the loudest critics, Louisiana Governor Jeff Landry, who found himself in the middle of major drama around LSU's program last month. He'll join me live. That's ahead.

The Lead tonight, the fallout from a CNN exclusive report, sources telling CNN the CIA carried out a drone strike on a port in Venezuela earlier this month marking the first known U.S. attack on Venezuela soil. It's the latest escalation in President Trump's controversial campaign to counter drug traffickers, which has included more than 30 strikes on suspected drug boats in the Caribbean and Pacific. The most recent U.S. airstrike just yesterday killed two people, according to U.S. Southern Command.

I'm joined now by CNN's Alayna Treene and Zach Cohen. Zach, let's start with you. You broke the story alongside Natasha Bertrand and Jim Sciutto, your colleagues, where -- our colleagues, I guess you could say. Where did the strike hit and how has the Venezuelan government reacted?

ZACHARY COHEN, CNN SENIOR NATIONAL SECURITY REPORTER: Yes, Phil. We know the CIA conducted this drone strike targeting a port facility in a remote location on the Venezuelan coast. And our sources say that, and made very clear, this was conducted inside Venezuelan territory, which is in and of itself is a significant escalation. You might remember the U.S. military, not the CIA, has been blowing up those alleged drug boats in international waters in the Caribbean and Eastern Pacific, but they have not come anywhere close to Venezuelan soil. That is what differentiates this CIA strike from what we've seen to date so far from the military.

And we're told also by our sources that this facility was believed to be operated and used by a gang, a Venezuelan gang, that's been designated by the Trump administration as of terrorist organization to essentially load drugs onto ships and send them on their way to transport those drugs around the world. Our sources made clear that nobody was killed in this strike. That's because nobody was physically at the facility at the time that it happened. But it was -- it's been characterized to us as a success because the facility itself was destroyed and, you know, the boats that were there at the time also were destroyed too.

But one source making clear as well that this was largely a symbolic strike. There's several different ports and locations inside Venezuela that drug traffickers can use to distribute their products. So, the tangible and literal impact of this strike really remains unclear at this stage.

But, interestingly, we only know that this information or really first came to light because Donald Trump is the one who disclosed it during that radio interview a few days ago. He was pressed on the strike details again by our Kevin Liptak at the White House. It's still very vague as far as the specifics go, but we do know that this was a CIA operation, really the first involvement by the CIA to date so far.

MATTINGLY: It is helpful for your big scoops when the president is the one who tips you off to them, first in a radio interview, and then you mentioned Kevin Liptak, our colleague who's in the pool covering President Trump down in Mar-a-Lago, asked the president about this yesterday, right before you guys pinned down all the details on this first. Listen to what he said.

(BEGIN VIDEO CLIP)

KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: Was the facility taken out by the US military or was it another entity like the CIA?

DONALD TRUMP, U.S. PRESIDENT: Well, I don't want to say that. i know exactly who it was, but I don't want to say who it was. But, you know, it was along the shore.

(END VIDEO CLIP)

MATTINGLY: Alayna, how this has all played out, again, the president mentioning it first in a radio interview yesterday to our colleague, Kevin Liptak. Inside the White House, what are they saying about kind of the public nature of it and what happens next?

ALAYNA TREENE, CNN WHITE HOUSE REPORTER: Well, there's a few things. One is -- I mean, I loved that question and answer with Kevin and the president because, of course, then hours later we get this great reporting from Zach and our other colleagues who say that it was the CIA operation. So, they answered that question in the end anyway. But he was being very tightlipped about this. And this has actually been the case from the get-go ever since we actually learned that the president kind of blurted this out on that Friday radio interview where he said that they had, in his words, knocked out one of these facilities.

[18:05:10]

They would refuse really to give any details, and they've been very careful about this. Now, of course, we know it's because this was this covert CIA operation, one, of course, that is not normally really publicized or talked about.

I also think there's probably a good chance, and Zach you can back me up on this, that if the president hadn't actually said this publicly himself or kind of gave a bit of, you know, a kind of hint at what had happened, we may not even know about it. And, really, it was kind of unclear, it still is a bit unclear about how much Venezuela actually knew about this themselves before Trump came out and said it.

But I think there are a couple things to also point out. One is that I think the differentiation that -- making the clear difference between that this was a CIA operation, not a U.S. military one, there are a couple implications there. One is that, again, if it's CIA, it's more likely to be covert. We know that the president kind of gave them essentially carte blanche to operate with these covert op actions, both in Venezuela and throughout Latin America earlier this year.

But if it was a U.S. military strike, the implications would be even bigger. Because I'd remind you the president has been threatening for weeks now, if not months, to have, you know, engage in land strikes inside Venezuela. And he said that he would alert Congress to doing so. It's very much unclear if that actually happened here. This is a different operation, but it's a huge escalation regardless, and great reporting from our team.

COHEN: And for Venezuelan Leader Nicolas Maduro, who has blamed the CIA for numerous other unconfirmed strikes and operations in his country, says that they've been trying to overthrow him basically the entire time he's been in power, nothing from him on this latest revelation about a CIA operation that actually happened.

MATTINGLY: Yes, the lack of Venezuelan response with any clarity or detail, plus the lack of any other White House officials saying anything given their pension for posting actual real time videos of everything else they're doing, it's such a fascinating dynamic right now. Great reporting, I can confirm. Zach was nodding, backing you up with (INAUDIBLE) back me up on this. As always, guys, really appreciate it. Thanks so much.

Well, CNN National Security and Legal Analyst Carrie Cordero and retired U.S. Army Major Mike Lyons are with me now.

Major Lyons, to start with you, you say this isn't an act of war because it was done by the CIA. Explain that for people who maybe don't understand. MAJ. MIKE LYONS (RET.), U.S. ARMY: So, two different guidelines that determine whether something is done by the military or the CIA, and it's Title 10, force on force would be military state to state operation. If the military is used, that would likely then be considered an act of war. Congress gets notified, War Powers Act, and that whole process kicked in. This was done under Title 50, different statutes of the U.S. code, done covert operations by the United States, the president has to notify interagency the group of eight, and likely it's kept under wraps very secretly.

The president has much more of a wider discrepancy about what he targets in this regard, but these are done for national security reasons. So, this was very specifically done by the CIA to keep it under wraps and to keep it out of that that Title 10 and that active war concept.

MATTINGLY: Carrie, the legal basis, the legal underpinning for kind of everything that's been going on in this space over the course of the last several months, the administration continues to compare this war on drug traffickers to the war on Al-Qaeda. Lay out the legal differences between these two groups and these two circumstances.

CARRIE CORDERO, CNN LEGAL ANALYST: Right. So, it really does seem as both the boat strikes have continued and with this new reporting on this strike that the administration is really following the playbook for the war on terror in the post 9/11 era. One significant difference is that after the attacks of September 11th, the Congress passed an authorization for the use of military force. So, all of the subsequent actions by the U.S. military were under a Congressional authorization.

In this case, with respect to the boat strikes, the president has been relying under U.S. domestic law on his Article 2 authority, just under the Constitution, because there has been no Congressional authorization for the use of force on the military side. And then with respect to this new reporting on the strike that is reported have taken place under covert action, that would be under intelligence authorities, which there is a statutory framework, and what it requires is that the president makes a finding authorizes the CIA to conduct those activities, and then the intelligence committees in Congress are supposed to be notified.

MATTINGLY: Major Lyons we mentioned earlier, there was another strike on a boat in the Pacific just yesterday, according to U.S. Southern Command. You kind of put everything together, the continued strikes, the oil tanker seizures, the now land strike in a covert operation, are you surprised there hasn't been a response or any type of retaliation from the Maduro regime?

[18:10:00]

LYONS: A lot of it is because they can't. I think a lot of us -- this is deterrent, it's performative on our side, but they're only really capable of doing something asymmetrical. I'll just put that out there. I'm not sure they have any way to respond and we're going after these drug cartels. When we hit a target in the Pacific, that's flying past Venezuela. That target likely came from Colombia, it came from another country. So, that's likely something that the president is notifying Congress on, has got to keep much more of an open access to.

So, again, this is just showing our strength here within the Caribbean and making sure that, you know, we send -- we continue to send this message. This is not the last time we'll likely strike a port that's alongside the land inside of Venezuela, and you'll likely see a lot more.

MATTINGLY: Yes, it certainly seems to be the case, a lot of questions still outstanding there.

Carrie Cordero, retired Major Mike Lyons, I really appreciate you guys. Thank you.

LYONS: Thanks.

MATTINGLY: Well, cases of the flu are rapidly spreading across the U.S. and new data out today shows where the virus is most rampant right now. We're breaking down the numbers and the best ways to protect your family. That's next.

(COMMERCIAL BREAK)

[18:15:00]

MATTINGLY: We have sad news from the Kennedy family tonight. Tatiana Schlossberg, granddaughter of President John F. Kennedy, died today. She was only 35 and an environmental journalist. Schlossberg disclosed her terminal leukemia diagnosis last month and a very powerful essay in the New Yorker. She was the second daughter of former U.S. Ambassador Caroline Kennedy and designer Edwin Schlossberg and has survived by her husband, George Moran, and their two children.

Well, also tonight, alarming new numbers in the Health Lead. The CDC estimates 7.5 million flu cases so far this year. That's nearly 3 million more than the week before. Those estimates are through December 20th, well before Christmas get-togethers.

I want to bring in Dr. Ashish Jha. He was dean of Brown University School of Public Health and White House COVID response coordinator under President Biden. Dr. Jha, 7.5 million cases so far this flu season, what do you attribute to the surge?

DR. ASHISH JHA, FORMER DEAN, BROWN UNIVERSITY SCHOOL OF PUBLIC HEALTH: Yes. First of all, Phil, thanks for having me back. A couple things are going on. We have -- you know, flu's always been up of several different subtypes of viruses. We have one this year that's a bit unusual. It's called H3N2, for those keeping track at home, and it is associated with just more severe illness and we're seeing a lot more people get infected, and we're seeing a lot more people get seriously ill this year than we have in many past flu seasons.

MATTINGLY: The D.C. Public Health Lab talked to CNN a bit about how the CDC gets the estimates. I want people to take a listen.

(BEGIN VIDEO CLIP) DR. JOCELYN HAUSER, DIRECTOR, D.C. PUBLIC HEALTH LABORATORY: The swabs and samples that are collected in a doctor's office or a hospital would -- each week, they send us representative samples, positive samples. Not only do we do testing on our own, but our results get directly transmitted electronically. As soon as we result out our results, they go directly to -- transmitted directly to the Centers for Disease Control. And then they use that information to add it to the national trends.

(END VIDEO CLIP)

MATTINGLY: So, Dr. Jah, cases are showing up positive for a new flu variant. You people have probably seen some videos on this. It's called subclade K. If you get -- if you got a flu shot, would your vaccination work for the new variant?

JHA: That's a great question. It's a question I get asked all the time. It depends a little bit about what you mean by work. It's probably not going to do a great job of protecting you against infection against a new variant, but it will do a good job of preventing you from getting seriously ill.

So, this year, that mismatch means that the effectiveness against infections probably only about 30, 40 percent. Look, you still get about a third or lower chance of getting infected, but where the benefit of the vaccine is clear isn't preventing E.R. visits, hospitalizations, and obviously the thing we care most about it, which is deaths.

MATTINGLY: Right. The CDC says, states with the highest flu activity are Colorado, Louisiana, New Jersey, New York and South Carolina. Say you traveled to one of those areas, we learned a lot about how to quarantine from the COVID days, would you recommend people keep their distance if they've been to one of those states? How should they be thinking about things?

JHA: Yes, I don't think you need to quarantine yourself or cut yourself off from other people if you've been traveling there. Flu is pretty widespread everywhere. Those are the states where the activity level's the highest. To me, the recommendation is if you start developing symptoms, if you have a fever, you have a cough, you have sore throat, stay away from other people until you get better. That's, by the way, generally good advice, you don't want to be spreading germs to others. So, it's not so much about avoiding people if you've been traveling to high endemic areas. To me, the most important thing is if you have symptoms, stay home and stay away from people who are vulnerable particularly.

MATTINGLY: Yes, it's great advice, as always, from you. Dr. Ashish Jha, thank you so much. I appreciate it.

JHA: Thanks, Phil.

MATTINGLY: Well, new video shows China's military carrying out its war game exercises around Taiwan. We'll go to the region next for a closer look at this aggressive show of military might. (COMMERCIAL BREAK)

[18:20:00]

MATTINGLY: In our World Lead, a massive show of military might happening right now in the Pacific. China is carrying out so-called war games around Taiwan for a second day, a move Taiwan is calling, quote, military intimidation.

CNN's Will Ripley is in the region. And, Will, what's the latest?

WILL RIPLEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Phil, China is escalating pressure on Taiwan with large-scale military drills paired with a surge of propaganda. The People's Liberation Army releasing this A.I. generated video showing drones attacking Taiwan, robot dogs firing weapons and humanoid soldiers fighting in city streets as Beijing launches what it calls Justice Mission 2025.

China says these exercises test its ability to blockade Taiwan and seize key ports. The PLA says its Army, Navy, Air Force, and Rocket Force are all involved. Beijing declared live fire drills in at least five zones around the island with maritime authorities listing seven zones in total. Taiwan's Defense Ministry says China fired 27 rockets in two waves landing north and southwest of Taiwan, some closer than before compared to past drills.

In just 24 hours, Taiwan says 130 Chinese warplanes and 22 warships operated nearby, the second largest single day deployment on record. Taiwan responded by scrambling fighters and increasing patrols. In Taipei, defiance, one teacher told CNN the drills are meant to intimidate. Another resident insisted Taiwan is already a country with its own president, Constitution and legislature.

But in Beijing, residents echoed the Communist Party line, calling Taiwan an internal affair and framing the drills as part of unification. Chinese Leader Xi Jinping has vowed to unify with Taiwan by force if necessary. U.S. military leaders say Xi has directed the PLA to be ready by 2027, warning that Beijing is moving closer and closer to that goal.

When asked about the drills, President Trump downplayed the risk saying, nothing worries him, and insisting he does not believe China will invade. The timing is notable. The drills come just days after Washington approved a record. $11.1 billion arms sale to Taiwan, fiercely condemned by Beijing. Phil?

[18:25:00]

MATTINGLY: Will Ripley with the latest, thanks so much.

Well LSU's poaching of Lane Kiffin is one of the biggest sports stories of the year, but after seeing how everything worked behind the scenes, the state's Governor Jeff Landry declared, quote, the way the sport is run is a complete mess. He'll join me live next to explain why.

(COMMERCIAL BREAK)

MATTINGLY: In our Sports Lead, the college football playoff continues this week and so does the scrutiny over which teams deserve to be there. Looking forward to your bowl game, Notre Dame fans. Aside from that, there's growing concern over how money is changing the sport, whether it's lucrative name, image, and likeness, or NIL deals for the players, revenue-sharing, players using the transfer portal over and over and over again. Some believe stricter rules could fix what they see as a broken system across college sports.

Republican Governor Jeff Landry of Louisiana believes central governance and oversight is the answer and a critical piece of this.

[18:30:00]

He joins me now. And, Governor, I'm really grateful to have you on because you wrote a column about this and you're also coming off of a really intense coaching search where you ended up center stage for the biggest coaching get, I think, of a year where there have been a lot of coaching changes. And that experience, I think, was the genesis to some degree of the calm. Explain why.

GOV. JEFF LANDRY (R-LA): Yes, that experience took years off my life. I got to know an in depth in the college football, the likes of which I would rather just be a college football fan. Of course, many college football fans express the same amount of frustration as I had as well.

I mean, what you see is a calendar that is unworkable, a timeline that's unworkable for college football, and it also is destroying other college sports as well. It has the likeness of destroying many. Women's sports, as whether the Olympic sports in college right now, college athletics is losing $4 billion a year right now. And it's all because of this house settlement.

And so college football right now is broke and it's time for there to be central governance where we can unify the media rights, where all the conferences will survive. And there's an opportunity to save one of the greatest traditions in America, and that's college football.

MATTINGLY: I was struck in reading the column. I actually chuck a little bit, you had a line where you said, don't hate the player, hate the game, in terms of your role here. And you took a lot of heat because you had a role, which always struck me as funny at the time, one, because if you don't understand Louisiana governors and LSU football, you don't understand your Louisiana political history on some level. But also as an Ohio State alum, like I would hope my governor would get involved if we needed to go get a big time coach. So, I understood it there.

But your point in terms of what was the worst thing you saw, or what was the most unsettling thing you saw when you were really underneath the hood?

LANDRY: Well, the most unsettling thing was, number one, the fact that the buyout that we had with Coach Kelly left the taxpayers footing the bill ultimately. So, if the donors didn't step up, that meant the taxpayer had to spend $54 million, according to the contract. To me, that was absurd. At the same time, we had the board of supervisors approving a ticket increase for fans out there while we were losing games. And so those things were all unsettling.

Look, there are great people that work real hard to go out and watch college football. They watch it in the rain, in the snow, in the wind, and the price of college football should not be placed on their backs both as a fan and as a taxpayer.

MATTINGLY: There are legislative proposals. I mean, we actually overlapped for a little bit when you were on Capitol Hill and I was covering Congress. Nick Saban has been up there lobbying at times. Coaches have been up there. The president had an executive order as well. How do you kind of merge those two things together to actually get something done here?

LANDRY: Well, listen, if there are two people that can fix college football right now, it would be President Trump and Coach Saban. Both of them understand, one, if you unify the media rights, and that would allow all of the colleges to enjoy additional revenue, thereby supporting the other sports that college football supports and traditionally has supported, and then putting in the guard rails that Coach Saban has talked about.

I mean, look, we've got agents that are charging some kids up to 40 percent on contracts. There's conflicts of interest that are not being followed because there are no guardrails. Again, we talked about the transfer portal when it opens up. We look at the dilemma that I got, that we got in at LSU, going out there and negotiating with Coach Kiffin towards the end of the season. All of those things can be avoided so that the fan gets to enjoy college football again. But it's going to take folks like President Trump and Coach Saban to really step up and to get Congress off of dead center.

MATTINGLY: I have to ask, I have another policy question for you, but I have to ask just because I'm a football fanatic. Coach Saban -- or Coach Kiffin said that you two had a phone call when it was all said and done. What'd you guys talk about?

LANDRY: Oh, we talked about football and we talked about LSU. Look, I think Coach Kiffin is going to do an unbelievable job at LSU. I think he's really enjoying himself here in Baton Rouge. The fans around Louisiana certainly have rallied around Coach Kiffin. Everyone is excited. We got a new president, we got a new chancellor, and we got a new head football coach.

MATTINGLY: Okay. So, this is going to be a hard turn on some level, but I got to ask, because I think it's only been about nine days since President Trump announced that you were going to be his special envoy to Greenland, the semi-autonomous Danish territory that the president has said he wants to take over, interested in kind of your qualifications for the role, and how do you plan to do it while also serving as governor?

[18:35:07] LANDRY: Look, this is the same thing I do on a daily basis when I get to do economic trips abroad or to other places to talk about the greatness of Louisiana. This is an opportunity to talk about Louisiana and to talk about America, and to talk to the Greenlanders about joining one of the most advanced, strongest economies in the world.

Look, the president has made it a point to strengthen the Monroe Doctrine. Greenland is in the Western Hemisphere. This is a great opportunity to open up dialogue between us and Greenland and have them join one of the greatest economies going on in the globe right now, and that is America's.

MATTINGLY: And just with the little bit of time we have left, is your kind of communications with them, this is something that needs to be completed because the president wants it or just starting a dialogue?

LANDRY: Look, I think it's something that needs to -- that dialogue needs to happen in a more serious manner. I got an email today inviting me to some dog sled races in Greenland. I look forward to doing that. Again, look, Louisiana, we're in that same position. We served under multiple flags over the history of Louisiana, and then we ended up under one of the greatest flags out there, and it's been good for Louisiana.

And so, again, having a discussion with them about opportunities, I think, is smart and is beneficial to those living in Greenland.

MATTINGLY: Louisiana Governor Jeff Landry, I really appreciate your time, sir. Thanks so much.

LANDRY: Take care. Happy New Year.

MATTINGLY: Well, if your nearest resolution is to save more money or make a big purchase, you won't want to miss our next conversation. I'm going to ask two experts what we can expect when it comes to inflation and prices. That's next.

(COMMERCIAL BREAK)

[18:40:00]

(BEGIN VIDEO CLIP)

TRUMP: Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.

Prices will come down. You just watch. They'll come down and they'll come down fast, not only with insurance, with everything.

We're going to have prices down. I think you're going to see some pretty drastic price reductions.

(END VIDEO CLIP)

MATTINGLY: In our Money Lead, President Trump has so far fallen short of his promise to drastically bring down prices. Now, to be clear, prices on some essentials have gone down, eggs, gasoline in particular, but other essentials have seen prices soar. Electricity costs are up 7 percent. Well, coffee, ground beef, they've increased double digits. So, what can we expect in the new year?

Let's discuss with two experts, Michael Strain, director of Economic Policy Studies at AEI, and Economist Daniel Hornung, former deputy director of the White House National Economic Council under President Biden. First off, I'm very glad you're both here. Your project, Syndicate Columns, are like all over my office, dog-eared and highlighted, consume everything that you write or work on and also you put up with me during the Biden years when I would go down economic rabbit holes, and I always appreciated that.

Michael, I'll start with you. Is there any reason to think inflation, costs on essential items will improve markedly in 2026?

MICHAEL STRAIN, DIRECTOR OF ECONOMIC POLICY STUDIES, AEI: There's some reason to believe that inflation might come down. Now, the rate of inflation decreasing is different than prices dropping in their absolute level but we have seen sub indications that the rate at which prices are going up, which is inflation, will slow in 2026.

I think that we're not going to get near the Fed's 2 percent target. I think inflation is stickier than a lot of economists seem to think. So, looking ahead to 2026, inflation is going to be a problem.

MATTINGLY: Daniel, the risk of opening up like your full panoply of policy proposals, are there things the president could do in the near term to address price increases, to address inflation?

DANIEL HORNUNG, ECONOMIST: I think there are a few things the president could do on inflation in particular. I mean, you think about why it is that a year ago at this time, forecasters generally thought inflation would be back to the 2 percent target now, and instead we're closer to 3 percent. One of the big reasons is tariffs and imported goods, prices going up.

I think in the first half of 2026, it's very likely that the Supreme Court could strike down some of the president's tariffs. I don't think he will, but that could be an opportunity for the president to walk back from some of the tariffs and bring the average tariff rate down, which would help on inflation. Another place is respecting the Federal Reserve's independence. We know that we could have real inflation problems if the Federal Reserve loses its tools to operate independently.

And then, finally, I think that housing is a key salient price point for so many families. That's a place where you could see the administration try to bring together state and local governments, the private sector, to do more, to get more housing supply online, which is a big part of how we actually answer the affordability challenge on the housing front.

MATTINGLY: The housing issue is fascinating to me. One, because it's really hard, two, because it's not -- there's no like singular federal solution. Also there are structural issues that are ingrained that will take years to kind of filter out on some level. What could the White House do? What could the administration do in Q1 with this big promise that there will be a housing proposal that could have a tangible effect?

STRAIN: So, you're right to point to the challenge. I would look back to President Ronald Reagan, which I often like to do. President Reagan faced the challenge with drunk driving fatalities. He wanted states to increase their legal drinking ages. Most states were at 18. He wanted to push them up to 20. He wanted to push the age up to 21. And the president said, if you want highway money, get your drinking age up.

President Trump could do something that dramatic. President Trump could say, if you want money for the federal government, which every state does, then you need to make some tangible progress toward relaxing the restrictions that are stopping people from building new homes.

[18:45:05]

I don't expect to see him doing anything that dramatic, but I think he could pull that lever if he chose to.

MATTINGLY: What do you think?

HORNUNG: I think Michael's right, and I think, you know, one bright spot is we are seeing blue and red states taking some really promising steps on housing, places like California and Massachusetts, but also Texas and Florida.

I think that another thing, in addition to reducing some of those restrictions, there is more that the federal government could do to incentivize construction of housing that is affordable for households with low and moderate incomes. I think that has to be part of the puzzle.

I do think there's going to be a temptation for the administration to put forward a splashy proposal on the demand side, and that often is less likely to really contribute to answering some of the root causes of housing affordability over the longer term.

MATTINGLY: So like a splashy proposal, like, I don't know, IPO-ing the GSEs at a 50-year mortgage is not necessarily the near-term answer that you guys are thinking of right now?

HORNUNG: It would be splashy.

MATTINGLY: It would be -- they've already splashed on some level.

All right. Before I let you guys go, Fed -- the president again, going off on the issue yesterday, randomly at the end of a press conference. But we know there are really kind of two, I think, key finalists here. Maybe a third if you include Governor Waller, the Kevins, who do you think it will be? And do you think independence will be a problem regardless of who it is?

STRAIN: Look, I think the president has a clear goal, which is lower long-term interest rates. He wants the 10-year interest rate on government debt down the 30-year rate down. He wants mortgage interest rates down. And if he continues to call into question the independence of whoever his nominee is, he's going to have the opposite effect on those long-term rates. He's going to push those long-term rates up. So regardless of who he chooses, it is in his direct political and policy interests to stop calling into question the independence of the next Fed chairman.

MATTINGLY: I think the question I have, is it too late? On some level, right? Like is the kind of the horses are already out of the barn in terms of his view. Whoever he picks, there's going to be an assumption in the market that's baked in that that person wouldn't have gotten the job if there hadn't been some kind of commitment, if there hadn't been some type of agreement.

HORNUNG: I don't think it's too late at all. And I think it will be incumbent on whoever it is of those three finalists that he picks to come forward, and very clearly indicate to markets and to the public that they will make decisions based on the data.

I think there probably will be some behind the scenes of explaining, explaining that person will need to do to the president to make this point, that taking down short-term interest rates really rapidly, the way the president wants will not help on long term interest rates. And those long-term rates are what matters for people when they buy a home, take out a loan for their small business, or buy a car.

MATTINGLY: All right. We don't have enough time to do anything long here, which is why I'm just going to say, is A.I. a bubble yes or no in 2026?

STRAIN: No.

MATTINGLY: Not in 2026.

Nice. Okay. Michael Strain, Daniel Hornung, really appreciate you guys coming in. Happy New Year. Thanks so much.

STRAIN: Happy New Year.

HORNUNG: Thank you.

MATTINGLY: Well, turning to our Business Leaders series. We speak with small business owners about Trump's tariffs.

And today, we're traveling to Omaha, Nebraska, where Hardy Coffee is based. A 15-year-old coffee shop that survived the housing crisis. It survived COVID. Now it's grappling with tariffs.

Joining me now is co-owner of Hardy Coffee, Autumn Pruitt.

Autumn, really appreciate your time. Just to kind of start top line for viewers. How have tariffs affected your business this year?

AUTUMN PRUITT, CO-OWNER, HARDY COFFEE: You know, in short, it's been an expensive year. I think the tariffs have affected a variety of different parts of our business. But coffee has been uniquely impacted. The United States just simply cannot grow nearly enough coffee to meet demand. And so, importers like -- roasters like us have to import coffee from other countries.

And so, at times that rate has been up to 50 percent this year.

For us, top-line revenue is relatively similar to last year, but our margins are just so much smaller. And so, it's not just the expense of the tariffs, but it's also the unpredictability that they have caused for our industry.

MATTINGLY: That was what I wanted to ask about, in terms of planning going forward. You know, quarter by quarter, how possible is it right now?

PRUITT: I'm optimistic that in light of some recent changes with tariffs, that we have a better chance of forecasting in this next year, but it's going to take time for any changes that happen at that level to actually impact our bottom line. So, it's a -- it's a tricky thing to know how to price and plan and have any confidence for growth moving forward.

MATTINGLY: Can I ask you specifically, they made changes to tariffs that were directly tied to coffee. I guess it was about a month ago now.

PRUITT: Yes. Uh-huh.

MATTINGLY: How quickly does that filter through? Like, you see that change?

[18:50:00]

It comes through like the federal register in Washington. When do you see that?

PRUITT: It'll probably be February or March for us. It depends on growing cycles, and it definitely depends on when our importers work through the inventory that they already have.

MATTINGLY: In terms of customers, have you seen customer behavior change over the course of the last few months, either with the general economy or with individual concerns about tariffs?

PRUITT: Yeah. So, at Hardy Coffee company, we have four brick and mortar locations, but we also roast for about 50 wholesale accounts across the region. And so we're balancing customers both B2B and direct to consumer.

And I would say in general, customers have understood the change in prices, but they're stretched. There's just been a sense of fewer impulse buys, fewer add-ons, and few less frequent visits to our shops in the process.

MATTINGLY: In terms of 2026, I know I asked you kind of broadly about trying to plan or forecast, how are you looking at 2026? PRUITT: Optimistically. But I think that that tends to be a flaw of a

lot of small business owners like us. We tend to think that we can adapt to just about anything. And we do have 15 years to prove that we can, but it really does take the predictability of being able to forecast ahead instead of being reactive in so many of these policies.

MATTINGLY: Yeah. You say floor. I would counter with superpower on some level, given the 15 years up to this point.

Last one before I let you go, if you could give a message to Washington policymakers, what would it be?

PRUITT: You know, I think I would just tell them about our business. My husband Luke and I started this in 2010, and we have grown locations. We've added to our team. We have led through a pandemic.

We are not asking for it to be easy, and we don't mind working hard. I think that what we would ask the government is just to not make it more difficult. And that's what tariffs have really felt like this last year.

It's just been an added expense. It's been just a lack of certainty as we look ahead. I am convinced that -- that small businesses can adapt to just about anything, but we do need that predictability to be able to do it well.

MATTINGLY: That is certainly a message. I think they both need to hear and should hear as often as they possibly can.

Autumn Pruitt, I really appreciate your time. Thanks so much.

PRUITT: Thank you for helping us get the message out.

MATTINGLY: Happy New Year.

Well, we are counting down to New Year's Eve, but celebrations are already underway in Scotland. We'll check in with CNN's Max Foster for a look at some of the events that date back to the Viking times. That's next.

(COMMERCIAL BREAK)

[18:56:54]

MATTINGLY: In our world lead, end of the year celebrations known as Hogmanay are underway in Scotland, starting last night with the river of fire torchlight procession, which dates back to Viking times. Today, the festivities continued with a concert under Edinburgh castle and fireworks preparations.

If you were wondering what you'd wear to celebrate, well, a Scottish kilt, of course.

CNN's Max Foster spoke with a kilt maker about making the traditional garment fit just right.

(BEGIN VIDEOTAPE)

MAX FOSTER, CNN CORRESPONDENT: Howie!

UNIDENTIFIED MALE: Max.

FOSTER: You've got some fabric here.

UNIDENTIFIED MALE: Yeah.

FOSTER: How much do you need for kilt?

UNIDENTIFIED MALE: Well, it's 7.3 meters, eight yards.

FOSTER: All of this?

UNIDENTIFIED MALE: All of this is what I'm wearing in one kilt.

FOSTER: Just explain where all the fabric goes then.

UNIDENTIFIED MALE: All the fabric goes into the pleats. There's over 30 pleats here, and it has to recreate the pattern. And it's fully hand-stitched. The only part of this kilt machined is the waistband.

So, when you're wearing it, you still get that swing in that masculine feeling. But it's not a woman's skirt. It's made for a man.

FOSTER: So, when someone flies in from another part of the world, is it acceptable for them to wear the tartan?

UNIDENTIFIED MALE: Absolutely. It's all about how you feel mentally and physically in a kilt. You've got to feel confident.

FOSTER: So, you showed how much fabric was used. So, there's a lot of fabric. It gets heavy, but weirdly when you wear them, it doesn't feel heavy. What's you got? Just a secret.

UNIDENTIFIED MALE: Just a little bit. The weight of the kilt was very proportioned around the body.

FOSTER: Yeah.

UNIDENTIFIED MALE: I want people to enjoy wearing a kilt, so it has to be comfortable and shaped to the body.

FOSTER: And the length?

UNIDENTIFIED MALE: The length is personal preference. Now I measure from the pelvis to the kneecap, top of the kneecap. And that's where Queen Victoria liked it. And that's where it should be worn for formal wear.

FOSTER: Did she like that?

UNIDENTIFIED MALE: She liked to see the men's -- soldiers knees.

FOSTER: This is what people will recognize, the sporran. UNIDENTIFIED MALE: Yeah. This is Gordon Winkleman.

FOSTER: What was the thinking behind the sporran?

UNIDENTIFIED MALE: Well, sporran was a pouch originally. And when it became more military, they were long haired like this and were centralized. French royalty were wearing it. They were worried about a man being aroused. So, the sporran got put in the middle as a kind of protection.

FOSTER: Really?

UNIDENTIFIED MALE: So, the legend goes.

FOSTER: So your view is that anyone, anywhere in the world can wear a kilt.

UNIDENTIFIED MALE: Yes. Yeah. Just as long as it's a nice kilt, properly made, hopefully made in Scotland.

(END VIDEOTAPE)

MATTINGLY: I learned a lot in that. Our thanks to Max Foster.

Well, have you heard? Probably. Tomorrow night, the ball will drop twice in New York's Times Square. Once -- square, once to ring in 2026, and then again a few minutes later to kick off celebrations for the nation's upcoming 250th birthday.

You're looking at a practice run last week and a little history lesson. Crews dropped the first New Year's Eve ball in Times Square way back in 1907. The ball did not drop during World War II, when the city instituted a nightly dim out.

And, of course, you can watch all the big countdowns from around the world here on CNN. Anderson Cooper, Andy Cohen, once again, they will be hosting 2026 from New York starting at 8:00 p.m. Eastern tomorrow night. Watch that on CNN or stream it live on the CNN app.

Happy New Year, everyone.

"ERIN BURNETT OUTFRONT" starts now.