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Markets Open as Trade War with China Escalates; Robert Thayer is Interviewed about California Water Release; Trump Orders Creation of U.S. Sovereign Wealth Fund. Aired 9:30-10a ET

Aired February 04, 2025 - 09:30   ET

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

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[09:30:22]

JOHN BERMAN, CNN ANCHOR: All right, you are looking at live pictures right now from Wall Street. That is the opening bell. Trading begins in two, one, zero seconds now. And we have our eye on the stock markets this morning because this tit for tat trade war between the United States and China went into effect at midnight. Yesterday just wild swings on Wall Street with the back and forth between the U.S. and Canada and Mexico. The United States ultimately backed off those tariff threats. But it's on with China.

So, what does that mean for the markets today? CNN's Matt Egan is here watching alongside me.

MATT EGAN, CNN REPORTER: Well, John, what a difference 24 hours makes. Look at this. The market, yes, down a little bit, but this is so much chiller than what we saw yesterday when the Dow was down almost 700 points in the morning. We saw the Nasdaq was down yesterday at one point around 2 percent. You see its trading a little bit higher. Of course, that selloff yesterday morning was before President Trump hit the pause button on the tariffs on both Canada and on Mexico. So, I think the message from the market is simple here, right, hitting China with tariffs, that's one thing. But doing China, Canada and Mexico all at the same time, that's risky. That's a whole nother ballgame. So, I think that's why we're seeing the market react much calmer here.

So, thankfully, we got the tensions in North America cooling off. But they're heating up with China, right. So, we have these new Trump tariffs on China. Let's talk about where that's going to hit consumers. Because we do get a lot of stuff from China, including computers, smartphones, other electronics. Almost a third of that category comes from China in terms of U.S. imports. Also clothes, chemicals, electrical equipment and machinery.

Now, remember, these tariffs, they're paid by U.S. importers. And those importers can choose to pass along some of the costs to consumers. So, when you think about possible price impacts, that's where we could see it.

And as you mentioned, China just retaliated, right? They're announcing retaliatory tariffs on stuff that's coming from the U.S., including a 15 percent tariff on coal, liquefied natural gas, 10 percent tariff on the way for crude oil, machinery and some vehicles. And that's not all. They also have some non-tariff retaliatory moves. They have new export controls on some metals. Some U.S. companies were added to an entity's sanctions list. And they've also got this anti-monopoly investigation into Google.

I would say though, John, that this retaliation from China, it seems pretty measured, right?

BERMAN: Yes.

EGAN: They didn't go after Apple. They didn't go after McDonald's, U.S. crops. It seems like China doesn't want this to get out of hand. Of course, now the question is, how is President Trump going to respond to this retaliation.

BERMAN: And mild trade war, as it were, at least -

EGAN: For now.

BERMAN: For now.

All right, Matt Egan, thank you very much.

EGAN: Thanks.

BERMAN: Kate.

KATE BOLDUAN, CNN ANCHOR: And as of this morning, the trade war with Canada has been put on pause for now. President Trump and the Canadian prime minister announcing a 30-day reprieve.

And here is how we got here. Donald Trump demanded that Canada do more to fight illegal immigration and keep fentanyl from coming across the border. That is even though data shows less than 1 percent of the fentanyl entering the U.S. comes from Canada. And that's even though only 1.5 percent of border patrol encounters with migrants take place at the border with Canada. Still, here is what the Canadian Prime Minister said about that 25 percent tariff that President Trump had ordered.

(BEGIN VIDEO CLIP)

JUSTIN TRUDEAU, CANADIAN PRIME MINISTER: This trade action by the Americans, and our response, it's going to have real consequences for people, for workers on both sides of our border. We don't want to be here. We didn't ask for this. But we will not back down.

(END VIDEO CLIP)

BOLDUAN: Cue the flurry of phone calls and meetings that eventually led to where we are now, a 30 day pause on any tariffs and consequences. Trudeau announcing that the two countries had come to a deal essentially that would include Canada naming a fentanyl czar and also implementing an existing plan to boost border security and also classifying drug cartels as terrorist entities, to name a few. Joining us right now is Canada's minister of public safety, David

McGuinty. He's in charge of border and policing by agencies in the country.

Minister, thank you for your time.

How would you describe what Canada has agreed to in terms of concessions in order to bring about this pause on tariffs?

[09:35:01]

DAVID MCGUINTY, CANADIAN MINISTER OF PUBLIC SAFETY: Kate, our first objective is to not have any tariffs applied on Canada or the United States. We've had 150 years of successful commercial relationships on the longest undefended border in the world. Probably the strongest bilateral relationship that exists even today in the world. That's our objective. Not having any - any tariffs whatsoever.

So, we've been working hard. The president has pointed out some concerns. We take those seriously. We've been negotiating with American authorities. I was in Washington just last Friday meeting with White House officials. And we've had other delegations down. We've seen - we've found a good, I think, accommodation here, and we're going to be showing progress over the next 30 days.

BOLDUAN: When you talk about an accommodation, what is new here, though, that wasn't already what Canada was working on?

MCGUINTY: Well, this new fentanyl czar position is one that will transcend any one part of the government, will pull together a full Canadian national response between our provinces, our police of local jurisdiction, and work with our American authorities. This fentanyl crisis is a North American crisis. Our families have been rocked by it. American families have been rocked by it. We've got to come to ground on this together. We understand how joint it is, which is why we've, for example, announced that we're going to be listing cartels as terrorist organizations under our criminal code. Why we're going to strike a new joint task force between Canada and the United States and our officials at the operational level to work on this jointly together, because it's so interconnected.

There are a series of measures here that we think will help us wrestle this to the ground because too much is at stake.

BOLDUAN: When Canada's responsible for less than 1 percent of the fentanyl that's entering the United States, how much of this is Canada's problem? How much more of that less than 1 percent do you expect to actually stop?

MCGUINTY: Well, as much as we possibly can. And we're going to be working together with our American counterparts, for example, on the cartel issue, which is an issue that is expanding in Canada. It's expanded in the United States. So, it's a - it's a joint problem we have to wrestle to the ground.

We're going to have more intelligence sharing. We're going to be working more closely together in our borders. You know, there are maybe 6 or 7, maybe even eight border crossings, Kate, where we have our border officials and American border officials sharing the same buildings. So, that's the level of interconnectedness that we've got here that we need to build on.

We win, America wins. We lose, America loses. We're wondering why this has to go this way. And we're actually - we're - we're - we're feeling good about the fact we've got 30 days now to make progress here in Canada and to further our relationship with American authorities and folks on the front lines so we can continue to protect our peoples.

BOLDUAN: You talk about the interconnectedness. That leads to something that the - President Trump did say. Before the afternoon call that brought about this 30 day pause, President Trump was asked specifically what Canada, what the prime minister could do to change Donald Trump's mind on tariffs. I want to play for you what his direct answer was to that.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Look, what I'd like to see, Canada become our 51st state. We give them protection, military protection. We - we don't need them - them to build our cars. I'd rather see Detroit or South Carolina or any one of our - Tennessee, any one of our states build the cars. They could do it very easily. We don't need them for the cars. We don't need them for lumber. We don't need them for anything.

(END VIDEO CLIP)

BOLDUAN: And how do you respond to that, Minister?

MCGUINTY: Well, the first thing I would say is that President Trump was duly elected by the American people, and he made promises to the American people. And I think he's trying to keep those promises. We understand that in Canada.

But let's also be serious. Canada is a sovereign state. We continue to build our economy. We've had a wonderful commercial relationship with the United States and beyond for a long, long time. I think we're going to continue to make progress. We just keep moving forward.

Our customers know it. Our clients know it. The folks that we work with across the border know it. So, I think right now we're going to see eventually a change. But we're trying to satisfy the president's concern right now when it comes to this question of fentanyl. And I think we'll be able to do that.

BOLDUAN: When the president's press secretary told CNN yesterday, Canada is bending the knee, just like Mexico, what do you say to that?

MCGUINTY: I say that we're going to continue to manage our - our relationship well with the United States. And we understand the level of interconnectedness -

BOLDUAN: Oh, I think - MCGUINTY: Know that this precious relationship we have between our countries is worth protecting and investing in. So, we simply move forward. We keep moving forward to find the way to keep this important relationship alive and having it thrive.

[09:40:08]

BOLDUAN: David McGuinty. Minister, thank you very much for your time.

Sara.

SARA SIDNER, CNN ANCHOR: You know how Canadians are known for being nice. It was an interesting response. Very diplomatic to your question, Kate.

All right, billions of gallons of water unleashed on Donald Trump's orders in California to help with the fires and help southern California. There's only one problem. Experts say it didn't. And may now hurt farmers in the long run. We have a guest on this subject, coming up.

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[09:45:01]

SIDNER: President Trump's move to give southern California access to more water might have ended up simply wasting water, experts say. So far, 2.2 billion gallons of water have been unleashed from reservoirs by the Army Corps of Engineers because of Trump's insistence that it was a lack of water in southern California that caused the fire damage to be so extensive. But local officials and some experts say it was not the lack of water, but the hurricane force winds that was the real culprit.

Joining us now is Robert Thayer. He is a King County supervisor who lives downstream of the Tulare County dams, where the water was released.

Thank you so much, sir, for - for joining us. And to help inform those folks who are not familiar with the issues with water across California, first, I just wanted to ask you, is that 2 billion gallons of water that was released helping in any way to fight the fires, which are still burning but have now been contained?

ROBERT THAYER, KINGS COUNTY, CA, BOARD OF SUPERVISORS: Well, I'm not sure where all of the - the 2 billion gallons of water is coming from. I don't think it necessarily came from the lakes that are above our area. So - so, I'm really not able to speak to that matter.

As - as for the water that has been released, you know, as long as it doesn't flow out into the ocean, our local farmers know what to do with that water. And they put it in their recharge basins and send it back into the ground so they can pump it at later dates.

SIDNER: So, there is a long-standing issue with water in southern, central and northern California. You just alluded to the fact that farmers really, you know, constantly say, look, we need more water to deal with the crops for our livelihood and to feed the nation. And then, of course, you have Angelenos, who are further down the line, further south, who need the water for drinking and other purposes. And there are also always environmental issues that we hear about.

So, in essence, the release of this water, I mean, where is it going exactly? Because we've talked to some folks who say, look, it's just going to evaporate. It may not be able to be used very efficiently.

THAYER: No. I mean, not necessarily. The, you know, it did come as a surprise to - to us locally that - that - that - that they were releasing water from Kaweah Lake. You know, and a big portion of that flows through our county. Right now I was just - I was notified last night it's - the water has arrived in the Lakeside Irrigation District Complex. It's down here in the central San Joaquin Valley of California. And those people that - that run those irrigation districts are putting it in recharge basins, kind of as you would, it's like a savings account, I guess, for water is a better way to put it. And they sink it into the ground and pump it later when we have crops that need that water and they can send it through their own canal system to other growers throughout the central San Joaquin Valley.

SIDNER: So, it sounds like some of this, at least in your area, where the dams were open for a bit, may end up helping farmers, but it's not necessarily getting to the issue of giving the water to Los Angeles County, which has been dealing with these - with these fires.

I am curious whether you think that climate change has played a role in all this. There has been a lot of blame to go around, a lot of people having to answer questions. Donald Trump has really gone after some of the local officials and the governor. But to you, is climate change also one of the factors here, something that we don't hear really from the president?

THAYER: I mean, I - I don't - I don't know in that sense. I mean, if you're talking about the fires down there and the weather and the weather patterns -

SIDNER: Yes.

THAYER: If that's the stamp they want to put on that, I guess I understand that, you know, to that complex. But really it's a - it's a - it's a government, it's a legislator issue in the state because there's plenty of water that impacts California in one sense or another. But I think that's - that's kind of what the president is alluding to, that when we're sending fresh water into the - into the Pacific Ocean, rather than sending it into peoples' faucets or to farmers, its an issue. And so, you know, whether this is - was meant to be for the fires, I'm not certain of that.

SIDNER: It was meant to be for the fires. The president made that pretty clear.

THAYER: But at least it has people talking.

SIDNER: Yes.

THAYER: Yes.

SIDNER: He made that pretty clear. And I - you know -

THAYER: Yes. And at least it has -

SIDNER: Go ahead.

THAYER: There's probably other lakes. You know, the San Luis - the San Luis Reservoir that feeds the California aqueduct would feed - which if you travel Interstate 5 in California from northern California to southern, that - that aqueduct crosses, you know, the ridge line, the ridge route going into southern California. And that's the only water conveyance that I'm aware of that that sends water down south.

[09:50:02]

And so, I know that there's probably other ways to do it. It's just these lakes above us, where we're at, aren't that right choice.

SIDNER: The lakes that have been opened up and sort of the water is flowing.

THAYER: Right.

SIDNER: All right, thank you so much. Appreciate it.

THAYER: Right.

SIDNER: We'll be right back.

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BOLDUAN: So, is there a new option to save TikTok? President Trump signed an executive order to create the nation's first sovereign wealth fund on Monday. And TikTok is up against an April deadline now to sell before it's banned in the United States.

[09:55:02]

CNN's Clare Duffy is here to fill in all the details.

How could a sovereign wealth fund be the solution?

CLARE DUFFY, CNN BUSINESS WRITER: Yes, I mean, this announcement was light on details. This would be a state-owned investment fund that could invest in stocks or companies, potentially real estate. And Trump said that TikTok could become part of that fund. Technically, that could work under this law that requires TikTok to be sold or banned in the United States, provided that ByteDance, its Chinese owner, no longer owns less - more than 20 percent of the platform and has no operational control. But legal experts tell me there could be some big questions about this, including, could you get a fund like this off the ground in the 60 days that TikTok has to find a new owner. And there could be big First Amendment questions too. It could essentially make the platform ungovernable because if it's the government that is moderating content, removing content, deciding what to promote or demote, that could raise big First Amendment questions.

I also think there's a question about whether TikTok users, who have been skeptical since the beginning about the government's motivation for trying to force a sale of this app, whether they would stay on the platform. We've already heard TikTok users say, I don't want the government owning or monitoring this platform that I use often to criticize the government itself. And so I think, if we were to see this come to pass and then TikTok users leave, that could really undermine this government investment.

BOLDUAN: I think that sounds about right.

SIDNER: It certainly - it certainly doesn't make the government smaller if you're adding this on to it. We will see what happens with this.

BOLDUAN: Thank you, Clare.

SIDNER: Thank you, Clare.

BOLDUAN: It's good to see you.

BERMAN: All right, thank you all so much for being with us this morning. This has been CNN NEWS CENTRAL. "NEWSROOM" is up next.

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