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Interview With Rep. Gerry Connolly (D-VA); Elon Musk Dismantling Government Agencies; New Trump Tariffs. Aired 1-1:30p ET

Aired February 13, 2025 - 13:00   ET

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

[13:00:34]

BRIANNA KEILAR, CNN HOST: Breaking news.

We are moments away now from what President Trump is touting as the big one. He is preparing to sign new executive orders in the Oval Office. He's hyping the event on TRUTH Social, writing: "Three great weeks, perhaps the best ever, but today is the big one, reciprocal tariffs."

BORIS SANCHEZ, CNN HOST: Of course, matching other countries' tariffs on U.S. goods, dollar for dollar was one of Donald Trump's key campaign pledges.

A lot is at stake here, not just economically, but geopolitically as well.

We're following all the angles with CNN's Jeff Zeleny, who's live for us at the White House, where we are anticipating this announcement to come soon, and CNN's Matt Egan, who is watching markets for us.

Jeff, first to you.

What can we expect from this tariff announcement?

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: Well, Boris, this is one example where I would caution us to wait and see what the president says and what he signs.

He's been talking about now for really the first 3.5 weeks of his presidency about the threat of tariffs and he certainly has made this a central anthem of his presidential campaign. It's something he truly believes in. He has for a very long time. However, there have been more threats of tariffs than actual tariffs.

But the reciprocal tariff idea, of course, is designed to even the score, if you will. If the U.S. is paying more on a tariffs of things that we are importing, he wants to level out the playing field and charge those tariffs, if you will, the same percentage for each country, a tit for tat, if you will.

But the reality here is, we're also getting word that the White House is paying very careful attention to inflation. So there may be a discussion of tariffs, but we shall see if he actually signed something and when it would take effect, because, again, those threats of tariffs last week for Mexico and Canada were halted for a month.

So this is something where I think we will have to wait and see the fine print. The president wants to advertise the discussion of these big tariffs. He's producing this daily activities here, but we shall see if it happens immediately or down the road.

But the bottom line is, this is used as a negotiating tool and this president firmly believes in doing that.

KEILAR: All right, Jeff.

And, Matt, how would -- how might a dramatic hike on tariffs impact the economy?

MATT EGAN, CNN REPORTER: Well, Brianna, I think the timing here is really striking, because it was just yesterday that we learned that the inflation rate in the United States heated up to 3 percent.

We haven't seen that since last summer. And economists again and again have said that the higher tariffs go, the higher you're going to see prices go, particularly prices on imports. So it's hard to come up with a worse time in the past year or so to then come out with a big announcement on tariffs.

Of course, the actual impact on the economy, the actual impact on prices is going to depend here, to Jeff's point, on exactly what gets announced and what actually takes effect. So, today's announcement on tariffs is reciprocal tariffs.

And, as Jeff was saying, this is an import tax and it's designed to match levies that have been imposed on items that have been made in the United States. The goal here is to try to level the playing field. And, ultimately, like other tariffs, these are import taxes that are paid by U.S. importers, by companies that ship stuff in from overseas.

And those companies can then decide to eat the cost of the tariff, which might mean a smaller profit, maybe they can hire fewer workers, or they can pass along the cost to you and I as consumers in the form of higher tariffs.

Now, reciprocal tariffs are really all about trying to level the playing field. Officials in the White House, the president himself, they really feel strongly that the United States is getting cheated on trade.

And one very timely example here is the U.S. and India, because Trump later today is meeting with the prime minister of India. And there's research from the World Bank that shows that the U.S.-weighted average tariff on items that are made in India, it's only 3 percent.

But look at that. More than triple is what India has a tariff on items that are made in the United States. And so the goal here, again, is to try to level the playing field. But the issue and the concern from a lot of the mainstream economists that I talked to, a lot of investors is whether or not this will ultimately be inflationary, right, because, if it is inflationary that could end up, of course, lifting prices for consumers.

[13:05:08]

And it could also unnerve markets. And it could delay when the Federal Reserve is able to resume those interest rate cuts, so a lot of major questions. And, hopefully, we get some answers in the coming minutes here.

SANCHEZ: Yes, we should point out that the United States, through the World Trade Organization, has tried to persuade India, China, and Brazil and other countries to lower their tariffs on U.S. goods. But they historically have resisted that. We will see if this approach might yield a different outcome.

Matt Egan, thank you so much.

We're joined now by Aaron Klein, former deputy assistant secretary at the Treasury Department and now a senior fellow at the Brookings Institution.

Aaron, thank you so much for being with us.

Trump obviously said that reciprocal tariffs would hit every country. I wonder what shape you think that takes. Is it going to be on certain industries or sort of a blanket tariff?

AARON KLEIN, FORMER U.S. DEPUTY ASSISTANT TREASURY SECRETARY: Yes, so I think a lot of this is hot air. I think Trump is talking a big game right now. You can see markets kind of discounting that there will be actual action. And this is more of a bargaining position that he's going to do to try and claim some credit for reductions on tariffs on other countries.

So I think that it's going to be a lot more talk than action. At least that's what markets are thinking that they will do.

And the other thing, I think, to the extent this is a negotiating ploy, then each country will be coming individually and there will be different issues in areas. Blanket tariffs are a little more -- they sound simple, but they're more complicated.

Take the trade with India that was just referenced, right? That's on goods that are going back and forth. How do you tariff a call center, right? So trade is more complicated and nuanced than just sending each other things on ships.

KEILAR: So, as we wait to see how other countries respond and if this works as a bargaining chip, what is the chaos that could ensue in the interim as these things get worked out?

KLEIN: Right.

So it's substantial, because, when you're trying to import and export, when you're trying to run a business, you want certainty. You want to know what your price of goods are going to be three, six, nine, 12 months out. And this creates a tremendous amount of uncertainty. And, generally, economics tells you that, when there's uncertainty, you retrench and you're a little less active. So the uncertainty that is constantly being churned by this president flinging from left to right is in the long run bad for business.

SANCHEZ: I do wonder, as you see the markets, as you put it, sort of calling Trump's bluff on how intense these tariffs are going to be, how much they're going to impact trade, I do wonder what you make of him calling for the Fed to further reduce rates, because tariffs historically have been inflationary.

KLEIN: Yes.

So there are a lot of deep contradictions in Trumponomics, one of which is his desire to have low interest rates and high tariffs and low inflation. Tariffs will be inflationary, period, end of story. There may be other good reasons to do tariffs. There are problems with this trade situation that we have had structurally with China for a long time.

But tariffs increase inflation. The January data came in hot on inflation, which markets meant -- I think means that we're going to have higher interest rates for longer as the Federal Reserve tries to cool the economy and bring down inflation.

So Trump is working against his own stated objectives.

KEILAR: And he says that decreasing interest rates go hand in hand with tariffs, that this is an approach of two things that should go hand in hand.

It's hard to find an economist who believes that.

KLEIN: Yes, because it's just not accurate, right? If you're going to try to reduce inflation, what is the goal here? Is the goal to reduce inflation, the price that we pay for things like eggs and used car parts, right?

Or is the goal here to create a fairer, better trade level playing field? And those two things don't go hand in hand. And he's going to find himself picking more and more fights with the Central Bank, who's behaving, like, in a land of economic rationality, not in Trump fantasyland.

SANCHEZ: To your point, Aaron, about some of the disparities in trade with China and some of the structural problems that the U.S. has now had with trade with China now for decades, what do you think the proper approach should be? Should it be targeting them individually with tariffs? Should it be a coalition of countries going after China?

KLEIN: So, it should be done more multilaterally. One of the things China has done is manipulate its currency for decades. That is not -- that functions the same as a trade subsidy or a tariff, but its implementation mechanism is different.

Remember, when Trump ran for president the first time, he promised to make China -- designate China a currency manipulator. He failed to follow through on that promise. He immediately wimped out and backed down to China in their process of a long-term currency manipulation.

And so there are ways that countries gain trade with America that is not simply looking at reciprocal tariffs in this. And China still, to a large degree, pegs their currency to the weight of the dollar, which is a way to manipulate trade and manipulate their currency to give their exporters an unfair advantage.

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KEILAR: Aaron Klein, great to have you. Thank you so much.

(CROSSTALK)

SANCHEZ: Thank you.

KEILAR: We appreciate it.

And under way right now, the Trump administration is firing scores of federal workers, as the president and Elon Musk carry out their plan to dismantle government agencies. We don't yet know the full scope of these layoffs, but this is the first time that we have seen Trump and the tech billionaire officially terminate employees.

Until now, they had been placed on leave.

SANCHEZ: CNN's Rene Marsh has been following this story for us.

Rene, who exactly does this impact, and how is this going to unfold?

RENE MARSH, CNN GOVERNMENT REGULATION CORRESPONDENT: Right.

And just can't underscore it enough. This certainly is this new phase, as they are trying to shrink the federal work force.

CNN obtained a copy of a letter sent to one employee who was terminated at the Department of Education, and it reads, it says: "The agency finds, based on your performance that you have not demonstrated that your further employment at the agency would be in the public interest."

Now, we know that dozens of employees received termination letters at the Department of Education. Also, similar letters were sent to federal employees at the Small Business Administration, and a small note there at the Small Business Administration. There was actually a snafu where, on Friday and Monday, a draft notice of termination was sent out to employees.

They rescinded that, saying, we sent that in error, and then the next day, on Tuesday, many employees actually did receive those termination letters. But, again, this is all happening as a judge just yesterday upheld the administration's ability to offer the buyout. Of course, that deadline for taking the buyout has expired.

But I just heard this one scenario from a union president, saying that one of the individuals who was fired just yesterday actually put in his name to go for the buyout. He was accepting the buyout, and despite that, he was still fired. So we're starting to get a lot of stories in here, but I should say there is not clarity on just how many of these individuals have been fired so far this week at these agencies.

KEILAR: Very interesting, Rene.

And we're also learning that billions in federal funding is still frozen, despite court orders to keep the money flowing? Tell us about that.

MARSH: Right, so we have been paying close attention to what's happening at a variety of agencies, including the EPA, Department of Energy, even FEMA.

And we know that the courts have said that the administration needs to unfreeze these funds. That Rhode Island federal judge has made that order and actually really kind of chided the government for not following the court's orders. But what we found is that, at agencies like the EPA and Department of Energy and FEMA, there are still funds that are frozen and have not been able to be accessed by people throughout the country.

At the EPA, they are saying that they now need to review a lot of these funds. At the Department of Energy, they're saying that political appointees have to approve every financial transaction when it comes to these grants. And many of the people who we have spoken to say, it's just simply impossible to review every single financial transaction under a grant which has multiple payments over the course of a year.

So what they're effectively doing is finding this work-around and continuing to keep a hold on these grants and funding, where technically they can tell the courts that we don't have them frozen technically -- back to you guys.

SANCHEZ: Rene Marsh, thank you so much for the update.

Still to come: USAID workers are in court right now asking a judge to indefinitely block the Trump administration from dismantling that agency. We're on top of the latest there.

KEILAR: Plus, Ukrainian President Volodymyr Zelenskyy saying that Ukraine will not accept a peace deal struck between Trump and Putin without Kyiv's involvement.

And then later: key Cabinet votes in the Senate, RFK Jr. confirmed as Trump's health and human services secretary. And Kash Patel's nomination as FBI director advances to the Senate floor.

We have that and much more coming up on CNN NEWS CENTRAL.

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[13:18:47] SANCHEZ: As we await President Donald Trump's scheduled announcement on reciprocal tariffs, we want to focus on some other headlines.

And, right now, a federal judge is hearing arguments on whether to keep blocking President Trump and Elon Musk's effort to dismantle the international humanitarian aid agency USAID. Last week, U.S. District Judge Carl Nichols, a Trump appointee, temporarily paused the administration's plans to put thousands of the agency's employees on administrative leave, and he ordered USAID to reinstate 500 workers who'd been suspended.

Meantime, on Capitol Hill, the House Foreign Affairs Committee held its own hearing on Trump's overhaul of USAID, where there appear to be some differing views among Republicans when it comes to protecting the agency and its stated mission.

Have a listen to current committee Chair Brian Mast and former Chair Michael McCaul.

(BEGIN VIDEO CLIP)

REP. BRIAN MAST (R-FL): Many of the people and many of the programs in USAID have literally betrayed America. It's not just the content of USAID that is the betrayal. It's the larceny that USAID has conducted.

[13:20:00]

REP. MICHAEL MCCAUL (R-TX): All these programs gave USAID a black eye, and that's unfortunate. I believe it still has a legitimate purpose to counter the rising threat of China and Belt and Road and our other foreign adversaries. It also has the ability to counterterrorism.

(END VIDEO CLIP)

SANCHEZ: Let's discuss with Democratic Congressman Gerry Connolly of Virginia. He serves on the House Foreign Affairs Committee.

Congressman, thank you so much for sharing part of your afternoon with us.

Before we get to that USAID hearing...

REP. GERRY CONNOLLY (D-VA): My pleasure.

SANCHEZ: Thank you.

I do want to ask you about this announcement from the White House about reciprocal tariffs to start. Do you think that what the U.S. charges for imports should be equal to what other major countries charge?

CONNOLLY: Well, I do think reciprocity has an important place in international trade, but it's got to be done carefully.

It can't be a self-destructive kind of imposition. And that's what I fear with the whole approach Donald Trump has taken in terms of his tariff scheme. It's going to impose significant costs on the average household in America. The average family is going to pay an extra $1,200 a year and going up in terms of a basket of goods and foodstuffs because of these tariffs.

SANCHEZ: I do want to now pivot to that hearing you were part of this morning, the House Foreign Affairs Committee discussing USAID and Trump's dismantling of that agency.

You heard there the chairman, Brian Mast, talking about larceny and President Trump calling some of the work of USAID corrupt. Some of your colleagues have presented accusations about taxpayer dollars being used for DEI and LGBTQ projects overseas. What do you make of these accusations, how the agency is being described?

CONNOLLY: Well, I think it's a gross exaggeration and a smear.

Every federal agency has probably got something, upon reflection, it wish it hadn't funded, but not to mask the enormity of AID's contribution in the world. It is the world's largest food program. It is the world's largest public health program. It is eradicating disease.

It is saving child and maternal lives in terms of child and maternal health and bringing down mortality rates. It is fighting the good fight on HIV, a program George W. Bush, a Republican started, PEPFAR, 26 million lives saved because of that program alone.

We're fighting -- pushing back polio. We're pushing back schistosomiasis. We're developing vaccines for malaria control, one of the biggest killers in the world. You want to stop this in its tracks and smear it because of a small contract somewhere that maybe is misunderstood?

Maybe it isn't. Maybe they shouldn't have funded it, but that ought not to color how we view this enormous humanitarian agency that saves lives every day and makes America proud.

SANCHEZ: You have alluded to programs that you believe might be wasteful and steps that agencies have taken that they might regret. It reminds me of the DOGE Subcommittee hearing yesterday where you called on colleagues to be serious about cutting government waste.

I do wonder if you think these programs that some of your colleagues have highlighted, these DEI programs in other countries, do you think those are wasteful?

CONNOLLY: Well, I think that's in the eye of the beholder, isn't it?

If you're in a multiracial society where you're trying to protect and push forward the interests of a, say, persecuted minority, a DEI program makes a lot of sense in terms of inclusion and in terms of trying to build stability in a multiracial society. Is that a bad thing? I don't think so.

And the Republicans have decided that that's a dirty word, but, in many cases, actually, it is a positive tool for more assimilation, more inclusion in the economy, more opportunity for minorities, especially persecuted minorities.

SANCHEZ: I want to dig in on DOGE specifically. I wonder if you think Congress has any recourse to oversee what Elon Musk is doing. He's an unelected official. DOGE is supposed to be this advisory agency that's outside of government, but they're cutting off funds that Congress has already appropriated.

Do you think that right now Musk has more authority than you and your colleagues? And how do you plan to stop him?

CONNOLLY: Well, I think he has de facto authority through the president of the United States. Whether he has de jure, legal authority, that's a different matter. And that's going to be contested in the courts across the board.

[13:25:03]

I think there are already 60 lawsuits pending. And there have been several victories already in terms of slowing down or stopping Elon Musk and his minions from proceeding to destroy lives, destroy careers, destroy agencies. Nobody gave them a mandate to do that, and we're going to contest it every step of the way.

SANCHEZ: It was a federal judge who cleared the way for Trump's deferred resignation policy to be restarted yesterday. You have that much faith in the legal system and a Supreme Court that has been shown previously that they're willing to buck precedent?

CONNOLLY: Well, I don't know about how much faith I have got, but I have got hope.

The legal system is the last resort when there's a contest between the other two branches of government. And it's my expectation we're going to have some significant wins. We're also going to take some lumps on the chin.

But we have to contest this. We have to count on the judicial system for upholding the rule of law in America.

SANCHEZ: What do you think when President Trump makes allusions to the executive branch being more powerful than the judicial branch or when the vice president, J.D. Vance, says that the executive branch's legitimate powers should not be interfered with by the judiciary? Do you think those are hints that they might ignore court orders?

CONNOLLY: I think that's maybe a leftover from Elon Musk's South African heritage. And maybe he's falling too far back on the apartheid system of government that was a fascist form of government.

Here in the United States, Mr. Musk, we have three branches of government, each of them separate, but co-equal. And, ultimately, the judicial branch is the deciding factor when there is a dispute between the other two branches of government. That's how our system works here. SANCHEZ: Congressman Gerry Connolly, I appreciate your time and

perspective. Thanks for joining us.

CONNOLLY: My pleasure, Boris. Thank you.

SANCHEZ: Coming up: Ukrainian President Volodymyr Zelenskyy says his country will not accept any peace deal between the United States and Russia unless Kyiv gets a seat at the table.

What this could mean for negotiations -- next on CNN NEWS CENTRAL.

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