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Trump Holding Trade Talks with Japan as U.S.-China Feud Deepens; A Ship Fill of Lifesaving Wheat Sailing Toward Yemen Could End Up Rotting on Dock Amid Trump's USAID Cuts; Chinese Suppliers Flood U.S. TikTok Feeds Amid Tariff War; Stocks Slide as Powell Warns of Tariffs on the Economy. Aired 3:30-4p ET

Aired April 16, 2025 - 15:30   ET

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

[15:30:00]

BORIS SANCHEZ, CNN HOST: Stocks right now are tumbling. As Federal Reserve Chair Jerome Powell has warned that President Trump's tariffs will likely lead to this.

(BEGIN VIDEO CLIP)

JEROME POWELL, FEDERAL RESERVE CHAIR: Unemployment is likely to go up as the economy slows, in all likelihood. And inflation is likely to go up as tariffs find their way. And some part of those tariffs come to be paid by the public.

So that's the strong likelihood.

(END VIDEO CLIP)

SANCHEZ: With us now is Douglas Holtz-Eakin. He's served as Chief Economist on the President's Council of Economic Advisers under President George W. Bush. He's now the president of the American Action Forum.

Doug, thank you so much for being with us, as always. So you heard there from Jerome Powell. Higher inflation, slower growth. Consumers are going to pick up the tab on a large part of these increased tariffs.

What do you imagine is going to happen here if this scenario goes on without newly negotiated deals?

DOUGLAS HOLT-EAKIN, EX-CHIEF ECONOMIST, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS UNDER GEORGE W. BUSH: Well, if things stay as they are now, I think what you'll see is a series of reports for the remainder of the date on March that will be surprisingly strong. And everyone will think, oh, gee, maybe they didn't get this right. Because people went out and bought things in anticipation of tariffs. A lot of businesses built their inventories in anticipation of these tariffs.

And then I think once you get to the second quarter and start seeing the data, it's going to drop off sharply. And that's going to be exactly what the chairman was worried about, a real decline in the growth of employment, perhaps even a drop in employment, an increase in the rate of inflation.

And the other part of it he was worried about. A real decline in the growth of employment, perhaps even a drop in employment, an increase in the rate of inflation. And the other part of his remarks were really devoted to his concern that inflation be a temporary and one- time phenomenon and not be allowed to become, you know, an enduring phenomenon, as we saw over the years since 2021.

So it was, I think, a very, very clear warning to the American people and to the administration about the consequences of what's going on right now.

SANCHEZ: Notably, President Trump says he's attending a meeting at the White House today with Japanese officials to negotiate tariffs. What are you looking for to come out of that meeting?

HOLT-EAKIN: You would hope that we can find a way for the tariffs to be reduced. But remember, the negotiations are in principle focused on the so-called reciprocal tariffs, which got paused for 90 days. We still have in place a 10 percent universal tariff, an unprecedentedly large tariff for the United States.

We have the steel, aluminum and auto tariffs. He's promising pharmaceuticals and silicon chips and copper and lumber. And those tariffs by themselves are comparable to the tariffs known as the Smoot-Hawley tariffs in the Great Depression.

So the things they're negotiating about leave in place an enormous tax increase on the American people and a real headwind to the capacity for this economy to continue to grow.

SANCHEZ: Do you see the news that Japanese carmaker Honda is going to shift some production to the U.S., partly due to tariffs, as a win, as a positive development?

HOLT-EAKIN: I don't see it as a win at all. You know, they're going to shift it because they want to try to maintain their part of the market share. But for the economy as a whole, the tariffs are what they are.

And the American consumer is going to pay them. We're going to have the higher prices and slower growth. And in the end, we're not going to see a dramatic change in the production patterns.

Honda was already here. They can moderately rearrange their production lines. But we're not going to see global carmakers concentrating in the United States and produce only here. That's a very unlikely outcome.

SANCHEZ: So Beijing has said that they are open to trade negotiations. But Trump has told his team at the White House that President Xi needs to make the first move. Some Trump administration officials told Chinese officials that Xi should request a call with Trump.

I mean, who blinks first? Who picks up the phone first to call the other leader? HOLT-EAKIN: I don't know. The history of these kinds of episodes, trade wars, are tit for tat. And the really, I think, troubling part is that they take a long time to unwind.

The last great trade war in the Great Depression, we spent most of the remainder of the 20th century with the GATT rounds and the WTO unwinding those tariffs. It was decades, not years, in unwinding. And that's the way we cemented in place economic alliances to confront the Soviet Union.

It would be wise, if we're concerned about China, to be doing that work with our other allies in Europe and the Pacific region instead of confronting them and losing their support.

SANCHEZ: Doug, I had a really fascinating conversation with Kevin O'Leary earlier this hour, and he was talking about the potential for there to be some kind of European Union-like alliance between the United States, Canada, and even Mexico, perhaps a unified currency, a sort of Schengen zone where people can travel freely with a unified passport.

Is that realistic, number one? And number two, would that provide enough economic weight to the United States and its allies in North America to really compete with China moving forward on energy and AI and all the other breadth of competitive issues between the two nations?

HOLT-EAKIN: So there are really two things to that. Number one, what he's talking about is a customs union where we would have a unified tariff, say, toward China in Canada, Mexico, and the United States. And I think the president, in his heart of hearts, would like something like that.

He's very frustrated by the fact that the tariffs he put on China back in 2018, you know, they turned around and started shipping things to Mexico and then into the U.S., to Canada and then into the U.S. So I understand that.

The second part about the economic strength, we have that. We had a unified economic entity in North America. There were, you know, restrictions for travel at the border, but they're not severe. And the president is the one who's unwound that. It is his 25 percent tariffs on Canada and Mexico that are threatening that strength.

He'd be wise to back down completely on that. It was interesting that on so-called Liberation Day, he didn't put any additional tariffs on Canada and Mexico. That's good, because there was enough damage done there. He should do no more, and we should keep that strength in place. Douglas Holtz-Eakin, thank you so much for being with us.

SANCHEZ: Douglas Holtz-Eakin, thank you so much for being with us.

HOLT-EAKIN: Thank you.

[15:40:00] SANCHEZ: Still ahead, a really fascinating story. A much-needed life- saving ship full of wheat is on its way from Oregon to Yemen. But apparently, no one is going to be there to receive it because of cuts to USAID. We'll explain in just moments.

(COMMERCIAL BREAK)

ERICA HILL, CNN HOST: When a ship full of life-saving wheat arrives in Yemen next month, it may just end up rotting on the dock, or maybe it'll be pillaged because no one will be there to distribute it.

[15:45:00]

And that's just one example of the impact, following those drastic cuts to USAID, the U.S. Agency for International Development. Those cuts, of course, coming at the beginning of Donald Trump's second term.

SANCHEZ: CNN's MJ Lee has been following this story for us. So, MJ, what's the latest on this?

MJ LEE, CNN SENIOR NATIONAL ENTERPRISE CORRESPONDENT: Yes, so what we know about this ship, according to sources, is that this ship left sometime earlier this month in Oregon and is headed towards the port of Aden in Yemen. And it is filled with wheat that is supposed to go to hungry people in southern Yemen. But as you said, the headline that we discovered is that when it arrives sometime probably in mid-May, the wheat that is on that ship may end up just rotting or, you know, being stolen by people.

And that is the direct result of the decimation of USAID. As you know, earlier this month we saw a number of additional contracts being canceled by USAID. And that included contracts for countries like Yemen and Afghanistan for the U.N.'s World Food Program.

So what this all means is that barring there being some kind of intervention, maybe the funding gets revived at the last minute, this ship is going to arrive and there will not be people to actually do the job of getting the wheat off of the ship, distributing it, making sure that it is stored correctly.

And this is for a country, keep in mind, where there are millions of people that desperately need this kind of food and this kind of aid. According to the WFP, some 70 million people, that's around half of Yemen's population, they have food insecurity.

So this is just one piece of the larger story of the decimation of USAID.

HILL: And there's not a chance that anything could change between now and then?

LEE: We don't know. It could. It definitely could.

SANCHEZ: MJ Lee, thanks so much for tracking this for us.

LEE: Thanks.

SANCHEZ: Still to come, how some Chinese manufacturers are getting creative to keep American dollars flowing their way. They've got a new sales pitch and they're taking it to TikTok. We'll explain in just a few minutes.

[15:50:00]

(COMMERCIAL BREAK)

SANCHEZ: China is taking the trade war to a new battleground. America's TikTok feeds. U.S. users are now seeing clips urging them to buy directly from Chinese factories. In fact, one TikTok video claimed that luxury goods buyers are already purchasing Chinese manufactured products, despite what their labels may say. Watch this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Some say as long as there's a tag saying made in China, the bag can never be luxury. However, in fact, more than 80 percent of the luxury bags in the world are made in China.

(END VIDEO CLIP)

HILL: CNN's Clare Duffy has been digging into these TikToks and those claims. So, Clare, what did you find here? I mean, there's some talk about some major labels, well-known ones. Lululemon, Chanel, made in China?

CLARE DUFFY, CNN BUSINESS WRITER: Yes, there are a number of major U.S. brands that do produce in China, or they have components that come from China. But these videos that we're seeing where you have people who claim to be workers or managers at factories that produce for these big brands and telling people that if they buy directly from them, they can pay lower prices, they can save on the cost of tariffs.

This has become such a big trend that a number of Chinese e-commerce and wholesale retail sites have shot to the top of the App Store. We're seeing DHgate and Taobao really gain popularity in the last few days.

But experts warn that the people in those videos are almost certainly not the owners or workers at factories that manufacture for big brands. And that's because the factories that work with big brands, they sign contracts that require them not to talk about the names of the big brands that they're working for. So, now we're seeing big brands like Lululemon disavowing this trend and warning people that they could be scammed if they engage with the people in these videos.

SANCHEZ: But, Clare, I'm asking for a friend here.

HILL: I'm glad we clarified that. It has nothing to do with Boris.

SANCHEZ: If someone decided to go ahead and buy directly from these Chinese suppliers, would they avoid these tariffs? DUFFY: Almost certainly not. There are now 145 percent tariffs on China, as you know. And Trump has gotten rid of what's called the de minimis exemption.

That was an exemption on tariffs for packages that are worth less than $800. That is going away. So now, even if you order a single pair of leggings, you're probably going to be still paying higher prices than you would have before the tariffs.

SANCHEZ: Interesting.

HILL: Sorry, Boris. It's not really the news you wanted to hear, is it?

SANCHEZ: The de minimis exception strikes again. Clare Duffy, thanks so much. Appreciate it.

So, we've been watching markets for what feels like about two weeks now.

HILL: It feels like a long time.

SANCHEZ: Yes.

HILL: But every day there is -- it is remarkable how every day there is something new. And the way that we watch it play, right? So, maybe 25 minutes ago, the Dow was down 2.3 percent. Now, it's recovered half a percentage point. But this, of course, is what we're watching after those comments from the Fed chair.

SANCHEZ: And you could track exactly when those comments came out. Right around 1:30 p.m., you see that dip. There was a blip of green earlier in the day.

But, of course, all this comes as there's so much uncertainty about when some of these deals that the White House has stipulated may come from other nations may be brokered. We know that President Trump is meeting with Japanese leadership today. Perhaps there's an announcement on the horizon.

HILL: Maybe. We will be watching. But, yes, there are a lot of questions to your point about when there will be one of those deals announced and what it will ultimately mean. Could it make other deals follow along?

SANCHEZ: Yes. Erica Hill, great to be with you today. Appreciate you joining us as well.

THE ARENA with Kasie Hunt starts right now.

[15:55:00]

(COMMERCIAL BREAK)

KASIE HUNT, CNN HOST: There's breaking news right here on CNN. Let's head into THE ARENA. U.S. stocks taking a significant new hit as the trading day is ending

after a stark warning from the Federal Reserve chairman about President Trump's tariffs.

Plus, Maryland Senator Chris Van Hollen in El Salvador right now pushing for the release of a constituent mistakenly deported and imprisoned there. The legal and political fights over Trump's deportations heating up.

And the Justice Department now suing the state of Maine for refusing to comply with a ban on transgender athletes in high school sports.

We'll talk about that with the Education Secretary, Linda McMahon.

END