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Biden & Xi Talk as Pelosi Weighs Visit to Taiwan; Pentagon Preparing for Possible Pelosi Visit to Taiwan; Ukrainian Farmers Await Resumption of Grain Exports; Reaction to Pope's Historic Visit and Apology Tour; New Tensions in Port-au-Prince Spark Fear of Prison Break; Russian Arms Dealer at Center of Prisoner Exchange Offer; U.S. GDP Down 0.9% in Second Quarter of 2022; U.S. Bill to Boost Semiconductor Production Set to Become Law; Low Monkeypox Testing Numbers in U.S.; Trump Under Fire for Hosting Saudi-Backed Golf Event. Aired 1-2a ET
Aired July 29, 2022 - 01:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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JOHN VAUSE, CNN ANCHOR: Coming up this hour here on CNN Newsroom, a clear warning from Beijing to Washington, when it comes to Taiwan don't play with fire. They came directly from Xi Jinping to Joe Biden. Ukraine harvest is coming in, huge amounts of grain desperately needed to ease a global food crisis, but still going nowhere. And as he nears the end of his apology tour of Canada, Pope Francis finally acknowledges indigenous children was sexually abused by church workers.
ANNOUNCER: Live from CNN Center, this is CNN Newsroom with John Vause.
VAUSE: Was it a warning, was it a threat? Either way, the message from Chinese President Xi Jinping to his U.S. counterpart Joe Biden was clear and unambiguous according to an early translation. He said public opinion should not be violated. And if you play with fire, you get burned. I hope the U.S. side can see this clearly.
China state media has since revised that translation changing the words, "you get burned" to, "you perished." Now, the fire and all this is Taiwan. And well, House Speaker Nancy Pelosi and impossible trip there were not mentioned it certainly was implied.
The U.S. describes the language as standard fare from Beijing until the two hour long, 17 minute phone call was directed honest, as well as candid. That's often diplomatic speak for a difficult exchange. Presidents Xi and Biden, also discussed the war in Ukraine, the need for China to be transparent about COVID-19 as well as human rights.
U.S. national security officials are trying to convince Speaker Pelosi of the high risks posed by a trip to Taiwan. At the same time complex security planning is underway to ensure the safety should she decided to go. CNN's Pentagon Correspondent Oren Liebermann has this report.
(BEGIN VIDEOTAPE)
OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: The Pentagon is developing a series of plans and options. If Speaker of the House Nancy Pelosi chooses to go ahead with a trip to Taiwan. Defense officials here at the Pentagon have said such a plan would involve U.S. military assets in the region, such as aircraft and ships, as well as potentially satellites to monitor the area around Pelosi if she were in the region. The USS Ronald Reagan, a carrier that operates in the Indo-Pacific has just reentered the South China Sea after a few day port visit to Singapore. Already a defense official has told CNN, the Chinese are shadowing the Reagan as it moves through the South China Sea.
Now it's important to note that that's a standard fairly common place both from the Reagan which operates in those waters, and from Chinese ships, which routinely shadow American ships operating a region. It's happened in this case again, but this is all of what the U.S. is watching here as they wait for the decision from the Speaker of the House on whether she chooses to go forward with his trip.
Defense officials we've spoken with have said they're not really concerned about the possibility or the risk of any sort of shooting happening between American forces and Chinese forces. The concern is more on a potential miscalculation between those forces if there are more in the region around. Speaker of the House, Nancy Pelosi and also what China might do in reaction. China has used some pretty harsh rhetoric leading up to and responding to a potential Pelosi trip to the region. What might the U.S. expect to see? Well, Chairman of the Joint Chiefs General Mark Milley has talked about what he sees as growingly, increasingly aggressive actions by the Chinese military around the ships and aircraft of not only the U.S. but U.S. allies such as intercepts and unsafe or unprofessional interactions. So perhaps that would be what the U.S. expects to see should this trip go forward.
Behind the scenes, U.S. national security officials have tried to brief Pelosi on the risks of such a trip, but it's unclear if that has influenced her thinking at all. Oren Liebermann, CNN in the Pentagon.
(END VIDEOTAPE)
VAUSE: Live now throughout Beijing Bureau Chief CNN's Steven Jiang. So Steven, there's a couple of ways China's could respond to this. There's the obvious military might display, which could be on show around Taiwan, around the Pelosi's flight to Taipei. There's also the sort of less obvious ways, like maybe possibly more aid to Russia for the fight in Ukraine. So there's myriad options here when it comes to China and what they can do.
STEVEN JIANG, CNN BEIJING BUREAU CHIEF: That's right, John. The hope is after this lengthy, conversation, both leaders would gain better understanding and insights and clarity in terms of where each stands on the issue of Taiwan. So to help them and their teams to better contain the potential fallout if Pelosi does decide to go ahead with this trip.
Now, as you mentioned, that stern warning from Xi Jinping to Biden even though it makes very eye catching headline it was not the first time Xi has used this Chinese phrase, he last used it in November of last year when the two men talked. That tweaked a Chinese government translation is interesting because, you know, perish by fire sounds more ominous than getting burned. But the message is the same.
[01:05:18]
What's changed, of course, is the timing of this phone conversation. Now, it's only some three months away from a key Communist Party Congress where Xi Jinping is almost certain to assume a precedent breaking third term as this country's top leader, and potentially paving the way for him to rule for life. So that's why, you know, with all the domestic challenges Xi Jinping is facing, he simply cannot afford to look weak, he has to demonstrate power, strength and resolve. That's what makes the promise the Chinese responses are the more unpredictable and potentially a lot more forceful.
But beyond Taiwan, though, I think the two -- both sides are trying to highlight the wide ranging nature of this conversation. That's why in the Chinese readout, you have seen Xi Jinping really trying to drive home the point of Biden, that the U.S. has been reading China wrong, that the U.S. perception that China is a strategic competitor and long-term rival is simply wrongheaded. This is something I've often heard from senior officials here publicly and privately.
So the point is, Americans have been saying that they tried to set guardrails in this relationship to prevent things from getting out of control. But the Chinese perspective is, if the whole U.S.-China policy is headed in the wrong direction, what's the point of these guardrails? And but interestingly, also is also what the Americans have said after this phone call with a U.S. official really reminding reporters that despite all the saber rattling from Beijing, on a working level, officials from both sides have been following up on both leaders previously discussions and the commitments that they have been making progress in some areas. So I think the one thing both sides seem to agree as this kind of level of presidential exchanges candid and in depth exchanges has to continue has been -- has to be maintained, especially at a time when tensions are running high when fiery rhetoric is being thrown back and forth in public. John.
VAUSE: Steven, thank you. Steven Jiang live for us in Beijing, as always, we appreciate it.
Jamie Metzl was a senior fellow at the Atlantic Council and served as Director for Multilateral Affairs on the National Security Council during the Clinton administration. And it's been a while, great to have you with us.
JAMIE METZL, SENIOR FELLOW, ATLANTIC COUNCIL: Thanks, John. Nice to see you.
VAUSE: OK, well, these threats have been made, chests have been thumped. Both sides have been leaking information. So with so much domestic politics involved on both sides here, is the only certainty right now that Nancy Pelosi will be going to Taiwan at some point?
METZL: I don't think it's certain, but I believe it's likely and I believe that it will happen relatively soon. China is making clear that there will be consequences. And from the Chinese perspective, they now have to respond in some meaningful way. And the United States has made clear, United States government has made clear that if Speaker Pelosi decides to move forward, and there are too many shenanigans, the United States is going to respond very aggressively. And so if she goes, the best case scenario is there's some kind of Kabuki Theater where the Chinese make a statement and we make a statement and nothing escalates. But there's a very real possibility that there are miscalculations or calculations. And there's an escalation that could lead to something meaningful and dangerous.
VAUSE: The last Speaker of the House to visit Taiwan back in 1997, was Newt Gingrich. He wrote -- who wrote at news -- Newsweek rather, what happened when Beijing threatened to cancel his trip to the mainland because he was visiting Taiwan. He writes this, National Security Adviser Gardner Peckham inform Beijing that the Chinese Communist Party does not dictate the travel plans, or the American Speaker of the House, when the Communist persistent, Gardner shocked them by saying we would happily take the extra free days and have a longer more extensive visit to Taiwan. At that point, Beijing backed down, and we settled with a face-saving compromise." That was they went to Taiwan via Japan not directly from the mainland.
But 1997, China is not 2022 China, the economy is 23 times bigger, they spend almost 20 times as much as they do on the military. Do those numbers, do you make the decision about how to make this trip rather than whether or not this trip should happen in the first place?
METZL: Oh, absolutely. The United States treats China differently than we treat most any country in the world. Because of the size of China's economy, its military, its impact on so many other issues. And that's the way it should be big power countries like the United States and China need to be highly cognizant of each other. At the same time, if the United States, it puts itself in the position of continually backing down in the face of Chinese blustering and threats, that's going to incentivize them to do it more and more in our room for maneuver will be more and more limited. So whether or not this is the right place to push back. In many ways, it's advanced so far, because Speaker Pelosi just expressed her interest. China has been extremely aggressive and threatening in its comments and if Secretary Pelosi -- sorry Speaker Pelosi decides to make this trip, United States is going to have to back her fully.
[01:10:07]
VAUSE: You know all the usual reasons apply for why Taiwan is such a red line for Beijing. But there's also this leadership conclave, which is happening in the coming months when Xi Jinping is expected to get the green light for a third term and become, you know, dictator for life. And much of that has been built on his hardline approach towards Taiwan. So if Pelosi goes to Taiwan, what will be the impact domestically for Xi? What does he do to sort of counteract that? METZL: Well, that's the essential issue because Xi is now going for his third term, by all accounts, he's going to get it. And he's doing it at a time when the economy isn't going well, in China, this zero COVID policy, is not going well. And he has invested a lot in being the champion of Chinese nationalism. And so if he backs down in the face of this, that's going to cost him politically domestically. So he has to, in many ways bluster. And that's why this is such a dangerous place to be in both for the Chinese and for the United States. Nobody wants a conflict. But nobody also wants to be humiliated. By the other side, nobody wants to back down.
VAUSE: Is the only positive from that phone call between Biden and Xi, the fact that it actually happened?
METZL: Well, Biden and Xi have known each other for more than 10 years, it's critically important to have that kind of connectivity. And the United States and China have a lot of shared interest. And some of them are common interests. Some of them are highly divergent.
We have no choice but to be speaking with the Chinese and we have no choice, but to do everything possible to try to keep those lines of communication open. We're certainly heading into choppy waters, but at very least, we should be speaking with each other. And like I said before, we may need to orchestrate or try to orchestrate a series of back and forth where the Chinese are going to make some kind of aggressive step, we may need to make some kind of compromising step. There's already talk of some kinds of compromises on certain tariffs that aren't serving the U.S. economy well. There may be some kind of give and take. But this is not a coordinated effort. The United States if Speaker Pelosi goes, this will be seen as a very aggressive move by the Chinese. And whatever the Chinese do in response, it will be seen as an aggressive move by us.
VAUSE: Well, at the end of the day talking is better than not talking, I guess. So Jamie, thanks so much for being with us.
METZL: My great pleasure, John, anytime.
VAUSE: Work with these, by the way, by Russia to restore supply routes in the south. Ukrainian artillery damage a key bridge preventing heavy weapons from crossing. Ukraine says the Russians are now building a pontoon bridge
Meantime, according to Ukrainians, a number of cities came under Russian artillery fire Thursday, including the town of Toretsk in the Donetsk region. Missile strike damaged a five-storey building, killing two people.
During an address to the nation on Statehood Day, President Zelenskyy said Ukrainians will fight to the end.
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VOLODYMYR ZELENSKYY, PRESIDENT OF UKRAINE (through translator): We will not stop until we free every meter of Ukrainian land. We will not rest until we free our last village, last home, last well, last territory and last willow. This is the only way it's going to be.
(END VIDEO CLIP)
VAUSE: Ukraine also says Russian forces have made small gains in the two towns in the Donetsk region, but they say other Russian attacks have been repelled.
The U.N. says final details are still being worked out before grain exports from Ukraine can resume. Right now there is no agreement on the route, grain ships we use the so-called Safe corridors. The export agreement is unique. It's also complicated because it involves two countries at war.
(BEGIN VIDEO CLIP)
MARTIN GRIFFITHS, U.N. UNDER-SECRETARY-GENERAL FOR HUMANITARIAN AFFAIRS: This is an agreement which continues despite the war and in which the two parties sitting in that center in Istanbul. Enemies still need to work together to bring to fruition, the things that they have agreed to.
(END VIDEO CLIP)
VAUSE: As CNN's Nic Robertson reports, the exports cannot come soon enough for Ukrainian farmers.
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NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Grain fresh from harvest, floods into the farm storage. What happens to it next? The question on everyone's minds. 250 people work here. Their jobs depend on the success of the new U.N. brokered grain deal.
UNIDENTIFIED MALE (through translator): We have a lot of grain here. We want to ship everything quickly, this grain trucker tells me, but we are stuck because the ports are closed. It's bad.
ROBERTSON: Any other year, this is exactly what the farmer would want, grain coming in more profits for him and his workers. This year, or all of that, it's lost money.
Wheatstone number five.
Farmer Boris Urisko (ph) owns the farm, shows me his rapidly filling grain stores. He tells me until empty ships arrive, grain prices will stay low. He'll be forced to cut staff and grain production for next year.
[01:15:15]
And this is the problem for the farmer. The silo here, it's dark, but it's absolutely full. And he still doesn't have a buyer for all this grain. Shota Khajishvili usually buys grain from Boris, tells me for the U.N. deal to work, the outgoing ships already full with last year's harvest must be replaced by more ships to bring out this year's harvest. SHOTA KHAJISHVILI, CO-OWNER, RISOIL PORT TERMINAL (through translator): So far, we don't see any ships coming our way to replace those expecting to leave. Because our partners cannot find ships that want to come to Odessa.
ROBERTSON: At Boris's farm, more grain trucks are on their way. Each loaded with grain that in a normal year would already have a buyer, even a slot a boarded cargo ship.
If the grain deal doesn't hold, this truck driver tells me he doesn't know what he'll do. He hopes there'll be work. Boris worries, if he plants less crops next year that will be less food for Africans and all the others whom he says he wants to help. At this farm and far beyond so much right on getting this year's harvest to the world. Nic Robertson, CNN Marazliivska, Ukraine.
(END VIDEOTAPE)
VAUSE: One way, Vladimir Putin is speaking Western sanctions is by exploiting the resources of compliant nations. CNN's Nima Elbagir and her team investigate Russia's involvement in Sudan gold production, and how it could be helping support Russia's war in Ukraine. Here's a clip.
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NIMA ELBAGIR, CNN SENIOR INTERNATIONAL CORRESPONDENT: Deep in Sudan's Gold Country, miners toil in the searing heat, barely surviving in what should be one of Africa's richest countries. Providing gold for a war a continent away. We investigate a force more powerful than Sudan's government controlling its gold. Subverting Sudan's destiny, threatening me and our sources and 14 democracy to evade sanctions in Russia's war on Ukraine.
Russian managers on his way, they say. We uncover the extent of Russia's grip on Sudan.
(END VIDEO CLIP)
VAUSE: Nima's full reporting starts Friday 3 p.m. in London, 6 p.m. in the evening in Abu Dhabi. Nima (ph) here on CNN.
Well, as the Pope's apology tour Canada nears an end, the pontiff has finally lodged a deep wounds caused by sexual abuse. But are his words enough?
Also ahead, surging gang violence in Haiti raising fears of a prison break. The latest when we come back.
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VAUSE: For the first time since arriving in Canada, Pope Francis has acknowledged and apologized for the sexual abuse of minors and children by members of the Canadian Catholic Church. And a cathedral in Quebec City, he called the crimes evil, but placed the blame on church members, not the institution.
(BEGIN VIDEO CLIP)
POPE FRANCIS (through translator): The church in Canada, after being wounded and devastated by the evil perpetrated by some of its children has begun a new path. I'm thinking in particular of the sexual abuse committed against minors and vulnerable people, crimes that require strong actions and an irreversible fight. I would like to, together with you, once again apologize to all of the victims. The pain and shame that we experienced must be an occasion for conversion. Never again.
(END VIDEO CLIP)
VAUSE: In the coming day, the pope will travel to northern Canada the last stop on his pilgrimage of penance. He's been apologizing to indigenous communities for the role of the church in Canada's residential schools abuse scandal. CNN's Paula Newton picks up the story.
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PAULA NEWTON, CNN CORRESPONDENT: The Pope's self-proclaimed act of contrition in Canada was not without its lighter moments. In crowds embracing the church's future, these acts seem to fortify an ailing Pope. After he begged Canada's indigenous peoples for forgiveness, there was this extraordinary gesture. Chief Wilton little child himself a survivor of a Catholic residential institution, honoring the pontiff with a headdress. So many indigenous peoples still revere him and the religion he represents.
AGNES SWAMPY, RESIDENTIAL SCHOOL ABUSE SURVIVOR: A lot of stuff happened --
NEWTON: At 89, Agnes Swampy's gnarled hands swollen and damaged from years of forced labor in a residential school are still classed in prayer.
SWAMPY: I still say my rosaries because I always think I always say, God wasn't the one that abused us.
NEWTON: Her painful past has nothing to do with her Creator, she says. She appreciates the apology but forgiving the church, no, not yet.
(On camera): As hopeful as the Vatican and the Catholic Church have been that this apology will be well received. So many indigenous survivors are asking what now, what more can be done for reconciliation.
ARCHBISHOP DONALD BOLEN, REGINA ARCHDIOCESE: For those who are looking for more, I guess, all I would want to say is we want to continue to walk with you. We want to find ways that we can find words and actions that will bring healing and that's going to be a long journey.
NEWTON: That journey must continue with all Canadians and especially the nearly 1/3 of the country that identify as Catholic, Arigian (ph) says she's disheartened by indifference to the faith. Not many showed up to see the Pope.
UNIDENTIFIED FEMALE: I'm so disappointed. I thought there'd be more people here. We all thought there'd be more people here.
NEWTON: In fact, the Catholic Church's future in healing is still in doubt here. In the words of Canada's Governor General indigenous herself, seeking reconciliation is not enough, she says. Reconciliation must be earned. Paula Newton CNN, Quebec City.
(END VIDEO CLIP)
VAUSE: Well, the power of gangs and gang violence have surged in Haiti since the assassination of the president last year. One neighborhood alone reports hundreds of people killed, injured or missing so far this month. In some parts, food supplies are now at risk. And as CNN's Matt Rivers reports, there are fears a prison in the capital could be overrun.
(BEGIN VIDEOTAPE)
MATT RIVERS, CNN CORRESPONDENT: Four months now, Port-au-Prince has been trapped in a brutal cycle of gang violence and the latest crisis point in the city's downtown.
In a video obtained by CNN first published by the Miami Herald, officers with the Haitian national police can be seen engaged in a tent shootout with suspected gang members on Wednesday. The fighting brought this part of the city to a virtual standstill with fears mounting over what might happen here. Haiti's National Prison just a few blocks from the fighting.
A source inside the prison said that when the fighting broke out, prisoners had not received food or water for three days, desperate and scared amidst the gunfire, the source says hundreds of prisoners managed to escape from their cells and into the prisons courtyard, where they were met by police. "The police began to shoot indiscriminately, said the source, it's still unclear if there were any injuries.
The Haitians law enforcement source confirmed the partial breakout to CNN saying the hundreds of prisoners were eventually put back in their cells when riot police entered. But the source added that this could happen again, gangs in the area could attempt to overrun police and free prisoners from inside. "The gangsters are taking over the area around the prison and they have pushed the police back." The police keep losing with poor management and a command staff that is not qualified, said our source.
[01:25:22]
In addition to Haitian prisoners, the facility houses, the roughly two dozen Colombians accused by authorities of participating in last year's assassination of President Jovenel Moise. They've sat in prison for more than a year and is still yet to be formally charged. The National Police did not respond to CNN's request for comment. Downtown Port-au-Prince just the latest part of the city where gangs have laid siege. Roughly 75% of the city is either under the control of various gangs or in the crosshairs of ongoing gang violence, according to the Haitian law enforcement source, including the neighborhood of Cite Soleil were more than 200 people have been killed in July alone due to fighting between gangs according to the mayor.
He says the situation is very critical. People are in a very bad place and the ongoing violence makes it worse. It has created a dire humanitarian crisis in the neighborhoods where people are struggling with basic access to food and water and bleak reality that might be replicated in more parts of the city if this fighting continues unabated. Matt Rivers, CNN.
(END VIDEOTAPE)
VAUSE: U.S. markets are up the key economic indicator is down and the debate is on. Is the U.S. headed for already in a recession? More on that after the break.
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VAUSE: Welcome back, everyone. I'm John Vause, you're watching CNN Newsroom. White House officials are reportedly frustrated that Russia is yet to respond in any meaningful way to a prisoner swap. The U.S. has offered up notorious arms dealer, Viktor Bout, one of the world's most wanted men before it was caught, in exchange for American basketball star, Brittney Griner and former marine, Paul Whelan.
Moscow says its top diplomat is, you know, busy and will decide whether to discuss the trade with the U.S. Secretary of State, you know, when we get around to it, when time permits.
Viktor Bout eluded capture for years traveling under different names, different passports. The former Soviet military officers speak six languages. His life inspired a Hollywood film. CNN's Nick Paton Walsh interviewed Bout after his arrest in 2008. He has this report.
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NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR: He's the Lord of War, according to this fictional movie, starring Nicolas Cage.
NICOLAS CAGE, ACTOR: Say what you like about warlords and dictators, they always pay their bills on time.
WALSH: Or the "Merchant of Death", per a book about his alleged life. But despite much evidence, Viktor Bout has always denied being one of the biggest arms dealings of the 90s, fueling civil wars, and bolstering Moscow's interests. Yet he still never really wanted to be a nobody.
Why do the Americans want you so badly? VIKTOR BOUT, ARMS DEALER: (INAUDIBLE) Go and ask them. Go and ask
them. The Bush administration the Obama administration. Go and ask Mrs. Clinton why they need. I don't know. I have not clue.
WALSH: Mr. Boot, Mr. Boot, good morning.
He gave me his last interview in a Thai jail 13 years ago when he denied the worst charges against him.
BOUT: This is a lie and just bullshit. I never supplied arms as such at all. And especially didn't have any deal with Al Qaeda.
WALSH: In the noisy, packed visiting area as he sat behind the glass. The bit I remember most is his mother interrupting.
BOUT: Thanks Mum. We're trying to talk. Why do you come here every five minutes.
WALSH: And that he admitted he had worked for the Russian government.
BOUT: Yes. Look but I don't want to say now this or that.
WALSH: Have you ever worked for the Russian government.
BOUT: Sometimes yes. We did the flights.
WALSH: In the end, he was not superhuman. And arrested in Thailand after a U.S. sting operation. And while his decades of life in the shadow has left him fuller faced, he was always just a pilot (ph) courier he insisted, even as he was led into this Bangkok courtroom.
UNIDENTIFIED MALE: Today in Manhattan federal court, accused arms dealer Viktor Bout begins to face American justice.
WALSH: The U.S. sting was complex, over many months and countries, catching him offering weapons to U.S. Agents, pretending to be Colombian terrorists. He were eventually extradited to face a New York trial for conspiring to kill Americans.
It saw him sentenced to 25 years in prison in a medium security facility in Illinois. There he told me in emails, he was in good spirits brushing up on his many languages. And in 2019, very glad when his wife and daughter visited.
But he was slowly edging towards the end of this sentence, perhaps a reason his role in a swap was more appealing.
But the biggest mystery about Bout was why the wanted him so fiercely. Yes, he had allegedly dealt arms to a lot of bad people across Africa and n the 90s. But that was known and exposed.
Observers search for another, weightier reason and wondered if he had served alongside any Kremlin insiders (ph) in his long past overseas that remains a huge question mark both over him and any swap.
Is he a pilot in the wrong place at the very worst times, or as so many have said, a profiteer and policy tour (ph) for Moscow in the world's nastiest wars.
Nick Paton Walsh, CNN -- London.
(END VIDEOTAPE)
VAUSE: Let's check our global markets right now. It's a day of mixed economic data from the U.S.
Here's a look at all Asian market indices at this hour, the key ones anyway. The Nikkei is down. Hong Kong down by more than 2 percent. Shanghai composite down by almost 1 percent. Bucking that trend though is Seoul Kospi up there in positive territory by a third of 1 percent.
This is after U.S. markets closed up a second straight day Thursday. Dow Jones Industrials, S&P 500, Nasdaq -- all ending the day up over 1 percent.
Wall Street is betting that interest rates will actually fall, or at least the rate hikes will slow after the government data raised Thursday showed the U.S. economy shrank once again in the second quarter of 2022.
Rahel Solomon has more now on that and one expert said that whether the U.S. is actually in recession or headed for one.
(BEGIN VIDEOTAPE)
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Another day, another major economic report. It has been a busy week for economic data.
Thursday the Commerce Department released second quarter GDP data which showed the U.S. economy shrank at an annualized rate of nine- tenths of a percent. The report showing while U.S. consumers are still spending, that's slowing.
We also learned that business investment is slowing, especially categories like inventories, and in the residential space. Thursday's report will be revised at least two more times, but does follow a 1.6 percent decline for the first quarter of the year.
The U.S. economy has now seen two straight quarters of negative growth, and that is reigniting the debate about we're in a recession.
Many economists say, we are not, at least not yet. The job market is still strong, unemployment is practically at a 50-year low, and demand for workers continue to be strong.
The official arbiter of recessions is a group of eight economists that make up the business cycle dating committee at the nonprofit, nonpartisan, National Bureau of Economic Research.
They operate rather discreetly, but define a recession as a significant decline in economic activity. The committee considers factors such as personal income, the job market, and consumer spending.
[01:34:59]
SOLOMON: I spoke to Harvard University professor Jeffrey Frankel, a former member of the committee on Thursday and asked might we see a recession call after this GDP print?
He told me the committee is very unlikely to say a recession happened in the first quarter because a whole host of other indicators are positive. As for his thoughts on today's report? He says, the economy is clearly slowing down.
Rahel Solomon, CNN -- New York.
(END VIDEOTAPE)
VAUSE: With us now from Los Angeles is Rodney Ramcharan, professor of finance and business economics at the University of Southern California. Thank you for taking the time to be with us tonight.
RODNEY RAMCHARAN,PROFESSOR, UNIVERSITY OF SOUTHERN CALIFORNIA: It's my pleasure indeed. Thank you.
VAUSE: Ok. So despite meeting this widely definition of recession of two quarters of negative growth, the Fed chairman also doesn't think we are in recession. Here he is.
(BEGIN VIDEO CLIP)
JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: It doesn't seem that the U.S. Economy is in recession right now. And I think you do see weakening -- some slow down, let's put it that way. And growth and you see it across some of the categories that I mentioned.
But there is also just the very strong data coming out of the labor market still.
(END VIDEO CLIP)
VAUSE: The thing about the labor market though, it's a lag indicator right. As of today that's where the economy was. It's not indicative of where the economy is going. We have leading indicators for that like residential investments, down 14 percent; business construction, fixed investments like new factories, warehouses, down almost 12 percent; consumer confidence slightly down for a third straight month.
And that means after growing at a record clip for 2021, the economy is now slowing. And isn't that precisely what the Fed wanted? By you know, dramatically increasing interest rates. Sometimes bad news is good news.
RAMCHARAN: Yes, so that is exactly right. All of the interest sensitive parts of the economy are beginning to slow now. And that's exactly the plan.
So as the interest rate sensitive parts of the economy slows, it's going to begin to weaken demand, and put less pressure on the inflation front. And that is the target that the Fed is trying to get at this point.
VAUSE: Yes. And the U.S. president, he's also -- he's not feeling this talk of a recession either. Here he is.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: We've a record job market of record unemployment of 3.6 percent today. We've created 9 million new jobs so far. Just as I became president. Businesses are investing in America at record rates. That doesn't sound like a recession to me.
(END VIDEO CLIP)
VAUSE: It may not feel like a recession to him, but when wages are up but those gains are eaten away by inflation, It's going to take $75 to fill your tank, not $35. Or when you're shopping at Dollar Tree and there's it's nothing under $1.25, you know, these are things that actually do feel like a recession to most.
You know, you can think and choose what you want but it does seem that the opinion out there by, you know, most of the country is that either we are in a recession or we are heading towards one.
RAMCHARAN: So I think that is the sense, right. The Fed is trying to calibrate with this interest rate policy to slow things down just enough but not really kill the labor market and drive up the unemployment rate.
So we are beginning to see the effects of that policy now and the hope is that the policy works enough to contain inflation but it doesn't really annihilate the labor market itself. It doesn't really lead to a big job losses and so forth.
So that is the fine line that they are trying to walk at this point.
VAUSE: I'm just wondering all this sort of recession denial, if you like, it's obviously driven by politics with the midterm elections coming up. No one wants to be talking about the country being in a recession.
But you know, if they don't own it, could they get it wrong? You know like they got inflation wrong. They deny that inflation was a, you know, a systemic problem, all trying to focus so long and now it's out of control. So if they don't own it, are they going to get it right?
RAMCHARAN: So you are absolutely right that on the political side, the politicians and people in the administration have a strong incentive to put the best spin on things. But mind you that the definition of a recession is very standardized. It's a task that the National Bureau of Economic Research, the NBER, they are nine people on the committee that they have the final say on that.
So you are right that the administration wants to spin this as much as possible. But ultimately, it's a scientific call.
VAUSE: There is one sort of note in this report with things she was mentioning. Marketplace reports that the main reason why GDP didn't technically grow in the second quarter is because a bunch of companies put too many goods we didn't want. They had a holdup on buying more while their warehouses cleared out.
And that showed up in the data for this quarter. And I guess to your point, this is why GDP numbers alone are not used to decide if the economy is in recession, right.
RAMCHARAN: Indeed. Indeed. So they look at a wide range of things including the consecutive contraction and output. But they also look at the labor market as well and mass unemployment. So if companies are laying off 50 or more people at a given time.
[01:39:57]
RAMCHARAN: So these are some of the factors that they consider. And it could be that if you have a consecutive contraction it could be a technicality so you need to have a wide look at the data in order to come to the conclusion that the economy is in a recession.
VAUSE: Professor, thank you very much for being with us. We appreciate your time.
RAMCHARAN: It's my pleasure.
VAUSE: Makers of semiconductors in the United States are about to receive hundreds of millions of dollars in subsidies after the U.S. Congress passed the Chips and Science Act, all intended to shore up a very significant industry in the United States.
Overall, this will see production increase, and CNN's Miguel Marquez inside us one of these factories, making (INAUDIBLE) important chips.
(BEGIN VIDEO CLIP)
MIGUEL MARQUEZ, CNN CORRESPONDENT: It is enormous. GlobalFoundries, semiconductor chip plants in Malta, New York.
In this fab or fabrication unit, how many chips are being made for how many products?
UNIDENTIFIED MALE: So we can produce roughly millions of chips a day.
MARQUEZ: A day?
The fab, where the chips are made, about the size of six football fields. The process so sensitive a single human hair could gum up the works. Even the light has to be controlled.
UNIDENTIFIED MALE: Any exposure to ambient light will have a negative impact on our wave.
MARQUEZ: The chips produced here go into everything from cars, computers, video games, communications technology and the defense industry. SAAM AZAR, HEAD OF GLOBAL GOVERNMENT AFFAIRS, GLOBALFOUNDRIES: We are
at a half a trillion right now, our semiconductor industry. Conservative estimates by 2030, we are going to be at a trillion.
MARQUEZ: So the question isn't whether or not --
(CROSSTALK)
AZAR: A trillion dollar industry. So we are going to double between now and 2030.
MARQUEZ: The chips that calls for investing $52 billion in semiconductor production here at home. 18 states now produce chips and could benefit from the funding.
GlobalFoundries started producing chips here in 2012. New York state chipped (ph) in $2 billion helping the company secure another $13 billion to build a plant. Today employing 3,000 employees, with a median salary says the company of $90,000. At just this one plant, the expected effect of the Chips Act funding.
AZAR: We intend to double capacity, right, in partnership with the federal government, with the state government.
MARQUEZ: Doubling capacity, adding up to a thousand more jobs, many of them high paying, all of it a boom to the area.
In the last decade, how has the economy here changed?
BETH HARR, OWNER, ENCOUNTER CLOTHING STORE: It's just grown. Almost --
MARQUEZ: Leaps and bounds, booming?
HARR: It almost seems that it's sort of a bubble.
STEVE ROSATO, MANAGER, SARATOGA OLIVE OIL COMPANY: And the dividends are felt like a ripple effect throughout all the shops, and all the restaurants, and all the taverns.
MARQUEZ: Some conservatives and progressives argue, government should not be in the business of subsidizing private industry. The industry says a little bit of public financing goes a long way.
AZAR: The proof is in the pudding. Look at this facility we have and the number of jobs, the taxpayer returns -- two, three, four x for the state.
MARQUEZ: An industry started by America, an industry essential to the tech economy, and an he industry to the nation's defense. An industry the U.S. would like to dominate again.
Industry executives say it doesn't take much governmental financing to attract lots of private capital. They also point out that America's biggest competition in semiconductor production, China, the EU, India, Korea, and Japan, they collectively have put together about $280 billion in government financing to spur their own semiconductor industries. It is very big money, and very heavy competition. Back to you.
(END VIDEOTAPE)
VAUSE: Miguel Marquez, thank you.
Little testing in the U.S. despite thousands of monkeypox cases. Just ahead, why labs are processing tests at a fraction of capacity.
[01:43:54]
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VAUSE: The U.S. Centers for Disease Control says the number of monkeypox cases worldwide has plus 21,000. Health officials in Africa though say they still have no vaccine for the monkeypox Despite having all of the 75 recorded deaths from the disease.
And in the U.S., some cities and states are not waiting for the federal government to raise alert levels of the virus. New York is calling it an imminent threat to public health. San Francisco declaring monkeypox, a public health emergency.
And health officials are becoming increasingly concerned over the low number of monkeypox tests. They say labs are operating at a fraction of capacity. And without that crucial testing, it's difficult to know the true state of the outbreak.
Here's CNN's Elizabeth Cohen.
(BEGIN VIDEOTAPE)
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: A key to getting the monkeypox outbreak under control is testing and lots of it. And that is why the U.S. Centers for Disease Control and Prevention, has engaged with five commercial labs to increase testing capacity. And now those five labs can do 70,000 specimens per week. That is a lot.
But CNN has found by checking in with these labs, that actually, the demand at these labs, is very low. Doctors aren't sending in specimens in any large numbers.
Let's take a look at a few examples. For example, at the Mayo Clinic, one of the commercial labs, they have a capacity to handle 1,000 samples a week. And over the past two weeks, they have received 45. Not per week, but 45 over both of those weeks.
And Aegis, another lab, they have a capacity for 5,000 a week, and they have received zero, they haven't received any samples thus far.
A third lab, Lab Corps, they're one of the largest commercial labs in the United States. They say they have received more than this, but still, they say that the number of samples coming in has been extremely low.
So this is problematic, for several reasons, one of them is that you can only find out who has monkeypox if you test them. And then you can isolate them, and you can do contact tracing.
Also especially in a country as large as the United States. You want to know where your cases are so you can set resources to the right places.
So let's take a look at monkeypox cases in the United States. So you can see the number of cases has risen dramatically, at a time when they are trying to get this under control.
So a month ago, there was about 244 cases. Now, there is about 4,600 cases. So there are several reasons for the low demand at labs, and one of them is that most of the cases, really almost all of the cases, have been among men who have sex with men. These men often go to sexual health clinics to get their care.
Now these clinics say that they are underfunded, and about half of them don't even use commercial labs because they say it's too expensive. So if you have a lot of patients going to clinics that don't send their samples to private labs, but, those private labs have a lot of capacity, obviously there is a disconnect there.
Back to you.
(END VIDEOTAPE)
VAUSE: There is a lot more to come here on CNN including the full extent human caused climate change had in the record heat wave in the U.K. Details in a moment.
Also, Donald Trump in the rough, hosting a Saudi-backed golf tournament at his New Jersey country club.
[01:49:20]
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VAUSE: Monsoon season is deadly across parts of southwestern Pakistan. At least 106 people have died. 62 injured according to the National Disaster Management Authority. Many have been left stranded without food or water. Pakistani army says two helicopters with relief supplies have been sent to the region.
Rescue efforts though have been hampered by ongoing severe weather. More heavy rain and storms are expected in the coming days. It is monsoon season.
At least eight people have died from flooding in eastern Kentucky. The state's governor says that number is expected to rise. Right now more than 25,000 homes and businesses are without electricity. More than eight inches of rain fell on parts of the state from Wednesday into Thursday morning overwhelming creeks, streams, and rivers already full from earlier rains.
The governor warned it could take years for families to rebuild, calling it the worst flooding disaster of his lifetime. Human-caused climate change made the United Kingdom's recent record- breaking heat wave at least ten times more likely to happen. And the climate scientists in Europe, United States and India, who came to that conclusion a warning that number might just be an underestimate.
Last week temperatures in the U.K. surpassed 40 degrees Celsius for the first time ever. That forced the government to issue its first ever extreme heat warnings in parts of England, including London.
The scientists say that while their analysis shows this type of extreme weather is still rare, it is on the rise.
Let's go to CNN meteorologist Derek Van Dam, for more on the fingerprints of climate change. I think we know who to blame.
DEREK VAN DAM, CNN METEOROLOGIST: Yes, that is right, and it is unequivocal, we know who to blame. Right? It's the burden of fossil fuels by humans. Human induced climate change. We talk about it so frequently.
And what I'm going to show you right now is that we do indeed live in a warmer world, and our extremes -- the extreme heat are becoming more extreme. So think of this graph here, what you're looking at is the state of the world climate, pre-industrial revolution.
We were used to temperatures very nice, let's say for humans, cold to warm temperatures. We can live in that. But now as we started to burn those fossil fuels, the heat trapping gases, the greenhouse gas emissions, that average has slide over.
So not only are we having more frequent days with warmer temperatures, but we are also seeing those extremes reach higher extremes. We are seeing never before recorded temperatures like what we did in the United Kingdom.
And the study that John was talking about, points out just what this really means. It puts it into context that we are seeing the first ever 40-degree plus Celsius temperature in the United Kingdom. That is an all-time record heat for the U.K.
And we found this very interesting as well. The ten hottest days in the United Kingdom on record all set in July of 2022. You can see those temperatures right there.
Just incredible amounts of heat within this month across much of western Europe, and it's quite an interesting sign here as well. Not only do they have the highest record temperature in the U.K., this month, but look at July 2019 in Germany, June of 2019, in France, in Spain, august of last year with record setting all-time high temperatures.
So you're starting to see a trend there. Just within the past couple of years, the extremes have become more extreme. The hotter days have become more frequent. And we continue to live with extreme heat for many locations. A few other examples from Italy, to Spain, and France as well. Unfortunately, we know that western Europe is woefully, unprepared for heat waves of this magnitude. Considering the amount of households just for instance, in the U.K., with air conditioning equates to less than 1 percent. Just to put this into broader worldwide context, the U.S. and Japan has households -- over 85 percent of households have air conditioning helping them cool off especially at night time, John.
VAUSE: Yes, and until we stop putting carbon into the atmosphere, it's going to keep getting hotter and hotter.
VAN DAM: You are right.
[01:54:52]
VAUSE: Derek, thank you.
French President Emmanuel Macron, under fire for hosting Saudi Crown Prince Mohammed bin Salman in Paris. They shook hands as the de facto leader of -- Saudi leader rise (INAUDIBLE) Thursday. A spokesperson said Mr. Macron would bring up Saudi Arabia's human rights record as well as individual cases.
Meantime, former U.S. President Donald Trump is hosting a controversial Saudi backed golf tournament this weekend at his New Jersey club.
CNN's Polo Sandoval has our report.
(BEGIN VIDEOTAPE)
POLO SANDOVAL, CNN CORRESPONDENT: Former president Donald Trump teeing off in a pro-Am at his namesake golf course in New Jersey, amid controversy that is testing both the sporting world and international relations.
The third event of Saudi-backed Liv Golf starts Friday at Trump's Bedminster Golf Club attracting big name athletes with millions of guaranteed paydays.
Two-time masters champion, Bubba Watson reportedly the latest to join in. The breakaway league has drawn criticism over concerns that it provides international legitimacy to Saudi Arabia's regime which has been accused of human rights violations for years. Includes the 2018 killing of Jamal Khashoggi.
U.S. Intelligence maintains Saudi Crown Prince Mohammed Bin Salman, approved of the operation that targeted the Washington Post" journalist. Bin Salman denies that allegation.
TERRY STRADA, NATIONAL CHARTER 9/11 UNITED: It is a multi billion dollar public relations stunt, bought and paid for by the kingdom of Saudi Arabia.
SANDOVAL: Critics claim it's a moment of quote, "sports washing", using this league to help the kingdom's image, something on full display yesterday with players claiming Saudi Arabia's correcting its human rights record.
PAUL CASEY, PLAYER LIV GOLF: I can confidently say that change is happening, and that what we do is having a positive effect.
SANDOVAL: Families of 9/11 victims point to Saudi Arabia as home to 15 of the 19 hijackers responsible for the terror attacks, though the kingdom denies that involvement.
STRADA: I lost my husband in the north tower, Tom Strada.
SANDOVAL: Donald Trump's golf club just 50 miles from ground zero, the former president defending the tournament to ESPN today.
(BEGIN VIDEO CLIP)
DONALD TRUMP, FORMER PRESIDENT OF THE UNITED STATES: Well nobody's gotten to the bottom of 9/11, unfortunately, and they should have.
SANDOVAL: It's the first of two Liv competitions on Trumps properties.
JAY MONAHAN, COMMISSIONER PGA TOUR: We welcome good healthy competition. The Liv Saudi golf league is not that.
SANDOVAL: The PGA has gone as far as suspending golfers who joined Liv.
BOB COSTAS, CNN CTTOR: If we are backed by any other entity, then it would just be a rival tour. In this case, there is a direct business relationship between each of these golfers and the Saudi regime.
SANDOVAL: 9/11 families trying to speak out again on Friday, ahead of the official start of this golf tournament. They maintain, they blame every U.S. president for attack of 9/11 for not holding the Saudis responsible for their alleged role in the attacks of some 21 years ago.
Paulo Sandoval, CNN -- Bedminster, New Jersey.
(END VIDEOTAPE)
VAUSE: Every hijacker on 9/11 came from Saudi Arabia, just for the record.
Thank you for watching. I'm John Vause.
CNN NEWSROOM continues with Kim Brunhuber after a break.
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