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Trump Escalates Worldwide Power Plays; Stocks Plummet 600- Points as Trump Hits Top Trading Partners With Tariffs; USAID Employees Told to Stay Home as Agency Faces Closure. Aired 10-10:30a ET

Aired February 03, 2025 - 10:00   ET

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


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PHIL MATTINGLY, CNN ANCHOR: Taking aim at USAID, Elon Musk saying President Trump wants to, quote, shut down the agency as employees of the D.C. headquarters were abruptly told not to show up to work this morning.

Plus, escalating a threat, President Trump warning of, quote, something very powerful if the U.S. cannot take back the Panama Canal. Secretary of State Marco Rubio just wrapping up a news conference, we'll tell you what he said.

And later, Vice President Vance on his way right now to East Palestine, Ohio, on the two-year anniversary of the toxic train derailment. I'll speak to someone who lived through the disaster in his one message this morning to Norfolk Southern.

Good morning. Pamela Brown is on assignment. I'm Phil Mattingly in Washington. And you are live in the CNN Newsroom.

And we begin the hour with sweeping worldwide power plays from the White House, plays that are sending shockwaves throughout the global economy this morning and having world leaders on edge. Now, just since Friday, President Trump announced 25 percent tariffs on Canada and Mexico, 10 percent on China. The USAID website, it went dark. Employees at the Washington headquarters have been told to stay home today. Elon Musk declared that the agency is responsible for saving -- that's responsible for saving millions of lives is a, quote, criminal organization. The Trump administration is revoking legal protection for 300,000 Venezuelan migrants here under a humanitarian program.

And the president's purge is expanding. The DOJ demanding a list of thousands of FBI agents and others who worked on January 6th and Trump investigations.

So, let's tackle the first one, first, a trade war. At midnight tonight, all goods from Mexico, most imports from Canada, will be slapped with a 25 percent tariff. For Chinese imports, that number is 10 percent. And here's what that means for you. You'll pay more for fruits, vegetables, grains, meat, sugars, just to name a few things. A typical car sold in the U.S. now could cost you $3,000 more. All in all, the average U.S. household will pay more than 800 more this year, and Canada already retaliating with tariffs of its own. And at any moment, the president of Mexico is set to speak. And we'll get more details on which U.S. goods her government will target.

Joining me now for more on this, CNN Business Editor-at-Large Richard Quest and CNN Global Economic Analyst Rana Foroohar.

Richard, I want to start with you. Let's look at the markets. What are we seeing here?

RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: We're seeing common sense, to quote the president. We are seeing exactly what one would expect to see. Bring up the numbers. All right, now if you have just been told that your business is going to have to pay an import tariff going into Canada, or you've been told that the U.S. economy is going to slow down because of a tariff coming into the United States, your profitability is at threat, and therefore your share price can no longer be taken for granted. That's what you're seeing.

The share price is not some magic number that's plucked out of air. This is investors saying they believe economies are going to slow down, and in the case of Canada and Mexico, probably going to recession. There will be a -- to put it in posh economic ease, there will be a downside to economic activity. And in that scenario, everything falls out of bed.

And, by the way, just to really complete the trifecta here, we haven't even seen -- this isn't pricing in full tariffs against the E.U., the issues with South Africa, starting off with Japan, Australia, this hasn't factored in anything like the full nature of the whole shebang.

MATTINGLY: Yes, it's an important point. The president has been very clear. This is just the start. This is not by any means kind of the end game, at least this point in time.

QUEST: But it makes sense, Phil. Phil, my point is, this is not the child's tantrum. This is not the markets throwing their toys out the pram. What you're seeing is, makes economic and market sense.

MATTINGLY: You know, Rana, to that point, look, the president was very clear over the weekend, said that Americans will feel, at least in his mind, quote, a little pain as a result of this. This is what he said. Take a listen.

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DONALD TRUMP, U.S. PRESIDENT: We may have short-term, some little pain, and people understand that.

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But long-term, the United States has been ripped off by virtually every country in the world. We have deficits with almost every country, not every country, but almost. And we're going to change it. It's been unfair. That's why we owe $36 trillion. (END VIDEO CLIP)

MATTINGLY: You know, Rana, look, let's be very clear. President Trump has been very clear that this was his plan. This was something that he wanted to do. The cost benefit here, when it comes to people's wallets, how does it net out?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Oh, boy. I'm feeling that there's going to be more than just a little pain, Phil. You know, adding to everything that Richard just said, which I agree with, we haven't even started to factor in the effect of the stronger dollar. And, you know, it sounds, oh, okay, the dollar's strong. Actually, that means inflation is coming. That starts to affect emerging markets, which have been doing well in the global context, but it makes their debt more expensive. That could create a debt spiral. That could affect markets in the US.

So, this isn't just about how much more you're going to pay for orange juice. It may not even be about how much more you're going to pay for a car longer term or whether or not the entire auto industry is going to be disrupted. We're talking about moves and countermoves that are the sort of things that, without being alarmist, can spark real financial chaos prices at a global level. So, I'm very worried.

And, yes, we've been told by the president that these were some of the actions he was going to take but we had also been sort of, led to believe that tariffs might be a little more strategic than what we're seeing. Right now, we're seeing tariffs on allies, actually, interestingly, bigger tariffs on allies than on adversaries, like China. And what is considered success by the Trump administration is completely nebulous. So, this has all the hallmarks of something that is going to get hotter and worse before it gets better.

MATTINGLY: Richard, Rana mentioned kind of the retaliatory piece of this. We've already seen the first tranche of what Canada is rolling out a second to come. We are set to hear from Mexico's president, Claudia Sheinbaum, any minute now, could get a clearer picture of what their actions will be. What do you expect those will look like?

QUEST: Oh, they'll be tit for tat. They will be exactly the same. They will hit U.S. exports into those countries and they will be tariffed.

You see, the problem with -- the problem challenge, issue, whatever you want to say, with Canada and Mexico, is that we've spent the last three decades doing this, integrating the border. Now, first with NAFTA, then with USMCA, the very goal of trade policy in the last 30 years has been to create a frictionless, borderless trade area between the three countries.

Now, you're going to do this. Essentially, think of it like that, every single item on every little car, whether it's the thrust capacitor, the widget, whatever it is, it's going to cross the border backwards and forwards and get tariffed and re-tariffed and re- tariffed. And this is what's happening, you, the, imagine you've just taken the whole trading relationship and turned it upside down, and as The Wall Street Journal describes it, the dumbest trade war ever because it wasn't necessary.

There is a huge gap between what the president is doing and what he could have done and how you could have got there. But instead, look I've probably got a few years on Rana because in terms of doing this but we're pretty close, not by

FOROOHAR: I take that as a compliment.

QUEST: Yes, exactly. I don't think either of us have ever seen anything like this before. No one does.

MATTINGLY: Look, I'll be honest, our graphics folks couldn't do any better than what you just demonstrated with your interlocking rotational figure.

Rana, real quick, because we have to go, but endgame here, the president talks about revenues and the need to raise them. The president talks about rebalancing trade relationships. What is the endgame in your view?

FOROOHAR: I think the endgame is that the president thinks he's William McKinley and that we are in a different era, because that's the moves that you're seeing. Richard's quite right. We haven't seen anything like this, not just in half a century, but since last century. We are in uncharted territory.

MATTINGLY: It's an important point. Richard Quest, Rana Foroohar, thanks so much.

And as things escalate, tariffs on lumber, other key construction supplies could have a dire impact on America's housing crisis. Now, about 7 percent of all materials and new home construction in 2023 were imported. That's according to the National Association of Home Builders and their president and CEO, Jim Tobin, joins me now. Jim, thanks so much for joining me.

Just to start, what is your sense right now within your organization of the actual impact of 25 percent on Canada, 25 percent on Mexico, on all imports, as it relates to home building?

JIM TOBIN, PRESIDENT AND CEO, NATIONAL ASSOCIATION OF HOME BUILDERS: There isn't a room in the house that isn't impacted by imported materials.

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China, Canada and Mexico are by far our three biggest trading partners when it comes to building material. So, I expect we're going to see prices go up right at the start of the spring building season.

MATTINGLY: I think the difficulty right now in talking to folks across the business community is, you know, day one in this administration, there is an executive order about trying to address high costs, housing being one a provision in the executive order on prices. This seems to run counter to that. How does your organization try and figure out the through line here? TOBIN: Well, President Trump ran on immigration, he ran on tariffs, but he also ran on housing. We have housing affordability crisis in the country and he talked about building more houses to do that. And we are absolutely at odds when it comes to tariffs. We just don't produce enough of the building materials we need in this country, so we have to look over our borders. And to hurt primarily are our two biggest trading partners in Canada. Mexico really sends the wrong message to homebuilders but also I think the home buyers and anybody who's trying to put a product in their house.

MATTINGLY: What's the strategy? You know, one of the, I think, striking things to me is just how different this is from Trump Trade Policy 1.0, right? Tariffs were obviously a huge element of his first administration. He's been very clear about his personal views on them, but there are no exemptions in what was just laid out over the course of the weekend. There doesn't seem to be any workarounds. You've got lawmakers right now kind of in a panic saying, you know, Chuck Grassley saying we need an exemption for Potash. Susan Collins is saying we need an exemption for things up in Maine. What are you hearing about kind of what your members can do to try and not get hit here?

TOBIN: I think there's a couple of things. One, we have to look for other countries where we can get imported lumber and timber. So, whether it's the Scandinavian countries or even South American partners where we have free trade agreements already or certainly lower tariffs.

And now we're going to see that Canada itself is going to look for better markets. Traditionally, they're going to find it to China, which means they're going to ship all of their timber over to China, which further constricts the supply and raises prices when it comes to lumber in particular. But for us, we're going to work in a coalition with all of our housing friends to make sure that not only our suppliers, but also other building organizations and other real estate organizations.

So, that's where we're going to -- and we're going to continue to petition the Trump administration on those exemptions and finding out where it is and what is the endgame here, especially since when it comes to housing. Again, we're running counter to what the president wants to do.

MATTINGLY: In terms of the endgame, what have you been told? Your coalition is a powerful coalition in this town. This administration listens to what business has to say. It doesn't necessarily do what they want them to do, but will always listen at this point in time. One of the things I picked up over the weekend is people have no concept of what is the endgame, how does this end. What do Canada and Mexico need to do?

TOBIN: Well, we know that it's about fentanyl and about illegal immigration. But what are the metrics, right? So, we're waiting to find out what it is too but we just hope it's not a prolonged trade war. But we're going to anticipate that, you know, the president, I take him at his word. He's going to use tariffs to drive policy, but also to raise money or also increase the domestic production capacity. But I don't think they can all do all three things very well. And that's the real challenge we had to have ahead of us.

MATTINGLY: On that third point, you know, that's what you hear a lot. Fine, our domestic producers will protect them and they'll have an opportunity to boost with their capacity. Is that plausible in the homebuilding industry?

TOBIN: I don't believe so because I give a great example with lumber. For the last decade, there has been consistently between 10 percent and 20 percent tariffs on Canadian lumber that comes in consistently, and we have not seen meaningful increases in capacity or production from the U.S producers while they've had that tariff protection. So, right now is about 15 percent tariff on Canadian lumber, now we're going to put another 25 percent on top. That's 40 percent and we may even see that increase over the summer.

So, I don't think the U.S. domestic supply has really responded to those tariffs, so I don't have much faith in it.

MATTINGLY: There's been -- we've seen in the markets that there has long been this view that there's the threat and then there will be a moderation or maybe a phased approach. He'll listen to the econ advisers, not necessarily the trade protectionists that are in his team. Were you surprised that this was actually launched this weekend, exactly how Trump said it would be?

TOBIN: No. I think we've seen, again, for the last two weeks now into week three of the administration, he's doing exactly what he said he was going to do.

We're trying to take this holistically, right? The president said it, there's going to be short-term pain. We get it, but we're also waiting to see what happens with further executive orders. Are we going to roll back regulations, or we have a tax bill that's coming? So, there's a lot more to go here, but I think this one seems like it's going to hurt in the short-term, no doubt about it.

MATTINGLY: Yes, there's a fulsome plan.

TOBIN: Right.

MATTINGLY: And a holistic plan, but this was definitely the pain at the front end of said plan.

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TOBIN: yes, this is going to hurt us. It's just ill timed, especially with our building season coming up. So, you know, we're fully expecting products to cost more.

MATTINGLY: Well, keep us posted as we go through it. Jim Tobin, thanks so much for your time. I really appreciate it.

Well, still to come uncertainty about the future of USAID workers at its D.C. headquarters. They were told unexpectedly to stay home today. That's next.

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MATTINGLY: Dramatic new developments in the fight over the US International Aid Agency, or USAID. In a surprise overnight email, employees at the headquarters in Washington were told to stay home today. The main office is now closed. Elon Musk says the president agrees with him that the agency needs to be permanently shut down.

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ELON MUSK, CEO, TESLA: What we have here is not an apple with a worm in it, but we have actually just a ball of worms.

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If you've got an apple that's got a worm in it, maybe you can take the worm out. But if you've got actually just a ball of worms, it's hopeless.

And USAID is a ball of worms. There is no apple. . And when there is no apple there's, you've just got to basically get rid of the whole thing.

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MATTINGLY: Now, this is a medium-sized agency that manages about $40 billion a year. It is the largest distributor of humanitarian aid in the world. But it also goes well beyond that, giving out money for everything, from education to promoting free markets and democracy around the world.

CNN's Alex Marquardt has been doing the reporting on this and joins us now. Alex, this agency exists in statute.

ALEX MARQUARDT, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: Yes.

MATTINGLY: Is it closed for all intents and purposes right now?

MARQUARDT: To say the very least, it's fate is very much in question, if not sealed all together. My colleagues and I have been speaking with USAID officials for the past few days. There is a tremendous amount of fear. One word that I keep hearing over and over is the word purge. I spoke with someone this morning who said that this feels like the apocalypse for USAID.

They were told in this overnight email to not come to the headquarters today, it's called the Ronald Reagan building, told us to stay home and work remotely. And so much of this is being driven by Elon Musk, who, of course, very much has the president's ear. After some of our reporting over the weekend, he posted on X, the platform he owns, that USAID is a criminal organization that needs to die. The president himself appears to agree. He said that it is being run by lunatics.

So, what would this look like? We've already seen the websites and X page for USAID shutdown. There is a new page on the State Department website which leads us to believe that what we're going to see is the absorption of USAID into state.

But you just laid it out very well. USAID is an operational agency that does so much around the world, and the people that I've been talking to, aid professionals, former and current officials, say that the State Department is not equipped to do what USAID does, which is going to some of the most difficult and dangerous places around the world. They don't have the capability to do this kind of thing. And so those services would be severely hampered.

And, of course, there's the legal question. You can't do away with an agency like this by executive order. It has to be done by Congress. So, its fate is very much in the balance right now.

MATTINGLY: I want to ask you, there's a piece in your story which I think is applicable across several agencies right now. I know we've been reporting it out on the Treasury Department side as well where there are DOGE personnel, the Elon Musk group that was created by an executive order on the first day of the presidency, trying to get access or getting access to the security system and personnel files. Is that -- how did this work?

MARQUARDT: So, on Saturday, a team from DOGE showed up at USAID demanding entrance, and they were initially blocked from getting in. We're told that they threatened the people at the headquarters, saying that they would get the U.S. Marshals over to basically force their way in, to barge into the building. They wanted access to security systems, even classified areas.

And, eventually, they did get into the building. And as a result, the top two security officials for USAID were put on leave, joining many other top USAID career officials who had been put on leave amid these fears that the agency is being gutted.

MATTINGLY: Just real quick, because I know we have to go, do we know who these people are?

MARQUARDT: Not exactly. The people who are actually showing up under the DOGE umbrella, we don't know who they are, but it's an excellent question and something we're trying to figure out.

MATTINGLY: They ostensibly work for the government, or at least are detailed on some level. We have no idea who they are, what their backgrounds are, what their clearances are. They're just showing up.

MARQUARDT: Demanding access to classified areas with extremely sensitive information.

MATTINGLY: And the executive order says unclassified is what they're allowed to have access to. Not classified.

Great reporting as always, Alex, thanks so much.

Now to Panama, where President Trump is reiterating his threat to, quote, take back the Panama Canal. Warning something very powerful will happen because of China's presence around one of the most critical waterways in the world. Secretary of State Marco Rubio was in Panama over the weekend, met with Panamanian President Raul Mulino.

CNN's Patrick Oppmann joins us now. Patrick, Panama has already made efforts to demonstrate concessions over China issues. I think the big question right now is, is that going to be enough?

PATRICK OPPMANN, CNN INTERNATIONAL CORRESPONDENT: Apparently not, and the Panamanians that I've been speaking with over the last couple of days were hopeful that diplomacy would prevail, that there would be a lessening of tensions which has really worried this key U.S. ally, which is just not used to being threatened by the U.S.

So, one of the key concessions made over the weekend by Jose Raul Mulino, Panama's president, is that Panama will no longer take part in the Chinese Belt and Road Initiative, and Panamanian officials as well showed how their assistance on immigration, closing down the Darien Gap has led to a steep drop and the number of migrants coming north through Panama and eventually to the United States.

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All the same, you heard from Marco Rubio a message from the Trump administration that they feel that there continues to be too much of a Chinese presence in the Panama Canal and these unfounded accusations from Donald Trump that the Chinese military has actually taken over the Panama Canal, that somehow these ports that are run by a Hong Kong company are actually kind of a front for Chinese military outpost, something there's just not any proof to back up.

But for Panamanian officials, they are essentially under the gun. And certainly the visit went well. Marco Rubio visited the canal, something shouldn't be possible. One would assume that the Chinese actually controlled the canal. So, Panamanians I've spoke with within and outside of the government felt at least they were able to sit down and talk but certainly it did not lead to any significant lessening of tensions and that they are seeing very clearly now, as others are in the region, that just because country has been a long time U.S. ally, that does not mean they're exempt from U.S. threats.

MATTINGLY: Yes. I was down there a couple weeks ago. We talked before the trip. You were very helpful, a lot of confusion as to what they actually want here. It doesn't seem like they've gotten any clear answers.

Patrick Oppmann, as always, thanks so much.

Well, coming up, it has been two years since a Norfolk Southern train derailed in East Palestine, Ohio. Now, a new lawsuit alleges for the first time that people died because of the disastrous and toxic derailment. Details ahead.

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