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Diplomacy Dust Up; White House: Iran On Notice; Trump All-In On SCOTUS Pick. Aired 4:30-5a ET

Aired February 02, 2017 - 04:30   ET

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

(COMMERCIAL BREAK)

[04:30:21] CHRISTINE ROMANS, CNN ANCHOR: President Donald Trump taking a hard tone with the leader of Australia. What did he say and how will the new secretary of state clean up the mess?

MIGUEL MARQUEZ, CNN ANCHOR: And the White House puts Iran on notice in the wake of a missile test. We are live with the latest on the growing feud.

ROMANS: And the president tells Senate Republicans to do whatever it takes to get the Supreme Court pick confirmed. Will they really have to change Senate rules to get it done?

Welcome back to EARLY START this morning. I'm Christine Romans.

MARQUEZ: And I'm Miguel Marquez. Good to see you.

ROMANS: You too.

MARQUEZ: It is 30 minutes past the hour.

Breaking news: word of new tension between the president and foreign leaders. Sources telling CNN about a pretty heated phone call on Saturday between President Trump and Australian Prime Minister Malcolm Turnbull.

Things came to a head when the subject of refugees came up, many of them from Muslim majority countries listed in President Trump's travel ban. The Obama administration agreed to accept more than 1,000 refugees now being detained by Australia which generally does not accept refugees over crime concerns.

ROMANS: Now, our sources say President Trump kept telling the prime minister the deal reached with the previous administration was a, quote, "bad deal", and one of those refugees would turn out to be the next Boston bomber.

A source says that as the Australian leader pressed Mr. Trump on the refugee issue, the president told aides he wanted to end the call, then he did so abruptly when the prime minister tried to change the subject to fighting ISIS. A source familiar with the circumstance says the president was

fatigued from a long day of conversations with foreign leaders. Conversations that included some tense moments.

Overnight, after the story broke, Prime Minister Turnbull largely avoided questions, but said the call ended courteously and says such talks are better conducted, quote, "candidly, frankly, and privately."

We also have new information on President Trump's phone call with Mexican President Enrique Pena Nieto. That call came last Friday right after Pena Nieto canceled an in-person visit to the White House over President Trump's repeated demand that Mexico pay for the border. An excerpt from the transcript of the phone call shows Mr. Trump offered to help with the drug cartel. He said, according to the transcript, "You have some pretty tough hombres in Mexico that you may need help with. We are willing to help with that big league, but they have to be knocked out and you have not done a good job knocking them out."

MARQUEZ: That differs from earlier reporting by the "A.P." and others suggesting President Trump was thinking about a hostile incursion into Mexico by U.S. troops to hit those drug carters. Sources say those reports are based on the inaccurate depiction of the call written by aides. One government official who spoke to CNN described Trump as naive to think he will have great relations with virtually all world leaders, even as he responds with a tantrum when confronted on policy.

ROMANS: The White House is raising the stakes with Iran. National security adviser Michael Flynn lashing out at the Iranians for conducting a recent missile tests.

Listen to Flynn's warning to Tehran after taking a parting shot at the previous administration.

(BEGIN VIDEO CLIP)

MICHAEL FLYNN, NATIONAL SECURITY ADVISER: President Trump has severely criticized the various agreements reached between Iran and the Obama administration, as well as the United Nations, as being weak and ineffective. Instead of thankful to the United States in these agreements, Iran is now feeling emboldened. As of today, we are officially putting Iran on notice.

(END VIDEO CLIP)

ROMANS: Iran's defense minister confirms his country carried out the missile test, but he says it did not violate any international agreements and warns Iran will not allow outsiders to interfere with military affairs.

I want to get the latest now from CNN's Fred Pleitgen. He was recently in Tehran. He joins us live from London.

You have been following the relationship between the United States and Tehran. To hear him say we are putting Iran on notice, what does that do to the relationship? What is that in terms of inflection point in the recent cooling -- warming of relations, I should say, cooling of tensions with the two countries?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it certainly looks as though the tensions could flare up again very, very quickly, Christine. And, you know, we have not had any reaction yet from Tehran on the comments of the national security adviser made. But they certainly, when they do come out, will probably be pretty combative from the side of the Iranians.

And you've already heard from the Iranian defense minister, they're saying, look, we had every right to carry out this ballistic missile test. What the Iranians are essentially is that they're allowed to do these tests if the weapons that they're testing are not capable of carrying nuclear warheads. The U.S. says they believe that weapon that was tested may be capable of doing that, and therefore, they believe that Iran was in violation of a United Nations resolution.

So, certainly, there is some conflict there. But it's been so interesting because I was actually just in Tehran last week and we were talking to a lot of Iranian officials. And some of them very hard line anti-American. And when you asked about the Trump administration all of them said at this point in time, we are taking a wait and see approach. They believe that Donald Trump was, quote/unquote, "an unconventional politician" and therefore, they thought they might be able to do business with the Trump administration.

And so, seeing the early days of that administration, especially the comments that were made last night by Michael Flynn, a lot of them are going obviously going to have to rethink whether or not that was really realistic to believe that they were going to have better relations with the Trump administration than they had with the Obama administration. And certainly speaking with regular folks on the ground in Iran, a lot of them are quite concerned as to which way the relationship could go after, as you said, the ties had been warming just a little bit in the Obama years.

ROMANS: Warming is a real relative term when you're talking about Iran, but indeed.

All right. Fred, thank you so much for that. We'll talk to you again very, very soon.

MARQUEZ: The White House may be backtracking on aspects of the president's highly charged refugee and travel ban. A source tells CNN tweaks to the executive order could be announced in the coming days, including an easing of restrictions on green card holders. That means legal permanent residents from seven banned countries could have their global entry status restored. The White House is also working out a deal with Canada to lift restrictions on their permanent residents who carry passports from those seven banned nations.

ROMANS: Breaking overnight, the White House taking steps to eliminate the Obama administration's CVE program. CVE stands for countering violent extremism. The idea behind it was to connect law enforcement with cooperative Muslim-American groups. Trump administration views the program as, quote, "politically correct". It wants a new approach that shifts the focus to radical Islamic extremism.

MARQUEZ: And the Kremlin has launched a purge of spies, suspected of passing secrets to U.S. intelligence. A lawyer defending one man charged with treason says Moscow has arrested two high ranking agents of the Russian security service as cyber security experts in an unidentified fourth man. The crackdown started shortly after U.S. intel officials accused Russia of hacking, aimed at helping swing the election to Donald Trump. American officials never said evidence for the claim came from Russian government insiders.

ROMANS: Confirmation hearings for Supreme Court nominee Neil Gorsuch expected to get underway in six weeks, scheduled for six weeks from now. And the president is already warning Democrats not to obstruct his confirmation. He's urging the Senate to deploy the so-called nuclear option if necessary, reducing the number of Senate votes needed from 60 to a simple majority.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: If we end up with the same gridlock that they've had in Washington for the last -- longer than eight years, in all fairness to President Obama, a lot longer than eight years. But if we end up with that gridlock, I would say, if you can, Mitch, go nuclear, because that would be an absolute shame if a man of this quality was caught up in the web. So, I would say, it's up to Mitch. But I would say, go for it.

(END VIDEO CLIP)

ROMANS: Democrats are divided over how to fight the Gorsuch nomination. Progressives, who were further on the left, they want an all out filibuster but fear a backlash if they're too obstructionist. It's worth noting, the first phone call made by Gorsuch after he was nominated was to Judge Merrick Garland. He was President Obama's stone-walled pick for the Supreme Court. His spokesman told reporters Gorsuch made that call out of respect.

MARQUEZ: It would be a sensible call.

Demonstrations at U.C.-Berkeley just the latest in the string of emboldened protests since the president took office. Why did this one turn violent?

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MARQUEZ: Overnight, a new protest at University of California- Berkeley flaring into violence as the peaceful demonstrations against planned speech by right wing commentator Milo Yiannopoulos escalated with protesters, lighting fires, throwing rocks and bottles and smashing windows. Now, the university is responding angrily, holding what it calls outside agitators responsible for the clash.

CNN's Kyung Lah was in the middle of all of it.

(BEGIN VIDEOTAPE) KYUNG LAH, CNN NATIONAL CORRESPONDENT: Christine and Miguel, amid a wave, a national wave of post-election protests, students here at UC- Berkeley organized one of their own, with a very specific goal. This protest which happened here right outside the student union was to stop right wing speaker and Breitbart editor, Milo Yiannopoulos. About 1,500 students gathered here with the goal to stop him, saying that he is not free speech. He is hate speech.

So, at some point, this protest became violent. These barricades were used to smash in the first floor windows of the student union. Protesters set fires and faced off with police who had to use tear gas. The university says about 150 outside agitators of the 1,500 who showed up. That's who they are blaming for this violence. Six people were injured.

And it became so violent that they had to cancel the event. The irony here is that UC-Berkeley in the 1960s was the free speech movement. That was for students to have the right to express their political opinions -- Miguel, Christine.

(END VIDEOTAPE)

ROMANS: All right. Kyung Lah, thank you for that.

Tax cuts are a top priority for many Republican lawmakers. Business leaders, ordinary voters. But just because Donald Trump is in the White House doesn't mean there will be a quick route to tax reform.

[04:45:00] That is the new thinking here. The reason, the Senate Finance Committee chaired by Senator Orrin Hatch. He told the U.S. Chamber of Commerce on Wednesday, that while Republicans agree on the fundamental issues and principles for tax reform, there are questions about detail and design that have to be worked through. Translation, hold up. We'll get there eventually, but it will take some time.

The Senate Finance Committee has yet to offer its own tax reform proposal or to meaningfully weigh in either on the House Republicans blueprint or Trump's various tax proposals. That may be one reason why you're seeing the stock market stall a bit from the Trump rally as the realization kicks in that may be there will not be a quick path to lower corporate taxes right away.

President Trump said nominees to oversee both the Health and Treasury Departments are now awaiting a confirmation vote by the full Senate after Senate Republicans took unprecedented measures to advance their nominations against the will of Democrats. Finance committee rules say at least one Democrat must be in the room for a vote to be held. But when every Democrat boycotted the hearings for Steve Mnuchin and Tom Price, Committee Chairman Orrin Hatch of Utah decided to suspend those rules, allowing Republicans on the committee to move the nominees for Treasury and HHS to a full Senate vote with no Democrats involved.

(BEGIN VIDEO CLIP)

SEN. ORRIN HATCH (R), UTAH: We took unprecedented actions today due to the unprecedented obstruction on the part of our colleagues. As I noted earlier, the Senate Finance Committee has traditionally been able to function in even the most divisive political environment. That all changed yesterday.

(END VIDEO CLIP)

ROMANS: Democrats say changing the rules to approve Mnuchin and Price is troubling, given the ethics questions. On Wednesday, Democrats also boycotted a committee vote for EPA nominees Scott Pruitt. It has been rescheduled for later this morning.

MARQUEZ: The nomination of Betsy DeVos for education secretary is in jeopardy. Two senators say they won't back her. As it stands, if no other Republicans defect, it would be a 50/50 tie which means Vice President Mike Pence would cast the deciding vote.

That puts McConnell in a strange position. He is indicating he'll have to move up the full Senate vote for DeVos as early as today. So, a vote can happen before Senator Jeff Sessions is likely confirmed as the next attorney general. DeVos is under increasing pressure after a rocky confirmation hearing performance and all the major teacher unions opposing her.

But one big position is now filled, Rex Tillerson. He has been confirmed and sworn in as secretary of state. He reports to the State Department, Foggy Bottom, this morning and we'll address employees when he arrives at 9:30 a.m.

ROMANS: President Trump this morning set to attend the annual national prayer breakfast in Washington, D.C. He will address the crowd. The subject of remarks is still unknown. The president may also meet with Jordan's King Abdullah at that event. The ISIS presence on Jordan's doorstep is a likely topic of conversation.

MARQUEZ: Now, the East Texans are getting ready for the big game. President Bush 41 will do the coin flip at Super Bowl 51, 41 at 51, this Sunday in Houston. Former First Lady Barbara Bush will also be there. The Bushes both in their 90s were recently released from the hospital. Mrs. Bush suffered a bout of bronchitis and Mr. Bush was in ICU during a treatment for pneumonia. Glad they are both out.

ROMANS: Wish them well.

MARQUEZ: How cool.

ROMANS: What would the second day of February be without a weather predicting woodchuck?

MARQUEZ: What would a woodchuck do?

ROMANS: So, in just a few short hours, the attention will shift to Punxsutawney, Pennsylvania, for the annual ground hog day tradition of witnessing Punxsutawney Phil emerged from his burrow to his shadow or not. Legend has it, of course, that if Phil sees his shadow, we are in for six more weeks of winter. No shadow would mean an early spring. MARQUEZ: What if he sees Bill Murray?

ROMANS: The CNN facts check. It is not a woodchuck. It is a groundhog.

MARQUEZ: Anyway, snow and rain hitting a swath of the northwest this morning.

Let's bring in meteorologist Pedram Javaheri.

(BEGIN VIDEOTAPE)

PEDRAM JAVAHERI, AMS METEOROLOGIST: Miguel and Christine, the west coast getting ready for another storm system. A lot of rainfall, certainly some wind associated with it, as well and we're looking at some areas potentially up to four to six inches of fresh rainfall across this region. That transitions to about 20 inches of snowfall in the highest locations across the sierra.

So, keep that in mind, if your travel plans take you towards the west. Around parts of the upper Midwest, temps into the teens, snow showers abound, lake-effect snow in Cleveland to Buffalo. Punxsutawney, of course, with snow showers in the forecast later this morning as well. Interesting to see what Phil sees out there. But notice highs only around 23 in Chicago, 41 out of New York, 66 in Atlanta. And all that cold air wants to move to the north and east.

By the time we get to Friday and Saturday, big time cooling trend in store for places like New York City. Say good-bye to the 40s.

[04:50:We bring down temps down to the lower 30s into this weekend -- guys.

(END VIDEOTAPE)

ROMANS: All right. Pedram, thank you for that.

The new secretary of defense touching down on his first trip overseas. What is James Mattis doing in South Korea? A live report from Seoul next.

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ROMANS: Newly minted defense secretary, James Mattis, landing in South Korea as he makes his first international trip overseas since assuming that post. His visit meant to listen and get current with leaders in South Korea and Japan with the North Korea threat in the area.

I want to bring in CNN's Alexandra Field live for us from Seoul.

What do the officials want General James Mattis to know? What do you think is top of the agenda here?

ALEXANDRA FIELD, CNN CORRESPONDENT: Well, I think, really, Christine, it is what they want to hear from him, which is that the U.S. commitment to these alliances will in fact hold under President Trump and they will remain strong.

[04:55:01] That was the message that President Trump delivered to South Korea's acting president this week. But it has been called into question when President Trump on the campaign trail and suggested he could pull troops out of South Korea.

However, the fact that the Defense Secretary James Mattis has decided to make the trip to South Korea is very significant in two fronts. First of all, it underscores the seriousness with which the U.S. considers the North Korea nuclear threat and it also does underscore this commitment to maintaining and strengthening the alliance with South Korea, which is determined to counter any threat from North Korea.

The secretary arrived here. He did meet with the acting president. He said that the U.S. stands shoulder to shoulder with South Korea. He is also here to say he and his counterparts are here to move forward with the deployment of THAAD. That is the U.S. missile defense system which is designed to intercept a missile and could be capable of averting a North Korea nuclear attack.

The installation of that system has raised serious concerns for others in the region, including Russia and China, who has said that U.S. missile defense system could contain or box them in here. But the secretary from South Korea has been very clear that the purpose of the system is to protect South Korea and defend against those North Korean threats, Christine.

ROMANS: All right. Alexandra Field for us in Seoul this morning, thanks for that.

MARQUEZ: President Trump paying respects to the first U.S. service member killed on is watch. The president went to Dover Air Force Base to witness the dignified transfer ceremony for Chief Petty Officer William "Ryan" Owens. The Navy SEAL was married and a father of three. He was killed in a firefight during a U.S.-led in Yemen over the weekend.

(BEGIN VIDEO CLIP)

TRUMP: It was something very sad, very beautiful. Ryan, a great man.

(END VIDEO CLIP)

MARQUEZ: And we're learning new details about the raid that killed the Navy SEAL. The group was detected upon approach, setting off an intense gun battle which killed three senior al Qaeda leaders. CNN has learned the U.S. team also called in an air strike which likely led to civilian casualties.

ROMANS: All right, 4:57 in the East. Let's get a check on CNN Money Stream this morning.

Apple shareholders are pretty happy this morning. The stock is the highest in 18 months. Boffo sales of the new iPhone 7 launched the stock up 6 percent yesterday. Now, analysts are raising their price targets. Apple, by far, the best performer on the Dow this year, up 11 percent.

But there is caution in global market stocks this morning. Dow futures are down. They're down slightly. Global markets are mixed. Gold prices are still rising, have been for a few days. That is sort of a sign of unease overall, that rushing to safety.

Playing into the gloom this morning, Chairwoman Janet Yellen and the Federal Reserve giving zero clues on timing for the next rate hike. The Fed holding rates steady after its two-day meeting yesterday. It says the U.S. economy is doing well, but we'll need to see more positive economic data before hiking rates again.

The Feds still expect three rate increases this year. Investors are putting their money on late spring or early summer for the next move. Some of the president's policies could push the Fed to hike faster if there's, for example, infrastructure spending or maybe border taxes. Those could lead to higher prices, which could mean higher rates.

All right. Facebook nearing a milestone -- 2 billion members. There are 1.86 billion monthly active users at the end of the year, up sharply from a year ago. Facebook is making money on everyone of those users, about 20 bucks a piece in the fourth quarter. That pushed sales up 50 percent. Look at that -- $8.8 billion.

It may have to put some of that cash aside, though. Facebook owned virtual reality company Oculus lost $500 million lawsuit last night. A jury found Oculus guilty of copyright infringement and violating a non-disclosure agreement, but said it did not steal company secrets from a game development firm as the suit claimed. Oculus plans to appeal.

Apple shareholders though overall are having a good day. Good morning.

MARQUEZ: It sounds like a pretty good day for Apple.

EARLY START continues now.

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ROMANS: President Trump losing his patience in the conversation with the Australia's leader. What set him off and how much of this will fall on Trump's newly sworn in secretary of state?

MARQUEZ: The White House says Tehran is now on notice in the wake of a missile test. We are live with the latest on the growing feud.

ROMANS: And the president is holding nothing back to get his Supreme Court pick confirmed. He is even telling Senate Republicans they should evoke the dreaded nuclear option if Democrats don't cooperate.

Good morning, everybody. Welcome to EARLY START. I'm Christine Romans.

MARQUEZ: Good morning to you.

I'm Miguel Marquez. It is Thursday, February 2nd. Groundhog Day, 5:00 a.m. here on the East Coast.

Breaking overnight: word of new tensions between the president and foreign leaders. Sources telling CNN about a pretty heated phone call on Saturday between President Trump and Australian Prime Minister Malcolm Turnbull. Things came to a head with the subject of refugees came up. But many of them from Muslim majority countries listed in President Trump's travel ban.