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Early Start with Rahel Solomon

China Raises Retaliatory Tariffs On U.S. Imports To 125 Percent; Trump Envoy Steve Witkoff Arrives In Russia; Experts Warn Drug Tariffs Would Raise Prices, Worsen Shortages. Aired 5-5:30a ET

Aired April 11, 2025 - 05:00   ET

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

[05:00:16]

ANNOUNCER: This is CNN breaking news.

POLO SANDOVAL, CNN ANCHOR: I'm Polo Sandoval in New York, in for Rahel Solomon. It is Friday, April 11th, 5:00 a.m. here in New York City.

We begin now with breaking news. A new shot from Beijing in the trade war with Washington that is escalating. China now raising tariffs on U.S. imports from 84 to 125 percent.

Now, it comes after the first public comments on trade from Chinese President Xi Jinping. And that's according to state media that he said that there are no winners in a tariff war and going against the world will only lead to self-isolation, the words of the Chinese president there.

Meanwhile, President Trump clarifying on Thursday that Chinese goods coming into the U.S. will actually be subject to at least a 145 percent tariff, not 125 percent as many had initially been told. Multiple officials telling CNN that the White House is waiting for China to reach out to Trump administration officials and make the first move to break the impasse. Certainly, this move just a few moments ago, may not help.

The president told reporters that there are still some kinks that he'd like to work out.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We had a big day yesterday. There will always be transition difficulty, but we had a in history. It was the biggest day in history. The markets. So very, very happy with the way the country is running. We're trying to get the world to treat us fairly.

(END VIDEO CLIP)

SANDOVAL: Well, the latest tariff revisions are resulting in more gyrations in global financial markets today. Let's get you some of the latest numbers right now, starting with U.S. futures trading on Wall Street is expected to start in just a matter of hours. Certainly, traders hoping to end the trading week on a positive note, contrary to some of these numbers that we're seeing right now with U.S. futures.

And also in a major Asia Pacific markets, Tokyo's Nikkei losing 3 percent, while in Seoul, markets there are down about half a percentage point. Hong Kong and Shanghai, they closed higher, as you see there, unlike the others.

And taking a look at early trading in European markets, you can see very similar to what we're seeing right now in the United States ahead of the opening bell.

CNN's Mike Valerio live in Seoul, South Korea, right now.

Mike, first to you, I'm curious if you could tell us what you're seeing right now there in in Asia and also this news of -- of retaliatory tariffs coming from China. Have they said, have they expected to go any higher?

MIKE VALERIO, CNN CORRESPONDENT: Well, right now, Polo, they said that they have not expected to go any higher. That's really the headline here. So, China is increasing its tariff on U.S. goods to 125 percent. But the real meat of the headline, like we were talking about a couple minutes ago, is that Beijing says it's not going to go any higher because it says to do so would be quote, unquote, a joke. But it has other tools in its toolkit to cause pain to the United States.

So, Polo, we were talking about a statement that was issued just about 35, 40 minutes ago. Here's a new one from the commerce ministry in Beijing, and it sheds new light on what exactly is Beijing's thinking here.

So, we're just going to read part of it. It's saying that it's not going to go higher than 125 percent. And this escalating numbers game, Beijing is saying, has become nothing more than a numbers game with, quote, no real economic significance. It merely further exposes the U.S. practice of weaponizing tariffs as a tool of bullying and coercion, the statement says, turning itself into a joke. And then it goes on to say, if tariffs go higher, China will not engage.

Beijing, though, Polo, is making it clear that it may take other countermeasures besides raising these tariff numbers. So what we were talking about in the last hour, you can envision Beijing no longer buying any soybeans or key agricultural products from the heartland of the United States, causing huge pain to farmers and Trump voters who are in that part of the country.

Kylie Atwood has this as a possibility in her reporting that her sources are saying was abandoned by Beijing. Imagine the Chinese Communist Party making it much harder for companies like Apple or Starbucks to operate in cities throughout China, things like that. Not selling rare earth minerals at all to the United States could also be a huge countermeasure causing pain to the United States.

But I want to listen to Kevin O'Leary. He is a huge Trump ally, Trump interlocutor, and he was telling our own Jim Sciutto late yesterday why the United States has to stand firm.

Let's listen to what he says.

(BEGIN VIDEO CLIP)

KEVIN O'LEARY, CANADIAN BUSINESSMAN & CO-HOST, "SHARK TANK": China does a lot of IP theft and has for decades has never, ever been compliant with the WTO since 2000 when they went in. And the amount of theft they do in Europe and the United States in terms of IP and then produce those products and sell them back into those markets at discounted prices because they don't have to pay for R&D. It's beyond abusive.

(END VIDEO CLIP)

VALERIO: And, Polo, you mentioned at the top of the show, this is the first time that were hearing from China's President Xi addressing the tariff war. Nowhere in his comments he was talking with Spain's prime minister in Beijing today. Nowhere did he say, yeah, I'm ready to pick up the phone and talk to the Trump White House.

It seems as though he's trying to get more allies to his cause, be it the European Union or Malaysia, Vietnam, Cambodia, neighbors in the region, Polo.

SANDOVAL: Mike Valerio in Seoul, thank you so much for all of that.

Meanwhile, there is new data that's showing that U.S. inflation has slowed dramatically in the month of March. At any other time, this would actually be a good sign.

But as CNN's Matt Egan advises, we shouldn't get too excited.

(BEGIN VIDEOTAPE)

MATT EGAN, CNN REPORTER: Yeah, this was a nice surprise on the cost of living, which of course is a major issue. Better than expected inflation report for the month of March. Unfortunately, economists are worried it's not going to last long because of the trade war.

I'll get back to that. First, let me run you through the numbers. Consumer prices, they dipped by 0.1 percent between February and March. That's the first time we've seen a monthly drop in prices since 2020. And the annual inflation rate cooled more than expected to 2.4 percent. Thats a six-month low.

So, what does this happen? Well, one factor was energy, specifically gasoline prices fell sharply. Of course, that happened for good reasons and bad reasons. Right. Part of that is about more supply of oil from the United States and notably from OPEC.

It's also because of concerns about lower demand, recession fears have caused a plunge in the price of oil, and that has driven gasoline prices down. As far as some of the other items that got cheaper, some economists that I talked to were concerned about the fact that we saw a significant drop in prices for hotels and for airfare. That speaks to a slowdown in travel and suggests that given all the uncertainty right now, some people are deciding that a staycation does not sound so bad.

One place we were hoping to see some relief, but we did not is in the grocery store aisle, specifically eggs. Weve seen wholesale egg prices come down, but that has not translated to consumers yet. Egg prices increased by another 6 percent month over month. That takes the cost of an average dozen of eggs up to $6.23. That is an all-time high.

Look, the bottom line is, outside of eggs, this was a good report, but it's a snapshot in time. It reflects prices in March, and we know the trade war has only gotten much, much worse since then.

In fact, the Budget Lab at Yale put out new estimates where they're estimating that the cost of these tariffs to the typical middle class family is going to be $3,400 per year. And so that is why some economists, they worry that this progress on the inflation front could not only stall out, but actually unwind in the coming months, all because of tariffs.

Back to you.

(END VIDEOTAPE)

SANDOVAL: And those middle and those middle class families are certainly concerned right now.

Straight ahead here on EARLY START, the U.S. is trying to reach an understanding with Russia about the American embassy in Moscow.

Next, why Secretary of State Marco Rubio says that the embassy is barely operational.

Plus, a Russian American ballerina now back on U.S. soil, reunited with her loved ones after a long flight. She's all smiles now after the Trump administration completed its second prisoner swap with Russia. Details on that swap, next.

And later, President Trump says that he plans to impose even more tariffs, this time on pharmaceuticals. More on that, coming up.

(COMMERCIAL BREAK)

SANDOVAL: Welcome back to EARLY START.

The Kremlin confirming that the top Trump administration officials Steve Witkoff has arrived in Russia.

For more now, let's go to CNN international diplomatic editor Nic Robertson joining us live from London.

Nic, curious what this trip is about. What's going to be this envoy's objective?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: You know, I think we're all pretty curious, right? Because we don't get much heads up that this is happening. Russian state media saying that Witkoff's plane or a plane that's been associated with him in the past, tracked by Flight Radar landing in St. Petersburg. The last time he was in Moscow or in Russia, at least he did meet with President Putin. But Dmitry Peskov, Putin's spokesperson, is saying at the moment that he cannot confirm that there will be a meeting with President Putin.

But it's very likely to try to push forward with what Witkoff was there, trying to do last time, which was to get Russia to agree to an unconditional ceasefire in the same way that Ukraine has. Ukraine arrived at that moment under huge U.S. pressure, under pressure from president Trump to agree a 30-day ceasefire that would allow the space for real ceasefire talks about the details of the front lines, the complexities -- complexities of it to get, you know, to get handled, if you will, to get into the nitty-gritty of what a ceasefire might really look like.

[05:15:14]

And it appears that while Witkoff and Trump may have made progress with Ukraine, Russia is recalcitrant. In fact, we've heard over the beginning of this week, President Trump, frustrated with -- with Russia over the number of missile strikes on Ukraine, particularly killing, the number of civilians that they've killed this month, the number going up by 50 percent over last month.

But Witkoff, very interestingly, a couple of weeks after his last meeting with President Putin, gave an interview with Tucker -- to Tucker Carlson that was quite revealing of his negotiations, conversations with President Putin. He said President Putin has huge respect for President Trump.

Okay. That's -- that's president Putin's word on that and Witkoff's interpretation of it. But he seems to take that word at face value.

He also spoke about how there had been agreement over a ceasefire for energy infrastructure, I think to this moment, that interview was given several weeks ago to this moment. There have been multiple strikes by Russia and actually by Ukraine as well on Russia and Ukrainian energy infrastructure.

And even at this moment, there's actually confusion because U.S. interpreted this as energy and infrastructure. And Russia appear to interpret this as energy infrastructure, you know, two entirely different things, essentially being discussed.

And I think another takeaway from that Tucker Carlson interview by Witkoff was the way that he was, as many people would see it sort of buying into the Russian line referring it appeared to the situation of Ukrainian troops, according to president Putin, being surrounded in that Russian area of Kursk, which of course, over time transpired not to be correct. The Ukrainians at the time were saying it isn't correct, that they've been able to extract their troops from that area.

And this was a narrative created by Putin. But on the face of it, Witkoff appeared to be buying into Putin's narrative. So, Witkoff it appears back on the ground in Russia to try to push ahead and try to get Russia to a less conditional place on the ceasefire, because Russia is pushing for sanctions to be lifted from banking.

It suggested there couldn't be an international security force of any description or of a very limited description on the ground boots on the ground in Ukraine after a ceasefire, and also has suggested that actually there should be some sort of interim Ukrainian government not headed by President Zelenskyy, by some sort of international oversight, all of which go against the parameters of what was discussed about a ceasefire that would lead to, you know, the full sovereignty of Ukraine. Well, you don't secede your government if you have full sovereignty and you can't be told which boots you can have on the ground if you have full sovereignty.

So, you know, Witkoff back, engaging in what many analysts and experts said will be very difficult negotiations with the Russians because they're experts in negotiations, experts in stringing these talks out. And here he is many weeks later, still trying to get this unconditional 30-day ceasefire for proper full talks out of the Russians.

SANDOVAL: We all remember that Witkoff's deployment has proved to be instrumental in other conflicts in securing a ceasefire, obviously, referring to the Middle East. But as you mentioned, the Russians play by a very different set of rules. So, we'll see how -- how this visit goes.

Nick, thank you so much for -- for your -- for your expertise. Appreciate it.

Meanwhile, Russian born American woman convicted of treason in her homeland, she is back in the U.S. after being released in a prisoner exchange with Moscow. Ksenia Karelina, she arrived at Joint Base Andrews near Washington, D.C., late Thursday to hugs and flowers, her family waiting for her on the tarmac, as you can imagine.

She'd been serving a 12-year prison sentence in a Russian prison for making a small donation to a charity that supporting Ukraine.

CNN's Matthew Chance has the details on this reunion and the exchange.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN CHIEF GLOBAL AFFAIRS CORRESPONDENT (voice-over): These are the first images of Ksenia Karelina being set free and handed over to U.S. officials in Abu Dhabi to be flown home.

The dual U.S.-Russian citizen, a beautician and amateur ballerina from L.A., was serving 12 years in a Russian penal colony for treason after donating just over $50 to a charity supporting Ukraine.

Her nightmare is now ended with the latest U.S.-Russia prisoner swap.

[05:20:02]

She was wrongfully detained by Russia for over a year, the U.S. secretary of state, Marco Rubio, wrote on X. And President Trump secured her release, he added. Back in Russia, the swap was breaking news, too, another sign of the warming relations between the Kremlin and the Trump administration.

One Russian source tells CNN the deal was advanced last week, with a key Kremlin envoy, Kirill Dmitriev, playing an important role during his visit to Washington.

The source tells CNN that an earlier prisoner exchange involving U.S. teacher Marc Fogel in February, quote, created additional trust and enhanced cooperation in prisoner exchanges with President Trump's team.

And this is who the Kremlin got in exchange: Arthur Petrov on the right, a dual Russian-German citizen being held in the U.S. for allegedly smuggling banned microelectronics to Russia that could be used to build weapons. The FBI said his arrest in 2023 showed it was resolute in its commitment to stopping Russia from rearming its military with U.S. technology.

But the war in Ukraine continues to rage. And while the Kremlin says talks with the United States are now multi-tracked, focusing on diplomatic normalization, economic deals, and prisoner swaps, the long-awaited ceasefire demanded by President Trump has yet to be agreed.

Matthew Chance, CNN, London.

(END VIDEOTAPE)

SANDOVAL: U.S. officials had what's been described as a constructive meeting with Russian officials in the second round of talks over embassy issues. Thats all according to the U.S. State Department. The two sides met in Istanbul on Thursday. What they're basically trying to do is reach an agreement on the U.S. embassy in Moscow, which Secretary of State Marco Rubio says barely operates because it's been denied access to the banking system. There have also been prohibited from employing local staff in Russia. The U.S. embassy had to lay off nearly 200 local employees in 2021, due to Moscow's restrictions.

Well, for the first time, Chinas president, speaking publicly about the trade war with the U.S., what he has to say about tariffs just ahead.

(COMMERCIAL BREAK)

[05:26:57]

SANDOVAL: Welcome back to EARLY START where were watching and following breaking news out of Beijing, where China has announced that it has raised retaliatory tariffs on U.S. imports from 84 percent to 125 percent.

A reminder this comes as China's President Xi, speaks out publicly for the first time against the measures, according to state media. There, he says that there are no winners in a tariff war and that going against the world will only lead to self-isolation. So just after this announcement, let's see how some of the financial

markets are currently reacting. You see U.S. futures right now despite some of these pretty rough numbers. Wall Street hoping for at least a positive end to this week. Thats been dominated by some major instability.

In the major Asia-pacific markets, Tokyo's Nikkei losing 3 percent. While you see also the South Korean market there ending with about half a percentage point down some positive numbers though there on the board as well.

Meanwhile, European markets really not that much better as trading continues in Europe. So, certainly, going to be one to watch to see if we can if some of these markets will take another beating.

Well, President Trump says that major tariffs on pharmaceutical imports are coming soon, experts warning that they are likely to drive up prices and worsen shortages of some of these drugs.

CNN's Meg Tirrell with more.

(BEGIN VIDEOTAPE)

MEG TIRRELL, CNN MEDICAL CORRESPONDENT: Well, pharmaceutical tariffs were left out of that original round of tariffs that President Trump announced on what he called Liberation Day, April 2nd.

But he did talk in that speech about why he has pharmaceutical tariffs in his sights.

Take a listen.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The United States can no longer produce enough antibiotics to treat our sick. We have a tremendous problem. We have to go to foreign countries to treat our sick. If anything ever happened from a war standpoint, we wouldn't be able to do it.

TIRRELL: Now, essentially, universally, experts agree that this is a problem that needs to be fixed. But they warned that tariffs are unfortunately likely to make this problem worse before they bring any manufacturing back to the United States. If they do that at all, and it really comes down to the fact that most antibiotics are generic medicines. These are older medicines that sell sometimes for pennies per dose, which is really great for their accessibility, but it creates a very fragile ecosystem around creating them.

And in fact, 92 percent of prescriptions dispensed in the U.S. are for generic drugs.

Now, here's how experts say tariffs could cause more drug shortages. Generic medicines have very low profit margins, so they're sold for not much more than it costs to make them. But there are also limits on how much generic drugmakers can raise the price of generic drugs, both because of group purchasing organization contracts that typically are locked in for a few years. Also, because of. Laws that exist that limit their ability to raise drug prices faster than the price of inflation.

So if the price of the inputs, the ingredients that go into these drugs starts to rise, but you can't raise the price commensurately that could actually make it unprofitable to manufacture these generic medicines, and that could cause some of these manufacturers, experts tell us to just decide to stop making the drug or providing it for the U.S. market.

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