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Early Start with Rahel Solomon

China Says It's Considering U.S. Trade Talk Proposals; Trump Ousts National Security Adviser; Rubio: U.S. Wants A "Breakthrough" On Russia-Ukraine Peace Soon Or Trump May Reassess U.S. Involvement In The Effort. Aired 5-5:30a ET

Aired May 02, 2025 - 05:00   ET

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

[05:00:22]

RAHEL SOLOMON, CNN ANCHOR: Good morning and welcome to our viewers joining us from the U.S. and all around the world. I'm Rahel Solomon. It is Friday, May 2nd, 5:00 a.m. here in New York.

And straight ahead on EARLY START.

(BEIN VIDEO CLIP)

JOHN VAUSE, CNN ANCHOR: China on Friday hints at a slightly softer tone of holding trade talks with the United States.

KRISTIE LU STOUT, CNN CORRESPONDENT: A lot of anger is still out there and directed mainly at Donald Trump.

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: President Trump sending his national security advisor, Mike Waltz, to the United Nations.

JOHN BOLTON, FORMER U.S. AMBASSADOR TO THE U.N.: There are critical national security issues boiling all around the world.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Now is the time to work harder than you have ever worked before.

UNIDENTIFIED FEMALE: I've never been more convinced that in the 2025 job market, the more job applications you submit, the less likely you are to get one.

(END VIDEO CLIP)

(MUSIC)

SOLOMON: This morning, there is a new development in President Trump's tariff war. China now says that it's considering a U.S. proposal to hold trade talks, as Beijing appears to be softening its tone.

Let's get straight to CNN's Kristie Lu Stout live for us in Hong Kong.

Kristie, great to see you this morning. This is the first sign, at least from the Beijing side of things that

talks about trade talks may begin. I mean, how significant is this?

KRISTIE LU STOUT, CNN CORRESPONDENT: You know, Rahel, it's subtle, but it is significant. Earlier today, we heard from the ministry of commerce here in China saying that it is, quote, evaluating the possibility of trade talks with the United States. And this would mark a major shift in tone, and it could pave the way to talks, to trade negotiations over tariffs.

Now, this is how it all came down. Earlier today, we heard through an announcement from the spokesperson of the ministry of commerce saying that in emphasizing that it's the Americans who have been reaching out, but while also adding this, let's bring up the statement for you saying this, quote, the U.S. has recently sent messages to China through relevant parties hoping to start talks with China. China is currently evaluating this.

Look, China has been standing firm as both China and the U.S. these two major economic powers have been locking horns over tariffs launched by Donald Trump. It was Donald Trump who launched those tariffs at an eye watering level of 145 percent against China and China, retaliating with an unprecedented level of 125 percent tariffs on U.S. goods.

In the last week, we've heard the U.S. President Donald Trump, repeatedly say that he and his administration are talking with Chinese officials. Chinese officials have disputed that. And then we heard something really interesting from Marco Rubio on Thursday. The U.S. secretary of state, speaking to Fox News, pointing out in his words, the Chinese are the ones reaching out to the U.S.

Watch this.

(BEGIN VIDEO CLIP)

MARCO RUBIO, SECRETARY OF STATE: That's what they want. I mean, the Chinese are reaching out. They want to meet. They want to talk. We've got people involved in that. Obviously, our treasury secretary, Scott Bessent, is involved in those efforts, and their talks will come up soon.

(END VIDEO CLIP)

STOUT: Now, putting aside which side reached out to which side first, there have been signs of de-escalation in this trade war between U.S. and China, as we've been reporting here on CNN. Import agencies tell CNN that China has been rolling back retaliatory tariffs on some U.S. made semiconductors. And this week we've heard from Chinese suppliers telling us that major American retailers like Walmart, like Target, are resuming shipments. And now we have this announcement from the ministry of commerce.

This subtle but significant shift in tone, opening the door for trade talks with the United States. And if we could take a look at how Asian markets have reacted. Asian investors have been cheering the news. If you look at all the major indices this day, with the exception of

the shanghai composite ending up in positive territory.

Back to you.

SOLOMON: Yeah, I think this is the news that investors around the world have been sort of holding their breath and waiting for.

Kristie Lu Stout, live for us there in Hong Kong as we continue to wait for who actually started the conversation, but at least have this confirmation that at least it seems like talks about talks will continue.

Kristie Lu, thank you.

All right. Let's take a look now and see where European markets are. After Chinas announcement, European markets are green across the board. European investors apparently like it too. You have the CAC40 in Paris up 1.3 percent, the Dax in Germany up 1.3 percent, FTSE up between 6/10 of a percent and 8/10 of a percent.

Taking a look at how U.S. futures are holding up at 5:05 on a Friday morning, it's still early. Nasdaq looks fractionally lower, Dow and S&P up between 2/10 of a percent. And let's call it one third of a percent for the Dow.

And word of potential trade talks between the U.S. and China comes as a massive tariff on millions of American purchases has now gone into effect.

[05:05:03]

The de minimis exemption allowed goods worth under $800 to come into the U.S. duty free, and it really reshaped the way Americans shopped. The loophole allowed ultra-low cost Chinese E-commerce sites like Shein and Temu to send everything from yarn to patio furniture to U.S. homes. But the loophole expired hours ago, and those items will now face tariffs of up to 145 percent.

Let's get to Michael Baker, who joins us now from Boston, Massachusetts. He is head of consumer research and the managing -- managing director for D.A. Davidson.

Great to have you this morning, sir.

A lot of focus this week about the potential supply chain issues that could come from this. President Trump himself earlier saying that children may go from having -- I think he said 30 dolls to two dolls.

You follow this space closer than most. What are you hearing from the retailers about how they're planning to absorb these costs?

MICHAEL BAKER, HEAD OF CONSUMER RESEARCH & MANAGING DIRECTOR, D.A. DAVIDSON: Yeah, there are a number of ways to mitigate the higher costs. You can push back on vendors. You can try to raise prices. But -- but one thing that we think a lot of retailers will do is start

to cut back on their deliveries from China, in particular, try to move to other countries of origin.

But if it's not resolved soon, there is likely to be less product on the shelves. We've already heard from some retailers that they have slowed down some purchasing in deciding what they want to bring in for the back to school and the holiday period.

SOLOMON: And what about the potential for job cuts? I'm curious if you expect to see any of this. Obviously, it's early, but if you -- if you're going to be looking at the job report later this morning in a few hours and what you might be watching there.

BAKER: Well, we will be looking at the job report and it will be too early I think in the job report that comes out this morning for April labor to see any kind of impact.

But if this continues, we do think there'll be some impact for -- for a couple of reasons. One is, as I said, retailers are going to look for ways to mitigate the higher costs related to tariffs. And one way to do that is to cut back on your expenses, i.e., labor.

Also, if you have less product on the shelf, you need less labor to -- to move around that -- that product.

And, actually, a third thing that could happen is if retail sales do slow because of demand destruction associated with the higher cost inflation, that might come with that when retailers are seeing lower sales growth, they'll just naturally cut back on some of their costs, including, again, labor.

SOLOMON: And then talk to me a little bit about how much the size of the retailer matters in this environment, and how much differently the big box retailers will be able to absorb these tariffs and absorb this environment of uncertainty compared to the smaller retailers, compared to the mom and shop (ph) retailers.

BAKER: Right. Well, we always think scale is very important in retail. It's one of the big key advantages and probably never more so than right now, the bigger you are.

For example, Walmart, they, first of all, have the ability to push back a little bit more on their vendors. Now, that doesn't mean they can push all the costs back on their vendors. And we do think the retailer will need to absorb some. But the bigger you are, the more able you are to spread that over other costs or other revenues that you're able to find some offsets.

In fact, Walmart interestingly signaled that they might even try to keep prices lower and lower some prices because they would be able to absorb it a little bit better given their scale, and that will allow them to take market share in this environment because they are just better off than most retailers.

SOLOMON: Yeah, Michael, you know, I had a guest on earlier this week who tracks freight shipments, and he said that we'll likely see the impact on store shelves gradually, but really by back-to-school shopping season. Let's say you're at a cocktail party. Someone says to you, Michael, how can I prepare? Should I be shopping for back to school now? Or even thinking about the holiday season already?

Which sounds really crazy to say in May, but you're already seeing those warnings that you should be thinking about Christmas.

BAKER: Well, a lot of retailers did bring in goods early to try to get in front of the tariffs. So, there is probably product that will be on the shelves earlier than in the past. And then as we get closer to the holidays, there'll be less product.

So, it's probably not a bad idea if there's specific product that, that, that you're looking for. We don't think the shelves will be empty. There'll be product that you'll be able to find, but you might need -- a shopper might need to be a little bit more choiceful, and there might be a little bit less selection.

But with product likely coming in earlier than in the past, it's probably not a bad idea to get -- to get ahead of that.

SOLOMON: Yeah. And so, when you say you're not expecting empty store shelves, would you say that the warnings that we've seen about COVID- like shortages are -- are drastic or extreme, and not what you're expecting?

BAKER: Well, so, so we don't think the shelves will be empty. I think there could be less products. There could be some out of stocks.

But -- but during the early days of COVID -- COVID, I remember having to run around and look for toilet paper because you were afraid the stores weren't going to have that. I don't think we're going to get to that kind of extreme level. No.

SOLOMON: Yeah. Okay.

Michael Baker, appreciate you being here this morning.

[05:10:00]

Thank you.

BAKER: Sure.

SOLOMON: And changes at the highest level of the Trump administration are giving us a sense of who's in and who's out when it comes to access to the president.

More now from CNN's Jeff Zeleny at the White House.

(BEGIN VIDEOTAPE)

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: In one of the first big staff shakeups of this new Trump administration, President Trump sending his national security advisor, Mike Waltz, to the United Nations and sending Marco Rubio, the secretary of state, into the West Wing to be the temporary national security advisor.

This has been long in the works. Mike Waltz, who, of course, initiated the one of the biggest scandals of this administration with the group chat on signal about those war plans in Yemen a couple of months ago, the president finally decided that it was time to send him away.

Now, this was a decision that could have been reached quite a while ago, but we are told that the president and the White House did not want to essentially give the satisfaction to "The Atlantic Magazine" or other reporters who had written skeptically about this.

But Mike Waltz will be elevated, if you will. But it's a Senate confirmed position to be the ambassador to the United Nations. But for the president, it is not a position that he is that interested in. He has never thought very highly of the U.N., to say the least. So, there's no doubt that Marco Rubio, a onetime rival to Donald Trump, now, was one of his closest advisers. He'll be working just steps away from the Oval Office, as well as being secretary of state.

But the bottom line to all of this is in this big shakeup of this administration, the president clearly wanted to keep Mike Waltz on the line, if you will, by giving him this other position. He well remembers the four national security advisers from his first administration. Two of them wrote very harsh books about the president.

So, the president does not want that narrative to set in. The also thing the administration, one administration official telling us the president was eager to change the conversation about the economy, to be talking about this.

Jeff Zeleny, CNN, the White House.

(END VIDEOTAPE)

SOLOMON: And amid the turmoil at the top, Vice President J.D. Vance says that this is not a demotion for Waltz.

(BEGIN VIDEO CLIP)

J.D. VANCE, VICE PRESIDENT OF THE UNITED STATES: So he wasn't let go. He is being made ambassador to the United Nations, which, of course, is a Senate-confirmed position. I think he can make a good argument that its promotion.

The media wants to frame this as a firing. Donald Trump has fired a lot of people. He doesn't give them Senate confirmed appointments afterwards. What he thinks is that Mike Waltz is going to better serve the administration. Most importantly, the American people in that role.

(END VIDEO CLIP)

SOLOMON: John Bolton, meantime, has a unique perspective on reassigning Waltz from national security advisor to U.N. ambassador, because he's done both jobs. And here's what he told CNN about the shakeup.

(BEGIN VIDEO CLIP)

BOLTON: Yet again in the Trump presidency, we have a circumstance where there are critical national security issues, boiling all around the world. And his team is in disarray again.

Essentially, what we saw in four years in the first term is that he is totally transactional, ad hoc, episodic and decisions are made almost unrelated to any ongoing policy. Thats bad in any of the areas of the president's responsibility and domestic affairs. It is critically wrong in national security affairs. And yet, we are seeing in real time exactly what happens when you have a president like Donald Trump.

(END VIDEO CLIP)

SOLOMON: Meanwhile, President Trump has new enemies in his sight. National Public Radio and the Public Broadcasting Service. Just a few hours ago came word that he has signed an executive order to cut federal funding for both of them. The government spends more than $500 million a year on public media outlets. Trump's executive order calls government funding on news media outdated.

It adds that neither NPR or PBS, quote, presents a fair, accurate or unbiased portrayal of current events, end quote. The loss of federal funding could force some local stations off the air.

All right, still ahead for us, Russia conducts new strikes in Ukraine as Vladimir Putin reportedly lowers his expectations from the war. We'll explain when we return.

Plus, why the next round of nuclear talks between the U.S. and Iran appear to be on hold.

And later this hour, the U.S. jobs report for April is due out later this morning. And president Trump is telling new graduates that now is the time to work harder than ever. Details from his commencement address still to come.

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SOLOMON: Welcome back.

U.S. Secretary of State Marco Rubio is reiterating that the White House wants to break through soon in its peace effort between Russia and Ukraine. Now, if there isn't one, he says that President Trump may reassess the U.S. involvement in the push for peace. He spoke hours after Russia struck the city of Zaporizhzhia, reportedly killing one person and leaving eight others wounded. Ukraine says that one man was trapped under rubble after the strikes, and emergency crews were working to reach him.

Meanwhile, Ukraine is denying accusations that it targeted civilians in the Russian occupied part of its Kherson region. Russia claims that seven people were killed in a drone strike on a market southeast of the city on Thursday. Ukraine says that it did not strike the market. It also says that the attack only hit military personnel who were hiding among civilians.

And Ukrainian President Zelenskyy says that Ukraine's new minerals deal with the U.S. is the result of this meeting with Donald Trump at the Vatican. The two met briefly on Saturday ahead of the funeral for Pope Francis. Zelenskyy suggests that more results could be coming.

Nick Paton Walsh has more.

(BEGIN VIDEOTAPE)

NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT: Be in no doubt. This is a landmark agreement, but perhaps not because of the immediate effect it's going to have on American finances.

[05:20:05]

They're not going to suddenly start seeing billions from Ukraine in the weeks and months ahead.

But I think more for how it shows that Kyiv and Washington's relationship is being salvaged. It's functional. It might even indeed be improving the document. It does seem pretty favorable to Ukraine. It creates a fund which benefits the United States and Ukraine from revenues from Ukraine's natural resources. A wide spectrum of resources, not just rare earth minerals.

And it has two key things that I'm sure will be particularly to Kyiv's liking. One is a phrase that the United States has clearly signed onto that says its full. It talks about the full scale devastation caused by Russia's invasion. Thats remarkably unambiguous condemnation of Moscow's conduct. We've heard the Trump administration often talk in slightly more pro-Russian terms at times about the origins of this conflict.

Also, this particular document establishes some kind of payment mechanism in the event that the United States agrees to sell arms to Ukraine in the future. Now, we have not had clarity from Trump administration. If they are considering continuing to arm Ukraine, but they have here worked out a mechanism for Ukraine paying them. If they did, and I'm sure Moscow will take specific note of that.

This document does have some teeth. It does have technical elements to it, certainly. And there are further technical documents that may well put some more onerous terms on Kyiv. But Ukraine has been able to sell this as a success to some degree. I think more simply because, as President Volodymyr Zelenskyy said, it's a sign of the positive tone he felt his meeting in the Vatican with president Trump had during the pope's funeral.

Well, this may also leave Russia potentially nervous that what they think may be has been their rapprochement with the Trump administration is perhaps coming unstuck, given they're able to form an agreement like this long term and strategic as it is with Ukraine, particularly given the turmoil around the national security adviser as well. This is a good piece of news, I think, for Ukraine and its allies, and it comes to an intense time of focus as to whether peace really can move forwards.

The Trump administration, unsure, saying repeatedly how its losing patience. And Moscow will, of course, look at this as a sign of Kyiv and Washington becoming closer as Moscow continues to reject the proposal for an unconditional ceasefire from the United States and Ukraine. So, a symbolic agreement, certainly, perhaps a landmark one as well, but not one that immediately will have effect. It's likely that different administrations will be in Kyiv and Washington when the terms of this are in fact implemented in perhaps a peacetime Ukraine.

And the investments put into infrastructure to start yielding those kind of revenues that they need. But certainly, a step in the direction that really Ukraine was forced to take. Without this, there would have been a seismic rupture with its relationship with the White House. And instead, we have a day of very positive news.

Nick Paton Walsh, CNN, London.

(END VIDEOTAPE)

SOLOMON: Multiple sources tell CNN that new intelligence suggests that Vladimir Putin may have shifted his short-term priorities in Ukraine. Until recently, analysts believe that Putin thought he might have enough momentum to seize all of the country. But now it appears that Putin wants to focus on holding the territory that he already controls. That's about 20 percent of the total. They also say that he wants to improve relations with the U.S. to help Russia's struggling economy, though senior U.S. officials say that even if Putin signs a peace deal, he may try to resume the war later.

Iran says that nuclear negotiations with the U.S., tentatively scheduled for Saturday, have been postponed for, quote, logistical and technical reasons, but didn't offer any additional details. The U.S. secretary of state says that any potential nuclear deal should involve inspectors at Iran's military sites. Marco Rubio telling Fox News that Iran shouldn't be afraid to let them in. He called it the best opportunity Iran will get, adding that Iran has a path forward if it agrees not to enrich uranium.

Meanwhile, President Trump has now threatened to slap sanctions on those who buy Iran's oil, writing, quote, all purchases of Iranian oil or petrochemical products must stop now, and any country or person who buys those products from Iran won't get to do business with the U.S. in any shape, way or form.

Now, that appears to be a veiled swipe at China, which is a major buyer of Iranian crude oil. The sanctions would be separate from the 145 percent tariffs that Trump has already placed on China during the trade war.

All right. Now to a major upset in the U.K., the right-wing reform party of Nigel Farage picked up another seat in parliament, winning by just a handful of votes in a recount. The results came in a northwestern district that went solidly labor in the last general election. Reform also scooped up a mayoral position and hopes to take over hundreds of seats on local councils.

[05:25:02]

Those votes are being counted today.

Farage declaring on social media that the labor and conservative parties are fearful of the results and claim that reform is now Britain's true opposition party. It now has five of 650 seats in the House of Commons.

Still ahead for us, President Trump facing another legal setback. When we return, what a judge is now saying about the presidents use of a wartime law to deport migrants. We'll be right back.

(COMMERCIAL BREAK)

SOLOMON: Welcome back.

The U.S. Defense Department says that it's creating a second military zone along the southern border. It's part of President Trump's push to stop illegal migrant crossings. The new area is attached to the Army's.