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U.S. Tariffs In Effect Against China, China Launches Retaliation; Pruitt Resigns in the Midst of 14 Ethics Investigations. Aired 7-7:30a ET

Aired July 06, 2018 - 07:00   ET

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

ANNOUNCER: This is CNN breaking news.

[06:59:50] JOHN BERMAN, CNN ANCHOR: Good morning, welcome to your NEW DAY. The breaking news: the trade war, it is on. President Trump launched the first salvo overnight, imposing tariffs on $34 billion worth of Chinese goods. China hit back with its own tariffs on U.S. goods, accusing America of starting the biggest trade war in history. U.S. farmers and manufacturers on high alert this morning, worried this hits them right in their wallets. So what are the consequences here? Could this trigger a recession?

ALISYN CAMEROTA, CNN ANCHOR: Meanwhile, the poster boy of scandal, EPA chief Scott Pruitt is out. President Trump says Pruitt made the decision to leave, but there are reports that it was a forced resignation. Now a former coal lobbyist takes over.

And the secretary of Health and Human Services still does not know the number of children they separated from their parents at the border. If they don't know the number, how can they reunite them?

Let's begin our coverage with CNN's chief business correspondent, our trade war correspondent, Christine Romans. She has all of the breaking details on what's happened since midnight -- Christine.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Game on here. Trade war between the United States and China is here; it's real. At the stroke of midnight, the U.S. hit China with tariffs on $34 billion worth of goods. China immediately responded with its revenge tariffs of equal value, accusing the U.S. of launching the largest trade war in economic history and calling America "trade bullies."

China is threatening high value U.S. exports: cars, crude oil, cash crops like soybeans. The farm goods here are strategic. They hit states and, really, county by county, places that voted for President Trump.

The U.S. tariffs target high-tech industries China vows to dominate: aerospace, robotics, manufacturing, autos. Now American companies will pay these tariffs when they import the goods. They can either absorb that cost or they can pass it along to consumers. And so far the U.S. has avoided slapping tariffs on things consumers buy, like shoes and cell phones. The White House really trying to minimize that direct outrage from consumers. But the U.S. won't be able to avoid those goods if President Trump follows through on this threat he made to hit $500 billion worth of Chinese goods. Five hundred billion. That's what he told reporters yesterday. That's roughly the entire amount the U.S. imported from China last year.

Now, consumers would be losers if this really continues to escalate, right? Also, domestic manufacturers, they pay to import foreign metals. That makes the cost of their products more expensive. Pork producers and soybean growers both affected by retaliatory tariffs here. In fact, 100 soybean growers, guys, head to Washington next week. They want to explain how these trade actions, the president's trade policy, is hurting their livelihoods.

The only clear winner I can see so far: the U.S. steel industry. We've seen a couple of furnaces fire up again in Granite City, Illinois, because of demand for domestic steel, you guys.

BERMAN: Of course, that industry, Romans, smaller than the manufacturing industry --

ROMANS: That's right.

BERMAN: -- which is impacted downstream. Romans, thanks so much.

Joining us now, CNN political commentator and "Washington Post" columnist Catherine Rampell, and CNN senior economics analyst Stephen Moore.

Catherine, I want to start with you. You say the question isn't whether this will hurt the U.S. economy. The question is how much?

CATHERINE RAMPELL, CNN POLITICAL COMMENTATOR: Exactly. Look, these tariffs that we are imposing, which affect, as you mentioned, our own manufacturing industry, lots of downstream firms, and there's, like, an order magnitude of more companies that depend on steel and semi- conductors and all the other things we put tariffs on --

BERMAN: All the parts and pieces.

RAMPELL: Right, exactly. They're going to be hurt from this, as well as the companies that are facing retaliatory tariffs.

The only question is how big the magnitude of that pain is. It's going to be a drag on the economy. I don't think we're approaching recession territory yet, but if things do escalate, it could get very, very bad.

CAMEROTA: Stephen, you're on the record as never being a fan of tariffs. How are you feeling about this move?

STEPHEN MOORE, CNN SENIOR ECONOMICS ANALYST: Well, look, this is good versus evil. You know, the United States -- you put up those numbers on your screen that we buy about $500 billion worth of their stuff. They're only buying about $150 billion of our stuff. So it's laughable that they say we're launching a trade war. They have not opened up their markets to U.S. goods.

I talk to CEOs all the time who say it's almost impossible to penetrate the China market. It's been -- it is not a level playing field. It is not a fair situation.

CAMEROTA: I get it. So now you like tariffs. I just want to be clear on that.

MOORE: No, what I'm saying, this is something that Trump ran on, and this is something I'm in full agreement with him on.

RAMPELL: You are? That's new.

MOORE: Yes. No, we can't --

RAMPELL: Tariffs are taxes.

MOORE: Let me be clear about this. I am not in favor of the auto import tariffs. I'm not in favor of the steel tariffs, but I'm very much, I think, with the American people of getting really, really tough with China.

And the only question is why is this just happening now? This should have happened 20, 15, ten years ago.

RAMPELL: Look, we have been tough with China.

MOORE: Where was Bush, where was Obama when China --?

RAMPELL: Where was Obama? Where was Obama? I'll tell you where Obama was.

The strategy for getting tough with China was banding together with our allies around the world who have been similarly harmed by China. Because you're right, China has been misbehaving. Not on the deficit. That doesn't really matter so much. That's affected by lots of other factors.

It's about intellectual property theft. Right? The way to get tough with China was banding together with all of the other countries that were also having their I.P. stolen. I'm talking about Japan, Canada, Mexico. Basically, all of the signatories to what was called the Transpacific Partnership.

[07:05:11] It was getting together and having a multilateral coalition of the willing, a term that Larry Kudlow has since used as what the strategy we should be pursuing is, and Trump pulled us out of it, like on his third day of office. That was the way to get tough with China, not by throwing tariffs willy-nilly that affect our own companies and consumers.

MOORE: Catherine, we tried that approach for many, many years. It hasn't worked.

RAMPELL: No, we didn't. We pulled out of TPP. We pulled out of TPP. You were in support of TPP just a few years ago. MOORE: Look, I sort of -- look, I don't disagree with you on TPP. I

think it probably, on balance, would have been a valuable thing to do. I don't think it would have stopped China from its bad behavior.

Now, look, this question about whether there's going to be a grade war, you know, I hope not. China is going to have to stand down here. They're going to have to make real concessions.

RAMPELL: But they're not.

MOORE: If they're not, then they're -- then they're in big trouble, because --

RAMPELL: They're retaliating.

MOORE: I know, but you know what?

RAMPELL: No one wins a trade war.

MOORE: That is true, but it is also true that, look, if we can't trade with China, we sneeze. If they can't trade with us, they catch pneumonia. Their economy cannot grow --

RAMPELL: No.

MOORE: -- without access to the U.S. market.

RAMPELL: That's false. If you look at the tariffs -- if you look --

MOORE: They sell us $500 billion --

RAMPELL: If you look at the tariffs that we have imposed on China --

MOORE: Right.

RAMPELL: -- they are more likely to affect American multinational companies.

MOORE: How is that possible?

RAMPELL: Look at the list.

MOORE: They're selling -- Catherine, look at how much -- they're selling us $500 billion worth of stuff.

RAMPELL: Yes. We haven't imposed $500 billion worth of stuff, thankfully.

MOORE: But they're only buying $150 billion from us. So they have much more to lose here. The only -- look, we have nurtured their --

RAMPELL: They are -- they are imposing much more strategically targeted tariffs --

MOORE: Catherine, we have nurtured their economy for 25 years.

RAMPELL: -- on Trump country, on places that will be much more politically sensitive to Republicans.

MOORE: Well, here's the -- here's the other issue. You know, you guys asked the question whether this could cause a recession. Look, we're going to get, by my estimate, and I think I'm going to be pretty close, we have 4.5 percent growth for the second quarter. The U.S. economy is booming right now. "The Wall Street Journal" says the U.S. economy -- in no small part, thanks to Trump.

RAMPELL: One quarter of growth means very little, effectively, if you're about to launch a trade war.

MOORE: Because we can't go on with the status quo, that's why. And by the way, this is the reason, Catherine, that Donald Trump won states like Michigan, Ohio, Pennsylvania, Iowa, West Virginia. Because workers --

RAMPELL: Just because he's selling bad ideas, and that sales pitch is working doesn't mean they're not bad ideas.

MOORE: NO, because Americans realized that we can't go on with running these gigantic trade deficits, with them stealing our goods and services, with them building their massive military.

And look, China is now not a friend of the United States. They are an adversary.

RAMPELL: I agree with you. I agree with you --

MOORE: They are -- we have to treat them as such.

RAMPELL: -- that they behave badly. Where I disagree with you and where I think you used to be on the same side is that the strategy for correcting that behavior is getting more leverage, by getting together with our allies, and using that -- using that alliance.

CAMEROTA: Yes, and so what's changed? How have you changed, Stephen, in your attitude about that?

MOORE: So that -- that's one point I think Catherine and I agree on. I think if there's been a flaw in Trump's strategy, it has been, you know, you don't want to fight a three- or four-front war at the same time.

You're right, Catherine. We should be, you know, stabilizing our relationship with Canada and the Europeans and so on, so we can focus on the bad actor here, which is clearly China.

RAMPELL: And what's especially galling -- what's especially galling --

MOORE: I don't think the TPP would have been enough.

RAMPELL: OK. What's especially galling here is that now China is basically stealing our once very promising strategy for keeping China in line. They're trying to build an anti-American alliance.

MOORE: They are. They are and --

RAMPELL: There was -- there was a report out of Reuters this week, saying --

MOORE: We'll find out who our real allies are. By the way --

RAMPELL: We're alienating them.

MOORE: Catherine, wait a minute.

RAMPELL: It's our fault --

MOORE: Wait a minute.

RAMPELL: -- that there is even an opening for China here.

MOORE: I've talked to Larry Kudlow about this. I've talked to the president about this. At the G-7 meeting -- this hasn't been reported -- Donald Trump put on the table zero tariffs with Europe and Canada, and they walked away from the table. So don't say that we're the ones.

RAMPELL: Because that was disingenuous.

MOORE: No, it wasn't.

RAMPELL: Because Trump -- Trump has launched all of the --

MOORE: They don't want tariffs, because they have tariffs that are twice as high as ours are.

RAMPELL: That is false. That is false.

MOORE: They do. In Europe --

RAMPELL: You can look at world bank data, and it shows the average tariff rate, the trade weighted average tariff rate in the United States, in Japan, in the E.U., in all of these countries that are our allies, and they are comparable.

MOORE: But they're not. Canada is about --

RAMPELL: In fact, ours are higher.

MOORE: How do you -- how do you --

RAMPELL: Ours are higher than Canada.

MOORE: -- explain their 200 percent tariff on our dairy products? How can you --

RAMPELL: We have, like, a 200 percent tariff on peanuts and tobacco. You can cherry pick any one individual product that you want. Lots of countries have particular products that they have very high tariffs on. They have particular products they have very low tariffs on. What matters is the overall picture, and if you look at the overall picture, our tariff rates are actually comparable to all of the countries that Trump claims are bullying us.

MOORE: Except the -- except they stop at 15 -- except they slap a 15 percent value-added tax on everything that we bring into those countries.

RAMPELL: You know there's a big difference between a value-added tax and a tariff.

MOORE: Well, it's like a tariff. It's a tax that's imposed right on the border.

RAMPELL: It is not like a tariff.

MOORE: It is.

RAMPELL: It's like a sales tax.

MOORE: Right. But it -- but it's imposed so when we sell stuff over there, you know, they -- the first thing that happens when our cars or manufacturing products hit their border is they slap it with a tax.

[07:10:08] RAMPELL: I can't believe you're trying to change the subject to value-added taxes here.

BERMAN: So let me ask you this.

MOORE: No, but the tariffs feel --

BERMAN: Does it stop at $35 billion? Does it stop at $35 billion both ways here, or do you think this goes on and goes up?

RAMPELL: You know, it's very hard to say at this point. Trump has thrown around much bigger numbers that should be very scary to us. Not only on China, of course. On car imports coming from anywhere around the world, including the E.U. It's hard to know.

I think Trump hasn't quite realized yet how much pain he's inflicting on his own voters. At the point that he maybe starts to notice that, he'll back down, but I just don't think he has really taken the time to appreciate how international supply chains work, how much pain this is going to cause for his own people.

And at the point that we start to actually see that damage seep into the economy, and we're seeing it a little bit now, like China has stopped buying soybeans from the U.S. They're buying soybeans from Brazil, for example. Those soybean farmers in Iowa and other places that voted for Trump. Maybe he will start to reconsider what he's doing. But right now, he seems full steam ahead.

CAMEROTA: Avlon, how do you see this?

AVLON: Stephen, you know --

MOORE: What we should do --

CAMEROTA: Hold on, Stephen. AVLON: We're all in agreement, you know, in the need of getting tough

with China.

MOORE: Right.

AVLON: Everyone at the table seems to be in agreement on that. But Larry Kudlow, your friend, has said that, you know, the tariff talk really was a negotiating strategy. It was a brushback pitch.

Well, here we are day one. So I guess the question is, now that it's no longer a negotiating strategy, but the trade war is on, have you changed your 25-year, long-held opinion about free trade and tariffs?

MOORE: No.

AVLON: Or is this simply about providing political viability in the party of Trump?

MOORE: Look, I am -- I've always been for free trade. Free trade is one of the pillars of growth. There's no question about international trade has caused massive reductions in global poverty.

My point is, we don't have trade. We don't have anything near free trade with China. We've -- we've opened up our markets to the Chinese for 25 years. This is my point. And China's never opened up their markets to us. Now they're stealing. Now they're massively building up their military.

AVLON: That's true.

MOORE: Look, we're dealing with the new Soviet Union here. This is not a country that is, in any way, friendly to the United States.

Now, look, what I would do, by the way, is I would use the money that we're going to raise from the tariffs to help out those farmers. Because we cannot back down here. If we back down here to China, it's going to be much worse for the U.S. in the long run. My point is this. I think Trump is --

RAMPELL: Look, one of these two countries has a midterm coming up. One of them doesn't. I think that tells you a lot about who has the leverage here.

BERMAN: Midterm elections in China come up once every 500 years.

RAMPELL: Yes.

MOORE: Yes, you know what's so interesting about this? Can I make one quick point?

BERMAN: Go ahead, Stephen.

MOORE: All you guys have talked about on CNN for the last year is foreigners intervening in a U.S. election, and this is exactly what China is doing right now, basically, right? They're using tariffs to try to influence our elections. We should be totally outraged by that.

RAMPELL: Because we've given them ammunition on that front.

MOORE: We should be totally outraged by that. And never let that stand.

BERMAN: Catherine, let me ask you this. At what point --

MOORE: Right? I mean, right? Do you agree with me on that point? We should be totally outraged that they are trying to use trade as a weapon to influence our elections.

BERMAN: I don't think this is quite like hacking DNC servers.

AVLON: Yes.

BERMAN: I don't know if this amounts to --

AVLON: That may be (UNINTELLIGIBLE) where the clock's going, but -- yes.

AVLON: -- collusion, but I understand your point that they're trying to -- they are using --

(CROSSTALK)

MOORE: I don't see anybody on the left complaining one iota about China.

BERMAN: Hang on, Stephen. Hang on.

MOORE: I've not heard anybody complain about that.

BERMAN: We have noted quite a bit they are doing this strategically. They are targeting things because they know it will inflict specific pain.

MOORE: To influence our elections.

BERMAN: You could make the case -- you can make the case, Stephen, that China is fighting this trade war with its head; and the United States is fighting with its gut right now. The president is lashing out where he wants to, where he can, without necessarily thinking exactly where it hurts.

And Catherine, my question to you here is, is there something that the United States is doing or can do that will get China to blink? Because you and Stephen are in agreement here that China has been treating the United States and the world unfairly. Will this policy, TPP aside -- that's gone. That's not happening now.

RAMPELL: TPP is gone, yes.

BERMAN: With these tariffs that the president has already imposed and the ones he might impose, will that push China toward the desired action? RAMPELL: I don't believe so. Again, China does not have an election

coming up. They have, obviously, not a democracy over there. They can sustain a lot more pain than we can for that reason, and also because they have designed their tariffs in such a way that it causes their consumers and their producers much less pain than our tariffs on them are creating for us.

So I don't see China backing down here. I really do think, as many trade experts who are much smarter than I believe, that the way to get China to back down is to band together with all of the other countries that have been similarly victimized by China. And we are doing the opposite of that. We are driving them into China's arms, or at the very least, driving them away from us.

BERMAN: All right, Catherine Rampell, Stephen Moore, we're going to take this show on the road. We're doing a road show with Rampell and Moore. That was a great discussion. Do appreciate you being here and taking part in it -- Alisyn.

MOORE: Thanks.

CAMEROTA: All right. So as you know, there were countless ethical and legal scandals with Scott Pruitt. He is gone. What happens to the investigations into him? Will he ever pay for all the things he was embroiled in? What will change?

(COMMERCIAL BREAK)

[07:19:01] CAMEROTA: After months of what seemed like countless ethical and legal scandals -- actually, it wasn't what seemed like; there were countless -- EPA chief Scott Pruitt has resigned. But Pruitt says it's because of the unrelenting attacks on him, nothing that he did. No personal responsibility here. His resignation letter fails to mention any of the 14 current investigations into his alleged misconduct in office.

So joining us now is CNN contributor and former director for the Office of Government Ethics, something particularly relevant today, Walter Schaub.

Walter, thank you for being here. It seems that, by all accounts other than Scott Pruitt's and the president, this has been a particularly ignominious chapter of a cabinet secretary. On a scale of one to 100, where do you rate the ethical sticky wicket that Scott Pruitt got himself into?

WALTER SCHAUB, CNN CONTRIBUTOR: I would say about 248.

CAMEROTA: Two forty-eight. Mm-hmm.

SCHAUB: You know, I've just never seen anything like this. And people are wracking their brains, trying to think of a similar cabinet official who had anything like these 14 investigations.

[07:20:06] You know, I had a law student intern put together a memo outlining all of the violations, and her memo was 13 pages long. CAMEROTA: Right. That's what -- I mean, look, let's put up the 14 --

here are the -- these are the cliff notes. Let me put up the 14 investigations that are currently going on with him.

As you know, I mean, just to recap --I don't have time to read all of them, Walter -- but, you know, he used first-class travel, because I guess coach was too dangerous for him. He had 24/7 security detail, though there were no active threats that the Secret Service could tell us about. He -- you know, his condo lease was so much below market value. He had his aides doing all sorts of special favors for him, some involving lotion. He had people looking for high-paying job for his wife. I mean, we could go on and on.

So all of these 14 investigations that we have on the screen, do those continue now that he has resigned, or do those evaporate?

SCHAUB: You know, they're going to continue, at least most of them. And it will be interesting to see what they uncover.

Chances are this is the end of the story for Pruitt, but it's not -- it's not entirely impossible that he may face some consequences for the procurement violations or for the destruction of records.

CAMEROTA: OK, the destruction of records. Let's talk about that, because that is -- these are things that are -- I mean, talk about the promise of transparency that, of course, has not happened with the Trump administration. But he was scrubbing his social calendar, or his work/business calendar, so that the public who pays his salary couldn't see who he was really meeting with or what he was doing all day.

Are there charges that he could face for that?

SCHAUB: Yes, I mean, interestingly, it's such an obvious consciousness of guilt that he was not doing right when he's trying to obscure his activities. But there are -- there's a federal records act that controls what you're supposed to do with documents and when you're supposed to retain them. And he certainly was not following that, as he was removing items. Now he probably should have even included some items he didn't, but it's the removal of items that's going to cause some problems for him.

Again, these things aren't usually pursued after a person leaves the government, other than they continue to investigate and come up with a full accounting of what happened. But there is the remote possibility of some further consequences.

CAMEROTA: And what would those consequences look like, if it were pursued to the fullest extent of the law? That means he'd pay a fine? What are those --

SCHAUB: Yes. I mean, there's some criminal provisions, but I'm not sure they've ever been enforced. And if they are, it's extremely rare.

And even when they are, usually, it's settled for the person being willing to quit government. So I think we've achieved that in removing Scott Pruitt.

I think the bigger problem is the legacy of congressional inaction. Most members of Congress who had the ability to do something did nothing.

CAMEROTA: Why is that? I mean, it was so egregious. Why did they do nothing?

SCHAUB: You know what's ridiculous about that is it was completely motivated by partisan objectives, trying to support the administration. And they had the gaslighting audacity to accuse people of engaging in partisanship for calling Pruitt out on his violations.

The reason that's nonsense is that his replacement is going to be more effective and at least as conservative and into deregulation.

CAMEROTA: Yes.

SCHAUB: So this was never about trying to replace Scott Pruitt with somebody who'd be more open to protecting the environment. This was about protecting the Government Ethics Program.

And if Scott Pruitt is the new bar for what you have to do to get fired, that creates a whole lot of leeway for government appointees to committee enough violations to get 12 investigations, as long as they fall short of 13 or 14.

CAMEROTA: And specifically, who should have been providing the oversight over Scott Pruitt?

SCHAUB: Well, I would have liked to see the Environment Committee take some action here, and really, this is the committee charged with oversight. Or the Homeland Security and Government Affairs Committee in the Senate.

In the House, Trey Gowdy, who's the chairman of the House Oversight Committee, did conduct some investigation, and his demand for subpoenas led to some resignations. So he certainly gets some credit for having done something. This, of course, still was not the Benghazi Trey Gowdy who vigorously pursued Clinton, but it was something, and he gets some credit. But many of his peers did absolutely nothing. Some of them gave tepid statements of concern. But this was not a Congress actively focused on oversight, other than Trey Gowdy.

CAMEROTA: Really good to know. Thank you so much for all of that context. Walter Schaub, great to talk to you.

SCHAUB: Thanks.

CAMEROTA: John.

BERMAN: The secretary of Health and Human Services estimates that fewer than 3,000 children are now in custody, separated from their parents by the U.S. government. The secretary estimates. How can he not know? And what will Congress do about it?

[07:25:03] We're going to speak to a Republican pushing for answers. That's next.

(COMMERCIAL BREAK)

CAMEROTA: The secretary of Health and Human Services has no idea exactly how many children they separated from their parents at the border. He now says it's less than 3,000. That's a number that's far higher than the number that they gave just nine days ago.

So CNN's Nick Valencia is live in San Antonio with the latest there.

What's happening, Nick?

NICK VALENCIA, CNN CORRESPONDENT: Good morning, Alisyn.

I was on that phone call, along with many other journalists, with the HHS secretary, and I think we were all sort of shocked when we heard that inflated figure. It was just recently that the government told us there was 2,047 separated children still in their care. And that number has inflated.

The secretary said they were dealing with a much more inclusive data set, and that's why the numbers are a lot higher. He didn't want to underestimate how many children were in their care.

Even still, they say they're going to be able to meet these three court-ordered deadlines. The first of which is today. By July 6, all parents were supposed to have some sort of contact or communication with their children.

They also implied on that call that there would be at least two calls for parents to make each week.

Now, I spoke to a detained mother, a mother in detention at Ft. Isabelle, and she said not only is that not happening, she doesn't entirely know where her child is.

Ultimately, these parents just want desperately to be reunited with their children. We don't know exactly --