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Quest Means Business
Dow Sinks as Trump Announces Steel Tariffs; U.S. Allies Vow to Respond to Tariffs; European Travel Snarled by Major Snowstorm; QVC Takes on Amazon; Belvedere Vodka Teams Up with U.S. Singer Janelle Monae. Aired 4-5p ET
Aired March 01, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street, the Dow Jones Industrials very sharply lower. Off the lows of the day,
but, still more than 400 points down, a loss of over 1.5 percent. We'll give you the actual details. Oh, there we go for the New York City
Marathon, a good, robust gavel at the end. Trading worldwide, pretty much over on Thursday, the 1st of March.
Tonight, tariffs are coming, and the markets are sinking. Donald Trump announces huge levies on all imported steel.
Allies are aghast, and the steelworkers celebrate. We'll talk to both sides of this debate.
And flights are grounded by the beast from the east. The latest on the snow forecast for you in Europe.
I'm Richard Quest live in the world's financial capital New York City where on a down day I still mean business.
Good evening. It was a stunning move towards protectionism. After months of Twitter threats, President Donald Trump says he will sign off on strict
tariffs for foreign steel and aluminum. Investors are worried that Mr. Trump's move could ignite a global trade war. The President told industry
executives the U.S. will impose a 25 percent tariff on steel and a 10 percent tariff on aluminum. They are to be implemented next week. And the
policy behind them is far from being completed.
The tariff will stay in effect for an unlimited amount of time, or as the president put it a long time. Donald Trump said he was not prepared to
wait any longer.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: What's been allowed to go on for decades is disgraceful. It's disgraceful. And when it comes to a time
when our country can't make aluminum and steel, and somebody said it before and I will tell you almost don't have much of a country. Because without
steel and aluminum your countries not the same.
(END VIDEO CLIP)
QUEST: CNNMoney's Maggie Lake and Patrick Gillespie are here. And we need to put this into context. First of all, some quick-fire questions. We
weren't expecting this today, were we?
PATRICK GILLESPIE, CNNMONEY CORRESPONDENT: No, this was a messy deliverance. We were told Wednesday night is coming and Thursday morning -
- this morning -- it's not coming. And then Trump goes out and says this, and the commerce department, the U.S. trade representative, they weren't
responding to this either. So, we're now getting a clear message and there is a fear of competing factions within the White House on this. You've got
folks like economic advisor, Gary Cohen, saying no tariffs. Others like Peter Navarro worried about tariffs. So, it was very mixed messaging and
about a lot of concerns today about these.
QUEST: Do we know the extent of these tariffs? Do we know which countries are going to be hit by them?
GILLESPIE: The interesting rational, Richard, is that President Trump and others, secretary Wilbur Ross -- commerce secretary, Wilbur Ross, said,
these are tariffs that are meant to protect U.S. national security and let's think of the counties that are top on steel. You've got Canada,
Brazil, South Korea, Turkey, Russia, you know, the thinking is these countries pose a threat to U.S. national security by importing steel and
aluminum.
QUEST: Maggie, China, Patrick did not mention China in that list and yet the President talked about China when he was at the White House today.
MAGGIE LAKE, CNNMONEY CORRESPONDENT: Richard, we don't know anything. Do we know whether there's really be tiffs?
QUEST: Yes. He said today --
LAKE: He told lawmaker -- you know, today Democrats there'd be gun- control. And he told them last week there'd be immigration. Nothing happened after that. A political analyst this morning, unrelated to
tariffs, said he said yes to whoever he's in the room with. And then everyone scrambles to figure out policy later. I'm not saying there's not
can be tariffs. But we don't know anything for sure about it. When asked in the White House briefing Sarah Huckabee said it's his intent that it's
25 and 10 percent. You know what in fact that means to investors. You can't quantify the risk. Because we don't know what it's going to mean in
terms of policy.
GILLESPIE: I think someone who did help to quantify the wrist today, someone that we'd spoken to, New York Fed President Bill Dudley said,
protectionism is quote, a risk of a trade war. It's a quote, dead end. And it risks or hurt U.S. growth. So, we're talking --
QUEST: We're going to get into this in a moment in more detail. What do we know other than an off-the-cuff comment of 25 and 10 percent?
GILLESPIE: There no exemptions. We know Canada is saying -- we just got a statement from Canada saying, they will respond if these measures are put
in place.
LAKE: Is it policy, though? It used to be policy when the U.S. president spoke. But I don't know if we --
[16:05:00] GILLESPIE: This is campaign promising.
LAKE: Yes, that it is. But I don't know whether we know whether this is really policy or not yet. I mean, they were asked multiple times at the
White House briefing and she said that's for later, no details. That's for later. We have to work it out.
GILLESPIE: I thought what was very telling about the briefing and what usually happens, Richard, in these cases is that the commerce department
immediately comes out with a very long fact sheet saying this is why we're doing it. This is the injury to U.S. companies and jobs and here are the
measures that we've taken. We've thought very carefully about this. You didn't get that today.
LAKE: You know what we do know that he's not looking to the business community. The CEO, president, has disregarded the advice of most business
leaders and those who risk --
QUEST: I want to look at the market. Look at the market today and look at how the Dow actually responded. It was pretty dramatic if we take the
graph. Now the Dow had been -- you and I were down at the exchange -- the Dow was pretty much --
LAKE: It was flat.
QUEST: It was flat. It couldn't decide what it wanted to do, but at 12:35 the downward trend begins, and it doesn't really recover, maybe marginally.
I am still not sure why Verizon is the only stock today that managed to buck the trend. It was an otherwise horrible day. I mean, Boeing I assume
because they use a lot of steel and a lot of aluminum in their various aircraft and all the big manufacturers.
GILLESPIE: Think about what's bothered markets a lot recently, Richard. Fears of inflation. What did tariffs do? They raised prices. They raised
inflation. So, you're risking the thing that markets --
LAKE: And undermining the economy. The recovery was the bright spot of this. By the way, the wobble, the selloff, the volatility had earlier. It
was a trading related issue. This is a fundamental issue if you have a price war and a price shock to the U.S. economy.
QUEST: Jean-Claude Juncker, President, European Commission, has a response from Europe. He says the EU has been a close security ally of the U.S. for
decades. We will not sit idly while our industries are hit with unfair measures that put thousands of European jobs at risk.
And the Canadians, Chrystia Freeland, has said pretty much the same thing.
GILLESPIE: I think --
QUEST: Final comment.
GILLESPIE: -- messy deliverance. It's going to exacerbate the retaliation we see from the EU, Canada and others.
LAKE: This was the worst fear of investors and traders. They thought they wouldn't see this once he was elected. That he wouldn't follow through on
this and that he seemed to be disregarding the advice of Gary Cohn who is very important to the investment community.
QUEST: Good to see you. Thank you so much indeed.
Now the markets may have slumped, but if we take a look over how the market was down, but steel stocks were anything but. You have United States Steel
Corp, U.S. Steel, is up 5 percent. And the sting thing about that one, if you look at the way the graph of the day went, when we knew that were there
was going to be -- or we thought there was going to be no tariffs, they went down. Suddenly, it goes back up again.
They are all up. AK Steel Holdings is up 10 percent. So, strong gains across the board. Imports currently make up a third of all of the steel
used in the United States. Now, various U.S. presidents have attempted to introduced tariffs. These are the most recent one. Ronald Reagan had 45
percent tariffs on Japanese motor bikes. It was an attempt to save Harley Davidson. In 2002 George W. Bush introduced 30 percent tariffs on steel
imports. Those tariffs lasted for just about a year and were most unsuccessfully. And then in 2009 President Obama put 35 percent tariffs on
Chinese tires. Now the problem with this was that the jobs that were saved in the tire industry, but the price of tires rose as a result because,
obviously, imported tires were cheaper. So, it was six and on half and a dozen of the other.
Carlos Gutierrez was the U.S. Commerce Secretary under George W. Bush. He joins me now from Washington. Mr. Secretary it is good to see you.
CARLOS GUTIERREZ, FORMER U.S. COMMERCE SECRETARY: Thank you.
QUEST: We will deal with the merits of these tariffs in a moment. But I think perhaps you might agree that this is no way to announce tariffs in an
off-the-cuff comment leaving everybody wondering what on earth you've done.
GUTIERREZ: Yes. That's absolutely true. It's the uncertainty of what's going to happen because the details will come out next week. Having said
that though, Richard, let's mark March 1, 2018 as when the first shot was fired in the first battle. I'm not going to call it a trade war, but war
is usually start with one battle. And this is a big one because this is not tariffs on one country. These are global tariffs. And what will
bother our trading partners the most is that were using the justification of national security. When it is well-known that the Department of Defense
buys about three percent of what we produce domestically and a lot less than that if you take into account imports. So, this is going to be a
tough one to justify and there will be retaliation. There will be a response.
[16:10:00] And I think it's extremely unfortunate.
QUEST: So, I shall use the word trade war because in that sense. And it begs the question, is the situation so desperate as it relates to steel and
steel imports that it was necessary to take these steps with tariffs. Particularly since the president has talked about China and China isn't
even in the top 10 of countries exporting steel to the United States.
GUTIERREZ: Yes, the top country is Canada. So, we get about 41 percent of our steel from Canada. A similar number for aluminum. Canada is an ally.
So, it's hard to say that we are doing this for national security reasons and as you say, very little of the steel comes from China. So, it's this
whole idea of, first of all, the global tariffs. Which means it's every country in the world and it. Second of all, it's the national security
justification. And the unintended consequence will be that our inputs will be more expensive which means that our prices to consumers will be more
expensive. And that could reduce sales and that could reduce jobs. So, this is most likely going to be a self-inflicted wound that will go on for
a while.
QUEST: You speak as somebody who was a secretary in a Republican administration who is anti-tariff in that sense, as a matter of political
philosophy. So, I ask you, how does a Republican president managed to make such a mess of something like tariffs on something as important as steel?
GUTIERREZ: Well, look, my guess at that question is that this is something that President Trump has always felt that needed some attention. Trade, he
always felt that we were taken for a ride when it came to trade. So, he's always believed this, but I think the way to do it is surgically.
QUEST: Right.
GUTIERREZ: If there is a country that's dumping. If there is a product that's being dumped. If there are unfair trade practices, but this is a
shotgun approach. This hits the whole world. So, it's very unfortunate and essentially, were going to see the whole world respond.
QUEST: Mr. Secretary, thank you for joining us. I appreciate it. Thank you.
GUTIERREZ: Thank you
QUEST: It was a late session route on the market. There you have just about there is when the tariffs were announced. Just around about 12:30,
12:45, and then the market goes up. The lowest point is just after 2:00. And after that significant fall, we saw when it's been a miserable few
days. Just look at the numbers. We may not have had those 1,000-point moves, but the volatility you've seen moves of at least 300 points in the
last five sessions. This is the week so far. 400, 300, nearly 400 and that has been the mood, that volatility has just basically maintained its
momentum.
I'm joined by Mark Rosenberg. He is the CEO and cofounder of GeoQuant. Good to see you, sir. Thank you for coming and putting some perspective.
Now you're a startup and your analyzing political risk in real time. Specifically, you have the Mueller risk index.
MARK ROSENBERG, CEO AND COFOUNDER GEOQUANT: We do yes.
QUEST: Before we talk about the Mueller risk index, how do we factor in something like this? A tariff trade -- it's not Mueller direct.
ROSENBERG: No, but I think it's a classic example of a politically driven sell-off. I think our indicators, for instance, have been showing this
kind of thing for a while. This administration has been pursuing policies that up until now have juiced the equity markets. But the flipside of that
I think were seen now, the populist trade policies, concerns about inflation. We've seen concerns about U.S. debt driven by the same set of
policies. And now I think the market is waking up to that reality.
QUEST: How serious is this volatility of the last week? Because after February where we saw 900, 1,000 points. We sort of take 3 to 400 points
in our stride.
ROSENBERG: Right. Well, I think, yes in recent history. But given, you know beyond that we've seen a period of historically low volatility. I
think all this arrival of volatility is really market volatility matching the political volatility. And now the political volatility I think is
starting to drive market volatility.
QUEST: There has always been a feeling of fragility in the recent market, in the last few weeks. The one common I've said again and again, is you
just get the feeling it's waiting to fall over.
ROSENBERG: Right, exactly.
QUEST: Are we now starting to see it crumble?
ROSENBERG: I don't know if it's going to crumble. Economic fundamentals are still strong. There some financial fundamentals that are still strong.
[16:15:00] I think to the extent politics drives markets and that could be another tariff announcement. It could be a big bang development in the
Mueller investigation. You're going to see a negative impact on equity markets.
QUEST: So, talk about the Mueller risk index. How do you calculate it?
ROSENBERG: Well, we measure U.S. political risk every day across a wide range of factors. What we did for the Mueller index is extracted data most
relevant to the investigation and construct an indicator of the risk of the Mueller probe to the Trump administration. To the strength of the --
QUEST: So, this is not index that -- about necessarily how it will affect stocks.
ROSENBERG: No. What we did is take that measure of impact on the Trump administration and then run that against stocks. And run that against the
dollar.
QUEST: So, if we take Mueller at the moment, after the 13 Russians and then the Manafort, now the Gates guilty plea, where do we stand with the
Mueller risk index?
ROSENBERG: It's at an all-time high since Sessions recused himself in March. And that's when we started the index. We still see it peeking over
march in and stabilizing a bit. But I think really it all depends on the midterm elections when you think about the long term.
QUEST: Right, but not factor that Mueller, because it's nice to know in a sort of esoteric sense that there is a great political risk out there.
ROSENBERG: Right.
QUEST: But it's pretty useless unless you can tell me how this is going to affect my portfolio.
ROSENBERG: That's exactly why we measure it.
QUEST: So, tell me, how is the current state of what we are told, that there is a state of chaos in the White House at the moment. How is that
likely to affect markets?
ROSENBERG: Negatively. To the extent politics impacts markets and of course, there is a lot going on in the markets besides politics but given
that variable it's going to have a negative impact on the markets. Thus far it's had a positive impact. We've had tax cuts. We've had regulatory
reform. I think now you see the downside of that.
QUEST: And it's not easy to see that there would be a simple way to unwind that. I mean, look, this could get a great deal worse before it gets a
great deal better. If I understand you correctly, that's exactly what you're saying.
ROSENBERG: From the political standpoint, yes.
QUEST: Good to see you, sir.
ROSENBERG: Thank you very much for having me.
QUEST: Thank you.
Now, European stocks didn't get a chance to react to President Trump's new tariffs.
Still, they didn't fare well, closing lower as traders watched comments from the Fed chair, Jerome Powell. German stocks were among the worst
performers of the day.
As we continue, the beast from the east meets the storm from the west. Europe is buried under a blanket of snow to the dismay of many travelers.
(COMMERCIAL BREAK)
QUEST: Vladimir Putin's warned the world to pay attention on Thursday as he boosted Russia's advance nuclear capabilities. The President said
Russia has developed a new missile that would render NATO defenses completely useless.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): Low altitude, difficult to notice cruise missile carrying a nuclear warhead with a
virtually unlimited range and an unpredictable trajectory and capability to bypass interception lines. It's invincible to all existing and prospective
air defense and missile defense systems.
(END VIDEO CLIP)
QUEST: U.S. officials express doubt to CNN about Mr. Putin's claims saying it's unlikely the weapon is anywhere close to operational. The United
States spends almost nine times more than Russia on its military. President Putin is up for reelection later this month. Military analyst,
John Kirby, joins me from Washington. Is it your feeling this is a bit of hyperbole? I mean, you know, heaven forbid the thought that someone might
be running for reelection and is going to make some extraordinary claims. Do you give credence to the rather draconian claims that are made?
JOHN KIRBY, CNN MILITARY ANALYST: I think there's a couple of things going on here, Richard, that's worth unpacking. First of all, we know that
they've been developing these kinds of systems for quite some time. And as you pointed out at the top, it's not very clear to American analysts just
how far along they are. I don't think anybody believes they are at implementation level or operational capability level right now.
But yes, Richard, I think we have to keep in mind he's got an election coming up. There's no doubt he's going to win. He's rigged it that way.
But he is concerned about turnout. There is, as you know, a lot of opposition to him in Russia. And he's concerned about having a large
turnout for this vote and he doesn't want a low turnout to question his legitimacy. So, there's very much a lot of muscularity here for the
domestic audience. I mean, heck, in their defense ministry today actually launched a public contest to name this system.
So, that tells you how much they're trying to sort of lather up their people. But the other thing to unpack here is that this is very much about
the United States. And there is a lot of thought out there that what he's doing isn't so much trying to intimidate -- although there is a piece of
that -- it's really to try to entice the Americans to take him more seriously and to try to get back to the negotiating table and work through
issues on military cooperation that the Russians desperately want U.S. assistance on.
QUEST: All right. But we assume then there's a great deal of psychology in the way this was handled. From your understanding is this the sort of
thing that President Trump would respond well to? I mean, we have to bear in mind it is Vladimir Putin and that creates its own set of difficulties.
Or is it much more likely to be mine is bigger than yours. You know, don't you threaten me.
KIRBY: Yes. I think this is not the kind of thing that Mr. Trump is going to respond to well. Instinctively the White House and the Pentagon were
muted today and very responsible and measured what to see what president Trump does on Twitter. This is not the kind of thing that he usually takes
well. But his defense establishment, his national security team, they're well affair of what Mr. Putin is trying to do and trying I'm sure as best
they can to keep the White House and the American government on one page here.
QUEST: John, when I read what Putin said this morning over breakfast with the time difference to New York, it's terrifying. At the end of the day it
is terrifying. But we are now talking about North Korea that's got half a dozen or whatever his nuclear weapons. You are talking about the Russian
President boasting he can put nuclears on cruise missiles that can't be detected.
KIRBY: It is -- now look, make no mistake, Richard, we have to take this threat seriously. We have to take the nuclear arsenal that Russia has
seriously. The Pentagon has said, Russia is the only existential threat to the United States right now in terms of nuclear capability. So, clearly,
there is need to be concerned about this. But you don't know -- you know, Richard, you don't need to go out and dig a bunker in your backyard. I
don't think we're at the cusp of a new cold war like, arms race right now. We have to understand the context of which Mr. Putin has laid this out
there and then work forward. As you rightly said at the top we spend almost ten times as much on defense and our capabilities are far more
advanced than the Russians. Not that we don't take it seriously, but we have to keep it all in perspective.
KIRBY: John, good to see you. Thank you.
KIRBY: Thank you.
QUEST: I'll sleep well as a result. Thank you very much.
Europe is being pounded by two major weather systems, quite extraordinary. There's storm Emma and the so-called beast from the east. They've collided
bringing rare snowstorms to cities across the continent. So, for example, in Rome, the ruins of the ancient coliseum buried in a blanket of snow.
The famous canals of Venice froze over bringing boats in the city to a standstill. And the London Eye, a rare sight, the snowy banks of the river
Thames. More disconcerting the weather close some of the continent's biggest airports. Large airports in the United Kingdom, Scotland, Ireland
and Switzerland all shut, and some have since reopened. Tom Sater has the forecast. Tom, we know how bad it's been. I am told -- I am told it might
get a great deal worse.
TOM SATER, CNN METEOROLOGIST: For some areas, Richard, you are correct. Southwest England, Ireland is going to get hammered. We have been watching
the so-called beast from the east for a week now, and new what the cold air entrenched all the way really from the Baltic beaches down to the French
Riviera that we would have a problem if any moisture moved into this.
The first point of interest is, obviously, has been the winds coming across the North Sea. It's like lake-effect snow. They see it in Japan. The sea
affects no, so with that, obviously, the first red warning and effect ever for Scotland went into effect that was cancelled this morning. We had one
in southwest England, and of course, and even Ireland has got two of their provinces. The last time we even had a red warning was in 2013 and that
was in Wales, but there is hope.
I mean, we do have a warm front on the map here, Richard. So, it is going to get warmer. But unfortunately, Emma, as you know in Europe you name
your storms. This one could have been a story all by itself. So, this is now centered just to the southwest of Paris. It's bringing in truckloads
of moisture and so it's colliding into that cold air. So, I think there's going to be more hurt to come before it gets better. The next 24 to 48
hours, I mean, how many times you see a radar like this for the U.K. I mean, they've had their fair share of snow even in Paris this year and of
course, there's problems with the river Seine rising. But there is still a lot of moisture that's going to be moving into that cold air. So, this is
not over with yet.
QUEST: Right, just completely turned subjects. I'm told also, here in the Northeast of the United States -- I realize you were warned about this and
you haven't got a map ready for me. But I am told that we're headed for a nor'easter. So, that's going to really mess up travel from Europe which
has dreadful weather, and the nor'easter where I am here.
SATER: Hurricane-force winds this weekend on the east coast. All-time record high tides in Boston.
[16:25:00] Remember back in January we had that storm that was dubbed the bomb cyclone? This is going to be almost the same strength. Snow is not
going to be an issue for New York or Boston. There will be some pretty heavy snows in interior section, but with hurricane-force winds and
crashing seas, it's going to be a chaotic, let's say in the air from Logan, to JFK, LaGuardia to Newark all of the way down probably to Charlotte. If
you're traveling and your coming over, be careful.
QUEST: Yes, well I am. Thank you for that, sir. It's nice for you to laugh at my misfortune.
SATER: I didn't mean it like that.
QUEST: No, no, no. I fully understand. Look, Tom, I've got one sentence for you. It's spring. Why are we getting this dreadful weather in spring?
SATER: Meteorological spring. Oh, I had a map for you, but this is the problem is right now, Richard, the arctic warmed up to 2 degrees Celsius
this week. That's warm enough for the melting. So, what happens is when you have a surge like this and the warm air into the Atlantic moves into
the arctic, temperatures were 30 degrees warmer than they should be. Scientists are kind of freaking out right now. We should be at the maximum
extent of ice in the all-time record low. So, that warm air has now pushed that arctic air, that cyberian express right through areas of,
unfortunately, all of Europe. Not what you want to see.
QUEST: Now I shall be texting you every five minutes when I'm sitting at the airport. Come on Sater, what's the weather going to be.
KIRBY: Please do.
QUEST: Thank you.
As we continue tonight on QUEST MEANS BUSINESS, the markets might not have liked it, but President Trump is taking aim at overseas steel exporters.
It's an aggressive plan on trade tariffs, and as you've heard on this program, a trade war is eminent.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS, we'll go behind the scenes of QVC on the day it announces a major rebrand as
Belvedere Vodka reveals a new campaign with Janelle Monae. As we continue, this is CNN and on this network the facts always come first.
President Trump says his administration will impose tariffs on steel and aluminum imports as early as next week. The controversial announcement
sent the Dow tumbling amid concerns of retaliation from China another US major trading partners. House Speaker Paul Ryan is urging Mr. Trump to
reconsider.
The U.S. says Russia's new boast about the nuclear arsenal prove it's violating an arms control treaty.
[16:35:00] Thursday President Putin has announced the Kremlin has invincible weapons that can get past any missile defense system. He showed
animated videos of nuclear warheads hitting Florida.
Flights are being cancelled and people are being warned to stay indoors as much of Europe it is battered by a huge winter storm. The arctic blast is
dubbed the beast from the east and it is merging with another storm named Emma and it's creating especially dangerous conditions. It is expected to
be severe in Ireland and parts of Europe.
The U.S. ambassador to Mexico, Roberta Jacobson is leaving her post in May, she departs in a time when the U.S. Mexican relations are strained over
immigration and trade. Dozens of countries including key U.S. allies like South Korea and the Saudi Arabia have not had U.S. ambassadors put in
place.
The Israeli prime minister says his country will welcome Prince William of Britain with open arms and Kensington Palace says the prince will visit
Israel and the occupied Palestinian territories along with Jordan this summer. The last member of the Royal Family to go to Israel was Prince
Charles who visited in 2016.
Two of our top stories, steelmakers and associations in the EU, Canada and Germany have issued forceful responses to massive new tariffs announced by
President Trump. The President was not done there. It was an impromptu announcement and he took aim at the World Trade Organization saying it's
only hurt the United States.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The WTO has been a disaster for this country, for our country, in fact, the rise of China economically
was, if you look at it, directly equal to the date of the opening of the World Trade Organization. It has been great for China and terrible for the
United States and great for other countries, but terrible for the United States.
(END VIDEO CLIP)
QUEST: This is the chart President Trump's talking about. The WTO was formed in 1995 after the old GATT. The Chinese growth was already
accelerating before then and after 2005 it accelerated more quickly and that's roughly when China joined the WTO. Ambassador Michael Froman is a
former U.S. trade representative and joins me from Washington. Do you agree with the president that it has been the WTO has been a disaster for
the United States?
MICHAEL FROMAN, FORMER U.S. TRADE REPRESENTATIVE: Well, Richard, no, I don't. I think the WTO is an organization that we helped form, we helped
create the rules and we demanded that it have strong enforcement procedures. And we've used those procedures very effectively vis-a-vis the
other countries to make sure they upheld the rules. I think the president is right that China poses a particular challenge to the global trading
system and certainly when it comes to steel and aluminum, a lot of the problem is tied back to excess capacity emanating from China. So that
really is an issue. The question is how best to deal with it.
QUEST: On the question of the tariffs that were announced today, 25 percent and 10 percent, in your view, is that the right way to go about it?
FROMAN: Well, first of all, I think, we have to take a breath because we don't know all of the details yet and the details I assume will be laid out
next week and one thing you know about this administration if you hold your breath they may change their mind on the policy issues and let's see what
the final results are in terms of which countries are hit and what products are hit. The tool they're using is a very blunt tool. It's affects all
steel and aluminum from around the world, it's not particularly targeted at the source of the problem which is China and in fact, we don't import much
steel and aluminum from China anymore. And we'll end up hitting a lot of our closest allies and partners and that will make it more difficult to
organize those partners to put pressure on China to reduce excess capacity.
QUEST: Right. If your goal is to make America great again or at least rebalance U.S. trade then you've got to hit Canada for steel, Mexico, South
Korea, and you've got to hit Germany because that's where the steel is coming from. Hitting China, well, it might be good politics, but it's not
going to improve your steel import position.
FROMAN: Well, on one hand, of course, we want a strong steel and aluminum industry here in the United States. Let's stipulate to that, but by
putting tariffs -- tariffs are nothing more than taxes, so we're raising taxes on the users of steel and aluminum and that's everything from beer
cans to automobiles, and the workers in those sectors are going to be adversely affected by this. And so, any administration that considers
protectionism has to weigh the jobs that they will help save or create in one sector versus the jobs that they'll very much put at risk in other
sectors.
[16:40:00] QUEST: On the wider point here, though, do you accept perhaps some people like yourself when you were in office, perhaps government
ministers and secretaries did not make the argument of globalization sufficiently or policies to alleviate the effects? So, there are people
who say, no, world trade globalization has harmed us.
FROMAN: Globalization is a fact of life, and most economists will tell you that 80 percent of the impact on wages and jobs come from technology and
automation and some come from globalization, but you're right, we need to do more domestically to deal with those adversely affected by change. And
we haven't seen that kind of focus in the United States in terms of what kinds of policies, whether it's education, training or transition
assistance to deal with those issues.
QUEST: Secretary Carlos Gutierrez on the program earlier who you know obviously well, he said what we have seen, he didn't call it a trade war,
but he did say this is the first battle. This is the first shot. Are you concerned that with these tariffs on steel and aluminum we are seeing the
beginning of a trade war?
FROMAN: Well, I don't think any country wants a trade war, but I also think that the other countries are not going to be able just to stand by
and do nothing in response to the U.S. acting unilaterally like this. I would expect other countries whether it's China or the EU or others to
respond proportionately, to retaliate against us in a proportionate where.
QUEST: Right. But that's a lovely phrase to retaliate in a proportionate way, but if I read to you what the statement from the Business Roundtable
has come up with. The Business Roundtable strongly disagrees with today's announcement because it will hurt the U.S. economy and American companies,
workers and consumers by raising prices resulting in foreign retaliation. Now that's essentially what you've been outlining already, but that foreign
retaliation is the trade war that everybody fears.
FROMAN: I think there's a real concern that if this begins to escalate and countries begin to retaliate at higher and higher levels and maybe more
worrisome, they begin to copy us and begin to imitate us by taking their own unilateral action. Remember, this trade action was taken under a
national security exception. The United States under Republican and Democratic administrations have always been very reluctant to use the
national security exemption, because we knew other countries would go on and say, well, food is a national security issue so let's keep on American
agricultural products. As other countries imitate us and say this is now fair game, they'll use national security as a way of closing their markets
and we have a lot to lose in that process.
QUEST: Finally, I mean, you've obviously steeped your entire professional career at the level of the negotiations for these sorts of things. Would
you agree that this was no way to announce something as serious as tariffs on goods as important to steel in a casual comment without any backing
documents so people -- I mean, we've had statements from the Europeans, the Canadians, the Brits, the Roundtable, everybody says we have no idea what
this is.
FROMAN: It's an unusual way to roll out policy but to be frank, we've seen this in the
administration over the last year. They've been talking about doing something like this for some time. The report's been delayed over and over
again, and the decision's been delayed over and over again, and again, we won't really know what the decision is until it is ultimately rolled
potentially but not definitely next week.
QUEST: Good to see you. Thank you.
FROMAN: Thanks for having me.
QUEST: Thank you. I appreciate. When we come back, QVC, synonymous with home shopping bargains. After the break, we're going to lift the lid on
this big business and how it's taking on Amazon.
[16:45:00] (COMMERCIAL BREAK)
QUEST: Oh, what quality, what wonderful jewels, hello and welcome to the Quest home shopping network, and have I got some special offers for you.
What could be more beautiful for that dinner, that date or that wonderful evening with the family than this stunning, plastic necklace? Now, while
you're enjoying these fake diamonds which would enhance any evening out, I want to tell you that QVC's parent company is rebranding, with all of this
stuff it's changing its name to the Qurate Retail Group and focusing on video commerce. In the chief executive says they are going for growth.
(BEGIN VIDEOTAPE)
MIKE GEORGE, CEO QURATE RETAIL GROUP: For us growth is about is also about showing up in more compelling ways in more compelling places on -- on video
platform. So, for us, growth is about making Facebook Live its own, a QVC network. Making Roku a QVC network, making the mobile phone a QVC or HSN
network, so we, we can grow on platform and devices. We can grow in categories and we can grow internationally.
QUEST: Grow, grow, grown. There's something else that's going on at QVC as I show
you this delightful laptop that's available. In other words, the company is trying to differentiate itself from Amazon. CNN's Clare Sebastian has
been inside this giant home shopping to find out how.
JENNIFER COFFEY, QVC HOST: Feature price vanishes at the end of the day.
CLARE SEBASTIAN, CNN CORRESPONDENT: Being a host on a home shopping channel is not as easy as it looks
COFFEY: 24 hours a day, seven days a week, and it's all live, it's unscripted. There is a little tiny gray card we basically have standard
information about the product, but other than that --
SEBASTIAN: Just go for it.
COFFEE: All up here and right here.
UNIDENTIFIED MALE: The first product here on QVC --
SEBASTIAN: In 1986 when it hit the airwaves with the Windsor shower companion --
UNIDENTIFIED MALE: A combination AM/FM radio with a clock.
UNIDENTIFIED FEMALE: You get the bill and she gets a bracelet.
SEBASTIAN: QVC was a way for retailers to reach markets where they didn't have stores. Now the challenge is e-commerce. Would you have the Amazon
doesn't have?
GEORGE: If you know what you want, you'll go to great companies like Amazon and you'll type the product in a search engine and it's some
hundreds of thousands of versions of the product will come up. If you want people to tell you stories and teach you about products and bring you
things you weren't expecting. That's what we do.
UNIDENTIFIED FEMALE: It's the kickoff of got to watch Thursdays here on HSN.
SEBASTIAN: Survival has meant consolidating last year QVC's parent company bought its biggest rival Home Shopping Network, creating the third largest
e-commerce company in the U.S.
UNIDENTIFIED FEMALE: We are talking about one of my favorite things.
SEBASTIAN: And it's meant adapting, QVC now broadcasts on Facebook live, Roku and mobile.
GEORGE: We know the consumer is engaged with video. We know she loves d demonstrations, we know she loves tutorials and look at how she engages
with YouTube as one example.
UNIDENTIFIED FEMALE: You got a 16-inch necklace here.
SEBASTIAN: It hasn't escaped Amazon's notice, the company briefly experimenting with its own live stream fashion and beauty shows, Style Code
Live, it was canceled last year.
GEORGE: There's a reason that there are many successful players doing what we do.
Because it is about very patiently and thoughtfully trying to build a connection and build a relationship with consumers. As soon as you think
about it as a device for selling stuff, and people typically go wrong.
UNIDENTIFIED FEMALE: You are being looking at the La-Z-Boy legacy.
SEBASTIAN: After seven years in the job, Jennifer Coffey has sold just about everything.
COFFEY: You've got your choice of leather or suede.
[16:50:00] SEBASTIAN: This is QVC's vast sample warehouse dubbed Noah's ark, because there's at least two of every product.
COFFEY: So, it's temptations we love. It's a cookware and bakeware line.
SEBASTIAN: What is it?
COFFEY: It's a windmill. Can you tell?
SEBASTIAN: The trick she says is simple just tell the viewer a story. Clare Sebastian, CNNMoney, Westchester, Pennsylvania.
(END VIDEOTAPE)
QUEST: That is -- if this business never works out. As we continue tonight I'll be joined in the C suite by the chief executive of Belvedere
Vodka who is going to tell me all about their new partnership with the singer Janelle Monet after you have had moment to consider TRADERS.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Fabric making at Androsia. It's an ancient form of dyeing cloth using the tools of today to sell around the world. Batik is a
technique of printing designs on fabric using handmade stamps dots and lines of hot wax.
Washing or stamping these fabrics are made by hand in the Bahamas by Androsia. The company's roots date back to the 1960s when Rosie Birch
wanted to find a creative outlet and provide employment for women in this remote part of the islands. The batik process was then done right on the
beach. Androsia is now run by Birch's granddaughter Casey.
CASEY BIRCH, ANDROSIA OWNER: The first thing we do is we create our stamp, then we use those and apply hot wax to white fabric. Once that's done we
take that fabric and we hand dye it in our tubs. Then we melt the wax off and that revealed the design underneath and after that we either ship the
fabric to you or we cut it and sew it right here into a variety of different products.
UNIDENTIFIED MALE: The word batik originates in the island of Java where the practice has been practiced for centuries. Ancient forms are found in
southwest China Malaysia, Japan and India where batik mixed with local craft making and it's believed that Dutch traders brought Indonesian batik
from Java to Africa in the 19th century. Today's forms of Java's batik thrive in Nigeria, Mali and the Caribbean where it's found on a number of
islands. In 2009 the United Nations designated Indonesian batik as culturally significant. Each region brings and local influences
BIRCH: All of the patterns are inspired by the natural beauty of the Bahamas. It's the flora and fauna that make the Bahamas perfect.
UNIDENTIFIED MALE: Batik is now the unofficial national public of the island nation.
Androsia produces up to 30,000 meters of fabric a year. It's annual sales of beachwear, table cloths and other products now reach half a million
dollars. Beyond the patterns are fish and shells and Androsia also customizes stamps using company logos which helps Androsia capture
customers around the world.
BIRCH: Being on a tiny island, with only 10, 000 people, there is no way we would be able to survive or thrive without our online shop. I would say
currently about a third of our business comes from our online presence. It's a bit ironic that for a company in which absolutely everything is done
by hand, we would not be able to survive without the digital world.
(END VIDEOTAPE)
[16:55:00] (COMMERCIAL BREAK)
QUEST: Excuse me. Viewers of last night's QUEST MEANS BUSINESS will know I am just back from Kentucky. The home of American bourbon. And today I
am in the C suite with the head of what's billed as the world's first luxury vodka. Belvedere Vodka has just launched a new campaign in
collaboration with singer and actress Janelle Monae.
The firm's chief executive is Rodney Williams. He joins me now. Two questions. Let's talk first of all, a luxury vodka. -- How can you have a
luxury vodka? Vodka is vodka is vodka!
RODNEY WILLIAMS, CEO, BELVEDERE VODKA: Well, two things. A luxury vodka really means quality and we believe vodka can impart taste. So, Belvedere
was the first to really launch a new, higher quality vodka back in 1990.
QUEST: How? What you mean by higher-quality?
WILLIAMS: We produce Belvedere with rye, the ancient grain of rye. Not with corn, not with wheat, not with potatoes to impart more and in fact
this year, Richard, we are launching two single estate rye vodkas with the rye come coming from specific farms.
QUEST: Right. What does that do to the price because obviously it's a highly competitive industry and if you are going to be charging premium,
well, you know, you might have trouble there.
WILLIAMS: Well, it does come at a premium, but we really believe that the global citizen, if you will, the type of drinker who is really interested
in this proposition is also a conscious consumer. They want to know what goes into the product. They expect the distillery to be transparent and
they expect quality.
QUEST: With Janelle Monae and I am always interested as to why companies feel they want a celebrity endorsement. A, it's a high-risk strategy if
something goes wrong with the celebrity and I'm not suggesting for a moment it would in this case, but why can't a product like vodka stand on its own?
WILLIAMS: Well, we think it can. In fact, we look at Janelle as a collaborator. Belvedere has long stood along the values of community. We
don't have one founder or group -- or one mass distiller, but we have a community of distillers from our inception who produced the product, and
Janelle really works artistically with the community of artists.
QUEST: But it is a risky strategy isn't it? Because you alienate some, others will love. You tie yourself to that celebrity for good or better or
worse.
WILLIAMS: Well, what we really tie ourselves to is the set of principles on which we operate. And the consumer is going to hold us accountable.
And we welcome that when it comes to this idea of giving voice to stories that aren't so often heard, and that's what the collaboration with Janelle
is really about.
QUEST: Which, of courses, is the video and the films you will be doing as well. Good to see you, sir. Thank you very much indeed. Now you just
leave this on this side. Because I'm sure you got more than enough. In fact, I'll just pop up there. We will have a Profitable Moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment, if you needed any reminder of the unease that the stock market faces or investors face when looking at the
question of tariffs and barriers to trade, there is your answer. The way the market fell over when Donald Trump made some off the cuff comments
pointing out 25 percent and 10 percent tariffs that are coming down the road in the next week for steel and aluminum.
The way this was announced in itself raises serious questions, but the effect global steel tariffs already, the EU, the U.K., the Canadians and
the Mexicans, they've all said if you do this, Mr. Trump, tit for tat, we will retaliate and if that happens, well, nobody's using the phrase trade
war, so I'll say it. If this goes the way it's going, you are looking at a full-scale trade war and the firing shot that was steel.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you are up to in the hours ahead I hope it's profitable.
END
