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Quest Means Business
Trade War Fears Push Dow into Correction; Trade Tariffs and Possible Trade War with China; Likely Retaliation of China to the U.S. Trade Tariffs; Terrorist Situation in Thebes, France; Deadly Car Bomb Rocks Southern Afghanistan; U.S. Indicts Nine Iranians in Hacking Scheme; U.K. Law Enforcement Raid Cambridge Analytica's Offices; File-Sharing Service Dropbox Pops in Wall Street Debut; Mozilla, Sonos Suspend Advertising on Facebook; Pint-Sized Champagne Set to Return After Brexit; European Markets Close Sharply Lower. Aired 5-6p ET
Aired March 23, 2018 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[17:00:00]
PAULA NEWTON,CNN HOST: I can guarantee you every single one of these people is out of town. They want no connection to this market what so
ever. Thank goodness it is now Friday. It was one of those weeks on Wall Street. The 23rd of March. Now tonight, two days of trading 1,000 points
lost, the Dow sinks again, China fights back on terrorists. Donald Trump keeps the U.S. government open after a will he or will he cliffhanger, and
companies are unfriending Facebook by pulling their ads. I'm Paula Newton and this is "Quest Means Business."
Tonight the Dow Jones sinks into correction territory. I know we haven't heard that for awhile as the trade war fears rattle the markets. Now
stocks seesawed throughout the session. You had to pay attention today. The sell off picked up steam in just that last hour of trading. Now the
Dow closed off 425 points. Get this, it's the worst week for the three major U.S. indices in more than two years. Yes, if you feel like it's
rough, it is. The U.S. news followed a selling - a very heavy selling I should add - in Asia and Europe. The Nekkei was the worst affected, down
some 4 percent. Stocks in Europe closed lower as well even though the E.U. is exempt from those U.S. tariffs on steel and aluminum. Can you say trade
war? Claire Sebastian has been tracking all these numbers for us.
I mean Claire, look, it was in the last little bit that the bottom fell out. Was it on low volume. I mean what was going on?
CLAIRE SEBASTIAN, CORRESPONDENT: Well it was interesting to watch how it kind of developed throughout the day. We started the morning out talking
to traders and many of them were feeling quite circumspect. They said you know look. China's response overnight with $3 billion in tariffs in
response to originally to the (inaudible) tax. That was quite measured. We also saw exemptions for the E.U. and various other trading partners to
the steel and aluminum tariffs and they were thinking perhaps if there was going to be a trade war it's not yet. Now we can move back in. Then we
get to about lunch time and we have these comments from the.
NEWTON: This is torture just listening to you.
SEBASTIAN: It's extraordinary how these things evolve - the volatility at the moment. The Chinese ambassador said to Bloomberg News that we're not
ruling out the potential to cut back on purchases of U.S. treasuries. That sent the market into a bit of turmoil. Then we have the spending bill
confusion. Will he veto it, will he sign it? Then suddenly the bottom falls out and I think this is something we're seeing (inaudible). In the
last year I was in trading suddenly people just don't see a reason to buy. You could say the machines are kicking in but I think in this case the
volumes were very low. We're going into the weekend and the buyers just disappeared.
NEWTON: There was no one buying anything this afternoon. That was clear. What's interesting here is that for months we've been saying that the
markets have been shrugging off a geopolitical risk, shrugging off the Trump White House and all its erratic moves, has anything changed?
SEBASTIAN: Yes. I think it has.
NEWTON: I was afraid you would say that Claire.
SEBASTIAN: Well I was talking to a treasurer about this actually yesterday and he said it was infuriating because we are trading on the entries and
exits into the White House and the fundamentals are still strong, the economy is still strong, earnings is still strong. Those are thing that
are supposed to underpin the market but I think we're seeing some personnel changes that have a material impact on the market.
When we see the exit of Gary Cohn which just showed how committed Trump is to this protectionist agenda. The exit of Rex Tillerson who we saw as a
moderate free trader, and just last night an hour or so after the market closed, we have H. R. McMaster being replaced by John Bolton who is seen as
a foreign policy hawk. That is something that is unnerving to the markets. But we are in a very sensitive situation Paula and pick a headline and
they'll trade on it frankly. That's where we are right now.
NEWTON: And we have to point out that some people actually like this volatility. We've been saying that for several weeks now. When we look at
who the winners and loser were, I mean, it was for one of the first times that tech was not escaping this by any stretch of the imagination. Drop
Box, we can verbal talk about them later, but tech also took it on the chin this week.
SEBASTIAN: Absolutely tech was another thing was the worst off today out of all the three major indices and I think it's partly, we've seen a 1, 2,
3 punch about you could say this week - Facebook, the fed, and now the trade issue. And the trade issue, in fact it was the first thing and we're
still seeing the drumbeat around the delete Facebook movement. It's still going. Today we saw [Elan Ross] today come out and delete the Facebook
page to test their space access that those advertisers are there pulling ads off the platform.
The regulator issue, Mark Zuckerberg has until Monday to respond to the (culture media and sport committee) in the U.K. about whether he'll testify
there. All of that could spread through the rest of tech if we start to see more regulation and I think people are still very nervous. I said to a
trader this week that's faced with a buying opportunity. He said it was still a couple hundred and sixty dollars. It think it was a buying
opportunity at 60. Now it's still expensive.
NEWTON: And yet there are some people jumping in. Claire if we have the stomach for it, let's have a look to next week. We will still have a lot
of risk in the market as you said the fundamentals of the world wide economy are good and yet we might hear more from the Trump White House
about Tariffs.
SEBASTIAN: Absolutely we have those deadlines
[17:05:00]
Stacking up so the U.S. trade representative says that we should hear the list which is something the traders are very focused on the list of
products that could face these tariffs. That could come out in the next few days. They have a 15 day deadline but they said it could be within
days. And so for that China's, we're not going to call them reciprocal tariffs but their $3 billion worth of tariffs, that comment period ends on
March 31. All of this is coming down next week and I think we could continue to see volatility and perhaps more unpredictable events that we
have no way of knowing about right now.
NEWTON: Yes which the message is we should all enjoy our weekends right now. Especially you Claire. Thanks a lot for wrapping all that up. Who
knew there would be so much excitement in the last two hours.
China meantime, as you've been saying, has been promising to fight a trade war to the end. It's responding to a one-two punch from the United States.
Now the tariffs on steel and aluminum announced earlier this month and tariffs on about $50 billion worth of goods announced on Thursday. Now
China has responded with tough rhetoric of course but we have to say the action has actually been restrained.
The government plans to slap tariffs on about $3 billion worth of U.S. goods ranging from steel pipes to pork. Now China has also threatened to
slow its purchases of U.S. government bonds. That is what Claire was talking about which was a huge risk to the market. China is America's
biggest creditor. Who could forget? It holds about a trillion dollars of U.S. debt. Now President Trump insists relations with China are of course
good. Actually he says they are great and markets won't be affected.
(BEGIN VIDEO)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Well I think the stock market is going to be great and if the stock market is way up when I came
into office, the stock market was from a different planet. It's way up. China is going to end up treating us fairly. For many years they've had
free reign. They don't have free reign anymore. We're very friendly with China. We have great relationships with China and look it's time. It's
time. Last year we lost $500 billion on trade with China. We can't let that happen. Thank you all very much.
(END VIDEO)
NEWTON: Joining me now, Ann Lee is an adjunct professor at New York University and the author of "What the U.S. Can Learn From China." What
the U.S. is learning from China now is exactly how it will react.
You know many people have interpreted the reaction as being restrained. Is it truly restrained meaning how long can it last and what would change that
equation for China?
ANN LEE, ADJUNCT PROFESSOR AND AUTHOR: Well it looks like China really is exercising Judo strategy which is let the opponent throw all their weight
and force and let it backfire on them. So I think China is trying to restrain itself and look like a good guy in the international field which
is what they did when Trump pulled out of the Paris Accords and said we're not going to restrain ourselves with carbon emissions. And China stepped
up to the plate and said we'll still take the lead there and it looks like here China wants to also do the same thing by saying look we're trying to
be international law abiding country and want to follow the international rules while the U.S. violates and hopefully people will follow.
NEWTON: But will they take that only for so long meaning obviously China has a lot to lose if there is any kind of a trade war, a stakeout. At what
point can we really see this get a lot uglier than it is now?
LEE: Well I guess that really depends on what the U.S. does too right? Because the U.S. says they're obviously going to do more than what's
already been announced.
NEWTON: And as they said this is a negotiation. They've been very plain about that.
LEE: I hardly think that they're really sincere about it but they can say whatever they want and may not follow through. Look China really wants to
avoid it because they know that history shows trade wars can lead to real wars. And a real war between U.S. and China is really the last thing
anybody wants on earth right? So I think they're trying to do whatever they can to try to tamp down the rhetoric and the actions and slow it down
so that hopefully cooler heads can prevail. But obviously China is not going to just sit there and let the U.S. walk all over it. They're going
to draw the line somewhere. And we know China has drawn very strict lines around national security issues regarding boundaries like Taiwan. And so
if the Trump Administration decides to go after those geopolitical areas, certainly China is not going to stand by.
NEWTON: And when we look at the entire picture of trade having to do again in Asia. When we look to South Korea, OK, they've been trying to
renegotiate (inaudible). Wilbur Ross was at the White House today, commerce secretary, saying look we could have this signed in a week. I was
in Seoul not too long ago, had a briefing from U.S. officials about this. What was so interesting is the pains that they went through to make sure
that they could separate the security situation from real agitation on trade.
At what point did this become an imperative meaning we have to take trade off the table because security is just too important to us?
LEE: You mean the U.S.?
NEWTON: Yes, the U.S. actually capitulating and saying let's get this done. Let's get this [chorus] signed, meaning the trade agreement with
South Korea.
LEE: Well, we'll see. The U.S. certainly wants South Korea on its side for any geopolitical issues that flare up and they sorely need them as an
ally. And so in that sense, South Korea may have the upper hand if that's truly the case. And what it does look like is they're gunning for a real
conflict meaning a hot war of some sort. And so if that's the case then the Trump Administration is going to try to hand ring any of its allies to
basically say you've got to be on our side and they're going to use whatever tactics they'll need to do.
NEWTON: It was nonetheless a really interesting development because South Korea has been a real irritant on trade for several years with the United
States. Thanks so much for coming in. I really appreciate it. I know it has been an incredibly busy day.
We now know that China, as we were talking about, will retaliate; the question that we specifically have and the next potential weapon, the tiny
little soybean. Matt Rivers has more. (BEGIN VIDEO)
TRUMP: It is the largest deficit of any country in the history of our world. It is out of control.
(END VIDEO)
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: With that Donald Trump took his first major action specifically against China on trade. The President
authorized some $60 billion of tariffs on Chinese imports to the U.S. after a seven month investigation into alleged Chinese theft of American
intellectual property. But we don't exactly know which of its products will be hit with a new tax, China has already vowed to not take the hit
lying down. Case in point, Beijing just responded to U.S. tariffs on steel and aluminum products that Trump announced earlier this month by
threatening to levy new taxes on American imports here worth $3 billion; everything from fruits and nuts and steels pipes. All this talk of tit for
tat is making American industries nervous.
Start with the simple soybean. The U.S. is the world's top soybean exporter and China is its biggest buyer by far, billions and billions of
dollars worth was unloaded at ports like this one last year. And American farmers are well positioned to take advantage of that growth. The U.S.
Soybean Council expects U.S. exports of soybeans to keep rising for at least the next 20 years and it's not just farmers reaping the benefits.
(BEGIN VIDEO)
UNIDENTIFED MALE: Your diner and your doctors and your - and other companies.
(END VIDEO)
RIVERS: But already officials and Chinese state media have singled out soybeans as a potential top target in Beijing's retaliation against these
U.S. tariffs.
(BEGIN VIDEO)
KIRK LEEDS, CEO OF THE IOWA SOYBEAN ASSOCIATION: They know if you look at President Trump's election and where those votes came from, a lot of them
came from the Midwest and states that are very large in soybean production.
(END VIDEO)
RIVERS: Kirk Leeds is visiting China with an agricultural delegation from one such U.S. state, Iowa.
(BEGIN VIDEO)
LEEDS: The rhetoric has begun to (inaudible) at winners and losers in trade relations and negotiations that American farmers will, unfortunately
might be the ones who will pay the price for other industries.
(END VIDEO)
RIVERS: Restrictions on market access could devastate U.S. industry and it's not just soy. Other industries and companies could be government
targets too; think Apple or Boeing or Cisco, pawns in a potential trade war with lots of influence back home.
A recent survey shows the majority of U.S. companies in China think trade between both countries isn't fair. They want things to change but nobody
wants a trade war. To achieve both, any new U.S. policies will have to walk a fine line as thin as a flake of soybean. Matt Rivers, CNN,
Qinhuangdao, China.
NEWTON: OK. (inaudible) at the White House. Now don't worry if you've lost track of everything Donald Trump has done in the last two day. We've
got this when we come back.
(COMMERCIAL BREAK)
[17:15:00]
NEWTON: A French police officer is fighting for his life after bravely halting a terror rampage in France. The sleepy rural town of Thebes
erupted in chaos when a man on a shooting spree killed three people. Authorities believe it started when the gunman claimed to be from ISIS shot
at four police officers from a car. The attacker stole a vehicle, killing its driver, before storming a nearby supermarket and killing two of its
staff. A tense hostage situation there was brought to an end when an officer who had offered himself as a hostage killed the attacker. Speaking
earlier, French President Emmanuel Macron praised the actions of that brave police officer.
(BEGIN VIDEO)
EMMANUEL MACRON, FRENCH PRESIDENT: (Through interpreter) Our country has been struck today by Islamist Terrorist attack. The courage of one
particular senior police officer who voluntarily took the place of other hostages and who is very seriously wounded, he saved lives and he does
honor to his force and his country.
(END VIDEO)
NEWTON: Melissa Bell is near the scene in Southern France and Melissa thanks for joining us. You know that tiny town so terrorized today and yet
what we saw today was quite dramatic and quite different. We saw that, we were just talking about that hostage swap and then the tactical teams
moving in so quickly.
MELISSA BELL, CNN CORRESPONDENT: That's right and the actions of that particular police officer who has been praised tonight, (inaudible), French
President Emmanuel Macron, but also the prosecutor Francois Molins from whom we learned earlier more of the details of what is known at these early
stages of the investigation. I don't know, Beltrame, we're told by sources close to the investigation is tonight fighting for his life.
I'm standing just outside the apartment building that is the subject of the investigation this evening Paula, the raids continue here tonight. Within
the last 20 minutes we've seen police officers heavily armed and protected making their way out of the building with sniffer dogs and there is quite a
heavy police presence. We've got police trucks with riot police in them to our left and to our right and they've warned us not to try and get any
closer.
They say the [users] have lived here and have prepared projectiles and said they will not let journalists get any closer. And even with this police
presence immediately around us, a couple of locals did come up to us and threatened us a little earlier on. So quite a tense situation here even
tonight even as these raids continue, as police try and work out precisely the recent history of (inaudible) who is with, we believe, lived in this
apartment block when he began. That series of attacks as you say they began here in Carcassonne early on. He began with a carjacking, went on to
take on those police officers.
One of the things we learned tonight Paula from the chief prosecutor is that he spent some time in front of military barracks perhaps considering
taking them on. He moved instead to police headquarters taking on four of them returning from a morning jog and hurting one of them - shooting at
one of them getting him in the shoulder before moving on to that supermarket not terribly far outside of Carcassonne, just a few miles in
the town of Trebe.
But an extremely shocking theories of attacks, three people dead, 16 injured and tonight France's Interior Minister is here in Carcassonne.
He's been meeting, paying visits in the hospital to some of those who are still ill.
NEWTON: Still to learn there, Melissa as you point out, is was he acting alone, is this another cell? Again, a French officials there have been
trying to get a handle. CNN's Melissa Bell remains there on the scene. Thank you very much. Now even by the standards of the Trump White House,
the past 30 years - past 30 hours
[17:20:00]
I should say. It does feel like 30 years doesn't it? My gosh, segment's a doozie. Close to 1:00 p.m. yesterday, Trump directs the U.S. to level
tariffs on $50 billion of Chinese imports then five hours later he tweets that National Security Advisor, H. R. McMaster is out replaced by the oh so
controversial John Bolton. Then this morning, I remember it well just before 9:00 a.m. Trump tweets again threatening to, yes, veto the crucial
spending bill Congress has just passed over night. Five hours later he signs the bill he's just threatened to veto calling it a ridiculous
situation.
(BEGIN VIDEO)
TRUMP: But I say to Congress I will never sign another bill like this again. I'm not going to do it again. Nobody read it. It's only hours
old. Some people don't know what it -- $1.3 trillion.
(END VIDEO)
NEWTON: Jeff Zeleny is covering all this chaos again from the White House. We will point out it is a Friday evening and Jeff you know what that means?
It's the witching hour at the White House. I do the President has now, though, apparently left, right? And he is on his way to a long weekend in
Florida. But Jeff, I mean we just went through the timeline. Can you take us through kind of the back story to everything that happened today?
JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Sure, certainly another tumultuous week here at the White House. Just moments ago the President
did fly out, leaving the White House here. He's flying down to Florida for a weekend at Mar-A-Lago. But boy the revolving door continues here at the
White House. Most particularly the firing of National Security Advisor General H. R. McMaster and the hiring the incoming National Security
Advisor John Bolton certainly is signaling a change in - or a potential change at the very least in foreign policy here at the White House. John
Bolton is someone the President has been watching on Fox News for a long time. He has very hawkish views, very different views on a variety, in
fact on many matters. So that certainly will be a change. That is taking effect in a couple weeks or so, but boy, certainly the stock market did not
like the events here at the White House this week; the Dow falling, of course. So as we end this week, we believe that business is mainly
completed. We don't expect any more firings. That is always a possibility but certainly this President is overseeing a lot of staff shakeup here and
more to come. He still says he wants to change some members of his cabinet here. So it's part of the drama he insists on. We'll see what happens
next week Paula.
NEWTON: You know in terms of American foreign policy, we are talking about the fact that we will have a new National Security Advisor, but not to be
forgotten, it seems like years ago but we had Rex Tillerson leave and Mike Pompeo will come in. From you indications from the White House there, how
much does Donald Trump actually want to remake the foreign policy initiatives that he started a little bit more than a year ago?
ZELENY: I mean it does seem like that is how he's shaping his sets of advisors. You know the Iran Nuclear Deal is coming up for recertification
in May. John Bolton, of course, is a very hard liner on Iran so certainly if he follows his views, something will change there. But of course, it's
the President's views who advisors work around and what the key here is with this new National Security Advisor, how does that change that
potential meeting with Kim Jong-un. We have been talking about that potential meeting between the President and Kim Jong-un at the end of May,
by the end of May.
H. R. McMaster, the former National Security Advisor, was potentially leading the charge here on those discussions so unclear how this will all
affect it. But with the new Secretary of State in play as well as the new National Security Advisor, we certainly expect some type of change likely a
more confrontational approach to foreign policy.
NEWTON: And certainly one that the President is saying he will be much more comfortable with. Our Jeff Zeleny there who I hope has some time off
this weekend. We'll see you Jeff. Take care, appreciate the update.
Now some of the most highly respected voices in U.S. foreign policy, for some of the reasons Jeff was just explaining are sounding the alarm warning
that Washington is creating a very dangerous world.
Richard Haass tweeted, this is the most perilous moment in modern American history and one we brought on ourselves. Haass is the President of the
Council on Foreign Relations and a Senior State Department official. He warned of the risk of economic, political, and actual war.
Ian Bremmer in the mean time called the new terrorist against China and the appointment of John Bolton quote, the worst day for geopolitical risk since
I started Eurasia Group in 1998. Now the rate of turnover among key decision makers in the Trump Administration stands at - drum roll please -
under 50 percent at a mere 48 percent according to the Brookings Institution. In his first
[17:25:00]
year, the rate of departures in this White House have far outpaced the last five administrations. Rana Roroohar, CNN's Global Economic Analyst, you're
nodding your head, to a lot has been said there (ph), but Rana, tell me, some people will just say its hyperbole. It doesn't matter who's in there.
No one's going to start a war.
RANA ROROOHAR, CNN GLOBAL ECONOMIC ANALYST: You know I know both Richard and Ian very well. They're not people that are given to these kinds of
statements unless it's really serious, unless they mean it. And, you know, I have to agree. I feel like all of us that have covered this White House
and covered these news events are constantly in the [seventh] stage of the brief. You never quite where you are.
I have to say I feel we have entered a new moment. I think the situation with China is very worrisome right now. And it's interesting. The fact
that you see tariffs being slapped on at the same time that you see John Bolton coming in, that is an interesting sign. I knoticed that when the
President was signing tariffs, an executive from Lockheed Martin was right beside him. Lockheed Martin gets pretty much most of its budget from the
Pentagon. Trade wars can sometimes become real wars and I see messaging there that's very disturbing to me.
NEWTON: It's so interesting that you say that Rana, and I know that you really talk to a lot of people about this. When you look at the divide
between politics and what companies, like what we're saying. Come on, they have skin in the game as well.
ROROOHAR: Yes.
NEWTON: Is there any moderating factor there? Because they seem to be piling in and saying, actually geopolitical risk may be bad for the stock
market but some of what's been going on in trade around the world.
ROROOHAR: Yes.
NEWTON: .we've got the President's ear and we're going to use it.
ROROOHAR: Well it's interesting. See I wonder if CEOs have the President's ear. Because if you remember, the manufacturing council,
business council were disbanded in part because CEOs felt that the President was not listening to their concerns. You know every since the
tariff announcement, I've been fielding comments, letters from industry groups, from CEOs, that are very worried about this. The idea that a trade
war is easy to win is just such an irresponsible thing to say for starters. There is no winner in a trade war and there certainly no winner when you
get geopolitical risk going on.
One more thing that's interesting is markets don't really know how to price geopolitical risk and I've actually been amazed that we haven't seen a
stronger reaction at various points leading up to this moment.
NEWTON: And they haven't priced it and we've been talking about this and finally you actually start to see it today and then last week.
ROROOHAR: Yes, that's right and I think it's the culmination. I mean we knew more volatility was coming and we're going to see a lot more going
forward. But this is the culmination of OK, we see on event, the next event, suddenly you can't really ignore that neoliberalism as we know it,
globalization as we know it, seems to be coming apart economically, politically, we're in a new era.
NEWTON: And it's interesting to see that at this point in time China is actually the one stepping in and saying everyone get a hold of themselves.
But you mentioned it before that the situation in China is really worrying you because they have had a restrained reaction and Donald Trump acts as if
he's using it as a bargaining chip. Like look we're going to end up in a much better place with China.
ROROOHAR: Yes, it's interesting, Maggie Haberman from the "New York Times" tweeted something earlier saying I wish everybody would stop thinking
there's a grand plan here. There's no grand plan.
NEWTON: Gosh no. Now you tell us Maggie.
ROROOHAR: Exactly. Exactly. I have to agree with that. I mean one of the things I was watching for very early in the Presidency was this idea of
economic nationalism. What does it really mean because you can make a case. Some people on the left would make a case. But you need to put
America first in certain ways but this presidency has had no coherent strategy. It's almost as if every action cancels out the action before.
So you talk about wanting to bolster American manufacturing and then you start a trade spat with China. Every policy action doesn't seem to be
linked. It's as though the President gets up in the morning and decides what to do and that's not a way to run an economy.
NEWTON: And when we factor everything that you said into the market risk, some people have pointed out that look if we start this trade war
with China, products will become more expensive, inflation will go up and when inflation goes up the fed doesn't have many options.
ROROOHAR: Exactly. And the fed is already - as we know the fed is in a difficult moment. Let's say things were perfect in the geopolitical
environment. The fed would still be facing a very difficult moment. In the last decade we dumped $4 trillion in this country into the global
economy; all over central bankers around the world $30 trillion. I mean that masks a lot of problems so when that money starts to pull out you
begin to see more volatility and risk and that's without all these other decisions in the room. And it's very, very concerning.
NEWTON: Yes, I was just saying I didn't know if I had the stomach to face next week at the time. Rana, thank.
ROROOHAR: Think Friday. Friday.
NEWTON: I know. We'll celebrate through the weekend although then again there is that Stormy Daniels interview on CBS.
ROROOHAR: Oh dear.
[17:30:00] NEWTON: OK, Rana, on that note, thank you very much. I really appreciate it. Now Twitter users dared Elon Musk to delete his company's
Facebook pages, a few minutes later, yes, they were gone. The backlash against Facebook and its data scandal is underway.
(COMMERCIAL BREAK)
NEWTON: Hello, I'm Paula Newton. Coming up in the next half hour on QUEST MEANS BUSINESS, Elon Musk pulls his company's pages off of Facebook, agreed
to another company putting their online ads on ice, and a miserable day, understatement for tech stocks, being spoiled with Dropbox, I do owe, no,
we did not spoil it.
You'll hear from their chief operating officer, first though, these are the top headlines on Cnn this hour. Three people were killed in Southern
France Friday and what the French President is calling an Islamic terrorist attack.
A gunman stole a car, fired at a police officers and took hostages in the supermarket. He was killed after a four-hour standoff. Witnesses say he
claimed to be an ISIS soldier.
At least 13 people were reported killed and 35 wounded Friday night in a car bombing in southern Afghanistan. The blast took place outside a sports
stadium in the capital of Helmand Province.
A wrestling match was underway at the time of the attack, an official says the victims were civilians. The U.S. has indicted nine Iranian individuals
and an Iranian company for what it says was a massive and bracing hacking scheme.
Some of the main targets were professors at universities in the U.S. and 21 other countries. The indictment says the hacking was carried out to
benefit Iran's Islamic Revolutionary Guard.
Silence from Donald Trump after Cnn's exclusive interview with the former "Playboy" playmate. Karen McDougal says she had a ten-month affair with
Mr. Trump, beginning in 2006 while he was married to Melania.
She says Mr. Trump tried to pay her after their first sexual encounter, but she refused. Investigators from Britain's data watchdog agency have now
entered the London offices of Cambridge Analytica shortly after a search warrant.
Now, the firm is at the center of a controversy over allegations that it reportedly, improperly obtained Facebook data to target U.S. voters in the
2016 elections.
Dropbox; the file-sharing service has just dropped its own strong market debut. So let's take a look at the numbers, the IPO price was set at just
$21 a share, raising nearly $760 million, even not though well above the original price range.
[17:35:00] Tonight, the stock closed up nearly 36 percent at $28 a share. Dennis Woodside is Chief Operating Officer at Dropbox with just 11 million
paying subscribers out of 500 million registered users. I asked him how he could grow this business.
(BEGIN VIDEO CLIP)
DENNIS WOODSIDE, CHIEF OPERATING OFFICER, DROPBOX: We have 11 million paying subscribers for Dropbox, which in the world of business software is
a lot of people.
There are very few companies that have that kind of skill. And we're really focused on solving a universal problem which is how do I collaborate
in a seamless way, whether I'm on mobile, what -- regardless of what device I'm on around content at work and around my most important files.
It could be video, it could be PowerPoint. That's a massive opportunity for us over the next couple of years, and in addition, we're really
figuring out what are the next problems that our users are asking us to solve and building problems to solve those -- or building products to solve
those problems.
NEWTON: Yes, and that certainly speaks to innovation. The problem is when you're thinking about the cloud now, it's a crowded space and it's an
expensive space.
We've seen companies like Oracle already getting trouble up there. What is your competitive edge?
WOODSIDE: You know, so Dropbox has had competitors -- big competitors for a long time. When we started the company, and Drew and Arash started the
company, very soon they were after some of the big guys got into the space, and since then we've added, you know, over a billion dollars in revenue.
So you know, we're focused on one problem, we solve this problem better than anybody else, it's a deeply technical challenge that we've been able
to meet.
And you know, when we look forward we think we're going to continue to innovate, invent the next product, one of those products is called Paper
which is a collaborative tool that enables people to create amazing things regardless of what device they're on or where they are in the world.
NEWTON: OK, so, you know, you say you definitely had a competitive edge, and yet some of your competitors, Microsoft, Amazon, Google can pretty much
swallow you whole if they want to.
I'm not sure that they're in the business of wanting to do that right now, that is though a risk. What I want to talk to you about though, is the
fact that the cloud is getting very expensive.
One of the main reasons is the fact of security. You are smaller than your competitors. So what can you tell us especially when we've had several
days now of reports that data breaches and data security is a key issue?
WOODSIDE: Well, we have some of the best engineers in the world focused on security. You know, we've been able to hire some of the best in brains in
Silicon Valley to focus on this issue.
And our product, our business really is built on trust, one of our core values is be worthy of trust --
NEWTON: Yes, we've heard that earlier in the week, we heard that earlier - -
WOODSIDE: Yes --
NEWTON: In the week from Facebook. I just want to point out what concretely because I can tell you whether you're in business or whether
you're just a person at home using Dropbox, you're getting a little edgy.
WOODSIDE: I think it's very different, you know, some of the media models are built on using information about individuals, our business is not built
on that.
We are paid voluntarily by users who find value from our product, and we don't use that information, we don't sell it to anybody, we don't use that
information in rather advertising in revenue --
NEWTON: But that doesn't mean you're not vulnerable to -- it doesn't mean you're not vulnerable to hack.
WOODSIDE: Well, look I think -- I think the benefit of what we've been able to do is build an incredibly secure system where -- that we encrypt
all of your information, whether it's at rest or whether it's in transit.
So in other words, on the web, on the internet, and you know, we have to obviously remain vigilant about security at all times.
(END VIDEO CLIP)
NEWTON: We're going to take his word on that. Now growing with stiff companies or taking a break from advertising on Facebook, I'll speak to
Sonos; the smart speaker company is going dark on big tech for one week.
[17:40:00] (COMMERCIAL BREAK)
NEWTON: Investigators from Britain's data watchdog agency have entered the offices of Cambridge Analytica earlier Friday, a high court judge issued a
search warrant for the company.
Cnn senior investigative correspondent Drew Griffin joins us now from London. Drew, good to have you there right now. You know, there's a lot
of confusion because sometime earlier in the week, Facebook said they were going to try and do this audit and then the government basically said hold
up, we want to have a look inside first.
DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT: Yes, Facebook actually had investigators at the headquarters of Cambridge Analytica,
which is the company in question.
But those investigators hired by Facebook were told to stand down until the information commissioner's office could enact their search warrant.
They're executing that search warrant as we speak, Paula, and trying to determine at the heart of this is this Facebook data and the misuse or
alleged misuse of it.
Whether that may have been illegally acquired and used for Cambridge Analytica in its many different pursuits and political operations.
So that investigation continues both here in the U.K. and several investigations continue in the United States involving this one firm.
NEWTON: You know, Drew, there's still a lot of people saying that, look, what Facebook did was a breach of trust, but was it illegal?
The laws are going to be different on one side of the pond as there are on the other. It seems that here, the U.K. really wants to see as if their
laws were broken, and yet this is several years now, none of this was done when Facebook first learned of this breach.
GRIFFIN: It's absolutely right because nobody knew if you believe Facebook story that the information was being used in this way that violated company
rules.
Facebook opened up its data files to a researcher and according to Facebook or Facebook story, is that researcher did not use it for research but set
up his own company and began selling the personal information, the personal data on upwards of 50 million Facebook users to companies particularly
Cambridge Analytica was then developed as psychological mapping, which was able to target voters in the United States.
But not only in the United States, perhaps here in the U.K., in Africa, in South and Central America, pretty much all over the world. And what's been
described to me, Paula, is kind of a targeted psychological operations being used in the political field.
NEWTON: And again, a bit startling to think that yes, that might have happened, yes, in some countries including the United States, it might not
even have been illegal.
Now, I know, Drew, this is difficult to parse, but I know if somebody -- anybody can do it, you can. There also alarmingly could be some
connections to all of these -- all of these Russia investigations that they're going through -- going through.
I mean, there are Russians involved here and Russian institutions.
NEWTON: What's interesting, Paula, is that these two groups, Cambridge Analytica and its political works and what the Russians were doing
according to U.S. special prosecutor Robert Muller seem to be the same tactic.
Fake news to be infiltrated among social networks to try to divide and sow unrest among a populace. There is no direct connection yet between the two
companies -- countries, entities, but certainly many people are looking for that.
These kind of psychological operations are very much prevalent in warfare. These are weapons of war and what Cambridge Analytica is accused of doing
now is taking this mind operation, the psychological weapon of war and applying it to regular, democratic elections which startles many people and
it's very interesting, that it is also in line with the kinds of activities that we now believe took place in Russia.
NEWTON: Yes, this is still going to take a lot more investigations, our Drew Griffin there following this investigations from London now,
appreciate your update, Drew.
[17:45:00] Now, soaking a battle of the tech billionaire, as Elon Musk has deleted the Tesla and Space X Facebook pages, its part of a growing
corporate backlash against Facebook and CEO Mark Zuckerberg after the data scandal that's consuming the social network.
Never short on snuck, Musk sent a tweet asking what's Facebook? When folks tweeted back and asked him to take his pages down, they were gone within
minutes.
Other companies are also hitting Facebook where it hurts. Mozilla, the maker of Firefox says it's going to stop advertising on Facebook until it
quote, "takes stronger action and how it shares customer data."
And Sonos, the smart speaker company is pulling ads from all of big tech, that's Facebook, Instagram, Google and Twitter. The company says it will
go dark for one week, starting Monday.
And Joy Howard is the Chief Marketing Officer at Sonos and she joins me here now in studio, thank you so much. Can you explain the thinking behind
these actions and more importantly, what you hope to gain from this?
JOY HOWARD, CHIEF MARKETING OFFICER, SONOS: Yes, well, we believe that this Cambridge Analytica scandal raises important questions about whether
big tech is doing enough to balance its own interests with its biggest responsibility which is safeguarding your privacy.
It's also an important moment for brands like us to reflect on the role that we play in all of this. And for us, it's an important moment to
elevate the voices of activists, academics and consumer rights groups, civil society groups who are working to defend consumer rights.
NEWTON: Now you're taking the money that you place on those ads and giving it to charity as well for a week. I think some people might say, look,
Joy, it's a good marketing stunt, but at the end of the day it's a stunt because they might even look to you as a speaker company and say, hey, how
do we know what that speaker is even doing in our household at this point in time?
Is it a reflection in general for all of tech?
JOY: It's a reflection for all of tech for sure, and safeguarding your privacy is a critical importance to anyone who depends on the internet for
their business.
Facebook, Google, they're important partners to us and they're only as valuable to us and to you and to everyone as our trust in them is.
So, we feel like you know, this is something that matters a lot to us, we've been working with our NGO partner Access(ph) for some time now, and
elevating their voices and elevating the voices of activists felt like the right thing to do right now.
NEWTON: And is this a point of inclusion in the company to say that we are going to take a critical view at our options as well.
HOWARD: Absolutely, it's a moment to press pause for everyone to stop and reflect on what it means to work together and how we can partner to create
a better social platform for each other.
NEWTON: What will determine whether or not it will last longer than a week?
HOWARD: I'd have to -- you know, we heard from Facebook right away today - -
NEWTON: Oh, you did?
HOWARD: Of course we did --
NEWTON: And what did they say?
HOWARD: They said they take it very seriously just like we do. And so I think you know, ultimately, the question is do companies like ours have a
choice other than Facebook and Google?
So more than 70 percent of the ad dollars and some of the markets are working as far higher than that or spent on these platforms.
It's basically a duopoly, and so for companies like us who really now have no choice right now to read to our customers entering these platforms.
NEWTON: When they spoke to you, did they say, please don't do this or don't extend it or just -- what did they say?
HOWARD: I mean, they value our partnership and we value our partnership with them. And again the only reason we're working with partners is to
make each other better.
So I think what they're saying is, we -- it's critically important to us, to Google and Facebook and also the Sonos, that people trust the
interactions that they're having on our platforms are safe and secured.
NEWTON: Do you think this is something more than a few weeks -- I heard some people complaining that, look, this is only going to last a few weeks
and then we're all going to forget about it.
Or is it a real reflection point for your kind of industry but also of course places like Google, Facebook and Twitter?
HOWARD: Well, we're absolutely in this for the long haul, we've been committed, you know, always to privacy for our consumers and we've worked
increasingly over the last years, so with NGOs who care about defending your digital rights because we think it's important that they'd be
protected.
NEWTON: What things have you guys done to audit your own behavior though? Because there are some concerns where you even speak (INAUDIBLE) household.
HOWARD: Yes, well, we take every step that we can, and safeguarding your privacy is of critical importance to us. We've also recently entered the
smart speaker space as you referenced before.
And so one of the features of our product that really matters to us is that we've hard-wired the microphones on our speakers. So if you want to turn
the microphone off, you can clearly press the button that can't be hard - just -- it's hardwired to the microphone and you can simply turn it off.
That's an example of the step that we're taking to make sure that you feel like you can trust us and that you know that when you want to turn the
microphones off in your house, you can do it.
NEWTON: But to be clear, you are examining other steps as well.
HOWARD: Absolutely, we're going to continue to look at everything that we can do to safeguard your privacy.
NEWTON: And from your point of view, what have we learned in the last week about --
HOWARD: I mean, I think the most important thing that we've learned is that people will interact on these platforms with each other and with our
brand only if they trust them.
And so once big tech loses our trust, its value to us as human beings and to us as business partners is very limited. And that -- if we've learned
anything, it stopped.
[17:50:00] NEWTON: OK, but we'll see how things change going forward, thanks so much for being here --
HOWARD: Yes, thank you for having me, thanks a lot --
NEWTON: Really appreciate it. Now buying a pint of your favorite wine sounds rather vulgar these days, but after Britain leaves the EU, you'll be
able to do just that.
We'll pass the buck(ph) on that story in just a minute.
(COMMERCIAL BREAK)
NEWTON: Champaign for everybody. Did I do that well? No, it's not about the next hour of my life. This is about real issues that are going on
between Britain and the EU and how things are going to change after Brexit.
Now whether it's this bottle of sparkling wine which contains 750 milliliters of bubbly or this bottle of Trump Chardonnay, and could you
not, a 375 milliliters over in Europe.
There are strict controls on the size of the bottle. But as Anna Stewart reports, after Britain leaves the EU, they'll be selling sparkling wine by
the most traditional of measures, the pint.
(BEGIN VIDEOTAPE)
ANNA STEWART, CNN (voice-over): Rolling hills and the sea breeze, this valley in the south of England has a perfect condition for a vineyards.
Sir Mark Driver founded the Rathfinny Estate eight years ago. It's well established in still wine and now it's moving into sparkling.
Unlike its rival French Champaign, a couple would like to serve it from a very British spice bottle, the pint.
UNIDENTIFIED FEMALE: Sparkling wine has always been my favorite drink, and to be actually honest, let's say you've got two and a half glasses in it,
that's got six glasses in it.
And of an evening if I want to drink -- I feel a bit extravagant, if it's just the two of us at home to open a full bottle, but the pint bottle is
perfect with four glasses.
STEWART: Pints of Champaign were extremely popular pre 1973 when Britain joined the European block, then EU regulations came bubbling up, dictating
that sparkling wine could only be sold in 375 or 750 milliliters.
And any multiple of that, but not the pint, 500 and 68 milliliters. Winston Churchill was often spotted with a class of Champaign and is widely
reported to have being a big proponent of the pint size bottle, saying an imperial pint is an ideal size for a man like me.
Even after two at lunch and one at dinner. Some may think it's the perfect size, but until the U.K. actually leaves the EU, the pint size bottles are
lying in wait.
UNIDENTIFIED MALE: We bottled about 800 of the pint size bottle in 2015. We haven't bottled anymore because we can't legally sell it.
However, we're planning to do some next year and that will be ready for release in 2021 when hopefully the laws will change in the U.K. and then we
can sell seven years.
[17:55:00] STEWART: So whether it's to celebrate or commensurate the end of the U.K.'s EU membership, Brits may be able to pop open a pint of
sparkling wine. Anna Stewart, Cnn East Sussex, U.K.
(END VIDEOTAPE)
NEWTON: And let me say, I'm really glad we did not open a controversy over the British pint and beer, but interesting nonetheless, now, we give you
European markets that closed sharply lower on the last day of trading, sweet amid fears of a trade war sparked by terrorists on steel and
aluminium.
Now Germany's Dax fared the worst, it was off as much as 2 percent at one stage, both Germany and its EU partners planning to respond with their own
tariffs until they too were added to that exemptions list.
Now at the EU's summit in Brussels, British Prime Minister Theresa May says EU leaders are working to make that exemption permanent.
(BEGIN VIDEO CLIP)
THERESA MAY, PRIME MINISTER, UNITED KINGDOM: We've been working very hard to secure an EU-wide exemptions to the steel tariffs that the Americans
have announced.
I am pleased that they've announced a temporary exemption for the EU. What I'll be working with my fellow EU leaders today on is to see how we can
secure a permanent exemption for the EU for those steel tariffs, and we'll be talking about what the next steps might be.
And I have stayed on to talk about those next steps because the steel industry is hugely important to the U.K. and to the British government, and
I want to ensure that steel workers and their jobs are properly safeguarded.
(END VIDEO CLIP)
NEWTON: In the meantime, fears of a trade war pushed stocks sharply lower on Wall Street, the Dow closed off 425 points -- it was ugly, it is now
officially in correction territory, the Nasdaq fell below the 7,000 mark, it cups the worst week for U.S. stocks in more than 2 years.
The Dow lost more than 1,000 points in just two sections. Facebook, just a reminder as well, was down 14 percent, and I wish it were a little bit more
optimistic for me, but that is it, everyone have a good weekend, Richard will be back here on Monday.
(COMMERCIAL BREAK)
END
