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Quest Means Business
194,000 new jobs added by U.S. employers last month; China Hits Back At Trump's Latest Tariff Move With Beijing Slamming That Decision; FAANG Stocks Slide After Tariff Announcement; President Trump Says North Korea's Missile Launches Does not Violate Singapore Agreement; U.S. Officially Withdraws from INF Treaty with Russia; U.S. Aims for Military Drawdown in Afghanistan. Aired 3-4p ET
Aired August 02, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: I know it's not looking too good, is it? I can assure you, it was much worse before after an
incredibly busy financial week. Those are the markets right there and these are the reasons why.
Jobs, jobs, jobs: 164,000 new jobs added by U.S. employers last month. China hits back at Trump's latest tariff move with Beijing slamming that
decision. And markets around the world hit by trade war contagion. Stocks in Asia and Europe fall hard.
Live from Atlanta, it's Friday, August 2nd. I'm Paula Newton, in for Richard Quest, and this of course, is QUEST MEANS BUSINESS.
Okay, tonight, trade war fears are back. And indeed with a vengeance. It's the good, the bad, and the ugly for the economy. Follow along here,
folks, the good 164,000 jobs were added in July. Now, that's right in line with estimates and the American unemployment rate hold steady at a cool 3.7
percent.
Here's the bad though, stocks are falling on Wall Street and around the world. As I was saying it was a little bit worse before on Wall Street.
And that is because Donald Trump is escalating the trade war. China is promising to retaliate. And it's the sort of thing really that could bring
boom times to a grinding halt.
And yes, I have to tell it to you straight. There is of course the ugly, stuck in the middle here are Jay Powell and the U.S. Federal Reserve. Now,
the President keeps pushing the Fed to slash interest rates, induce the economy ahead of an election year. Chairman Powell struggling to maintain
the Central Bank's independence in the face of unprecedented pressure.
Diane Swonk, the Chief Economist at Grant Thornton is with us in Chicago. You know, if only it was that easy, Diane that the Fed would actually be
able to wave a wand and actually solve some of these problems, but likely that is not the case. Let's deal with the jobs report first.
Perhaps, Diane, you tell me, it's a good reflection of the economy really - - strengths, weaknesses and challenges ahead? Any real red flags for you?
DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON: Well, the biggest red flag of course, is in manufacturing hours. What we've seen is manufacturing has
added marginally, but very marginally almost, they call it unchanged because it's within the statistical error.
But the hours worked have fallen. They fell the most in July since 2015, and they're down a percent and a half from a year ago. So, that's a
contraction of manufacturing activity, which is directly related to everything from the trade wars to weakness abroad. So that's the red flag.
And the concern out there that the next shoe to drop will be layoffs in the manufacturing sector. In fact, many auto plants actually closed for the
very last time on July 31st. So, we'll see those losses and employment in August.
The next step is also the issue in retail. In retail, we have you know, the move from bricks to clicks. And so that shows up as a decline in
retail employment. It has been very weak all year.
Lots of declines this year, as there a lot of store closings out there, even though the consumer came back in the second quarter. But you add on
tariffs to a lot of things that retailers are charging for and that takes their razor thin margins even down even more, they've got to pass some of
them on. And that will show up as more struggle in the retail sector, which we saw some of those stocks really hit in the retail sector as well.
NEWTON: Yes, there was no place to hide in that sector; that is for sure. In terms of this economy, putting people back to work, though, wage gains
have been decent.
But this whole issue of productivity, which we've been kicking around for a long time now, it's still a big issue, isn't it?
SWONK: It's a huge issue. And what we're not doing is so we're seeing 3.2 percent wage gains this month, which is up a little bit from a year ago.
Last month, the high of this cycle was 3.4 percent, much lower than other cycles.
And for an economy with this low of an unemployment rate, and even the U-6 which is that stress measure of unemployment, ticked down a bit as well
this month that was good.
And the reason the unemployment rate didn't -- the overall unemployment rate didn't tick down is because more participation in the labor market
actually black teens and men in their 20s with high school -- with less than a high school degree are coming back in, pulling those people in,
something Jay Powell really wants.
Those are good science, yet there's no heat. There's some wage gains. But without a lot more productivity growth, you can't get a lot more gains in
wages and productivity growth. You only get that when you invest.
We're not doing it with infrastructure spending and investment last quarter actually contracted a bit, again, reflecting the uncertainty surrounding
trade.
NEWTON: Yes, that was alarming, especially when you combine it with what you were saying about the manufacturing jobs. And that brings me to my
next question.
Diane, is this a job market that can withstand a trade shock? How vulnerable is it?
SWONK: Well, you know, the premise is like a snowball going downhill. It starts out really small and it can compound and become really big. You
don't want to be in front of it or when it's at the bottom of the hill.
[15:05:08] SWONK: And the question is how far down that hill we get. Another tranche of trade tariffs on September 1st is bad news, especially
as we're going right back to school and into the Holiday Season. That's really bad news. It could be a really weak fourth quarter, but it's
happening in the context of already a global slowdown.
So insult to injury to that global slowdown, you start to getting what could be a Brexit decision, a hard Brexit decision, and you're starting to
get a lot of things that could snowball us into a very bad situation in 2020, which is the opposite of, of course, what the administration wants.
And it's certainly not the best way to get the Federal Reserve to ease because we have trade tension and to offset the weakness, I think one of
the most important comments that Jay Powell made this week was we're where we're at when we thought we'd be raising rates by twice this year. No,
we're cutting rates. And that really says it all.
NEWTON: Yes, a real reflection of where he thinks the economy is at this point and what the challenges could still be.
I feel like we have to catch our breath here, Diane, I mean, what a week, right? It's like --
SWONK: It's daily, you know.
NEWTON: It's just crazy, Diane and having said that, have a great weekend, and thanks for the analysis. Appreciate it.
SWONK: Thank you.
NEWTON: Now, as we were just talking about that trade war, Beijing is slamming Donald Trump's promise to put a 10 percent tariff on any exports
the U.S. hadn't already put import duties on. Phones, computers, clothing, shoes, and toys. Yes, they could all get more expensive in the United
States. In fact, anything imported from China.
Now, study after study shows its U.S. consumers who are bearing the cost. The President continues to say though, without any factual basis that
tariffs are all paid for by the Chinese.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We're taking in many billions of dollars. There's been absolutely no inflation and frankly, it
hasn't cost our consumers anything. It cost China.
(END VIDEO CLIP)
NEWTON: Cristina Alesci is following all of this. She is at the New York Stock Exchange, still trying to recover really from that big trade
announcement yesterday. Do you have any more clues?
I know you've been following these negotiations for such a long time. It seemed that talks were okay. Not great. But okay. New talk scheduled in
September. What happened?
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: No one really knows what happened. All we know is that the talks were going
presumably quite okay. Not good. Not bad. When the team came back from Beijing, obviously the President not happy and that's what led to that
tweet yesterday.
Look, investors at this point, really see Trump gambling with the U.S. economy. With the numbers that we got from the employment report today,
it's pretty clear that there's some slowness ahead, some softness ahead.
Your former guest was talking about a slowdown, perhaps in the work week on the manufacturing front.
Now, the headline number today of 160,000 jobs was good, but we had revisions down for May and June. And that basically gave us an average of
about 140,000 jobs added for over three months for each month over three months, and that's pretty good.
Most economists say that we can keep the 3.7 percent unemployment rate steady with those kinds of additions every month. But there are pockets of
weakness. One is manufacturing and other is retail.
So a lot of people scratching their heads as to why the President would want to escalate the trade war at this juncture with that backdrop.
So that led to speculation today that perhaps the President is trying to decelerate the economy in order to put the Fed in a corner and force the
Fed to cut interest rates, again. Obviously a very risky strategy, and not one that Wall Street is very receptive to -- Paula.
NEWTON: Yes, that's a bit too cute. And it also assumes that the Fed is going to be able to do anything about this and that is an open question,
right? Even if they do cut rates by another quarter or half percent.
Before I let you go, two schools of thought on this, and one is, look, it's only 10 percent. Let's get these negotiations over with. The market will
absorb the 10 percent. What are people saying?
ALESCI: People are really not decided on this fact. What we do know is that the U.S. consumer has been the backbone of this economy.
When we saw the GDP numbers come out last week, it was very clear that U.S. businesses were pulling back on investment. They were very cautious. The
U.S. consumer, however, very optimistic, and that made up for any pullback on the business side.
So, if you are going to effectively tax the U.S. consumer with these tariffs, then you're really putting that kind of exuberance, that kind of
optimism at risk here -- Paula.
NEWTON: Yes. All good points. Cristina Alesci, thank you so much. Appreciate it. And as we were just talking about, Beijing, saying, look,
it's not afraid of a fight, but they only have a few options to retaliate. Let's go through them.
They could add tariffs of their own. The problem is China buys a lot less from the United States than sells to it. That's one of the sticking points
of the negotiation.
[15:10:10] NEWTON: Now, they can only put levies on about $120 billion worth of goods, Washington can hit more than $500 billion. China could let
the value of its currency fall and now, it would make exports cheaper, of course, and of course, it would dilute the impact of these Trump tariffs.
But it could spark an outflow of money from China and risks, of course, hurting its own Chinese economy.
Now, China has a near monopoly on rare earth minerals, those are vital to the U.S. tech industry. It could curb those exports, right? That would
also hurt trade though with allies like Japan.
Finally, think of the major U.S. companies from Apple to Starbucks that are heavily dependent on the Chinese market. Beijing could add red tape and
regulations. But China's economy is slowing, and it needs the jobs and investment from those large companies.
Craig Allen is the President of the U.S.-China Business Council. He is in Washington. It doesn't seem like the President was listening. You guys
have been saying for months, don't do any of this.
I want to ask you a pointed question, though. What do you make of the President's claim that China will pay these tariffs? That China will be
the one to be taxed?
CRAIG ALLEN, PRESIDENT, U.S.-CHINA BUSINESS COUNCIL: Clearly American consumers are going to pay the tariffs, and especially on for consumer
goods. For industrial goods, it's American manufacturers. In addition to that, American farmers are being hurt by their retaliatory tariffs.
So, I'm afraid to report back that it is all of us who are paying the cost for this trade war.
NEWTON: Now, Craig, you have said that these latest tariffs will drive the Chinese from the negotiating table. But clearly, there wasn't enough
progress being made.
Why isn't this a good negotiating strategy? Show the Chinese that you are serious, and this will not happen on their timetable. But what will happen
on an American time table?
ALLEN: So, the Chinese position has hardened considerably since about mid- May when the United States put Huawei on the entities list. And this will lead to yet a further hardening of the Chinese position.
And what we see is that the Chinese are preparing for a longer term trade conflict. Now, they have not shown their hands. Yesterday was a big
surprise for them. But I would anticipate that early next week, we will see a tit-for-tat response on the trade side.
NEWTON: So, you do believe we're in for retaliation here without question?
ALLEN: The Chinese trade policy has for decades, been tit-for-tat and I doubt that there will be any change in that policy and from yesterday's
statements by the Ministry of Foreign Affairs, the Chinese are intending to react.
Now that said, they've been very calibrated in their response to the U.S., so I'm not anticipating that this will get out of control. But I am
anticipating that there will be further pain involved.
U.S. exports thus far this year are down 31 percent. Remember, this is the world's fastest growing large market, and each one of those percentage
points that we're getting hit will bear a long term cost as well.
NEWTON: Wow. Thirty one percent. Some of that might be attributable to the strong dollar as well. But I mean, obviously the global trade picture
is not looking very good.
But you had said that okay, there could be retaliation. If this escalates, American businesses are on top for what? You said that you worried about
regulatory scrutiny, delays and licenses and approvals. How hostile of an environment could China be for American companies going forward?
ALLEN: Well, again, I would emphasize that the Chinese have been very calibrated in the response, and there has not been actions against American
property or American companies, or American citizens in China.
However, nationalism is rising rapidly in China. There's a recent survey by the Brunswick Group that says 57 percent of Chinese citizens have
avoided of buying American products since the trade war began.
So we must be careful. This is not a short term game. This is a long term game and I am especially concerned that structurally, we will lose market
share in this very rapidly growing market and that will have a longer term impact on our farmers, ranchers, workers and companies.
NEWTON: And I'm sure that is what you were hearing from all of them. Greg, really appreciate your analysis as we continue to follow the story
over the coming weeks. Thank you so much.
ALLEN: Thank you.
NEWTON: Now, President Trump's tariff threat drove European stocks deep into the red. London's FTSE was down two percent the DAX and the Paris CAC
40 both saw their heaviest one day losses since -- for the day just over three years ago, three years ago following Britain's vote to leave the E.U.
That is definitely saying something.
[15:15:01] NEWTON: Now, the threats felt around the world. Trump's trade war is rippling through these markets. We will take a closer look at who
could suffer the most with a focus on the tech sector; and strap in. Okay, I'm ready Virgin Hyperloop 1 is fast on its way to becoming a reality in
India. We will take you there later in the show.
(COMMERCIAL BREAK)
NEWTON: And another check on the markets there, you see the Dow down now 200 points, not quite as low but not good either. Three quarters of a
percent right there. Everyone firmly in the red. And I really believe that the NASDAQ is the one to look for today, down now, better than one and
a half percent. And that was because Trump ratcheted up his trade tensions with China.
The Dow is in case you weren't counting headed for its worst week since May. The S&P and the NASDAQ could have their worst week since December.
As we were saying, a good indicator of how painful the new tariffs could be is the reaction of those all-important tech investors.
One high profile barometer is of course, the FAANG stocks: Facebook, Amazon, Apple, Netflix and Alphabet, the owner of Google. Look at there --
that is quite a decrease. The top line lower, better than two percent. And Netflix and Alphabet hang on, still really low in terms of their effect
from these trade wars.
Brian Fung joins us now from Washington. If we start with Apple here, it's really the poster child for this. Of course, they want and need that China
market, how potentially damaging could this be going forward?
I mean, we've heard it from Apple themselves. We've heard it from the very high profile CEO who doesn't seem to be having the hotline that he wants to
the White House?
BRIAN FUNG, CNN TECH REPORTER: Well, absolutely, this is going to be a big, big deal for Apple, as you saw there just now, you know, it's
struggling more perhaps than some of the other tech stocks in the sector.
The big part of the tariffs that's going to hurt Apple here is, you know, just the increased cost for components that go into products like the
iPhone.
And you know, as these tariffs roll out, they're affecting categories that weren't affected by previous rounds of tariffs and that includes things
like smartphones and gadgets and laptops and so forth.
And so Apple very clearly is sort of in that -- you know, squarely in the center of those categories as a major electronics supplier.
And you know, when you look at the iPhone, for example, you have some analysts saying that the iPhone will sell, you know, dramatically less in
places like the United States, as these components start becoming more expensive.
[15:20:12] FUNG: In fact, you had one analyst saying that, you know, Apple will sell six to eight million fewer iPhones in the United States as a
result of these tariffs.
But there is one bright spot here for Apple. And that is, its recent announcement that it's going to be buying Intel's 5G chip business.
And, you know, the reason why that's significant is because, you know, Apple really needs a strong supply of 5G chips as it tries to compete with
Android devices that can adapt to this new and faster mobile data technology. And Apple is a little bit behind the curve here.
And so by buying up Intel's chip business and 5G that could give Apple you know, a long term, longer runway to build out its new line of iPhones.
So, you know, in the short term, we're not sure how long these tariffs will last or could affect Apple. But you know, over the long term, the company
is trying to set itself up for good, strong growth its iPhone business.
NEWTON: Yes. And the issue is whether or not there will be a whole paradigm shift in terms of what Apple is able to do about either investing
in China or selling into China.
Before I let you go, Brian, in terms of, if we take the tech sector in general, revenue has been surprisingly resilient. And yet it are the trade
headwinds really a problem?
FUNG: Well, I think, you know, when you're talking about some of the other companies in this sector, many of them are software companies. And so, you
know, companies like Netflix are obviously less subject to some of the whims and pressures of the China trade war.
But overall, you're seeing a lot of these companies like Google, for example, needing to develop that extra Chinese market or suppliers, in some
cases to companies like Huawei. Google, for instance has approached the White House asking for a temporary waiver of some of the restrictions on
Huawei so that it can supply its Android operating system to Huawei devices, which exists in millions of devices around the world.
So you know, there are other ways in which this trade war could have impacts on the tech industry, aside from just Apple.
NEWTON: Yeas and mixed results really on trying to get those waivers from the White House. Brian, thanks so much. Really appreciate the analysis.
Now, some analysts say President Trump is playing a dangerous game with America's economy, which could end up in a recession at this point.
Matt Egan joins me now to discuss. That might be, you know, kind of putting too fine a point on it, but not if you're manufacturing or your
farmers, right? They seem to be squeezed every day. They really need this trade war to be over.
MATT EGAN, CNN BUSINESS LEAD WRITER: That's right, Paula. I mean, the stakes really could not be any higher here.
President Trump's threat to impose 10 percent tariffs on these additional goods from China really are going to be a big negative if it happens if
China retaliates, right, I mean, there's no way to see it other than more downward pressure on manufacturing, which has really slowed in the United
States, but around the world, it's been very depressed even before these latest trade tensions.
It can deal a blow to business confidence, to consumer confidence, which in the United States has been really strong. But that could be under
pressure, because for the first time, we may see consumer goods get hit with tariffs, everything from electronics, like smartphones and tablets, to
apparel and footwear.
And from a business standpoint, you know, this on again, off again nature of the trade just makes it so hard to plan.
Some CEOs rather than open a new store or open a new factory or hire a worker might just decide to sit it out and wait to see what happens.
And so Paula, it's clear to a lot of the people that I've talked to that this is only a negative, and this does increase the chance of a of a
recession.
NEWTON: And Matt, in terms of global growth and who thinks global growth is slowing, those would be the oil markets. It was completely eye watering
yesterday to see that dip in oil. A nice pop back today, but what is sentiment like?
EGAN: Sentiment is clearly very fragile, eight percent crash in oil prices yesterday in the United States. I mean, that is the worst single day loss
in four and a half years, which is pretty incredible when you think about it.
I mean, worse than after Brexit, worse than the mayhem in U.S. financial markets in December. Now, as you mentioned, prices did bounce back a bit
today. But I think this is mostly about demand. Right?
I mean, clearly a deepening trade war is only going to hurt what is already anemic demand. Bank of America has said that it could actually wipe out a
half a million barrels per day of demand. But there's also potentially some supply factors as well.
Bank of America also said that China may decide to retaliate indirectly by purchasing a lot of oil from Iran which has been sanctioned and that would
actually deal a significant supply blow because that oil has been kind of thought as off the market right now by investors.
[15:25:16] EGAN: So, oil markets are going to be swinging as these trade war developments keep coming in.
NEWTON: And quickly before I let you go, very quickly, Chevron and Exxon, though, despite all this really good revenues.
EGAN: Good revenues, and what they're doing is they are -- they're quickly growing output in the United States, especially in the Permian Basin.
Exxon's output of 90 percent, Chevron's output in the Permian, up 50 percent. To date, they've never pumped more oil and natural gas than they
did in this quarter.
So another reminder that there's a lot of supply out there -- Paula.
NEWTON: Yes. Thanks, Matt. And as we've been speaking, there are some buyers even on a Friday afternoon in the market there. The markets, you
know, off their lows quite nicely. So we'll continue to watch this market. Matt, thanks so much.
Now we have another trade war worry, as if we needed another one. Japan has removed South Korea from its list of trusted trading partners.
South Korea's President has vowed to retaliate. Sherisse Pham has more.
SHERISSE PHAM, CNN BUSINESS REPORTER: There's another trade war brewing that could have global consequences for tech companies and smartphones.
Japan dropping South Korea as a preferred trading partner, removing it from the so-called whitelist. That means big headaches for Japanese companies.
Exports to South Korean companies now need more screening to make sure they're not being used for weapons or military applications. Japan
defending the decision.
(BEGIN VIDEO CLIP)
HIROSHIGE SEKO, JAPAN'S INDUSTRY MINISTER (through translator): This move was approved to revise Japan's export controls appropriately and was not
intended to hurt Japan-South Korea relations or to crack countermeasures.
(END VIDEO CLIP)
PHAM: South Korea's President calling the move reckless and promising retaliation.
(BEGIN VIDEO CLIP)
MOON JAE-IN, SOUTH KOREAN PRESIDENT (through translator): Japan even though it has great economic spring attempts to harm our economy, then the
Korean government also has countermeasures with which to respond.
(END VIDEO CLIP)
PHAM: A short time later, a government official said South Korea was taking steps to remove Japan from its whitelist. Moon's Democratic Party
putting it bluntly saying in a tweet that "Japan's decision is an all-out declaration of economic war on our country."
The trade spat between the two countries started last month when Tokyo placed export restrictions on three chemicals used to make high-tech
products like display screens and memory chips.
The materials are vital to South Korean companies, including the world's biggest smartphone maker, Samsung.
Seoul sees Tokyo's restrictions as retaliation for a series of disputes dating back to the early 20th Century when Japan occupied Korea. Japan has
denied that's the case.
Investors were already worried about President Trump escalating the U.S.- China trade war. Now, this dispute between South Korea and Japan just adding more fuel to the fire.
Japan's Nikkei fell more than two percent. South Korea's KOSPI ending the day down about one. Sherisse Pham, CNN, Hong Kong.
NEWTON: Hey, after the break, White House reaction to today's jobs report and an extraordinary attack by the President on Elijah Cummings leads to a
chiding by one of his most loyal supporters, Nikki Haley.
(COMMERCIAL BREAK)
[15:30:00]
PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton and there's more QUEST MEANS BUSINESS in a moment when positive jobs numbers
and a strong labor market come as the U.S. economy faces new uncertainty on trade. And Virgin's hyperloop project in India takes a step closer to
making ultra-high speed travel a reality. But before that though, this is CNN and on this network, the facts always come first.
Despite North Korea recently testing multiple short-range missiles, U.S. President Donald Trump tweeted that it is not a violation of the Singapore
agreement, referring there to the joint statement signed by the president and Kim Jong-un last year. But the president did acknowledge the missile
test could be a U.N. violation.
The cold war era intermediate range nuclear forces treaty between the United States and Russia is no longer in effect. The Pentagon says the
U.S. has now officially withdrawn due to Russia repeatedly violating the treaty. Russia, however, claims the U.S. is the reason, saying Washington
made a serious mistake.
Thousands of U.S. troops in Afghanistan could soon get marching orders to head home. Sources say the U.S. is aiming for a military draw-down in the
coming months. Troop levels would drop from about 14,000 to between 8,000 and 9,000. Washington is hoping to achieve that by reaching a peace deal
with the Taliban.
U.S. President Donald Trump meantime says Congressman John Ratcliffe is no longer his pick for director of National Intelligence. Shortly after that,
Ratcliffe said on Twitter that he asked for his name to be withdrawn. Mr. Trump tweeted that it was better for Ratcliffe to remain in Congress than
quote, "go through months of slander and libel."
Sources tell CNN that even Republicans had voiced concerns to the president about that nomination. ASAP Rocky will be allowed to leave Sweden while he
awaits a verdict. He and two other men face assault charges. Donald Trump tweeted that the rapper is on his way home to the United States.
The president has been personally trying to persuade Sweden to release ASAP Rocky. A judge will deliver a verdict on the trial on August 14th.
OK, solid growth, but slower growth. That's the main takeaway from today's U.S. jobs report. A hundred and sixty four thousand non-farm jobs were
created in the U.S. last month, and average hourly earnings rose greater- than-expected 3.2 percent year-over-year.
Here's the thing though, job gains in May and June were revised downward and taken over a three-month period, employment growth is at its weakest in
about two years. Now, the White House says the jobs market remains robust. Abby Phillip joins me from the White House. All of that is true, Abby, and
yet, they can't be all too pleased. It's not the jobs market they were hoping for.
ABBY PHILLIP, CNN WHITE HOUSE REPORTER: Well, it's certainly not nearly as strong as President Trump would like it to be, especially considering that
he has been touting this as the best economy in U.S. history. And clearly, there are some concerns, not just outside of the White House on Wall Street
and in the business community about the trade war.
The White House aides are aware that there are concerns that this trade war could end up starting to hurt the economy that President Trump frankly
wants and needs to run on in 2020.
[15:35:00] This economy is not doing poorly by any stretch of the imagination. I think the jobs report is relatively good, but for a
president who wants to run on the best jobs report ever, and given all the concerns that there are, that this trade war with China in particular is
only heating up and not slowing down.
There are some notes of caution here, and the White House certainly, based on what we're hearing, his aides are aware of this and our communicating to
him that the trade war may be something that he might want to cool off.
NEWTON: Yes, and it's going to be interesting to see if that really makes a difference, in terms of how he handles those trade negotiations going
first -- going forward.
PHILLIP: And so far, it seems to have not made a huge difference in the trade war with China, because just yesterday, he announced new tariffs
going into place in September. But the key thing here is that there is a bit of a gap of time here between that announcement and when they will
actually go into place.
There is potentially time for China to do something that might cause the president to pull those tariffs back, so they built in some space, but
clearly President Trump is eager to keep putting the pressure on Beijing even at the risk of pushing this trade war into overdrive.
NEWTON: And Abby, I mean, the president overnight unfortunately on Twitter making light of Elijah Cummings and it's bad luck, really, and it really
affected his safety, his home was burglarized, and yet, this is really led to another Twitter problem. You see the tweet right there, "really bad
news. The Baltimore house of Elijah Cummings was robbed. Too bad." That's too cynical by half, and then you have Nikki Haley coming back on
him about this.
PHILLIP: That's right, but pretty extraordinary development on Twitter where Nikki Haley; the president's former U.N. ambassador weighed in on
this issue, and frankly, criticized the president saying, "this is so unnecessary." This is not something that we typically see from former
Trump officials, especially someone like Haley who left the administration more or less in the president's good graces.
The administration have been trying to keep her fairly close, even though her own political aspirations had seemed to be potentially overlapping with
President Trump's. A lot of people in the Republican Party want Haley at some point to run for president. Some had even suggested that she might
end up on the 2020 ticket with Trump.
And on that point, we saw the president's counselor Kellyanne Conway weighing in as well, firing back at Nikki Haley, saying that Haley's tweet
was so unnecessary, and she signed off with a Trump-Pence 2020 hashtag. That seemed to be a reference to those rumors that Haley could end up on
the ticket in 2020.
It has gotten kind of messy on social media, but it just goes to show the White House is paying attention to this, and it's being seen and taken note
of. It is very unusual to see former aides criticizing the president in this way, especially ones who did not necessarily leave the administration
on a bad note.
NEWTON: Yes, I mean, he's always hailed Nikki Haley, in fact, for the job that she did, and he is quite brutal about criticism. Abby, thanks so
much, really appreciate the update. And now to Facebook, which says it's taken down pages in accounts involved in a covert influence campaign tied
to the government of Saudi Arabia.
Now, the social media giant says the people behind it tried to use Facebook and Instagram to prop up support for the kingdom and attack its enemies.
Facebook said the campaign involved hundreds of pages and accounts. The organizers spent more than $100,000 on ads and the pages involved had more
than 1 million followers.
Donie O'Sullivan joins me now. These are quite insidious campaigns, sometimes hard to uncover. I mean, what was the nature of this campaign,
and why are they so difficult to pin down? Because some people would say that Facebook's policies just aren't working.
DONIE O'SULLIVAN, CNN BUSINESS REPORTER: Paula, you know, what's interesting about this is we have heard that the Iranians have been doing
this, we know that the Russians are up to it. This is actually the first time Facebook or any major social media platform has said that an
information operation like this was tied to people, linked to the Saudi government.
Well, what the page is doing, they were praising the Saudi royal family, Saudi Arabia's military actions in Yemen, and were also attacking Saudi's
enemies, sort of going after Qatar, "Al Jazeera" and also trying to undermine the credibility of Amnesty International which of course has been
critical of Saudi Arabia.
The pages were posing as sort of local news organizations, mostly targeting the Middle East and North Africa. And we're also -- they had built
personas. So, pages, accounts that made it look like they were real peoples in those countries. What the Saudi government is telling CNN over
the past 24 hours is that they know nothing about it.
NEWTON: It was an official no comment on that, and yet, it is up to companies like Facebook to get to the bottom of this. I mean, you raised a
good point. You know, one of the first times that they've actually been, you know, fully transparent about what was going on here and what they did
to take it down.
[15:40:00] Do you sense that there's progress here in terms of these policies in trying to get to the heart of these campaigns?
O'SULLIVAN: I mean, Facebook, mostly because of what happened in the 2016 U.S. election where we saw there was a vast Russian information operation
targeting the U.S. Facebook has staffed up. They've actually hired quite a few former Intelligence officials, people from DOD and elsewhere who are
now -- whose job it is, is to find these campaigns and take them down.
This specific campaign -- the investigation was actually a result of a tip- off from work by "Bellingcat", which is an open-source investigation -- organization, but absolutely right. I mean, this is a huge challenge,
particularly going into 2020 election here in the U.S. where, you know, there's so much scrutiny on these companies and they do not want a repeat
of 2016, but also, you see globally.
So, I mean, a little bit -- it could also be a little bit, you know, too little, too late. This was a vast operation that the Saudis were running,
you know, hundreds of thousands of dollars behind it, and, you know, we really might only be seeing the tip of the iceberg here.
NEWTON: Yes, and this is when governments around the world are looking in fact on how to regulate this kind of stuff. Donie, thanks so much,
appreciate it. Meantime, a new milestone in Saudi Arabia slow-march towards equality for women. They will finally be able to hold passports
and travel without the consent of a male guardian. Sam Kiley has more.
(BEGIN VIDEOTAPE)
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Saudi Arabia has announced that women over the age of 21 can finally apply for passports and
travel on their own. In the past, at least, back until the year 2000, they had to get permission to apply for a passport from a male guardian.
That would have been a father, husband or brother, most often. Now, recently, a number of Saudi young women have escaped the country by the
logging on using usually parental details to the website to apply for passports, and then running away to claim asylum in other countries,
claiming that they feared some kind of retribution from their loved ones or indeed, the regime, for leaving the country without permission.
This represents from the perspective of reformers in Saudi Arabia led by Mohammad bin Salman, a step towards his vision of 2030, a modernized Saudi
Arabia, capable of attracting investment and living in the modern world. It follows last year when women were finally allowed behind the wheels,
getting their licenses.
Now, this, of course, comes at a time also when Saudi Arabia is under intense pressure from politicians in Washington D.C., trying to reverse the
Trump administration's support for the Saudi-led war against the Houthi rebels in Yemen, and also, at a time when Saudi Arabia and Iran have locked
horns over each other's regional influence.
It's interesting to note that in Iran, women still do need those permissions from a male guardian to get a passport and travel. So, that
puts Saudi Arabia a little bit ahead of their regional rival. This move was celebrated by none other than Princess Reema Al Saud who is the
ambassador for the Saudi Kingdom to Washington D.C.
As a princess, of course, she has rather different rights, but now, all women can travel in Saudi Arabia once they get their passports without
asking permission of the men folk. Sam Kiley, CNN, Abu Dhabi.
(END VIDEOTAPE)
NEWTON: OK, when we return, Virgin Hyperloop One gets a big boost in the race to turn hyperloop technology from science fiction to fact.
[15:45:00] (COMMERCIAL BREAK)
NEWTON: Today, the future of hyperloop technology is zooming in to view. Virgin Hyperloop One just got the green light to build the world's first
hyperloop system in India and it's teaming up with Saudi Arabia as well. They create the first ever long-range test track.
Now, the company is developing ultra high speed projects all over the world including the UAE, Spain and the United States. This week, it's taking its
SP1 vehicle on the road in America stopping over in Ohio, Texas and Missouri. Jay Walder is the CEO of Virgin Hyperloop One, he joins me now
from Los Angeles. I mean, look, this is exciting news, we are all excited to try and do perhaps what we could be an eight or ten-hour drive in an
hour.
But we need a primer again, why is this so exciting and is the potential real?
JAY WALDER, CHIEF EXECUTIVE OFFICER, VIRGIN HYPERLOOP ONE: Well, it is exciting, it is that exciting. And look, let's imagine this, and this is
really what the deal is about. We're talking about traveling through a depressurized tube up to 700 miles an hour.
We're going to travel in a vehicle, we call it a pod that floats, literally on air, magnetic levitation. And so, we have the ability to do something
that is super smooth, super fast and super convenient. And now we're taking trips that are three, four, five hours and turning them into a
matter of minutes.
So, the specific project in India that we brought to the government in India was to build a hyperloop between Mumbai and Pune. These are two
major cities that are there, the transportation between the two cities is frankly, incredibly difficult right now, and it would take a trip that is
about four hours, and it would turn it into a trip that's under 30 minutes.
And we love the fact that the government is running with this. That they see this as an opportunity to be able to leap-frog, to be able to jump to
the forefront of this and explicitly is saying that they want to build the first hyperloop anywhere in the world. That's great.
NEWTON: And Jay, what's the timetable for this? I mean, and you know, what you're talking about is hyper-speed travel on essentially something that's
like a vacuum tube. Safety is clearly an issue. What challenges remain there?
WALDER: Well, you know, we've already built a test facility in the desert in Nevada. So, we have a -- we have a 500 meter test facility in the
Nevada desert. We've run over 400 tests on that, and so, this is no longer at stage one, this is a stage in which we're ready to go to shovel in the
ground. The project in India would have a first phase, it would build a 12-kilometer route and we're ready to go with it, and I think it would be
very exciting.
And during that phase, we expect to receive the full safety certification from the government to be able to move forward with the rest of the route.
NEWTON: OK, and I understand you, but how long before people are actually doing this in the route that you envision in India, let's say. Are we
talking three years, five years, seven years?
WALDER: Well, will be shovels in the ground next year, and I think that we can have certification in a few years after that. You'll be talking about
hyperloop before the end of the next decade, you'll be riding on hyperloop before the end of the next decade, and this will completely change the way
that you look at the area around Mumbai and Pune.
NEWTON: I'm going to hold you to that, because many of us --
WALDER: OK --
NEWTON: Are fed up with travel as we know it and do want other options. And you're a guy, your background, you're usually rooted in real life,
right? We're talking buses, trains, roads, I mean, do you really believe in terms of cost and application that this can transform travel for many
people?
[15:50:00] WALDER: I do, and, you know, your point, personally for me, I joined the company about 8 months ago as the CEO, and if you asked me, what
turned me -- what made me think that this was doable, it was the visit to DevLoop, you showed the pictures a moment ago about that test facility
that's out there.
One of the things that I love about what we're doing right now is we don't have a way to bring everybody in America to our test facility in Nevada,
but we're now bringing our XP-1, the pod that actually has moved around in DevLoop, we're bringing it on the road. Road show for us.
So, we'll be in -- we'll be in Ohio, in Texas, in Missouri, we hope to go to other places as well. We want to give people a sense of how real this
is right now. We're really measuring things in years, not decades, and yes, and I appreciate you saying that --
NEWTON: Right --
WALDER: I can't help but think about this in the terms of real people riding this and what this actually means. That's what my career has been
about, that's what I believe we're going to be doing here. And I think we're at that turning point where we've moved from thinking about this just
as technology to being able to think about it as a real transportation system.
NEWTON: Right, Jay, I certainly hope you're right, we'll continue to watch the project, really appreciate it. And we will be --
WALDER: Thank you very much --
NEWTON: Right back with more news.
(COMMERCIAL BREAK)
NEWTON: OK, Akerna is the newest cannabis stock to hit the market. The company listed on the Nasdaq in June but unlike most pot stocks, this
company is pushing software, not soft drugs. Legal cannabis suppliers use Akerna software to monitor product-data, all points in the supply chain
from planting the seed to those all-important customer sales.
Akerna says it's supplying a fast-growing market where compliance food standards is absolutely vital. Julia Chatterley asked the CEO about the
growth potential.
(BEGIN VIDEO CLIP)
JESSICA BILLINGSLEY, CHIEF EXECUTIVE OFFICER, AKERNA: July 4th is the third busiest holiday of the year --
JULIA CHATTERLEY, CNN: Right --
BILLINGSLEY: For cannabis sales. And this year, cannabis in the July 4th week did 80 percent more than in a normal week --
CHATTERLEY: Wow --
BILLINGSLEY: In terms of sales. And in fact, in 20 -- the current rate of consumer growth, which is about 12 percent a month, so if you think about
that, the consumer growth rate of cannabis, 12 percent a month, we predict that by 2020, people will buy more cannabis 4th of July week than wine.
[15:55:00] CHATTERLEY: Really?
BILLINGSLEY: Just next year.
CHATTERLEY: Just based on the growth that you are seeing right now? And you said that you're tracking in other countries too. Is the United States
far more prevalent in terms of the growth rate and the amount that's been bought than any other nation right now?
BILLINGSLEY: The United States still leads, but it is hampered by the federal state conflict --
CHATTERLEY: Right --
BILLINGSLEY: Which is still existing, and it's a question of when, not if it's going to end. And in the meantime, we are working with many countries
that are legalizing at a federal level and enabling compliance for them, providing the backbone and regulation as really a global marketplace is
emerging.
CHATTERLEY: I mean, I've read that you sold $400 million worth of sales in that July 4th weekend. I mean, as you said, that's the third largest
holiday. So, we can't take that in isolation. But what kind of size market are we talking about by 2020? If you're talking about a 12 percent
growth rate on a monthly basis.
BILLINGSLEY: So, we're projecting around 30 billion.
(END VIDEO CLIP)
NEWTON: Now, you can hear more from Akerna next week on first move with Julia Chatterley, and I will have another check of those markets right
after the break.
(COMMERCIAL BREAK)
NEWTON: OK, these are the last few minutes of trade on Wall Street. There are some buyers in there, you know. Look at that -- we've had them going
in, maybe picking up some bargains before the weekend ends. U.S. markets are still in the red and as I said, having climbed off those lows.
And it's been a week of losses with uncertainty and that trade war still on, signs this Friday as well of a slowing jobs market. Now, the Dow is
down as you can see there a little bit better than 100 points, a lot of big names still down there, especially those that depend on China and
manufacturing.
This is its fourth straight-down session, the longest losing streak since March, and of course, that tech sector is also suffering amid those trade
fears. Apple down 2 percent, the Nasdaq and S&P are each on course for their worst week this entire year.
And I also want to point out to you that in fact, President Trump speaking now, we'll have that for you soon. But he is saying that, in fact, China
has to do a lot more to turn things around. He says that he still can put on more tariffs if he needs to. And with the closing bell there, this is
QUEST MEANS BUSINESS, I am Paula Newton here on CNN, "THE LEAD" with Jake Tapper" starts right now.
(BELL RINGING)
END
