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Quest Means Business
U.S. Economy On Brink Of Recession After Q2 Contraction; Soaring Energy Costs Drive Record Profits For Big Oil; Etihad Posts Record H1 Profits As Demands Return; Breakthrough On U.S. Climate-Energy Bill; U.S.- China Relations; Call To Earth; Meta Shares Tumble. Aired 3-4p ET
Aired July 28, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELENI GIOKOS, CNN INTERNATIONAL HOST: With one hour left in the trading day, gains across Wall Street. The Dow Jones right now is in positive
territory, despite a negative growth number for the second quarter; Dow Jones up just over one percent. Those are the markets and these are the
Now, the White House argues the US is not in a recession after the economy contracts for the second straight quarter.
The Chinese President warns the US over Taiwan if you play with fire, you get burned.
And Etihad Airways returns to profitability. CEO Tony Douglas joins me live.
Live from Dubai. It's Thursday, July 28th. I'm Eleni Giokos. I'm in for Richard Quest and this QUEST MEANS BUSINESS.
Welcome to the show, and a very good night to all of you.
The US economy is shrinking, and recession may be on the horizon. US GDP contracted by 0.9 percent from April through to June. It is the second
negative quarter in a row, and the number is worse than many economists had anticipated.
American consumers pulled back on spending amid the highest inflation in decades. Now, despite the surprise drop, President Biden said the US
economy remains in good shape.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: Let me just give you what the facts are in terms of the state of the economy. Number one, we've a
record job market, a record unemployment of 3.6 percent today. We've created nine million new jobs so far just since I became President.
Businesses are investing in America at record rates.
That doesn't sound like recession to me.
(END VIDEO CLIP)
GIOKOS: All right, the White House says there is more to the story than GDP growth when it comes to calling a recession. Now in a blog post
published last week, the White House said economists must also take into account factors like the labor market, consumer and business spending,
industrial production, and personal incomes, the White House concludes.
Based on those pieces of data it is unlikely that the decline in GDP in the first quarter of this year, even if followed by another GDP decline in the
second quarter indicates a recession.
Treasury Secretary Janet Yellen said the hallmarks of a typical recession simply aren't there.
(BEGIN VIDEO CLIP)
JANET YELLEN, US TREASURY SECRETARY: Most economists and most Americans have a similar definition of recession, substantial job losses and mass
layoffs, businesses shutting down, private sector activity slowing considerably, family budgets under immense strain, and some a broad based
weakening of our economy. That is not what we're seeing right now.
(END VIDEO CLIP)
GIOKOS: All right, Rahel Solomon is in New York to unpack this very messy report, I have to say, so many contradicting pieces of data. And you had
Biden on one side saying the economy is still in good shape; you had, you know, the output -- the overall output of the US economy contracting, and
then you've got these bright spots.
So how do we read into, you know, what the normal definition is, which we've come accustomed to, of course, two negative consecutive quarters
versus what we see today.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, let's go over sort of all of these data points and what is sort of working right to your point,
Eleni, so good that we heard the President and certainly his economic advisors tout this quite a bit today and recently is the jobs market. It is
historically low for unemployment, we are continuing to see record numbers of workers being added each and every month and the demand for workers is
very high, 1.9 for every one person looking.
Consumers are still spending, but we saw in this GDP report today, it is slowing, still a positive contribution, but slowly. Let's talk about some
of the things that are not working so well. Not hard to find these.
Of course, aggressive central bankers who are trying to get a lid, trying to put a lid later on inflation. Business spending is slowing. We also saw
this, Eleni in the report certainly, in terms of inventory, certainly in terms of homebuilding.
So businesses are starting to cool their spending, their investment; and supply chains, I mean, we're starting to see signs of life in supply
chains, but that is still creating a havoc on businesses.
Let's talk about what is just downright ugly, not just for us here in the US, but for many countries around the world. Inflation here in the US,
we're dealing with inflation at 9.1 percent affecting everything from food, energy costs, gas, apparel, everything practically is more expensive with
just a few exceptions.
So we know of course, that this is at the heart of it all, right? I mean, this is at the heart of those aggressive central bankers. And so it is a
very strange time, JPMorgan put out a note this morning that's at odd times becoming even odder.
I can say that, look, in the report consumer spending, like I said, slowing but still positive. The biggest drags were the inventories, was the
business spending. We also saw less government spending. So it is a really strange time.
Eleni, I spoke to an economist today from Harvard, who actually used to be on that Committee in Boston that actually decides a recession. And I asked
him, "Well, what do you think?" And he said, "Look, it's still very unlikely that the Business Cycle Dating Committee of the NBER is going to
call this a recession, because even if you look at some of the indicators from the first quarter GDP, it was still positive without getting into sort
of all of the wonk behind how that could be.
But when looking at those figures, it was still positive. And we won't know more about this until we start to see the revision, so it is an uncertain
time unfortunately made even more uncertain.
GIOKOS: I know, right. We are so used to looking at the technical definition, but the metrics -- there are so many more metrics to take into
Rahel Solomon, always good to see you. Thank you so much.
Now, the White House says slower growth could help put the economy on steadier and more stable footing after two tumultuous years. This year's
decline comes after a period of unprecedented economic expansion, all of that says the US economy recovered from the shock of the pandemic.
And now the Federal Reserve is trying to calm growth without tipping the economy into an official recession.
I'd like to welcome, JPMorgan Chief US economist, Mike Feroli joining us now.
Mike, have to say, the US economy is on a very unusual trajectory, and, you know, you've got weakening output, you've got strong jobs gains. How are
you reading into this latest report? Would you define this as a recession? Are you taking a wait and see approach as well?
MIKE FEROLI, US CHIEF ECONOMIST, JPMORGAN: So look, this has been an incredibly turbulent two years and it continues into the second quarter.
I would agree with the previous analysis that we are probably not in recession, given -- or in the second quarter, at least, we weren't in
recession, given that we averaged 375,000 job gains per month in that quarter. So that strikes me as not a recessionary environment for all the
reasons that were discussed earlier.
Going forward, we will see. Certainly, there are some hints that perhaps that job market strength is weakening, or at least slowing down a little
bit. But I think the data through the second quarter suggests that we're probably not -- again, probably not in recession, even though it is
obviously very unusual to have two negative quarters of GDP growth, and even more unusual to have that with such a strong job market.
So you know, this very uncertain period continues right up to the very most recent data that we are seeing.
GIOKOS: It absolutely is -- it is peculiar and odd.
Okay, tell me about where you saw the biggest misses within this report that is showing signs that when there is a big probability that we might be
seeing a recession in the US. By the way, warnings that we've heard from many analysts, many economists saying this might happen if we start to see
global sort of exogenous factors as putting more pressure on the US.
FEROLI: Sure. So you know, every sector of the economy that was sensitive to interest rates actually turned down this quarter. And I think earlier,
you discussed business investment spending, and that was one of the one of the misses is that you see now consumer spending on durables, on housing,
and business spending on capital goods slow.
And so that suggests that, that is quite consistent with the early stages of tipping into slower growth or contraction. It is also what the Fed is
trying to do and what hopefully will lead to less inflationary pressures over time, but you have to keep in mind inflation usually lags economic
activity by a couple of months.
So hopefully what we saw in the second quarter, which was genuinely a weak number, for sure, even if you want to kind of cut through all the little
details and the noise, it was a weak quarter, but hopefully it is to say, just some weaker or softer inflation numbers ahead.
GIOKOS: Yes, I mean if you had to just under different circumstances see two consecutive quarters of contraction, there would be panic, so I mean I
see the markets up today.
But look, the consumer is the most important part of the US economy, and I was looking at consumer spending that came in better than expected at one
percent. It seems that consumer balance sheets are still looking very robust, which is reflected in the jobs growth number as well.
But are you worried about the state of the consumer given the inflationary environment?
So you're right, the consumer performed admirably given the strains on purchasing power in the second quarter, and I think going forward, one of
the reasons to be a little hopeful for second half growth is that, you know, if the markets are correct, that energy prices, while still high,
should moderate a little bit from where they were in the second quarter.
And if that actually transpires, I think you have some relief on consumer purchasing power, which could lead to better spending outcomes.
I think we are also seeing that in some of the agricultural markets where, you know, we've obviously had tons of food price inflation as everyone, I'm
sure all your viewers have experienced. And that could moderate to which if that happens, I think we could actually get a little bit of good news on
headline inflation, at least certainly in the -- you know, we're looking at, I think, for the next two months, if those markets are correct.
Headline inflation, perhaps averaging below two-tenths of a percent, month- on-month. So I do think there is some scope for consumers to do a little better here if we get that softer inflation patch.
GIOKOS: Look over the past few days this week, the markets have done quite well, despite some of the sort of bad pieces of economic data. Again,
another rate hike, bad GDP numbers, is this a signal from the market that they are liking what they are seeing in terms of response from the Federal
Reserve, and generally, the messaging.
And is it also a signal that they, you know, that the market participants perhaps believe that this is as bad as it is going to get, and that we
might not be seeing a deep recession?
FEROLI: So I do think, to your latter point, a lot of bad news has been priced in, and I think what we heard yesterday from the Federal Reserve is
that we're probably closer to the end of this rate hike cycle than the beginning.
So, we still have more rate hikes to come, but probably not 75 basis points each month. So I think that even incrementally slower pace of rate hikes
should be positive.
And I think perhaps the market saw today's number as even though it was weak, to my earlier point, if it actually -- if that weakness does give us
a little bit of relief on inflation eventually, then that slower pace of rate hikes can be sustained without them -- without the Fed having to
rethink whether they need to crank it back up again.
So I suspect a lot of that -- a lot of the negatives have been priced in and now, perhaps we're feeling like maybe there's a little bit of light at
the end of the tunnel in this inflation battle that we're kind of just starting.
GIOKOS: Hopefully, yes. Well, let's see if hopefully, things get better. Mike Feroli, thank you so very much. Good to see you.
FEROLI: Thank you.
GIOKOS: All right, we're going to very short break and the CEO of Etihad Airways joins me next. I'll be talking to Tony Douglas about the airline's
first profitable period in nearly seven years. You don't want to miss this interview, that's coming up in a few minutes.
GIOKOS: In Germany, inflation hits eight and a half percent in July and that was an unexpected increase from June's 8.2 percent.
Now, the surge was driven by food and energy prices. Energy costs alone are up 35 percent, and that's compared to a year ago.
Energy giant, Shell and Total in the meantime, reported record profits on surging oil and gas prices. This comes as Russia slows flows to Europe and
the EU leaders agreed to voluntarily cut gas to avoid an energy crisis this winter. Both oil giants will be buying back billions of dollars' worth of
Anna Stewart joins me now. Anna, good to see you.
We were covering the incredible pain that the oil majors experienced during the pandemic when we had unprecedented low prices and this is sort of the
reverse, super strong earnings. Is it making up for the losses that were incurred during the pandemic?
ANNA STEWART, CNN REPORTER: Well, that's a really good point because the losses we saw in 2020, like Shell, I think full-year profits were down 23
percent. They are certainly making hay there now. As you say, some stellar earnings.
Not surprising at all, given where energy prices are that we are seeing a bonanza for Shell and TotalEnergies today. In terms of profits, $9.8
billion, this is just for the second quarter for TotalEnergies; $11.5 billion in terms of profits for Shell, so breaking what was already
actually a record breaking first quarter.
And then there's the big question of what do you do with all those juicy profits? Well, lots of investment and I think Shell were very clear that
they are looking at energy security very closely. Lots of investments in gas projects in the North Sea of the UK, also LNG and Qatar.
But, and you mentioned it in the read, it is really a buyback Bonanza from all of them. So huge one from Shell, $6 billion share buyback for this
current quarter. They already did an $8.5 billion share buyback for the first half of the year, similar news from Total. It was small.
And I was very interested that despite this incredible earnings report, shares are actually down today. So I think some investors disappointed.
We've also had buybacks from Equinor, from Repsol and you know what, Eleni, for your diary for your social calendar, perhaps lots more to come.
We still have Exxon, Chevron, and BP. And you know what, I think we'll be talking about some very similar themes with all of them.
GIOKOS: I'm writing those down, I am going to fill it in my social diary. Anna listen, you know, I get excited when earnings are out, especially from
We are seeing so much pressure in terms of messaging from President Biden, for example, and just generally leaders that oil companies also have an
ethical responsibility to think about what households are going through. You're talking about share buybacks. The companies are saying we want to
invest in future energy security.
Tell me about those very contradictory conversations that are happening at the moment.
STEWART: Yes. As soon as I saw the earnings released today as a kind of breakthrough, you really think, right, whatever I'm going to think here,
because already the conversation particularly in Europe has been, what can energy companies do to ease what is going to be a terrible winter with
millions of people pushed into poverty, as energy prices rise at the same time as household bills, food and everything else as well, relating to
Windfall taxes are very much on the agenda, and actually, the UK and Italy have already announced a windfall tax on big energy companies. It's being
discussed elsewhere as well.
In France, for instance, I think it narrowly missed out on a vote recently. It is still kind of on the agenda and actually TotalEnergies have agreed
that they will cut their fuel prices at French forecourts from September through the winter. So you can tell that they are really under pressure
But these energy companies in all of the earnings calls we are hearing are making it very clear that they understand the pain people are going
through, but this is making up for lost time during the pandemic. And if people want to have energy security, and if they want to have cleaner
energy, these companies need these profits to invest in the future -- their message no mine -- Eleni.
GIOKOS: All right. Anna Stewart, always good to see you. Thank you so much.
All right, so moving on.
Etihad Airways says it made a record profits in the first half of this year. The strong results come after six straight annual losses. The airline
says hot demand, more flights to Europe, and cargo revenue helped offset rising fuel costs.
Etihad is not without its problems though. Its CEO says travel chaos in Europe is hurting guest experience, and that the carrier might be short on
capacity if -- if -- demand recovers in Asia.
Tony Douglas is the CEO of Etihad Airways. He joins me now from Abu Dhabi on the phone.
Tony, thank you so very much for joining us. Good to be with you.
Look, you have recovered after a devastating pandemic, but you also experienced so much pain before the pandemic. This is a record profit that
you've seen in your 18-year history.
Is this because of pent up demand, the surge, because of the pent up demand due to the vet pandemic? And do you see more room for growth? Or do you
think that these numbers perhaps are repeatable?
TONY DOUGLAS, CEO, ETIHAD AIRWAYS (via phone): Well, good afternoon, everybody.
And for us, this has been a very, very special day to be able to announce record profits, as you say $700 million EBITDA and $300 million, core
operating profit for the first half of the year. But this has been a story that's been five years in the making.
We engaged in a major transformation program late 2017, and I think it's fair to say that was a result of some mistakes we've made in our earlier
years and it required an absolute root and branch review of the operating model of Etihad, a complete change with our fleet strategy, a downsizing of
our cost base considerably. And we were doing so well by the end of 2019, we were almost thinking "What could possibly go wrong?" We're about a year
ahead on that transformation trajectory. And of course, the pandemic hit.
We really worked hard through the pandemic. We continued on the cost base. We continued in terms of fleet rationalization and here we are now, I guess
with the fruits of that labor with absolute record profits for Etihad.
We've had 75 percent average load factor in the first half of the year and we are already in the second half of the year in July. We're averaging 88
percent load factor. So revenge tourism came back. It went off with a fire hydrant and long may that continue.
GIOKOS: Yes, yes, hopefully. I mean, you're talking about what could possibly go wrong?
Fuel costs are up 60 percent at this point, and I know that you hedge around 25 percent of your fuel requirements at this point. You know, I've
flown recently and I've seen how prices have changed in a matter of months.
Do you think that ticket prices are going to reach a point where they become unaffordable where you won't be able to absorb some of those costs,
and at what level would you say the oil price becomes dangerous for Etihad?
DOUGLAS: Well, there is question for every airline executive oil price is the number one concern because it's the biggest part of the cost base. But
having said that, here in Abu Dhabi, Etihad, we are the national carrier of the UAE, we've got a situation, which I would describe as a high-class
The demand has come back so strongly, we're sitting here now with last week, our load factors were in the low 90s, but pretty much sold out for
the whole of August, and most of September.
So the situation we find ourselves where it is almost, get onto etihad.com now to be able to book the tickets, because the demand is so solid. In
terms of being able to pass oil price through into ticket price, some of it is in there in the fuel surprise surcharge. But of course, given the amount
of competition in commercial aviation, it's impossible to pass it all through.
So are we concerned? Yes, we are.
However, this time last year, our load factors were 25 percent given the pandemic. What a difference a year can make, and notwithstanding the
challenges that sit in front of us, this is the best situation we found ourselves in in the 18 years history of Etihad.
GIOKOS: All right, Tony Douglas, really good to speak to you. I hope next time I can see you in person. I'm also here in the UAE. Much appreciated
for your time.
All right, returning to Europe's energy issues, Greece's Prime Minister says people are making money at the expense of European governments and
Kyriakos Mitsotakis spoke with Julia Chatterley about the energy crisis and he said Europe needs to have a credible solution in the event that Russia
cuts off gas.
(BEGIN VIDEO CLIP)
KYRIAKOS MITSOTAKIS, GREECE PRIME MINISTER: We have agreed, in principle, to reduce our demand for gas by 15 percent and we've also agreed to, sort
of the mandatory framework, to make sure that this does happen in case there is a real emergency.
But obviously, we need to send a much clearer signal to the market that our approach is credible. And that is why I've sent a letter to Ursula von der
Leyen proposing what I consider to be a reasonable middle path between completely mandatory measures and voluntary measures, essentially, as you
describe it, it is a demand response mechanism for industry that will have a much longer duration than the usual demand response mechanism that we use
when we want to take into account peak demand for electricity.
Essentially, we will be paying industry not to produce and not to use gas in a much more organized manner, with a much longer time horizon.
We think this is a credible proposal, it has been relatively well received, and I would hope that we can get some serious traction on these issues
before September, because right now, there is obviously significant uncertainty in the gas market, gas prices have increased tenfold, and this
is something we all know is not sustainable.
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: What's the response been? I know, it's what -- it's been four days.
MITSOTAKIS: Probably too early to tell, and as you know, Brussels is not at its most active during the heat of the summer, but what I can tell you
regarding crisis is that we've been making the case that there is something fundamentally wrong in the gas market since last February.
But if you look at the volatility in the TTF, there is no reason why the prices should be so volatile. If you compare it, for example, with TTF
index to the oil market, you will notice the significantly larger volatility.
I think, you know, a lot of people are making a lot of money at the expense of European governments, and at the end of the day, at the expense of
This, in my mind, is an unacceptable sort of situation that needs to be addressed much more drastically. We need to reconsider the link between gas
prices and electricity prices.
When we put in place our marginal pricing mechanism for the European electricity market, it made a lot of sense. It was a time when renewables
were still the most expensive form of electricity production.
But now with gas shooting through the roof, this mechanism makes no sense whatsoever.
So, I would really hope that as Europeans, we get our act together before winter comes and send a clear signal not just of solidarity, but also of
effectiveness in addressing a problem that essentially is affecting all of us.
(END VIDEO CLIP)
GIOKOS: All right, so up next, President Biden speaks to China's President Xi as tensions mount over Taiwan, that's all coming up after the break.
GIOKOS (voice-over): Hello, I'm Eleni Giokos and this is QUEST MEANS BUSINESS.
We discuss congressional Democrats who reached a deal on climate and health care. President Biden said the bill would reduce inflation.
And Facebook owner Meta reported its first year of decline in revenue since going public.
Before this, the facts always come first.
GIOKOS (voice-over): Ukraine says Russian forces can no longer move heavy equipment into the southern Kherson region after a crucial bridge was
damaged. But further north, Russia is increasing attacks and launching massive missile strikes on areas that haven't been targeted in weeks,
including around the Ukrainian capital of Kyiv.
French president Emmanuel Macron is hosting a working dinner with the Saudi crown prince in Paris, they are expected to discuss the Iran nuclear deal
among other issues. Human rights groups have criticized his decision for hosting the crown prince, who the West accuses of ordering the killing of
Saudi journalist Jamal Khashoggi in 2018.
JetBlue airways says it will buy Spirit Airlines in a deal which would create the fifth largest airline in the U.S. It comes a day after Spirit
gave up plans to merge with Frontier. It adds $33.50 a share, bound to come under scrutiny from regulators.
GIOKOS: Just in to CNN: the U.S. House of Representatives has voted to pass the CHIPS Act, a bill aimed to boost U.S. semiconductor production.
Now it goes to Biden's desk for his signature.
At the same time the U.S. lawmakers are closing in on a bill that would fund the country's biggest climate investment, yet. And solar stocks are
reacting kindly. Sunrun shares up over 25 percent, Maxeon following. Then Sunpower and First Solar, both up by double digit percentages as you can
see on screen.
The bill would invest $369 billion in renewables and climate change programs. It just received key support from senator Joe Manchin, a
Democratic holdout. Biden ordered the bill's potential earlier today. Take a listen.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: This bill would be the most significant legislation in history to tackle the climate crisis and improve
energy security right away. It would give us a tool to meet the climate goals that are set, that we agreed to, by cutting emissions and
accelerating clean energy, a huge step forward.
(END VIDEO CLIP)
SOARES: Manu, let's talk about the climate bill first. It is historic. They say it's a breakthrough bill.
Does it have the hallmarks for the U.S. to reach its climate goals?
MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: It remains to be seen. The goal is an ambitious one. It would aim to reduce greenhouse gas
emissions by 40 percent by 2030.
It would invest in a host of energy and climate initiatives, including energy, electric vehicle tax credits and a whole host of other issues to
bolster renewable energy. But it's still an open question about how this ultimately will play out.
This bill would give the government of the U.S. the power to negotiate the prices of prescription drugs, which has been a big issue that Democrats
have been pushing for some time.
In addition, it would also impose a 15 percent corporate minimum tax against large corporations here in the United States.
But this still has some hurdles to overcome in order for it to become law. It did get the support of senator Joe Manchin. He's been the key holdout
for some time. He was one of the coauthors of this deal. But they need all 50 Senate Democrats to agree on this.
Senate Democrat, Kyrsten Sinema of Arizona, she has not said how she will come down. She's raised concerns in the past over one of the tax components
of this bill, which was essentially a Wall Street tax that would be imposed here.
She had raised concerns about that issue. Whether she gets behind this remains to be seen. If they pass this, the goal is to pass it by next week.
Can they get it out of the U.S. House?
Other lawmakers have concerns about other provisions that did not get in this bill regarding taxes. So there are still some questions about whether
they can get the support, get it over to the presidents desk.
But a lot of optimism after these talks have floundered for more than a year, have been on again off again and then the sudden surprise, this big
deal being reached last night. Democrats' momentum -- they get a significant portion of the Biden agenda enacted before the midterm
elections here in the U.S.
GIOKOS: So a few more hurdles there but I want to talk about the CHIPS bill which has just passed the Senate on its way to President Biden's desk.
How significant is this to ensure some of the businesses in the U.S. are not going to be so reliant on U.S. semiconductor companies?
RAJU: This is a big deal. This has been in the works for a year. They have concerns about some of these companies, planning to make semiconductor
chips, would move overseas. There's also been a short supply for these chips for cars, for refrigerators, for electronics.
And that's why this has been such a big push. This is part of a larger bill that had been negotiated for the past year. It had to be scaled back in
order to get this provision through. This would spend more than $50 billion on these semiconductor chip production.
It would add roughly $200 hundred more to bolster scientific research and other science initiatives in order to improve the U.S. competitiveness
versus China. So this is significant. It did have bipartisan support.
Democrats got behind it in the House and Senate. Only a fraction of Republicans got behind it because of their concerns over government
spending and the like. Nevertheless, this bill is now passed. It heads to Biden's desk and he's expected to sign it into law into the coming days.
GIOKOS: Manu, thank you so much.
Now China's president Xi, warned his U.S. counterpart against playing with fire on Taiwan. The two leaders spoke in a call lasting over two hours. It
comes after tensions mount over the island and the Biden administration considers lifting tariffs on China.
The White House says President Biden and Xi also discussed climate change and health security. Joining me now is Jamie Metzl, the senior fellow at
the Atlantic Council and he served as National Security Council staff under President Clinton.
Good to see you, thank you so much. When I saw that line about playing with fire, you'll get burnt, it sounds like an ominous warning to the United
States. And it really centers around Nancy Pelosi's visit or potential visit to Taiwan. The Chinese are perceiving this in a very negative way.
What do you make of it?
JAMIE METZL, ATLANTIC COUNCIL: Well, it certainly is a threat to president Xi. He's throwing down the gauntlet at the United States, saying if Nancy
Pelosi visits Taiwan, we are going to respond.
So both of these countries are increasingly locked in. The United States now -- it would be harmful in some ways to the United States to back down,
given that, in the South China Sea, in the East China Sea, with Tibet, the countries around the world have continually backed down.
And China has continually made more and more aggressive threats in order to limit everybody else's maneuver. The United States has the USS Ronald
Reagan aircraft carrier battle group in the region.
I think it's most likely that Nancy Pelosi is going to go. So president Xi is going to have to respond if that happens. President Biden is going to
need to prevent any kind of overly aggressive behavior by the Chinese. So it's a very, very tense moment.
SOARES: Do you believe that -- when you say respond, do you think he will respond forcefully, as in Chinese Air Force entering Taiwan airspace or
even interfering with Pelosi's flight?
METZL: I think they will continue to violate Taiwan's air defense field. They've been doing that on a daily basis. Maybe they'll be more aggressive
and go further.
Given that the United States military has indicated they would put a protective shield around Nancy Pelosi's plane, should she decide to go to
Taiwan, if the Chinese tried to violate that, there will be some kind of kinetic -- in other words, shooting conflict -- between the Chinese and the
I don't think it's likely to come to that. But Xi is right on the verge of pushing for his unprecedented third term. The COVID-19 situation, the
economy is not going so well in China. So I'm guessing that he feels that he can't back down and needs to be aggressive.
The statement that you quoted, about fighting fire with fire, reflects that.
GIOKOS: So the CHIPS bill has just passed in the Senate, on the way to Biden's desk. At the same time, we know that tariffs are up for discussion
with China. Those could be lifted.
I want to you to give me a sense of what Biden's plan could be to try to soften relations with China, which by the way, has also shown its stance
with Russia, buying cheap fuel, for example. So it feels like an economic play, just like it does a diplomatic one.
METZL: The CHIPS act is great. For the United States, it's all about national competitiveness. The United States wants to lead in the 21st
century. And it needs to build a 21st century economy. And that's what the CHIPS act is all about.
At the same time, there are concessions, minor concessions, that President Biden might make in order to allow president Xi to save some face, maybe to
make clear that neither side can be absolutist, neither the United States nor the Chinese.
And maybe some of the tariffs that don't make sense, that aren't in the interest of the United States -- I think it's probably a good idea for both
sides to say what are areas where we have to hold firm but also what are areas where we can have a bit of compromise.
Because whether we like it or not, the United States and China are the two most important countries in the world. And the relations between them,
which are at a low point now, can't be allowed to fall into the gutter. Too much is at stake.
GIOKOS: Jaime Metzl, thank you so much for that analysis. Good to see you.
We'll go to a short break. Coming up an animal caregiver is taking pangolins for a walk and she'll tell us why after the break.
GIOKOS: They are sometimes called the scaly anteater. Pangolins are hunted for their meat and scales. It's estimated that more than 1 million have
been trafficked over the past decade, putting the entire species under threat today. Today, on Call to Earth, these docile creatures are given a
lifeline in Liberia, when animal rescue centers rehabilitate and release them back into the wild.
UNIDENTIFIED FEMALE (voice-over): Wildlife caregiver Mercy Doe is taking two young pangolins for a walk into the forest.
She's helping them learn how to find food in the wild.
MERCY DOE, WILDLIFE CAREGIVER: I bring the pangolin for a walk because, for them, we cannot get their food from the market and put it into the
fridge for them to eat. For them, they have to hunt for their own self.
UNIDENTIFIED FEMALE (voice-over): Found in Africa and Asia, pangolins are the most trafficked mammals on Earth, with all eight species at risk of
extinction. These two were orphaned by the illegal wildlife trade and rescued while still babies.
DOE: So when I brought them, I have to look for branches. So open all the branches. You see the termites in them. We put them down and then they can
UNIDENTIFIED FEMALE (voice-over): Mercy works for Libassa Wildlife Sanctuary in Liberia, a haven where rescued and orphaned animals are given
a second chance. In 2016, the Liberian government introduced a groundbreaking law banning hunting, trading and eating protected species.
A year later, Libassa opened their doors, providing care to animals in need. But in a country where bush meat is traditionally consumed, keeping
wildlife safe can be a challenge.
According to the sanctuary director, in the past four years, they've taken in 600 animals, from pangolins and monkeys to birds of prey and dwarf
crocodiles. And caregivers like Juty Deh Jr. are crucial to their survival.
JUTY DEH JR., WILDLIFE CAREGIVER: Some we get at a very young age and we have to bottle feed them because they still need their milk. Since I
started working with Libassa Wildlife Sanctuary, I feel like animals are part of me. So whenever I see somebody hurt an animal, I feel like they're
personally hurting me.
UNIDENTIFIED FEMALE (voice-over): Liberia is home to three of the world's eight pangolin species and although commercial trade of them has been
banned internationally, the World Wildlife Fund estimates that over 1 million pangolins have been trafficked in the last decade.
While their meat is considered a delicacy, it's their scales, used in traditional medicine in China and Vietnam, that drive the demand.
DEH: Pangolin are harmless. They can't harm anybody. They do not have natural enemies, except with humans. So if they get afraid, they roll into
a ball. And no other animal can bite through the scales. Also, that makes it easy for we, the human, to just pick it up and do whatever we want to do
UNIDENTIFIED FEMALE (voice-over): Juty has personally cared for every pangolin that has arrived at Libassa Wildlife Sanctuary, which, by his
count, is over 70. The goal is to rehabilitate and ultimately release as many rescued animals as possible back to the forest where they belong.
DEH: I'm very happy and also proud I can say. After caring for an animal, for sometimes one year and then putting it back into the wild, you actually
Because you are already saving another wild animal.
GIOKOS: And let us know what you are doing to answer the call to Earth, #CallToEarth.
GIOKOS: Investors are punishing Meta after learning its revenues fell for the second time after going public. The shares are down 6 percent, taking a
bit of a knock. The current company of Facebook and Instagram reported earnings yesterday after the bell. It said second quarter revenue is down 1
percent, compared to the same time last year. Net income down more than a third. The unit developing its metaverse lost $2.8 billion last quarter.
That is also facing regulatory challenges.
The U.S. Federal Trade Commission said it has blocked Meta from buying the virtual reality company Within. Paul La Monica is in New York for us.
Good to see you. Trouble brewing in the metaverse, it seems.
PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes, Meta, the company formerly known as Facebook, really had a lousy quarter. There is no sugar
You had the first revenue drop, year over year, in the company's history. That's certainly a problem. It comes at a time where investors are very
worried about social media advertising revenue drying up.
Snapchat's parent company Snap had a terrible quarter. Even Google owner Alphabet, the YouTube unit's growth in advertising, was pretty anemic. So I
think there are just legitimate worries right now about people, average users, maybe tuning out of Facebook and Instagram.
And the growth has slowed as a result. And advertisers know that. And they are wary of this economy so they're not spending as much on social media.
GIOKOS: Do you think that this is a blip in the greater scheme of things?
In that Facebook and Meta generally have incredible amounts of resilience. This is despite the fact that Kardashians gave a bit of flak to Instagram
this week. That was interesting.
LA MONICA: Yes, exactly. You do not mess with the Kardashians when it comes to social media, apparently.
You do so at your own peril. I think that, Eleni, one of the problems that Meta is going to be facing is that, when Facebook first went public, I
don't know if you remember that, there were a lot of concerns about how the company was allegedly behind the times with regard to a shift from desktop
When it bought Instagram, was it overpaying?
There were worries that Mark Zuckerberg really was not going to make that shift. He obviously proved everybody wrong. But now there's questions again
about whether Meta is spending too much on the metaverse.
And if virtual reality, augmented reality, will really be the way that consumers interact in the future, it's a bold bet that I think has made
Zuckerberg a target for mockery, more than anything else at this point.
Another thing I worry about, Sheryl Sandberg not there anymore, that's somebody that he has been able to rely on in the past, the quote-unquote
"adult supervision" in the room and she's gone.
GIOKOS: That's a good way of putting it. Talking about virtual reality, they're trying to buy it within. It seems like they're going to be facing
Are we going to be dealing with an environment where they are going to be looking at acquisitions as opposed to organic growth?
LA MONICA: Yes, I think that when you read that FTC statement, with their reservations about the deal, they are obviously stressing that a company as
big as Meta should be able to do things organically in that they are already a giant in the metaverse and virtual, augmented reality. So doing
this deal will make them even bigger.
And potentially, squashing competition. But this also represents a big change in the attitude that regulators have in Washington. And Meta is not
the only tech company that you are seeing people in D.C. crack down on.
I think it's going to be a lot tougher for companies like Amazon and Apple all to do these acquisitions, unless there is a wave of change in the
midterm elections. And even then, it seems like Republicans and Democrats, that's one thing we can all agree on, Big Tech is too big. It needs to get
GIOKOS: Interesting times. Paul La Monica, good to see you.
We've got the last few minutes of trading on Wall Street. We'll have a final look at the markets after the break.
GIOKOS: All right. That's QUEST MEANS BUSINESS. I'm Eleni Giokos in Dubai. That's the closing bell. Thanks so much for joining us.