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Quest Means Business
U.S. Strong Plunge on Trump's Sweeping Tariff Announcement; Lovely: Trump Tariff Formula Cherry Picks Numbers; WTO Predicts Decline this Year in Global Trade Volume; Trump Tariff Announcement Unleashes Global Shockwaves; Shippers Scramble as Trump Tariff Reality Sets In; The Impact of Tariffs on Everyday Items; U.S. Auto Stocks Tumble as Car Tariff Takes Effect; Trump's Tariffs Pummel Supply Chains. Aired 4-5p ET
Aired April 03, 2025 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:11]
RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street. Truly awful day. The worst day for the S&P in some
five years. We were at the lowest point on the Dow. We were doing 1,700 points lower. Quite right, sir. I would say just a little tickle of a
tackle on the gavel as trading comes to an end. The markets, there is so much to get into. Those are the markets and the main events that we are
going to be talking about.
Wall Street's fear gauge spiked as investors digest President Trump's sweeping change in trade policy.
Fundamentally wrong. Brutal and unfounded. European leaders react to the tariffs.
And put it in perspective. All economics is local. Just go to my local deli and the cost of tariffs and how it adds up.
Live from New York on Thursday, April the 3rd. I am Richard Quest. I mean business.
Good evening. We begin tonight with the numbers. U.S. markets are plunging to their worst day in years as the reaction to Donald Trump's sweeping
tariffs and the threat, the worry, the possibility that the way they dramatically reshape the global trade is going to be damaging. The market
at one point was 1,700 points lower. It just came back off the top. But it is still down nearly for percent, 1,600. It is going to tick for a second
or two more. It is the worst single day point drop since the pandemic.
The S&P was off more than four percent, and as for the NASDAQ, it is the worst of the day, it dropped, I was going to say nearly five six percent,
let's just call it six percent, because its 5.97 percent, a thousand points. The U.S. Treasury Secretary Scott Bessent advising nations to take
a breath and hold back from retaliating. Well, that's not really happening.
China is accusing the White House of bullying and has promised countermeasures. Canada has retaliated against the auto tariffs with its
own duty on some U.S. cars. The Canadian Prime Minister, who is now fighting an election, Mark Carney, says the global economy is fundamentally
changed and the E.U. called Trump's tariffs unlawful and unjustified.
Here is the Commission President, Ursula von der Leyen, who says Europe is finalizing its first round of countermeasures.
As for the U.S. position, the Commerce Secretary, Howard Lutnick, says the U.S. has been taken advantage of.
(BEGIN VIDEO CLIP)
HOWARD LUTNICK, U.S. COMMERCE SECRETARY: Let the dealmaker make his deals when and only if these countries can change everything about themselves,
which I doubt they will because that is the bet/
PAMELA BROWN, CNN HOST AND CHIEF INVESTIGATIVE CORRESPONDENT: So, he is willing to negotiate then. So he is willing to negotiate with these
countries right now or if they decide to look --
LUTNICK: Negotiate is talking, no talking, doing. These countries have abused us and exploited us. As he said yesterday, they need to change their
ways. Let's see them change their ways.
BROWN: All right, let me follow up with you.
LUTNICK: It is going to be a long time. Let's see what they do, not talking. Talking is nonsense.
(END VIDEO CLIP)
QUEST: Talking is nonsense.
Kevin is at the White House. Melissa is in Paris.
I am going to start with Melissa.
I guess talking is nonsense. But I guess, Ursula von der Leyen and the Europeans want to talk. So how and when and how?
MELISSA BELL, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, we understand, Richard, is that it is tomorrow afternoon that will happen. That will take
place, the very first high level talks between the European Union and Washington with regard to these tariffs. But there is a great deal of
anger, first of all, here in Europe, but also confusion.
What we have been hearing from the European Commission senior official, Richard, is that they've been looking at this 30-page document. They don't
understand how the 20 percent figure has been arrived at. What they say is by using the methodology and I quote, "if there is a methodology" that the
Americans appear to have used, they should come in at 1.5 percent, not the 20 percent that have been announced.
So first of all, they are going to seek clarification. Also, they say this is illegal according to WTO rules, so they are going to explore litigation
and they have been preparing for some time for various scenarios. And they believe they have quite a few tools in their armory to take this on.
They want to protect European consumers, but also hurt Americans where they can. The European Union, after all, as a bloc, is the largest trading
partner the United States has. They also point out, Richard, the European tariffs are remarkably low at the moment and particularly low for the
United States.
[16:05:07]
But that, of course, will not last. They want to protect E.U. citizens even as they take on the United States.
QUEST: Kevin, the White House is in no mood for listening, isn't it? And to some extent, they know that as the negotiations begin, they've got to be
very careful because they can't appear to have a chink in the armor of these global tariffs. We are changing the world.
KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: Well, can I say Howard Lutnick doesn't seem like he is in the mood for talking, but that's not to
say that other officials within the American administration aren't open to negotiations.
And I was struck by what we just heard from Donald Trump himself as he was leaving the White House to go to Florida. He said the rest of the world
wants to know if they can make a deal. That certainly sounds as if he is open to talking, to having a negotiation about these tariffs. And I think
that gives you a sense of some of the discrepancies that you're starting to see, even within Donald Trump's own team, after these have gone into
effect.
Certainly, they are adopting something of a sanguine approach. They say that this is the short term pain for the long term gain of reorienting the
entire American economy. But based on Donald Trump's own words here, it is clear that he wants to make a deal and I think for all of the reasons that
he says that he puts these tariffs into place, that perhaps is the closest to his heart.
He is a deal maker. He wants to be the person that the world comes to, to sell their goods, to sell their auto parts, to sell their agriculture. He
likes being the person that people pick up the phone to call and I think just his words there gives you a sense that that's where he at least sees
is heading.
QUEST: How annoyed are they in in Europe about the situation?
BELL: There is a sense, Richard, of betrayal, of anger. The Europeans oldest allies, said Ursula von der Leyen today, Emmanuel Macron, speaking
to business leaders here in France today, saying, look, we have to pause all investments in the United States. What kind of message would it send
that we should be investing at a time when this is being done to us?
So anger, frustration, but also Europeans feel that they are ready. A single market, the biggest in the world with 450 million consumers, they
believe they can fight back and they've got a bunch of instruments at their disposal to do it, taking on Big Tech, for instance, measures they believe
that can be punitive for American banks in terms of their revenue, and that is what they intend to roll out.
It may take some time. We know that on April 12th, we will get the measures that have been announced to face aluminum and steel. It may take longer for
the others, but Europeans are determined that they will do all they can to punish the United States and its companies and its consumers, even as they
protect their own.
QUEST: Last one for you, Kevin. I am having difficulty understanding what the White House's end game is. So, for instance, let's not worry about
revenue raising, but if the goal is to bring business back, then he doesn't want to negotiate down the tariffs because then the business just stays in
the other countries because it is tariff cheap. So how does he achieve that goal without -- you see where I am going.
LIPTAK: Yes, I mean I think you're just speaking to the contradictory nature of what the President is hoping to achieve from these tariffs.
Obviously, he says he wants to bring manufacturing back into the United States. He says that these tariffs will be able to do it. But obviously
that's a long term projection.
We won't know necessarily whether that is working for quite some time. And I think when you listen to officials speaking today, they essentially
believe that pressure, whether it is through the tariffs or whether it is through the President himself, talking about other kinds of sanctions on
these companies, that that will eventually be able to bring companies back into the United States.
There are a lot of other questions about whether, for example, there are the right kind of workers in the U.S. to actually staff some of these
places that he says will be rebuilding in the states, where he says that they will be. There are a lot of hurdles before this manufacturing boom
takes place in the United States that the President is projecting.
And already I think you're starting to see concerns from Republicans, particularly in the states where this is going to have the biggest effect.
States where agriculture is the biggest business start to say, yes, we are on board with this for now, but we really do want to see where this is
going before we can really get on board.
QUEST: All right, both of you, thank you. We've got so much more to talk about in the days and weeks ahead, but I am grateful tonight.
Now, the White House has shared the way it calculated the tariffs and the non-tariff trade barriers. It is very important. They said that they were
calculating that.
The equation includes imports, exports, price elasticity and other variables. But what everybody says is it boils down to something much
simpler. First, you take the U.S. trade deficit in goods with the nation in question. For China, it is 295. You then divide that by the number, by the
value of U.S. goods imported from the country, $440 billion and what you've determined is the surplus, which is 67 percent.
[16:10:10]
And then you divide that by two.
According to China, I mean, that's the effective rate. You divide it in half to arrive at the reciprocal tariff. The White House counselor, Peter
Navarro, told me in February, the formula is designed to level the playing field.
(BEGIN VIDEO CLIP)
PETER NAVARRO, SENIOR COUNSEL FOR TRADE AND MANUFACTURING: For the U.S. to compete, President Trump, what is going to happen here with this fair and
reciprocal plan is he is going to calculate equivalent reciprocal tariffs based on countries customized for each countries, depending on how big
they're cheating us and they are either going to stop cheating us, which we would love, or we are going to impose those tariffs.
(END VIDEO CLIP)
QUEST: Now, Mary Lovely is a senior fellow at The Peterson Institute for International Economics. They are the experts on tariffs and know all about
it.
When you looked at the -- first of all, it came online this morning on X, this idea of the very simplistic deficit divided by exports divided by two.
Then we got this complicated formula from USTR, which seemed to end up at the same result.
As you look at this formula at Peterson, what do you make of it?
MARY LOVELY, SENIOR FELLOW, THE PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: It is kind of backward induction to the answer that they want. I
don't know how else to put it. It does look very impressive. It has a delta and an epsilon, and subscripts, but it basically amounts to cherry picking
a couple of numbers so that it ends up with exactly what you said. It is the trade deficit divided by U.S. imports from the country in question.
You know, they picked a very, very high elasticity -- import elasticity, which is basically a measure of how much imports change when a tariff goes
up. You picked a number of four, which is a very high number. If imports disappeared that quickly with tariff rates this high, there would be no
U.S. imports and they would have no revenue, which contradicts of course, the administration's contention that they are going to raise a lot of
revenue with this.
QUEST: So do you believe that the formula, let's take the administration at their word, do you believe that the formula as postulated does account for
non-monetary tariff barriers?
LOVELY: No, it is really a made up number. I don't know -- there is nothing in economic theory and economic empirical work. There is no rationale for
it, really.
And for example, I mean, most importantly, I guess, no mainstream economist -- macroeconomists would tell you that you should try to solve the problem
of the U.S. trade deficit with bilateral tariffs. The question really is about the balance between U.S. consumption and income. It is a macro
question that has to be solved in the aggregate, not by taxing individual countries.
QUEST: And this idea that it will -- you know, I am just -- I am going to try and find what the President says, you know, it is going to be good. It
is going to be big. The economy is going to boom.
Even if we allow for the hyperbole that frequently goes with the President, is there -- I am trying to be as charitable as I possibly can to this
reworking of the global trade, and I think we would all accept that the U.S. has been unfairly treated in many cases on trade in the past, but is
this -- can you see a way in which this addresses it?
LOVELY: No. We should be running a trade deficit with some countries and a surplus with others, even in a world in which the U.S. overall trade is
balanced. So this clearly by putting very high tariffs on countries with whom we have a trade balance, a trade deficit, it really doesn't -- it
doesn't address the overall problem and it really penalizes countries that have a comparative advantage or a natural match with the U.S. in terms of
supplying us with goods that we really should not be producing because we cannot do it.
QUEST: Exactly. That is the idea that shoes get made better and the efficiency of producing in other countries, because you, you release
production capacity for more suitable things.
Now, when I looked, for example, at the tin tariffs of the 1890s, I know, I really am that sad -- when I looked at the tin tariffs, I saw that it
actually took about 12 to 15 years before production of tin really got to levels that were economically viable again.
This is going to be the same, whether it is automobiles, whether anything. It is going to take a decade or more to rewire manufacturing, if indeed it
can be done.
LOVELY: And if it is done, we will have a lower level of income. And, you know, I just -- I cannot state that enough. This is not a plan for
prosperity.
[16:15:10]
This is a way to reindustrialize in the most inefficient way possible. Do we think that there are trade barriers that should be addressed? Yes. Do we
think there are compelling reasons why the U.S. should want to re-shore or begin to produce some goods for National Security, economic resilience?
Yes. Is this the way to do it? No. This is optimized for maximum inefficiency, as well as really upsetting all of our trading partners,
friend and foe.
QUEST: Have you -- I am just going to throw this out. Have you asked yourself in a quiet moment over a cup of coffee, how did so many economists
sign on to this?
LOVELY: No, because I don't think most trade economists signed on to this. There are some there has always been some, sort of, I will call them
heterodox because we are being charitable, who sign on to theories that are not espoused by the majority. One interesting thing about this putting on
my social scientist hat, is that we are going to see what happens next. What happens? The administration has asked us to be patient through the end
of the year. As you justly pointed out, it takes much longer than that to rewire global supply chains. So we are going to see what happens by Q4 of
this year.
QUEST: Mary, well, forgive me, I am going to be coming back to you multiple times between now and the end of the year. Peterson really is the home of
expertise on this, and I am grateful to you as always. Thank you.
LOVELY: Thank you.
QUEST: Now coming up, it is QUEST MEANS BUSINESS. What a busy day.
Stephen Moore is with me, the former economic adviser to President Trump. He says tariffs are no cause for panic.
(COMMERCIAL BREAK)
QUEST: The head of the World Trade Organization is warning the tariffs alone will reduce trade volume this year and that is even before there is a
retaliation.
The Director General, Ngozi Okonjo-Iweala, said, "While the situation is rapidly evolving, our initial estimates suggest that these measures,
coupled with those introduced since the beginning of the year, could overall lead to a contraction of around one percent in global merchandise
trade volumes this year."
[16:20:00]
Stephen Moore is the former economic adviser to President Trump, who believes that Liberation Day is no cause for panic. Stephen is just being
prepared and we will be with him in just a moment.
While we wait for Stephen, we sort of put another five cents in, oh, no, apparently we do have you, Stephen.
Stephen, first of all, can you hear me?
STEPHEN MOORE, FORMER TRUMP ECONOMIC ADVISER: Hi, Richard. Good to be with you. Yes, I do.
QUEST: Good. There we go. There we go. I knew we'd get you. You can't escape me for long, Stephen. You can't. You can try, but you can't escape
me.
Listen, let's talk about this through. I want to take this slowly and clearly and in doing so, I am not going to question the reworking, if you
will, of the global trade network that the administration wants to do. That is a philosophical policy decision of the administration, rightly or
wrongly.
But I am going to question the way it is being done, the ham-fisted across the board, even tariffs on countries that have got no -- places that have
got no populations. This is not, they say, the right way to do it.
MOORE: You may be right about that. You know, I am not a big fan of tariffs to begin with. I am a big fan of Donald Trump and I do think he is a master
negotiator. And I think at the end of the day, he is going to negotiate lower tariffs around the world. So that's something I think we can all
applaud.
But it is a bit of a sledgehammer here, and I would have really liked to concentrate on two things. I think, first of all, China cheats and steals
and is a real danger to the world economy, so we should have really hit China first.
And then second of all, I do think that Trump's idea of reciprocity with tariffs, especially big countries that we trade with is the appropriate
response. So I want to make sure everyone understands that the United States has much, much lower tariffs and non-tariff trade barriers than
virtually all of our other trade partners, and that's not fair. It is not a level playing field and Trump is flexing America's muscle to say, no,
you're going to have to play by the rules. We are going to -- if you punch us in the nose, we are going to punch you back.
QUEST: The interesting economic argument, of course, is what is the end game? Now, it seems to be to want to revitalize American manufacturing and
to bring back, in a sense the manufacturing of a bygone era. But as we've just heard from Mary Lovely from The Peterson Institute if you do that,
you're bringing back the wrong type of jobs, a rebalancing of global trade is not taking the U.S. back to pre-1940.
MOORE: You may be right about that. I mean, look, one of the concerns I have is that the jobs of the future are not factory jobs. You know, I am a
major investor in a company that makes -- does housing construction and it is all done with robots and that is going to be the future. I mean, 20
years from now, every factory in the world, at least in the United States, is going to be basically robots doing that work.
And so I kind of agree that the United States should really focus on the high value added jobs, not jobs that may not even be around in 10 or 15
years.
QUEST: What do we do then? We are in this situation where, as I am sure, the political reality. Look, if you're Mark Carney in Canada facing the
electorate, Anthony Albanese in Australia facing the electorate, you're going to have to retaliate. If you're Ursula von der Leyen, you've got to
retaliate, and yet, retaliation will bring escalation. I just don't -- I mean, you've got to negotiate and I don't see how easily the certainty
comes back to some form of policy.
MOORE: Well, I think we have to start with the truism that the United States has the moral high ground here. We have the lowest tariffs. So for
other countries to say you know, I am kind of sick and tired of China and Canada and the Europeans saying that Trump is causing a trade war when our
tariffs are lower than theirs are. That doesn't make any sense. They are the ones who started the trade war by continually escalating their tariffs/
So the only real solution here that makes sense for everybody is for all of these other countries to agree to lower their tariffs. And if they do that,
Trump will -- look, you remember back, this was in about 2017 at Ottawa when Trump was at the G7 meeting and the last thing he said when the -- you
know, the Europeans were complaining about Trump's tariffs, he said, look, let's go to zero. Hey, how about that? How about if we all go to zero? You
think the Europeans would go for that?
QUEST: But then that -- but if you do that, see, here is where I find the ultimate contradiction in the policy. If you go -- if you do that, if
countries do reduce their tariffs, so it becomes a trade level playing field, you don't bring back the jobs.
MOORE: Yes. Well, you do because you know, the tariffs that we put on manufacturing items that come from China, those tariffs are lower than the
tariffs that China puts on our manufacturing. So you know this, if the price of something goes down, the demand goes up, and so we will have more
demand for U.S. manufacturing products if these other countries lower their tariffs. That's just simple economics.
QUEST: Stephen, it is good to see you. You'll be delighted to know I have in front of me Australian biscuits and licorice. I have some extremely good
Malaysian fast foods because these are all the tariff products. Good to see you, sir. Thank you very much.
MOORE: What you just described -- what you just described is something called the comparative advantage. So they make very good licorice there. We
should buy it.
[16:25:48]
QUEST: And we are and we have them. Thank you, sir.
Stephen Moore is joining me from there. I will taste the licorice, enjoy the biscuits and I might even have the hot and spicy. You'll see why I
brought all this stuff after the break. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Hello, I am Richard Quest. QUEST MEANS BUSINESS, a lot more. We are going to be talking to importers rushing to get goods into the U.S. before
the tariffs take place. The CEO of Flexport will be on the line.
And stocks in retail companies are falling. They face heavy tariffs on manufacturing. We will get to it after the headlines. This is CNN, and
here, the news comes first.
At least seven people are killed after a series of tornadoes have swept across the Southern and Central United States. Tennessee was among the
hardest hit with five deaths. Forecasters warn the same regions could be hit again this weekend, with the possibility of life-threatening flooding.
Hungary says its withdrawing from the International Criminal Court. The announcement made as the Prime Minister, Viktor Orban, welcomed Israel's
Prime Minister Benjamin Netanyahu arriving in Budapest. Prime Minister Netanyahu is wanted by the ICC for alleged war crimes in Gaza. Hungary is
technically obligated to arrest him as part of the ICC, but instead it rolled out the red carpet.
Rescue teams in Myanmar have found two survivors, more than five days after the deadly 7.7 quake. A 53-year-old man was pulled from under a collapsed
hotel near the quake's epicenter. He had been trapped for more than 125 hours. And a 40-year-old man was pulled from the rubble in another rescue.
More than 3,000 people have been killed in the tragedy.
Top story, from French champagne to Italian cheeses and beyond, the impact of tariffs is being felt across Europe.
CNN's Fred Pleitgen reports from Berlin.
(BEGIN VIDEOTAPE)
FRED PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): As shiny German cars roll onto massive cargo ships for export, fear is
spreading here that the seas could soon get a lot rougher after President Trump hit auto imports to the U.S. with a 25 percent tariff. European
exporters hoping Americans love German cars more than the U.S. leader loves tariffs.
For the American market, this port handles mostly higher-priced vehicles, the port's CEO says. We hope the buyers who purchase these rather expensive
cars are not so price-sensitive that they would refrain from buying them simply because they're subject to high tariffs. But the German auto
industry is already in a major crisis, with massive sales and revenue drops leading to job cuts and restructuring programs.
And it's not only the German auto industry that's in trouble. This country is in the midst of a protracted and worsening recession. And the last thing
Berlin needs now is a trade war with one of Germany's most important trading partners.
(Voice-over): In Berlin, people lashing out at the U.S. president for potentially exacerbating the woes.
We in Europe really need to concentrate on ourselves at the moment, this man says. The strengths are there in Europe in terms of industry,
development and technology.
And this man says, nobody will actually gain anything except perhaps Donald Trump's ego.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: This is one of the most important days, in my opinion, in American history. It's our declaration of
economic independence.
PLEITGEN: From fine Italian cheese and delicious Parma ham to French champagne and cognac, the Trump administration is slapping a 20 percent
tariff on goods from the European Union, citing the E.U.'s trade surplus with the U.S., a move the Europeans say is deeply unfair.
While they acknowledge Europe runs a trade surplus of about $173 billion with the U.S. when it comes to goods, for services there's a trade deficit
with the U.S. of about $120 billion, Brussels says, largely evening things out. And the bloc's leadership vows they will strike back at Trump.
URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: We are already finalizing the first package of countermeasures in response to tariffs on
steel and we're now preparing for further countermeasures to protect our interests and our businesses if negotiations fail.
PLEITGEN: And if those negotiations do fail, small businesses are set to suffer. The small Greek Kalavryta Cooperative for feta cheese had its
sights set on entering the U.S. market this year, but Trump's tariffs could drastically change that equation.
The tariffs certainly add a cost to the product, the CEO says, and what share of that will go to the final consumer, where the roulette ball will
land, remains to be seen.
Like for so many on both sides of the Atlantic, for those working here, the Trump administration's trade policy first and foremost means one thing,
uncertainty about who are friends and who are foes in international trade.
Fred Pleitgen, CNN, Berlin.
(END VIDEOTAPE)
QUEST: Importers are scrambling to get product into the United States before the tariffs take effect. The effort has been underway for months. In
February, imports surged almost 5 percent year over year, and they hit the second highest shipping volume for the month.
Ryan Petersen is the CEO of Flexport, a supply chain logistics company in San Francisco.
Sir, I imagine you are just bewildered and betwixt, working out particularly, you know, all the different new tariffs from all the
different countries on all the different products. How difficult has it been?
RYAN PETERSEN, CEO, FLEXPORT: Well, it's, you know, this is what we get paid to do. And we feel like this is the stakes have never been higher.
[16:35:01]
It's kind of our Super Bowl. Look at me here, I'm on television to talk about it. Normally really no one pays that much attention to their customs
broker. But, yes, we've been helping a lot of companies sort through the mess.
QUEST: What's the number one question they're asking you?
PETERSEN: Well, you know, there's a lot of confusion about how the new reciprocal tariffs will get implemented. And one of the questions is, hey,
do these tariffs get added to the existing tariffs and the answer is yes. So on first interpretation it looks like the tariffs from China of 34
percent are lower than Vietnam of 46 percent. But you have to remember they add to the 20 percent that was imposed by Trump earlier in his term.
And on top of that, somewhere between 7.5 percent and 25 percent, depending on the product, that he put in in his first term. So you're talking about
over 50 percent duty. And it may ratchet up from here. We'll see where things go.
QUEST: So give me a real -- I mean, without mentioning names obviously, but give me a real life example of the sort of thing that you're dealing with
at the moment. You know, is there a ship heading to the U.S. of which you're aware, with cargo of which you know about, and you're sitting there
thinking, well, hang on, that's going to be a bit more expensive now?
PETERSEN: Well, actually, that's a very interesting point because under the rules that actually if the cargo has until tomorrow to load under the
previous regime, but the ship has to depart. So there's a lot of people sitting around hoping that that ship, you know, picks up its anchor and
casts off in places like Vietnam because if it doesn't, if it, just because it's loaded, it doesn't count. And it's kind of out of your hands at this
point. You've turned your container over to the shipping company. Now you hope for the best.
So there's a fair amount of that. Now that's to get at the previous rate, which might be duty free depends on the product. And then it has until
April 8th to be at just 10 percent rate again for Vietnam example, instead of 46 percent. So April 8th you got a few days out. So there's definitely a
scramble right now to try to get containers loaded in time. Our teams are going to work overtime all weekend to make it happen.
QUEST: And this new, they've got rid of again the de minimis restriction which was for things under $800. Now that's going to have a dramatic effect
on many, you know the new fashion industry that's importing direct from China or Vietnam or whatever, straight into the U.S. postal system when it
arrives here, which until now had thrived on the fact that those packages were ignored at CBP.
PETERSEN: Yes. So that's going away. And that's been well known, although they finalized the dates to say it's going to be May 2nd for Chinese goods.
The big announcement yesterday was sort of a bombshell for the industry was saying it's not just going away for goods made in China but made anywhere
in the world. There will no longer be this exemption that goods worth less than $800 don't have to pay customs duties in the United States. So that's
going away.
And it's not just these Chinese e-commerce companies that use that. Over 30 percent of the e-commerce brands of the large e-commerce brands in the U.S.
are actually fulfilling from Mexico or Canada one item at a time into U.S. consumers and paying no duty. So all of those companies are scrambling as
we speak to bring that fulfillment back to the U.S.
QUEST: I had a headache when I looked at the harmonized schedule of U.S. tariffs, and I was really that sad that I looked it up online and just saw
the complexity of it. Now, I guess the tariffs in that harmonized schedule would be on, you then add those, would you, to the new tariffs, so you're
basically, let's say I've got rolled steel three millimeters with 14 percent XYZ, so you take the tariff that was already there. You add on any
extra tariffs and then you put the new ones on top of that.
PETERSEN: Exactly. So, you know, steel products got hit with a 25 percent duty. That gets added to 20 percent. That was earlier this year. It gets
added to whatever it was in a prior regime under World Trade Organization agreement. So yes, it's cumulative. It's getting ugly out there. And
companies need help with this. So that's one of the things like people in our industry, it's a pain. We are working our butts off right now.
But that is where we feel like we can create a lot of value for our customers, help them manage it with data. You can see, because also it
matters like where the steel was smelted and being able to track these things, you really need technology to be able to do that.
QUEST: I'm grateful to you. We'll talk more, if we may, in the days and weeks ahead, particularly as these deadlines hit. Thank you, sir, for
joining us.
Now, Donald Trump's tariffs have touched every aspect of everyday life. So I went out to buy one or two things. By chance there's a very good little
convenience store just around the corner here in near Hudson Yards. It's the Heavenly Deli. And when I went in, there were imported goods
everywhere.
[16:40:01]
(BEGIN VIDEOTAPE)
QUEST: It is easy to think of tariffs on the big stuff, the automobiles, the dishwashers and the like. But the truth is, most of us will feel our
tariffs at places like this. The Heavenly Deli where you buy your food and drink every single day. Just look. Tariffs. Tariffs. Tariffs. A bottle of
San Pellegrino. It comes from Italy within the E.U.
Now I know this costs about five bucks here. Tariff of 20 percent from the E.U. So you're talking about roughly a dollar or so. Who's going to pay the
dollar? The importer passes it to the distributor, the wholesaler, the good lady at the desk going to pass it on to me. You then start looking at other
things.
Licorice from Australia. Now there's an election in Australia at the moment. Anthony Albanese is facing the public. How is he going to explain
how this $7.99 licorice is now suddenly 10 percent more expensive? What's it going to do to the sales? You've got to buy a new charger. You can never
have enough chargers. Of course, Heavenly sells chargers. The charger and the cable come to about 20 bucks? But these come from China. And there is a
34 percent tariff on from China, 34 percent of 20 bucks. Do the mathematics yourself. Suddenly this becomes more expensive.
And then you've got the little stuff. The Ghost pepper spicy chicken flavor from Malaysia costs $2.99. It's described as spicy madness. How about how
much madness wants the 24 percent tariff goes on? And the $2.99 goes up. As it says here flaming spicy madness. Are they talking about the food or the
tariff?
Whichever way you look at it, everything is going up in some shape or form. And it really is just a question of who is going to eat the cost.
(END VIDEOTAPE)
QUEST: Never mind eating the cost. I'll eat the licorice and the Tim Tams, thank you very much.
The sweeping tariff plan announced will take effect over the next few days. But when it comes to auto tariffs, they've already come into effect. A head
of a U.S. auto dealership with me after the break.
(COMMERCIAL BREAK)
[16:45:33]
QUEST: Shares in carmakers fell sharply, plunged, if you will, after the President Trump's tariff on imported cars took effect last night. Shares in
Stellantis, look at the numbers themselves. You don't need me to go through it. Stellantis has actually paused production at some of its plants in
Canada and Mexico. Toyota and Honda both dropped sharply in New York. They're facing lower sales and revenues.
The 25 percent tariff applies to cars assembled outside of the United States. A tariff on auto parts that comes in in May.
Andrew Wright is a managing partner at Vinart Auto Group with me from Pennsylvania.
Sir, I feel your pain. Well, maybe, I mean, I can only imagine what you're going through now. But the tariff is now in and on, and I assume on all
your new stock that you will be arriving at least in the next few days and weeks and months.
ANDREW WRIGHT, MANAGING PARTNER, VINART AUTO GROUP: Yes. That's correct. And thank you for having me on, Richard. I appreciate the chance to be here
to talk about this important issue at such a critical moment in our country's history.
Yes, the ground stock right now, in my case, at my five stores, I have five brands, Acura, Honda, Hyundai, Mercedes-Benz and Porsche. So I'm well-
represented with import brands from both Asia and Europe. And the impact of these tariffs is really to be determined. But the one thing we do know
after yesterday's press conference they are coming and how each of the brands is going to deal with it remains to be seen.
Some have already made some statements about their intentions to sort of price protect, if you will, which is the language that's being used,
meaning they're not going to pass along any increases in pricing for the time being. And others are taking a wait and see approach. So in the
meantime, we have a little over 700 new cars in our ground stock, which is about a 45-day supply for my auto group here in eastern Pennsylvania.
And as our stock is replenished with cars that are subject to the tariff, we'll deal with it accordingly. But I think one thing is for sure, the
market is going to dictate pricing.
QUEST: What's your gut feeling on what will happen? I mean, we've got some examples of the cars that we've --
WRIGHT: Sure.
QUEST: That you've got on your lot and that you're selling at the moment. Here we have Hyundai. I can't see the -- Hyundai Elantra. $25,000. Now,
obviously, that's here and now, but $25,000, I can't even do the mathematics. The tariff 25 percent. You can work it out yourself. What's
your gut feeling of who's going to pay that tariff ultimately?
WRIGHT: I think ultimately the market is going to dictate the price at which cars will transact. That's why, you know, the automobile
manufacturers, they're constantly assessing the market and they're applying incentives to customers and to dealers as they see fit in order to keep
product moving, because at the end of the day, they're manufacturing companies. They need to keep their plants running.
So they're going to do what it takes to get cars down to a price that is palatable by the consumer, and that keeps things moving. It's all about
throughput. So in theory, the prices are going to get paid by the consumer. But in reality, if the consumers are not willing to pay it, then the
manufacturers are going to have to step up because they have to keep their plants running and the product moving.
QUEST: And you can't really, as I understand what you're saying, you can't really at this point know exactly how the consumers going to react, because
the last few weeks or days or weekends, whatever, have been somewhat artificial, with people rushing to buy.
WRIGHT: Yes. That's correct. I mean, we had the second best sales month in our company's history in March last month. So -- but that was definitely, I
think, artificially impacted by the news of impending tariffs. And again the sales pace has kept up this month as we're only, you know, in our third
day of April. But the sales pace remains brisk. And that is a direct result of consumers rushing to the market to try to beat the vehicles that are
coming in that will be subject to the tariff. So, but again, the market is going to dictate what the -- ultimately what the consumer will bear and
who's going to pay for it.
QUEST: One last quick question just occurs to me. You say you've got about 750 odd cars still on the -- in the stock. Could you get to a situation
where somebody comes in and says, look, we're now three or four weeks into this, have you got any nontariff cards left?
[16:50:05]
Or do you say, well, your salespeople say, well, that's over there is tariffed and that over there is not?
WRIGHT: I mean, I guess that's conceivable. We'll cross that bridge when we come to it. But for right now, we're dealing with a situation where our
ground stock is all pre-tariff. And as the post-tariff inventory gets co- mingled with the pre-tariff inventory, well, we'll address things accordingly. But again, the transaction prices are what they are.
QUEST: Send the bill for the aspirin to me, sir, as you tried to work it all out. I'm grateful to have you on the program tonight. Thank you, sir.
WRIGHT: Thank you.
QUEST: Now, QUEST MEANS BUSINESS, almost every fashion item sold in the U.S. will be hit with additional levies. After all, 98 percent of clothing,
99 percent of shoes are imported, in a moment.
(COMMERCIAL BREAK)
QUEST: Retail stocks were hit some of the hardest in the market. The chief executive of Restoration Hardware was on a conference call when the tariff
announcement. He used the words you can see on the screen and said, yes, this move is quite stunning. It's going to force everyone to just play a
different game. The company gets a large part of its goods from Asia.
Apparel Makers clothes are also likely to be hit. Look how far, oh, my goodness. Nike was well and truly hit hard. They were down very sharply.
Vanessa is with me.
Vanessa, my suit is from Hong Kong. Let me know where that is. So that's probably -- my shoes, you'll be pleased to know it came from China. So
that's going to be. And my tie is rather fine Italian silk. All in all, I'm a walking tariff.
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: You certainly are. And you see that reflected in those stocks right there. I mean, just
the dramatic drop in prices. Investors just selling off on retail because they know that these companies bring in so much product from all of the
countries that you just listed. And ultimately, at the end of the day, you, Richard, and the consumer will likely be paying those higher prices. Sure,
there could be a scenario where the suppliers are generous and maybe wants to absorb that tariff.
QUEST: Right.
YURKEVICH: But ultimately it's going to end up costing the consumer the money. That's what most economists believe is going to happen.
QUEST: So as we look particularly with apparel, where most of it comes in from overseas, how quickly, A, do you think we're going to start seeing the
price rise? And B, these sort of direct from China, Shein and things like that, Fashion Nova, they are really going to be hit by this new rule where
de minimis has now been taken off.
[16:55:09]
YURKEVICH: Yes. So I think if companies have stockpiled for a few months, maybe there's going to be a delay on price increases. But as you mentioned,
Shein, Temu, and Ali Express, these are companies that really have thrived off cheap prices and fast shipping. So this exemption that you mentioned is
essentially that if products were coming into the U.S. and were worth less than $800, they would be tariff free.
Now that is completely going away. They are going to be charged a tariff. So for China, for example, it could be a 54 percent tariff. For other
countries it will be double digits as well. But these companies have built entire business models off of this. And are consumers going to want to pay
50 percent more? Are they going to want to wait double the time as these now have to pass through customs?
It's a big, big question because ultimately consumers want cheap and fast. It doesn't look like that's going to be happening for these companies
anymore as this exemption was essentially thrown out.
QUEST: I'm grateful to you. Thank you. Keep a watch on these things and come back and tell us more as we see the prices rise. Thank you.
We will take a profitable tariff after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment," while we were in our commercial break, an e-mail just arrived. It's from JPMorgan. It's one of their
briefing notes. It's called "There Will Be Blood." And it now says that JPMorgan is saying the risk of recession in the global economy this year is
raised to 60 percent from 40 percent. So JPM now believing a 60 percent chance of a global recession. And for good reason. Because the bulldozer of
tariffs that was steamrollered into the global trading network yesterday has nothing like anything before.
Tariffs are now the highest level in a century. And on the U.S. itself, it's the highest tax rise since 1968. Put simply, this is going to have a
dramatic economic effect here in the United States and in all its trading partners as they adjust. Long term who knows what it'll mean? But one thing
I'll predict, people will now start to avoid the United States in terms of trade policy.
They will do business with whoever they can, wherever they can, profitably, if possible. But anything to avoid having to get caught up in the mess that
is now the U.S. trade policy. You can take that to the bank.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see
you tomorrow.
END
