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Quest Means Business
U.S. Stocks Tumble Amid Trump Tariff Uncertainty; White House Clarifies Tariffs on China Now at Least 145 Percent; NYPD: Helicopter has Crashed into Hudson River; Sell-Off Resumes on Wall Street, Recession Fears Remain; Prada Buys Versace in $1.4 Billion Deal. Aired 4-5p ET
Aired April 10, 2025 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:04]
RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street. I am sorry to say, we are back to business as usual
and that means the market is lower, quite sharply lower. Whatever gains there were yesterday, they've evaporated and more and hit the gavel to
bring trading to a close. One, two -- that was a very wimpy gavel. Very wimpy.
As trading comes-- we are off the lows of the day, well off the lows of the day, but still down 2.5 percent. The markets and the main event, the trade
war deepens as U.S.-China tariffs take effect.
Russia and the United States are swapping prisoners. We will have the details of that.
And two giants of Italian luxury are coming together. Prada has agreed to buy Versace, and the price tag is nearly $1.4 billion.
We are live in New York, on Thursday, it is April the 10th. I am Richard Quest, and I mean business.
Good evening.
So the relief rally, whatever it was, has been and gone, and now the reality of U.S.-China trade war is fully setting in. The stocks have
reversed sharply from what we saw on Wednesday's historic rally. The NASDAQ had been much sharply lower. So we've pulled back quite a long way on all
three of the major indices.
So the S&P is down about seven percent since the Liberation Day tariff announcement. The U.S. dollar suffered its biggest fall since 2022. It was
all happening while the President was speaking at a Cabinet meeting when Mr. Trump acknowledged there would be, as he put it, transition problems.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES OF AMERICA: Everybody wants to come and make a deal and we are working with a lot of different
countries, and it is all going to work out very well. I think it is going to work out really very well.
But again, there will be a transition cost and transition problems, but in the end, it is going to be -- it is going to be a beautiful thing.
Stuart Kaiser is with me, the head of U.S. Equity Trading Strategy at Citi. Stuart, I am guessing you are not at all surprised that the relief rally
has evaporated and we are once again falling. What was the sentiment? What was the feeling today?
STUART KAISER, HEAD OF U.S. EQUITY TRADING STRATEGY AT CITI: Yes, Richard. I think, there is a lot of the stuff you touched on, and the fact is there
is still very, very large tariffs, you know, kind of hanging out there. China and the U.S. continue this kind of one up brinksmanship you know on
the trade war.
So you know, the markets are definitely skittish. I think yesterday, really, what it did more was take some of the big tail risks off the table
and improve the risk reward a little bit. But it didn't, you know, sort of change the underlying dynamic, which is there are very large tariffs coming
and those have negative impact on growth, probably spur inflation a little bit higher.
And I think what it really does is it puts really big onus on trade negotiations over the next call it two to four weeks with our key allies in
particular. I think they're going to need to show some progress there, because if they don't, the market is going to then start to assume these
are more permanent tariffs. And I think then you have to start to price in really big recession risks.
So you know that's the sentiment I think from the floor here.
QUEST: And the market was already overvalued to start with. We must never forget that. And we had started to have that confluence of events where
people were questioning the -- not the future of, but just the overvalued and profitability of the Magnificent Seven.
KAISER: Yes, I think that's a hundred percent right. I mean, you had very strong sentiment, very high valuation. And remember, the market was down
about 10 percent, you know, late February to early March before the tariffs were even announced.
So I think to your point, high valuation, high sentiment meant the risk reward was pretty poor, and then you layer on a very surprising, you know,
large tariff on top of that and you can see what the results have been. It has been a very volatile sell off with a lot of uncertainty.
QUEST: So the next three months as these negotiations take place and later in our program, we will be focusing on the non-tariff barriers, but
assuming everybody knows what has to be done, the countries coming forward, the U.S. knows what they want to get rid of with each of those countries.
If there is progress, can this market live with a 10 percent general worldwide tariff?
KAISER: You know, Richard, I think it can, because I think that was kind of the baseline assumption of the consensus at the beginning of this year, and
now that we've gone so far beyond that, I think just coming back to it would be a bit of a relief.
Obviously, that is still a net headwind for the markets. But honestly, I think something like a 10 percent across the board was largely assumed as
the baseline to begin with. So I think the market can live with that.
[16:05:10]
You know, to President Trump's point, there will be a transition. There will be some hiccups here, but I think if that's where we settle, you know,
the markets will be just fine.
But I don't know that they have three months. You know, I think three months of uncertainty is going to have its own impact on economic growth.
So you know, hopefully they can at least be announcing good news and progress in the right direction you know, before three months is up.
QUEST: I know that my next question might seem a bit weird, but I think you'll know -- I think you'll know what I mean.
When we get the next earnings season, can we learn anything useful, bearing in mind the sheer amount of noise and disruption? What will we be looking
for from companies?
KAISER: You know, it is a great question. I think these three -- these companies have kind of three choices, right? You can defend your numbers
and if you defend your numbers, I think you better have really good evidence for that.
You can kind of kitchen sink it and just sort of price in all this tariff risk and get it out of the way or you can do you know what some companies
have done in the last week or two, which is just kind of pull guidance. And frankly, that level of uncertainty is quite negative for markets.
So I think these companies have a choice between three not great outcomes, and what that probably means is earnings season coming up is going to
include a lot of weak or uncertain guidance. And that could be, you know, another headwind for markets.
So it is really tricky for companies right now.
QUEST: And Stuart, hopefully, you'll be around to help us understand the earnings season as we get to it and as we go beyond it.
I am grateful as always, sir. Thank you.
KAISER: Thanks, Richard.
Now, the brunt of the tariffs, Donald Trump's tariffs if you will. They are now aimed squarely at China. The White House has clarified that goods from
China are subject to at least 145 percent tariff. It marks a sharp escalation in the trade battle between the two countries.
Just bear with me. U.S. duties on China went from 10 to 20 percent in March. Then in the course of a week, they went from 54 to 104 to 145.
Jim is with me. Jim Sciutto is with me.
Jim, the reality on the tariffs now, China hasn't yet responded because the 84 percent really just took them to a previous lot; hasn't yet fully
responded to what the President did yesterday in terms of going to 145. Would you expect them to or is now the time for both sides to skate to
thicker ice?
JIM SCIUTTO CNN ANCHOR AND CHIEF NATIONAL SECURITY CORRESPONDENT: Before I answer that, I just want to mention one phrase you used there, the
administration clarified its tariffs on China. There is nothing clearer. Clearly, the markets don't know what is clear, right? Because it changes by
the day.
It was 125, then it is 145. This is one of the issues, right? And as I understand it, it is one of the issues that our trading partners have,
whether that be China or U.S. allies, that this is a moveable feast. Right?
Every day, it is something different and that makes it hard to -- well, one make trade policy, but also to negotiate. From the Chinese perspective, as
I understand it, first of all, China is making quite clear they will not be bullied here. That's why you see the Ministry of Foreign Affairs from their
official account today, tweeting out quotes from Mao Zedong during the Korean War, the last time the U.S. and China were shooting at each other in
the Korean War with the words "We will not yield." And that seems to be their message now, is that they will not be bullied on these tariffs and
don't want to be perceived by the Chinese people as being bullied.
That said, as I understand it, Chinese leaders are open to negotiations, but they don't see those negotiation channels open right now. And no
concerted effort to do so by the U.S. so that's another piece of uncertainty.
If there is going to be a negotiation, how? With whom? When? Under what terms?
QUEST: The Chinese have also made their position, I think, remarkably clear. There was a commentary in "The People's Daily" that you will have
seen in which they reminded the U.S. that there is -- "Many U.S. products have high dependency on China, rare earth minerals. Currently, the U.S.
relies on China not only for many consumer goods, but also for investment and intermediate products exceeding 50 percent for categories," difficult
to find in the short term.
This is like be careful what you wish for, you might end up with it.
SCIUTTO: One hundred percent. It is quite implicit. You might even call it an explicit warning there. China has a lot. Let's not minimize the effect
on China, the damage to the Chinese economy here, it pays a heavy price for tariffs on U.S. exports to the U.S. market.
But China has, as it notes there, not just iPhones made in China, but lots of pieces of things that we buy in this country come from China.
[16:10:10]
And whether China is an exclusive market for those or supplier for those, or just a key supplier, that's still a pressure point, and it has other
pressure points.
The move in the last 24 hours restricting access to China's film market for U.S. films, major market for U.S. movie producers.
And then the big one, and you and I talked about this yesterday, Richard, it won't be the last time we talk about it that is that China owns a lot of
U.S. Treasuries, and China can inflict pain on the U.S. by selling those and driving up yields. Now, China would take a take a hit on that as well.
But the question is, do Chinese leaders calculate that hit is worth it as a way to apply pressure back on the U.S.
Nature of a trade war, right? It is a game of chicken.
QUEST: I am grateful. Jim Sciutto, thank you.
SCIUTTO: Thanks.
QUEST: Now, the interesting part that Jim was just talking there about, the non-tariff barriers. So the White House has raised concern over these non-
tariff barriers.
President Trump says these are really at the core of it all, the regulations that make it difficult for U.S. companies to sell elsewhere.
Here are some examples. They come from the USTR's recent report. South Korea, it has a difficult process for approval of process of biotech. It
favors its own companies with government procurement and has very onerous regulations on car emissions.
Australia, a good example, restrictions on beef, chicken and crops. It makes it difficult for U.S. farmers to export to Australia; and Vietnam,
basic price controls, bans on imports like offal products. These are the nitty-gritty, if you will.
Phil Mattingly is with me in Washington.
Now, look, getting rid of them is very difficult, but when Kevin Hassett said we have 15 countries coming with explicit offers, we know that -- it
is not like they are starting from scratch. The U.S. says, all right, here is the report. Get rid of those and we are talking.
PHIL MATTINGLY, CNN CHIEF U.S. DOMESTIC CORRESPONDENT: I think the thing to understand in this moment is, Richard, if you are one of those foreign
countries, if you are a diplomat or if you are a trade adviser for any foreign capital around the world, what you are bringing to the table,
whether it is one of the 15 the White House believes are tangible, or the other several dozen that are very clearly thinking about -- thinking
through this right now, you don't know what the actual threshold is that you need to hit.
And I think that's the most important thing about the non-tariff barriers and how the formula, to the extent we can call it that was crafted, that
led to the reciprocal tariffs that have now been put on pause, because that list that you just very eloquently laid out tells you two things.
One, they are bespoke to each country, right? There is no universal baseline with which you can say, all right, this country gets X, this
country gets Y, this country gets Z. That would be an actual reciprocal tariff. That's not what happened here.
The other is that to the point you were making, many of them can't just unilaterally be changed removed or revoked or repealed. And so what we are
hearing right now is this will be largely up to President Trump. What kind of effort are you making to either move things that you don't have the
authority to in this moment? But I think more importantly, it is what markets are you willing to open up to U.S. producers that aren't otherwise?
I think how they kind of frame that and how that actually slots into a way that meets whatever the kind of ambiguous threshold exists right now, those
will define the deals.
QUEST: Except the difference here is -- because a lot of these talks would have taken place in Geneva, as you know, at the WTO in a multilateral forum
where there has to be consensus, which is arguably not.
But here it is different. They do know that -- I mean, again, forget the headline number, because that, as you say, was a manufactured number that
nobody takes seriously anymore. But they do know what they have to offer up. And as you say, I mean a good one -- a difficult one will be Australia
and GMO or hormone treated beef, or because the Australians are and the E.U. are simply not going to take it. That is going to be non-negotiable
almost.
MATTINGLY: Yes, I think there are red lines that -- and I will tell you, talking to E.U. officials in particular, the Australia example is one that
I think they were particularly dumbfounded by in the sense of they knew, these are -- the fact that White House officials were citing that was kind
of bizarre, because they didn't know how you actually figure out some way to put that on the table. Right? That is just -- it is a nonstarter. It is
a red line. So what can they come up with instead? And I think that right now is a little bit of an open question.
I will say what's been interesting is as U.S. officials have kind of recalibrated somewhat over the course of the last 48 hours, they have put a
big emphasis on grouping the largest trading allies and largest just general bilateral relationships into the first in line, right?
[16:15:00]
But also countries in Asia in particular, and I am thinking Vietnam especially, who is, I think it was 48 to 49 percent tariff was just
crushing to what their economy actually produces in the understanding of there is now a very, very escalatory trade war ongoing with China.
What can they do with those allies? And obviously Vietnam, a lot of U.S. manufacturing moved their production from China to Vietnam. White House
officials, Richard, they make very clear, we believe that's a pass through for China, how can we figure out a way to eliminate that, block that, stop
that?
Those discussions are ongoing, including the Deputy Prime Minister, who is meeting with Scott Bessent, the Treasury Secretary, earlier today, making
very clear U.S. officials, I am told they want something done quickly, tangibly that actually they can announce. What that looks like, though I
think still very much an open question.
QUEST: Phil Mattingly, grateful for you, sir. The devil is in the detail with trade talks, and as you are very well aware, and I am glad that you're
on top of it. Thank you, sir.
Breaking news: The New York Police Department says a helicopter has crashed into the Hudson River.
Live images of the scene here in New York, the police say the crash happened in the vicinity, well, next to the West Side Highway. We've
learned that three people, including a child, have been rescued and are now being taken to hospital. One person is missing and there is a huge number
of emergency vehicles in the area.
CNN's aviation analyst, Peter Goelz is with us. We don't know why, we don't know how, but there is an enormous number of helicopters that go up and
down the Hudson and up and down the East River, not only sightseers, but going out to and from airports.
PETER GOELZ, CNN AVIATION ANALYST: Right. Many of them are charter operations taking passengers to Newark, Teterboro, and JFK and LaGuardia. I
mean, if you're an executive or person of some wealth, you want to beat the traffic, you want to take a helicopter and get you there in 15 or 20
minutes.
In this case, it looks like it is a Bell 206, but we won't know until we see more of it, and these accidents are terribly disorienting because you
hit the water hard. It is cold, it is murky. You're upside down in a minute and the safety harnesses that you wear are unfamiliar.
QUEST: And, of course, I've not done it, but I know those people who fly out to do stories on oil rigs have to go through that process of being
dunked and turned upside down. Now imagining, of course, that from a passenger who has not been tested or otherwise.
And yet the sheer number of helicopters, I was about to say, an admirable safety record, but then I am not so sure. You tell me.
GOELZ: Well, I mean, there have been 32 deaths reported since, you know, the 1970s. The last fatal accident was in 2018 with an open door tourist
helicopter that went down and because it had the doors wide open, it went down very quickly. So you know, helicopters have a good safety record, but
not a great one.
QUEST: What will the investigation -- we think that most of the people have survived from this one, which greatly assists, doesn't it?
GOELZ: Absolutely. The NTSB will be sending a team up there tonight, and the NTSB certainly have their hands full over the past couple of months,
but they will have a senior team on site, and they will start the investigation as soon as they get there.
Hopefully, the four passengers on board will be able to recover and contribute to the investigation. They will be able to explain exactly what
was going on inside the cabin, but we won't know that for a number of days yet.
QUEST: Now, Peter, you know, oh, look there, I think we are now seeing pictures of the helicopter there, which looks like it is -- you can't see
these pictures, but it looks like it is upside down.
And, Peter, while I've got you, just give me an overview if you will, FAA, NTSB, how they are all weathering now? They had a very, very difficult
start to the Trump administration. Are things settling down to the best of your knowledge?
GOELZ: Well, they have settled down. I mean, but you're right, Richard, the initial onslaught from the budget cutting and the personnel cutting did
affect the NTSB and did affect the FAA.
For the NTSB, those cuts were withdrawn and so the NTSB is still fully staffed and fully functioning. But, you know, they are under a great deal
of pressure.
[16:20:08]
And the FAA has taken some cuts, but you know, the Secretary of Transportation has been protecting them, and they are at work.
QUEST: And I am glad that you are at work for us today, sir. Very grateful. Good to see you, Peter, as always. Thank you.
Peter Goelz talking to us.
It is QUEST MEANS BUSINESS. In a moment, a Russian American woman is freed as part of a prisoner exchange with Moscow -- the U.S. released -- and how
it all happened in a moment.
(COMMERCIAL BREAK)
QUEST: A Russian-American woman is now free and on her way back to the United States. Ksenia Karelina had been serving time in a Russian prison
for more than a year on a treason charge, sentenced to 12 years for donating money to a pro-Ukrainian charity.
Karelina's release was part of a prisoner swap. The U.S. exchanged her for Arthur Petrov, a Russian-German citizen being held on smuggling, wire
fraud, and money laundering charges.
Fred Pleitgen is in Berlin.
There is always a back story to a prisoner swap. What is it in this case?
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, there certainly is a backstory and that backstory certainly seems to be from
everything that we can tell, improvement of relations between the United States and Russia specifically, of course, between the Trump administration
and the Putin administration, and one of the things that we are actually seeing is that these prisoner swaps, like, for instance, the one that we
saw in February where the American teacher Marc Fogel was released on the eve of the phone call, the first phone call between Russian President
Vladimir Putin and U.S. President Trump, that that sort of jump started the two countries trying to get relations back on track.
And in this case as well, the Russians are saying that this was a goodwill gesture, and CNN is hearing, all of this, Richard sort of started taking
shape when last week Kirill Dmitriev, who is, of course, the head of the Russian Direct Investment Fund and one of Vladimir Putin's top negotiators
with the United States, was in Washington, D.C., for meetings. That's when things really gained momentum.
Now, all of this coming also on a pretty important day, because also on this day, Russian and American delegations met in Istanbul for talks to try
and get the relations back on track -- Richard.
QUEST: So, why -- well, I can understand they want to curry favor with each other. How do they choose who is going to be released? And arguably, the
mere fact these take place, doesn't this just give ammunition to, you know, to take more people, to do more deals in the future?
[16:20:12]
PLEITGEN: Well potentially -- I mean, obviously potentially it could and for a while the United States obviously was very loath to negotiating for
instance with Russia, but also if we look at the case with the Iranians as well as far as Americans who were held there.
But in this case, it is actually a really interesting question, because the reason why Ksenia Karelina's case apparently was brought to the attention
of President Donald Trump is because her fiancee, who is a former boxer, got to know Dana White, the head of Ultimate Fighting -- the Ultimate
Fighting Challenge, UFC, who, of course, is very close to President Donald Trump, and Dana White brought it up with Donald Trump, and Donald Trump
said earlier today at a Cabinet meeting, it was at the request of a friend, Dana White. And then in the end, the United States of America, the Trump
administration made it happen.
The Russians, of course, for their part, get Arthur Petrov back, who was, I think, still on trial in the United States. But this very specifically, the
reason why Ksenia Karelina was released, was apparently thanks to the good relations of the head of Ultimate Fighting with the U.S. President --
Richard.
QUEST: I am grateful to you, Fred. Thank you very much, indeed. Thank you.
Now, Donald Trump may have reversed his harshest tariffs, but I always like to think of the economy at any given moment, it is like a cake. It is
always being baked. Think of the cake that's always in the oven baking with different ingredients. This one looks rather splendid, and I am looking
forward to dunking into it.
But what is the economy like? The economic cake in a moment, QUEST MEANS BUSINESS, assuming this cake survives, by the way, this is rather good. I
can't get into it.
(COMMERCIAL BREAK)
QUEST: Hello, I am Richard Quest, a lot more QUEST MEANS BUSINESS.
Donald Trump's U-Turn on tariffs, now, it may have averted an imminent bond market disaster, and yet, when we look at the economic damage, the cake may
already be baked.
And two of Italy's great fashion houses are going to be united, Prada and Versace, as part of a billion dollar deal. We will get to all of that only
after the news headlines, because this is CNN, and here, the news always comes first.
[16:30:20]
U.S. stocks fell sharply today after the White House clarified that tariffs on all Chinese imports are actually 145 percent. This as trade war
escalates, many experts are now saying the U.S. and global economies could fall into recession.
The search for survivors in the deadly nightclub roof collapse in the Dominican Republic has now come to an end. The authorities are focused on
retrieving the bodies. It's believed 221 people, at least, were killed when the roof collapsed early on Tuesday. The cause of the collapse has not yet
been determined.
The U.S. government has released a memo supporting Mahmoud Khalil's deportation order. It states that the pro-Palestinian activist's beliefs,
statements or associations would compromise U.S. foreign policy interests. Khalil was taken into custody last month.
Allow me to update you on the helicopter crash that's taken place this afternoon in the Hudson River just off Manhattan. Five people -- three
children and two adults -- have now been pulled alive from the river and transferred to local hospitals, but the condition is not known. Rescue
crews are searching for one more person, it's believed.
The president's trade war has pushed U.S. Treasury yields higher. The yield on the 10-year bond is more than 4 percent, 4.4 percent in fact. It was
even higher before the president announced a pause on reciprocal tariffs.
CNBC spoke to the director of the White House National Economic Council. Kevin Hassett said the bond yields contributed to Trump's decision.
(BEGIN VIDEO CLIP)
KEVIN HASSETT, DIRECTOR, WHITE HOUSE ECONOMIC COUNCIL: The fact that the bond market was telling us, hey, it's probably time to move certainly would
have contributed at least a little bit to that thinking.
(END VIDEO CLIP)
QUEST: Now a former holder of most economic posts, Janet Yellen, says that the president's policies are the worst self-inflicted wound on the economy
that she's ever seen. And she should know, she's been Treasury secretary and Fed chair.
Bianna Golodryga asked the former Fed chair and Treasury secretary to grade the administration's handling of the economy. In her first TV interview
since leaving office, Secretary Yellen said she could not give it a passing grade.
(BEGIN VIDEO CLIP)
JANET YELLEN, FORMER U.S. TREASURY SECRETARY: This is the worst self- inflicted wound that I have ever seen in an administration impose on a well-functioning economy. It is, if you take the whole complex of Trump
policies, tariffs that, as I just said, could cost the average household up to around $4,000 a year. The DOGE cuts in services, whether it's for our
veterans, Social Security, the Internal Revenue Service, the agencies, the public interacts with, a spending plan that is likely to involve huge cuts
in Medicaid and food stamps that lower income families particularly rely on all in order to support tax cuts that mainly benefit the wealthy.
You had an administration that said it's worker focused, and I really can't think of an overall economic agenda that could be more devastating on every
front, from tariffs to cuts in government services to leaving very large deficits, taking policies that will expand the deficit when we need to see
exactly the opposite. This is going to be devastating for American households and workers.
BIANNA GOLODRYGA, CNN ANCHOR: And quickly, the likelihood of a recession due to President Trump's economic policies, in your view?
YELLEN: Well, it's clearly risen. And in addition to the tariffs and the negative likely impact on consumer spending, we have a huge uncertainty
shock. No one knows where any of this is going. We're now in a huge war with China and the tariffs that have been imposed on China are what I would
call prohibitive.
[16:35:05]
They're going to result in massive impacts on the United States and the global economy. No one knows where this these policies are headed.
President Trump says he wants to create manufacturing jobs. What firm is going under these circumstances with this level of uncertainty is going to
undertake a long-life investment?
And, you know, the shortage, the decline in investment spending, in consumer spending could easily trigger a recession. So I think the odds
have meaningfully risen. I wouldn't want to predict we will have one, but I'm certainly concerned about it.
(END VIDEO CLIP)
QUEST: Janet Yellen talking today.
Now, today's market moves make it very clear to many investors, the cake is already baked. In this case, we're talking about a rather splendid, looks
like a sponge cake with icing. Now the threat of tariffs, the mixture that put it all together, well, the president can add icing and trade deals in
countries like Japan, Vietnam, South Korea. But it may not be enough to prevent the cake of recession, because at any given moment, the ingredients
are already there. The disruption from the federal government's restructuring, the tariffs, the uncertainty on reforms.
Mark Zandi is the chief economist at Moody's. Mark is with me.
You can't see this, Mark, but I have a splendid cake in front of me, which certainly doesn't look anything like a recession, I have to tell you. But
you know what I mean. The cake --
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: I do.
QUEST: You know, it's always baking because there are always new ingredients. At the moment, the economy is very weak. And the inflation
number this morning we saw suggests manufacturing and other things. The demand is falling off strongly.
ZANDI: Yes, I don't -- I'm very curious in the cake metaphor. It sounds like a good one. My first question is what kind of cake. But aside from
that, you know, I do -- I just listened to your clip of Treasury Secretary Yellen's comments. And, you know, I don't think I could say it any better
than that. I think that the trade war is a massive self-inflicted wound. And I'll go so far as to say, I think odds are that we will suffer a
recession. The global economy will suffer a recession. Probability that is now well over 50 percent, probably closer to 60 percent.
And, you know, lots of different ways that the trade war is going to hurt the economy. The most obvious is a tax increase. A massive tax increase on
American consumers and businesses in the form of higher prices for imported product. And if you do the arithmetic, it's about as large a tax increase
as we've seen since any time since 1968, during the Vietnam War or World War II. So pretty significant financial statistics to digest for
households. And I do think recession is much more likely than not at this point.
QUEST: And of course, we also have just, you know, as Secretary Yellen was saying, there is the totality of the complexity of what's happening. For
instance, the uncertainty about jobs as a result of restructuring from the federal government. Hundreds of thousands of people losing their jobs. Now
you or I or friends may not be immediately affected, but it does have -- it makes everybody very uncertain about what's going to happen in their
company, what's going to happen in their contracts for their company. And that in itself becomes a self-fulfilling prophecy. Does it not?
ZANDI: Yes, absolutely. She called it an uncertainty shock. And I think that's exactly right. You know, I think, you know, the stock market
yesterday had a good day because the president backtracked on his so-called reciprocal tariffs. But I don't know. Now we got 90 days of debating what's
going to happen with these tariffs or are they on again, off again? Which countries, which products? You know, just the uncertainty is a miasma, you
know, over the economy's performance. And that will continue to be the case. And you know, it's already evident.
I mean the Federal Reserve Board has point blank told us that they're not going to move interest rates any lower because they just need clarity
around economic policy. And of course, they're not going to get it, given the fact that those reciprocal tariffs were put on a 90-day hold. So, yes,
you know, I think businesses, consumers, investors, policymakers all uncertain. And, you know, at this point they're sitting on their hands.
QUEST: Right.
ZANDI: But at some point they're going to start cutting and that's a recession.
QUEST: The Fed is in a really difficult position because at these sort of numbers, let's just -- it doesn't matter the reason why.
[16:40:01]
But at these sort of numbers on inflation, you know, legitimately they could continue with their easing policy. And certainly -- but they can't
because they've got more inflation coming down the road from tariffs. And yet at the same time if there's a recession they should -- I mean this is
the classic definition of stagflation.
ZANDI: Yes. I mean, what's the Fed to do with this, right? You're right. I mean, inflation is coming. We know that as the tariffs are imposed. Prices
are going to rise. Inflation expectations. You know, what people think inflation is going to be in the future have already risen to a significant
degree. All of that argues for the Fed, all else equal to raise interest rates. But on the other hand, the tariffs are going to do real damage to
the economy, going to recession, cost jobs, growth is going to slow, go negative. That would call for lower interest rates.
So you're sitting at the Fed, you go, what do I do with this? And right now their answer is nothing. They're just sitting on their hands because they
don't know what to do. They don't know how to respond to it, which is, you know, that's the problem with stagflation at the end of the day.
QUEST: I'm feeling very, very guilty that here I am with a marvelous cake in front of me and you don't. So, we'll send you a cake. Are you more of a
vanilla slice, or are you more of a chocolate man when it comes to a piece of cake?
ZANDI: I, you know, I like variety, Richard. Variety. You know, I'll take a slice of each. Could we do that, please? Thank you.
QUEST: We'll find a slice. We'll find a multi-layered, multi-choice cake for you, and we'll have it sent you in South Carolina. Good to see you,
man. Thank you very much.
ZANDI: Thank you so much. You're so kind. Take care now.
QUEST: Thank you.
Now Prada and Versace are fashioning an Italian luxury powerhouse. We're going to talk about $1.4 billion when we come back. Thank you.
(COMMERCIAL BREAK)
QUEST: In British Columbia, in Canada, many indigenous communities view orcas as the guardians of the sea. They are majestic creatures, and they're
facing growing threats, particularly in the Northern Pacific.
[16:45:04]
Today on "Call to Earth," we meet a small research team turning to artificial intelligence where they'll track and monitor the orca
populations and help protect their habitat.
(BEGIN VIDEOTAPE)
JARED TOWERS, EXECUTIVE DIRECTOR, BAY CETOLOGY: Oh, good morning, Rolf.
UNIDENTIFIED MALE: Good morning. I assume you're looking for the Bigg's?
TOWER: Yes, I'm just creeping along here at the pier in the fog, super slow. I'm sure I'll see them here in the next few minutes.
HANAKO MONTGOMERY, CNN CORRESPONDENT (voice-over): Scientist Jared Towers and PhD student Chloe Kotik are on the lookout for dolphins. But not just
any dolphins. They're looking for the largest and most deceivingly named member of the dolphin family, the orca, also known as the killer whale.
TOWERS: I spent a lot of time as a kid here in Alert Bay and the surrounding waterways, and this area has always been a mecca for killer
whale research since the 1970s. So I was kind of brought up into this field.
My job basically entails keeping track of killer whales. I collect photo identification data, predation data, social and behavioral, as well as
genetic data.
MONTGOMERY: Jared has been studying whales for about 20 years focusing mainly on the Bigg's species, also known as transients that live in the
North Pacific Ocean.
TOWERS: Bigg's killer whales are transients. They primarily feed on marine mammals like seals, porpoises, dolphins, sea lions, and even other whales
occasionally.
MONTGOMERY: But as apex predators, they also ingest high concentrations of harmful contaminants found throughout the marine food web.
TOWERS: So when you have something like a killer whale come along and eat the seal that ate the fish, then it bioaccumulates those toxins at a much
greater rate. So that's why these mammal-eating killer whales we have on the coast here are some of the most toxic animals on the planet.
MONTGOMERY: The toxic chemicals from things like industrial waste and oil spills collect in whales' blubber which can affect their health and the
survival rates of their offspring.
CHLOE KOTIK, PHD CANDIDATE, UNIVERSITY OF ALASKA FAIRBANKS: My hope for this work is that by quantifying some of the effects that contaminants are
having on these killer whales, we can provide a little bit of evidence for how we're affecting them and that might motivate us to clean up our act.
MONTGOMERY: Their work relies heavily on photo identification through digital cameras, citizen submissions and drones.
TOWERS: Well, right now I'm just waiting for these whales to come up. I'll fly over each one of them and get a look at the body condition.
MONTGOMERY: Over the last few years, Jared has been tapping into A.I. to help process and organize the vast amounts of visual data they collect.
TOWERS: So when we click on a photo, for example, the model suggestion automatically shows up and then the model predicts who the individual is.
And you can see that even though this isn't a great ID photo, the model is correctly identifying this as T-90.
MONTGOMERY: They can then take a deeper dive and apply other analytical tools to look at specific parameters like calf mortality.
KOTIK: What we're finding so far is that individuals that are getting a higher dose of contaminants from mom seem to have an increased risk of
mortality before age three.
MONTGOMERY: This research helps provide insights not just into the health of these killer whales, but also their ecosystem.
TOWERS: So all the data we collect month after month and year after year is crucial for informing management decisions and conservation efforts to
protect these populations.
In this part of the coast, we have some of the strongest viewing guidelines and regulations when it comes to killer whales, and that is one example of
a protection measure which has been implemented over time.
When it comes to killer whales, I think it's really important that we really make an effort to coexist with them and find ways that we can both
live in harmony and have successful populations moving forward.
(END VIDEOTAPE)
QUEST: Fascinating. I love whales. I just love looking at them.
What are you doing? What are you doing to answer the call? Use the hashtag "Call to Earth."
(COMMERCIAL BREAK)
[16:51:56]
QUEST: Two of Italy's great fashion houses to be united. Prada is buying its rival, Versace. It's a $1.4 billion debt deal. Shares of Versace's
parent company, Capri Holdings, fell as fears escalate over potential impacts of U.S. tariffs. Prada seeking to expand as it defies a slowdown in
the luxury sector. A very different story for Versace, which has operated at a loss in recent quarters.
Bryce Quillin is the co-founder of the strategy firm, It's a Working Title, with me from Washington.
And why are they doing this deal? What, you know, what difference -- who gets what?
BRYCE QUILLIN, CO-FOUNDER, IT'S A WORKING TITLE: So I think that for Prada, this is an opportunity to sort of create a made in Italy sort of mega
label, to kind of allow them to better compete with what our significantly larger competitors from France, to wit, LVMH and Richemont. Even with the
merger, it still leaves them substantially smaller than the French giants. But this is an opportunity to kind of bring home a historic Italian label
and Versace with a very specific esthetic and create that kind of Italian tour de force to bring to the luxury space.
And then for Capri, I think, you know, it's fairly straightforward. Versace is a loss making option for them. At least it has been for a while.
QUEST: Right.
QUILLIN: They want to focus on Michael Kors.
QUEST: How is Prada, though? Its previous acquisitions have been difficult. And they're going to now have to bring Versace in, nurture it, but not
infect it in a sense, and allow a very different look to co-exist with the main Prada brand.
QUILLIN: Yes, I think that's true. And some have raised concerns on how well Versace will sit in the Prada group stable member muumuu, which has
had just absolutely astronomical success in the past couple of years. And as you note, some of the consolidations that Prada has done in the past
have been, you know, I think people have judged have not been particularly well-managed. So clearly they'll have to respect Versace, they'll have to
give them the independence. And all of this, of course, takes place against a backdrop of a very difficult time for the industry.
QUEST: So that is important. Now, look, these luxury items now facing higher tariffs, 10 percent higher because it's E.U. So it was going to be
20. Now it's 10. What's the luxury market saying? Never mind Prada. Just LVMH. What are they saying about the difficulties that they're now all
going to face trading into the United States?
QUILLIN: Yes, I mean, I think right now everybody is kind of in a wait and see sort of posture, just as they are in any kind of retail vertical given
the uncertainty over the direction of the global trade regime. But for luxury in particular, these difficulties come after a very difficult 2024
post-pandemic. You had this kind of super cycle in the industry. Last year was kind of a return to earth. There was a hope in the industry that 2025
would be better driven by the U.S. consumer.
[16:55:03]
Now, it appears that that's not going to be the case. The Chinese consumer doesn't appear to be coming to the rescue as they have for, frankly, the
last 10 years or so. So I think the industry now doesn't know which direction growth can come. And everybody is kind of sitting on cash.
They've got to manage inventory. Like everywhere else this has put a freeze on investment plans.
QUEST: And that freeze on investment and that luxury market, China, China was the big one. And yet China is going to slow down dramatically, you
know, because it's going to have a slowdown as a result of not being, you know, the way this thing works, it's like a piece of knit. It's like a
piece of very expensive Prada knitting that gets caught on a nail and all unravels fast.
QUILLIN: I think that's true. But if we look at 2024, the industry aggregate was much worse. But the aggregate high is a huge amounts of
differentiation. So LVMH was kind of performed somewhere in the middle. Prada Group continued to grow very quickly. Brunello Cucinelli. Ralph
Lauren grew very quickly. Versace and, you know, and a lot of the American firms did not. So I think that a lot of these organizations, you know, can
continue to be successful in China.
QUEST: Right.
QUILLIN: However, at the industry level, I think, you know, it's quite clear that they're not going to experience that bumper growth that they've
experienced because of the Chinese consumer for the past 10, 15 years or so.
QUEST: I'm grateful to you, sir. Thank you. Thank you for joining me.
QUILLIN: Thank you.
QUEST: Now I need to, before I take a break, I need to show you some information, a new video on the helicopter crash in the Hudson. These
images you might find disturbing so you might want to look away if you do. Gives you a moment or two.
There is the moment of impact. CNN can confirm that there are fatalities as a result of the crash. The exact number is not clear. You can see the
impact. And we had reportedly initially said that people have been -- five people had been pulled from the helicopter. The divers are searching for a
sixth person.
You can look back now. If you did look away, you can now look back. I'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment," earlier in the program, I was talking about the cake analogy and the economy and how the recession and the
ingredients. Now excuse me. It's very good cake. My boss doesn't agree with me. She says she doesn't get this cake thing. She says cake is a finite
thing. Once it's cooked, it's cooked. It either worked or it didn't. Whereas the economy has tweaks here and there and it makes an impact either
way, unless you destroy it. But you can't destroy the economy permanently.
No, that's not what I'm talking about. What we mean with this is that at any given point, the U.S. economy cake in 2025 is made up of various
ingredients. It's to do with government spending. It's inflation. It's trade policy. All these ingredients go into the cake. You mix it up and
then it starts to bake.
Now I agree, you could arguably say that the cake in October will be different to the cake now, but that's not the point. The point is, in my
view, that at the moment, the economic cake is one of recession because the ingredients we have put into it so far, they are telling us that the whole
thing is going to be much slow down and it will eventually go into recession. So that's why we say the ingredients of the economic cake in
2025. But then it's best not to disagree with the boss.
So you're right, ma'am.
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 and have a
slice of cake anyway.
END
