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China Raises Retaliation Tariffs On U.S. Imports To 125 Percent; U.S. Bond Yields Rise Even As Investors Flee Stocks; Investors Turn To German Bund Amid Global Upheaval; Judge Determines Mahmoud Khalil Is Removable From U.S.; Dollar Weakens As Trade Troubles Shake Investor Confidence. Aired 4-4:45p ET

Aired April 11, 2025 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[16:00:10]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Well, let's bring this to an end. Closing bell ringing on Wall Street. A lot more

encouraging the way the week is ending than we've seen over the course of the week. Now for the gavel, bring us to a close and have a -- come on,

sir. One, two, three, four, five, six, seven, eight. Well, I think we can justify seven or eight gavels, because those are the markets and the

stories that you and I are going to be talking about over the next hour.

"China is not afraid." The words of President Xi Jinping as Beijing ratchets tariffs on the U.S. up to 125 percent and then says there is no

purpose going higher.

The White House's erratic trade policy could put a dent in the dominance of the dollar. We will discuss that.

And Germany's Finance Minister live tonight on QUEST MEANS BUSINESS, because we are in New York and the program is live and it is Friday. It is

April the 11th. I am Richard Quest and I mean business.

Good evening.

We start tonight with the trade war well and truly underway, but for how long? It now seems to be spiraling between the U.S. and China, the world's

two largest single economies. China has increased its tariff on U.S. imports to 125 percent, so far, so good. You can see the disparity of the

numbers there and now comes the big but.

Beijing said it would no longer engage with what it called a numbers game with no economic significance, and so China seems set to remain at 125,

whatever the U.S. does, it is already over that at 145.

Beijing is saying that the Trump's policies are a joke, and President Xi Jinping says China is not afraid.

The White House says the President still wants to do a deal with Beijing.

(BEGIN VIDEO CLIP)

KAROLINE LEAVITT, WHITE HOUSE PRESS SECRETARY: The President, as I said from the podium just a few days ago when I was up here, would be gracious

if China intends to make a deal with the United States. If China continues to retaliate, it is not good for China.

But the President has made it very clear, he is open to a deal with China.

REPORTER: Why is he optimistic that China is going to make a deal or wants to make a deal if they're not talking? Where does that optimism come from?

LEAVITT: He is optimistic.

(END VIDEO CLIP)

QUEST: Well, so much, so good. The tariffs on China will impact many products. Too many to actually count. Christmas decorations for example, 98

percent of them come from China. But China is a major -- is a major supplier of raw materials to the U.S. companies that will not be easy to

replace. Around a third of U.S. leather imports come from China, everywhere from furniture, shoes, wallets and belts, a third.

The U.S. gets a quarter of its imported plastic and rubber from China. It is used in erasers, pens, toys, bottles, glass, eyeglasses, spectacles, and

so on. And of course, many in industrial processes highly, highly sophisticated plastics.

Nearly half of imported textile mill products come from China. The materials used in everyday items have just got considerably more expensive,

and that's even before we go into the minerals, the raw earth minerals.

Allison Morrow is with me in New York.

Let us break this down, first of all, with the statement that we got or this various comments from Xi saying, look, no point in going any higher,

we are stuck at 125 because at that price, all those things that I've just mentioned become no longer economically viable.

ALLISON MORROW, CNN BUSINESS SENIOR EDITOR: Right. Yes. You know, a lot of observers of this kind of ongoing escalating trade war is saying the United

States might have just picked a trade war with an opponent who won't give up, and who might be just as hard headed as Donald trump.

So it is a real gamble. And, you know, as you mentioned, Trump says he is optimistic that Xi Jinping will come to the table. I am not so sure. He

doesn't have -- Xi Jinping doesn't have the same kind of political and economic forces weighing on him, because it is a one party authoritarian

regime. So I think he can hold out and inflict more pain than Donald Trump has the stomach for.

QUEST: The decision to basically put their ceiling at 125, because it is useless to go any higher, that can also be interpreted as, I wouldn't say

an olive branch, but, you know, as an introductory, a signal, a signal that says do what you like, Mr. Trump, even claim victory if you really want to,

because we are not going higher and that could be a way in which the two could now start to come together.

Do you see that as being a potential signal?

[16:05:04]

MORROW: Absolutely. I think it is a way to save face while also saying, look, 125 percent, that's going to hurt American people. That is going to

make the cost of your iPhones that you can no longer manufacture in China or pay, you know, an import tax so high it makes the phone $2,000.00 for

the average consumer, and no one wants to pay that.

So I think China is well aware of its bargaining position here, which is that, frankly, the U.S. needs China a bit more than China needs the U.S.

QUEST: And I am fascinated by the way China is now running around the world, particularly through ASEAN, as Xi is off to ASEAN countries next

week. We have the Spanish Prime Minister there. We've got the E.U. saying that, you know, they want to fast track talks.

Now, nobody is suggesting that this is a perfect trading environment or that China behaves impeccably in trade rules. But if you're looking to

circumnavigate and replace a substitute as the labs call it, and then China is a very good opportunity for other nations.

MORROW: Yes. You know, that's kind of the tragedy that I am hearing from a lot of economists who have watched over the last 40 years, the American

openness to trade with China, an openness to the rest of East Asia as well, has also been a force for political and social stability.

And we want to, you know, make allies in Southeast Asia, and all of this is doing by putting huge tariffs on them is draw them closer to China.

QUEST: I am grateful. Have a good weekend. A busy week we've all had.

MORROW: You, too.

QUEST: I hope you'll find some way to relax over it and have a good weekend. Thank you.

The chief executive of JPMorgan is predicting, in his words, a kerfuffle in the U.S. Treasury bond markets. Jamie Dimon says he expects the Fed to step

in to calm things.

The bond market has been moving in a strange way lately. Stocks have fallen when that happens, they tend to move into safer assets like U.S. Treasuries

when you loan money to the government at a particular rate. When more investors want Treasuries, the yield tends to fall. it is an inverse

proportion. It is a classic, classic the price goes up, the yield goes down, and vice versa.

That's not what has happened now. Stocks have fallen and bond yields have actually risen. In other words bonds have fallen which suggests that people

are selling.

Richard Clarida is a global economic advisor at PIMCO. He was the Vice Chair at the U.S. Federal Reserve. It is always excellent to see you,

Richard, always excellent.

Now, what do you make of the bond market movements that we saw? What were those movements telling us?

RICHARD CLARIDA, GLOBAL ECONOMIC ADVISOR, PIMCO: Richard, great question, and it has been too long. Thanks for having me on.

You know, this week has been quite dramatic. As you mentioned, what has happened this week, is, you know, bond yields have gone up even though

evidence of a slowing economy and obviously, the turmoil in stock markets in particular also yields up in the dollar weaker.

You know, up to this week, year-to-date, you know, stocks were down and bond returns were positive. So we are really just talking about the last

four or five days. But yes, it has been quite eye popping to see what has happened.

QUEST: So why do you think that's happened? One quote that I see is a complete loss of faith in the strongest bond market in the world because

you don't know about the economic policies of this administration.

Do you think it is that, in other words, sell everything and get out of the U.S.? Or is there an element in this of shorts having to cover on margin

calls and therefore selling? In other words, what we are witnessing is the plumbing of the financial system having a bit of a blockage and a burp.

CLARIDA: Richard, I think it is certainly that there are some technical factors, you know, unwind of Treasury trades has certainly been a factor. I

think the other thing as well, which maybe folks have not noticed in all the tariff attention is the fact that the fiscal news out of Washington

this week was pretty bad in the sense that there was the House more or less agreeing to the Senate's reconciliation bill, which has a lot of tax cuts

in it, but not a lot of spending decreases.

So whatever your view of the budget deficit was a week ago is probably worse right now. So that may have been a factor as well.

QUEST: On this question, how -- I see one of the current Fed governors has basically been saying the Fed would obviously intervene, or at least would

-- it wouldn't allow a disorderly market, but what would you do if you started to see yields getting out of alignment to what fundamentals should

dictate?

[16:10:10]

How would the Fed move in in terms of liquidity? Because one of the issues has been small -- I mean, when we say that there has been liquidity

problems, obviously, it is still there. it is the largest, deepest market in the world, but smaller transactions are moving prices in a

disproportionate way.

CLARIDA: That's certainly true, and there are other indicators this week, including, you know, bid ask spreads and the repo -- how the repo market

works. And in my view, there were flashing yellow, they weren't flashing red. You know, I was at the Fed in the spring of 2020 when they were

flashing red.

So I think -- but to get to the first part of your question, Richard, I have no doubt that if market dysfunction got sufficiently concerning that

the Fed would step in, you know, they would, I think, try to distinguish between that and a rate easing or a QE program. They would hopefully make

it very limited and targeted more or less like the Bank of England did three years ago following the Liz Truss budget.

So I think there are conditions under which they do step in to support liquidity, but I think the inclination would be to make it a pretty limited

operation in terms of duration.

QUEST: I always hear people say, somewhat fancifully, the Chinese with their trillion dollars in bonds could screw over the United States if they

started selling them, if they started -- of course, they'd do themselves a lot of economic damage at the same time.

When you were at the Fed, did anybody ever seriously think that the Chinese would use their U.S. government holdings as a weapon?

CLARIDA: I didn't -- during my four years there, which were eventful that was not something that was on my or I think our, radar screen you know,

what we did see in in March of 2020 was a lot of foreign Central Banks, I am not singling out the Chinese in specific, a lot of foreign Central Banks

needed to raise liquidity and so there was some selling for those reasons, but nothing along the lines that you describe when I was there.

QUEST: This tariff policy, yesterday, Janet Yellen said it was like taking a wrecking ball to a well-functioning, a previously well-functioning

economy. How would you describe the tariff policy that we are seeing today?

CLARIDA: Well, you know, we have a tariff policy of nine days ago and then obviously this week, at least many of those tariffs have been suspended. So

I think the one thing I am confident about, Richard is, that there is a lot of uncertainty about U.S. trade policy and that in and of itself is a

headwind to growth, to investment, potentially to employment. I think we know that for sure.

The other thing I can say for sure is that even if the 10 percent tariff stays in place, notice I am saying, even right before coming into this

year, tariffs were about two percent of GDP.

QUEST: Exactly.

CLARIDA: So even if it is just that 10 percent tariff, you know, that would be the highest tariff rates we've seen, probably going back 70 or 80 years

and that in and of itself is going to be felt in the economy, at least in the first initial quarters.

But I think the main conviction I have is that it is very hard to know where we are going to end up with tariff or trade policy, you know, six

months or a year down the road.

QUEST: I listened to Chair Powell talking about all of this and in his last speech recently on monetary policy, and the Fed is still sort of talking

about rate cuts later in the year, almost as if the Fed is looking through the inflation consequent of tariffs, almost because they can see it and

provided it doesn't become systemic and self-feeding in terms of a wage cycle or a wage spiral, if you know that that's where the inflation is

from, you can sort of look through it and beyond it, and you can continue regardless, particularly if there is going to be greater weakness. Is that

a justifiable view?

CLARIDA: Richard, I think you well characterized the communication from the Fed up through the March meeting. In fact, I think you've nicely summarized

where I think the Feds were before April 2nd.

The Chair had an opportunity to speak on, I guess the Friday of last week, and my takeaway from his comments there were more guarded, acknowledging

that the upward pressure on inflation could be both larger and more persistent than they had thought and the downward pressure on the economy

and the labor market could be more material than they thought.

[16:15:18]

And I think that right now, we heard from President Williams today, I think right now, they are thinking that they are just going to really stand pat.

I do think if we see cracking in the economy, higher unemployment that they would respond, but I don't see them cutting simply based on a forecast that

things may get bad.

So I think in some ways, the Fed has maybe moved to a more, on the sidelines perspective than we may have interpreted at the March meeting.

QUEST: I am grateful to you, sir, as always. Thank you.

Have a lovely weekend.

CLARIDA: All rig ht. Thank you, Richard. You, too.

QUEST: The breaking news: A Louisiana immigration judge has decided that Mahmoud Khalil is removable from the United States. The U.S. government

accused the Palestinian activist and former Columbia University grad student of being a supporter of Hamas. As evidence, the government

submitted a two-page memo from the Secretary of State Marco Rubio, which outlined the reasons for the deportation, citing Khalil's protest activity.

Now, obviously, his attorneys are expected to appeal against the ruling and his deportation is not expected to be imminent. We will discuss and find

out more on this later.

As we continue, investors have been flocking to German bunds and the country has recently eased its debt limit. Germany's Finance Minister is

with me. There is the Minister. The Minister will be with you immediately after the break.

(COMMERCIAL BREAK)

QUEST: As the turmoil continues, investors are turning to German bonds or bunds, as they're known, as global trade takes -- turbulence takes hold.

The 10-year bund moved opposite to the price and you can see how its performing. It is near its lowest levels in more than a month.

Last month, German lawmakers abandoned a long standing government borrowing limit and ramped up government spending. The country's economy is largely

export driven, leaving it heavily exposed to tariffs, but at the same time, of course, there is this great increase in defense spending.

[16:20:00]

The Finance Minister, Jorg Kukies is with me. He joins me from Poland where you've been at Finance Ministers Meeting.

Minister, it is good to see you. I am grateful as always that you have given us time tonight.

The current situation of navigating these higher tariffs in an economy that is very susceptible on exports. I know tariffs and trade is the purview of

the Commission, but you have to deal with the economic realities of them in Germany itself.

So how are you preparing?

JORG KUKIES, GERMAN FINANCE MINISTER: Well, we are supporting the Commission in what it is doing. On the one side, indicating to the United

States that we are willing to negotiate and that we are even willing to reduce tariffs to zero on our end if the United States also goes to zero.

So all asymmetry talk is gone if both are at zero. But at the same time, we are also providing input if there is no result in the negotiation to react

effectively with countermeasures.

QUEST: Everybody knows it is really the non-tariff barriers, the rules and regulations. The U.S. would say there are too many regulations. U.S.

companies are being -- the VAT, for example. You know this backwards, upside down, the VAT rules, which they say are unfair to U.S. exporters.

The agricultural rules on GM crops or hormone beef. Those will -- if the U.S. goes heavily on those, this would be very difficult for Europe.

KUKIES: Well I mean the VAT example shows that the argument simply isn't sound. I mean, the VAT is being paid both by European companies and

consumers as well as by American companies and consumers that sell into the E.U., so everyone is treated the same in a level playing field. So this has

nothing to do with tariffs.

It is a form of a sales tax, so in that sense the VAT argument can be discounted completely.

QUEST: On the question of the role in a post, I mean, I think everybody would accept that the trade world post this Trump administration will be

different, however it looks. Where do you see Europe's new trading relationships being?

KUKIES: Well, on the one side, of course, with the United States, our diversification and de-risking out of China has now led the United States

to be our biggest trade partner in the world and the country that I am currently in for the Finance Ministers Meeting, namely Poland being a

larger export destination for German goods and services than China. So in that sense, we have been diversifying out of China quite a lot.

And in our view, the European Union should become very aggressive now that the United States seems to be wanting to get more restrictive on trade and

to embrace the world on zero tariffs, on trade agreements, reducing non- tariff barriers to trade.

QUEST: So I see you've had looking at doing deals with the UAE, and I've seen this and obviously a closer cooperation with the U.K. is very much on

people's minds, but it is not going to be difficult -- sorry, it is going to be very difficult and do you think now, you will see -- you're going to

see a recession in Germany, a longer recession, perhaps I should say in Germany?

KUKIES: Well, first of all, I mean, the UAE and the U.K. are very, very important. But please, we should also think about Indonesia, India,

Malaysia, Thailand, you name it. We should think about Nigeria and South Africa, big African countries. We should immediately ratify Mercosur. The

treaty is already signed.

So in my view, the European Union and the Commissioners said a lot about this today and that they're willing to do this, we should just embark on a

big sales pitch to the world saying, please trade more with the European Union, we will facilitate it by lowering tariffs and non-tariff barriers,

because to answer your question directly, one of our largest economic research institutes just told us that if the tariffs stay in place, as

proposed on 2nd of April, we will lose 15 percent of our export volume to the United States.

QUEST: I suppose that speaks for itself as to what the effects will be in that regard. Now, I am just going to take my luck on this one, Minister.

So the new administration or the new coalition, the SPD has got finance. I mean, have they knocked on your door and said, Jorg, please stay, we need

you.

[16:25:03]

KUKIES: Dear Richard, you've asked me this question twice already and I've evaded it successfully, so I will evade it a third time. The personnel

things are being discussed at the moment, but they will be announced to the public in early May, and you'll be one of the first to find out.

QUEST: All right, I will leave it there. I will leave it there. You've got enough on your plate without me haranguing you.

KUKIES: I will call you.

QUEST: Thank you.

KUKIES: And if I don't make it, I will become production assistant for QUEST MEANS BUSINESS.

QUEST: You got the job. You got the job. Good to see you, Minister. Have a great weekend. I am grateful, as always, that you found time for us

tonight. Thank you.

Now, as we continue tonight, you heard them talking about in Germany, about 15 percent of exports of concerning the tariffs. Well, as a result, not

surprisingly, European governments are finding ways to help companies hit by them.

Last week, Spain offered its businesses a $15 billion package that it said would soften the blow. Amongst those industries that are really looking to

take advantage of it is the Spanish olive oil industry, which has welcomed the additional help. But can it arrive in time before damage or higher

prices come along?

CNN's Pau Mosquera visited an olive oil business because obviously now, we need to know what is going to happen next.

(BEGIN VIDEOTAPE)

PAU MOSQUERA, CNN CORRESPONDENT: This is olive oil or liquid gold, as we call it in Spain. This is a business that exports nearly $1 billion of this

product per year from Spain to the United States.

Right now, we are on a family-run company located south of Madrid, and we are being told that here, they produce around 45,000 bottles of this

product per day, and 30 to 40 percent of this olive oil goes directly to the United States.

Now, they have decided that they will introduce the impact of the reciprocal tariffs announced by Donald Trump to the final sales price of

their olive oil. But not all Spanish companies can do the same, and that is why many of them are waiting for the aid promised by the Spanish

government, a package of around $16 billion to try to mitigate the impact of these tariffs on their businesses.

Pau Mosquera, CNN, Madrid, Spain.

(END VIDEOTAPE)

QUEST: The U.S. dollar has taken a hit since Donald Trump launched his trade war. "The FT's" Edward Luce says the President has no idea what he

has unleashed. He will tell us in a moment.

(COMMERCIAL BREAK)

[16:30:48]

QUEST: Now, back to our breaking news. Louisiana immigration judge has determined that Mahmoud Khalil is removable from the United States. The

government accused the Palestinian activist and former Columbia University grad student of being a supporter of Hamas.

As evidence of its intention, the government submitted a two page memo from the Secretary of State Marco Rubio, which outlined the reasons for the

deportation, citing his political protest activity. An appeal is expected, and his deportation is not expected to be imminent.

Gloria Pazmino is in New York. Now, here, as I understand it, and we're just all poring over it, in this case, under this act that's been used, the

McCarran-Walter Act, that's been amended, but it is essentially the McCarran-Walter Act.

The Secretary of State -- the court is basically saying the Secretary of State has the right to deport people where he believes there are

potentially serious adverse foreign policy consequences.

In other words, it's up to the Secretary of State to make that determination, which he did with his evidence, and the courts don't have

the jurisdiction to go beyond that. We will deal with the First Amendment issue in just a second. But that's the -- that's the background, isn't it,

to how this judge has got to where she has?

GLORIA PAZMINO, CNN CORRESPONDENT: That's exactly right, Richard. In fact, I have been speaking with the lawyers in the last hour. They told me that

the judge's determination in Louisiana is solely based on the Rubio letter.

Now, the Rubio letter is a reference to this two page memo. This was submitted to the court this week, and it is the government's evidence

against Khalil in his deportation case.

Remember, there are two cases that are playing out, sort of parallel to each other here. The first is the immigration case playing out in

Louisiana. The second is his habeas case, which is playing out in New Jersey. That case challenges the constitutionality of his detention.

Now, today, we're watching the immigration case, and this immigration judge has just ruled that she has found that Khalil is, in fact, deportable from

the United States based on this Marco Rubio determination.

Now, as you said, Marco Rubio and the Trump administration have said that they are relying on this incredibly obscure and rarely used portion of U.S.

law to determine that a person can be removed if their actions or their activities are determined to be a policy, a national security threat to the

United States.

But remember, all that's been alleged here is that Khalil participated in protest at Columbia University last year, played a prominent role there. We

have been given no information so far about any sort of criminal activity, violent activity, or certainly zero evidence to point to this so called

support of terrorist organizations that the Trump administration has accused Khalil of.

So, this finding by the immigration judge is extremely important. Now, it's important to point out that --

QUEST: Can I just -- can I just jump in, I just want to jump in, if I may, with a quick question.

PAZMINO: Please.

QUEST: So, since the law does give Rubio that discretion, which is clearly what the judge is saying, the next step on the immigration front, on this

particular case, does become the one of the First Amendment?

PAZMINO: Correct.

QUEST: This claim -- this claim, which we've seen before in the L.A. Eight, some years ago, back in the 1980s where they say, even if this law does

exist, he was exercising his constitutional right to a First Amendment, and therefore this law doesn't apply.

PAZMINO: That's exactly right, Richard, and that is why the case in New Jersey is important.

In fact, in the last hour, that federal judge has ordered the parties to dial into the court and have a telephone conference immediately following

the outcome of the immigration hearing, and he's told them that he wants to know what the party's standing is in terms of whether or not that

immigration judge actually has the authority, whether or not she has the authority to rule on Khalil's detention.

[16:35:23]

So, you have a bit of a jurisdictional battle playing out here between these two judges and. And if I'm interpreting the letters correctly, so

far, Richard, I'm getting the sense that the federal judge in New Jersey is trying to figure out just which legal levers he can pull here.

Because remember, in front of him is a motion filed by Khalil's attorneys for release -- for release on bond. They're saying, yes, this case exists

against him, but he should be able to fight this case from being -- while being freed, while not being detained. He's not a danger to the community.

He is not at flight risk, and he happens to have a U.S. citizen wife who is due to give birth in a matter of days.

So, that judge in New Jersey is looking at all of those facts before him, potentially going to consider if he should rule on whether or not Khalil

should continue to be detained.

QUEST: Is the feeling that eventually, in some shape, form or description, however, on its own motion or otherwise, this does end up in the Supremes.

PAZMINO: Absolutely, it's an -- it's an entire possibility, something that Hale's attorneys have told me they are considering. And it is very obvious

for this federal judge in New Jersey that he's being very careful, because he certainly does not want his decisions being turned on appeal, and that

is absolutely a possibility here.

We have already seen that the government has tried to appeal some of the decisions that have already been made.

QUEST: Gloria, I'm so grateful for you. This has only just happened, and you've threaded this needle beautifully for us to understand. Thank you

very much indeed.

Now, investors have historically flocked to the U.S. dollar in turbulent economic times. Tariff turbulence has been putting that safe haven somewhat

on the rocks. The dollar has lost steam.

Remember, we talked about bonds earlier. Bonds have gone in the wrong direction, and now the dollar's lost steam too. Sat around eight percent

compared to the Euro and the Yen, almost 10 percent off to the very safe Swiss Franc.

Edward Luce is the U.S. National Editor for The Financial Times. Edward, these are very rum (ph) times, as we used to say, very rum times, and

you've got the bond market going down. But the dollar, why would the dollar weaken in this scenario?

EDWARD LUCE, U.S. NATIONAL EDITOR, THE FINANCIAL TIMES: So, this is not what you would normally expect. When equity markets crash, normally, bond

prices go up and yields go down, because the dollar in the form of U.S. Treasury bonds is the safe asset that people flee to in times of panic,

war, global financial crashes, pandemics, et cetera.

What's different this time is that people are no longer trusting the authority behind the dollar, and that authority is Donald Trump. He's

proven himself so volatile, so capable of acts of what in -- in a very dispassionate bond market view, spectacular sort of risk and unpredictable

and capricious, that the sort of full faith and credit, the trust and safety that was vested in the U.S. dollar is now going, there is a Trump

premium now, and that's new. We for 80 years, the dollar has been king, and it's no longer uncontested.

QUEST: Arguably, yes. And this -- the point here is, isn't it that conventional business and economics that you and I have been sort of

tootling around for our careers is being turned on its head, and we're almost having to think about the world being flat, the U.S. is no longer

being considered as the reliable stalwart.

And I wonder at the moment, anyway, and I wonder who takes the place instead? Is it the Euro? Good Lord, help us. Is it an amalgam of others?

Who takes the place? Gold?

LUCE: It's not the Chinese. It's definitely not the Renminbi, because China doesn't have an independent legal system. It doesn't have an open capital

account. It just is. It's inconceivable China is going to transform its political system in the foreseeable future. Sterling's too small. The Yen

is too small, the Swiss Franc is too small. They all play a sort of role, but, you know, gold is just a hedge against disaster.

So, the Euro is the only sort of plausible alternative, but it's not nearly deep and liquid enough. And the fact that, you know, there are so many

governments in the European Union, in the euro zone, means it doesn't have that sort of, that core, sort of bedrock, foundational trust that the U.S.

federal government can put, or at least until the last week or two behind the -- behind the U.S. dollar.

[16:40:19]

QUEST: I always remember the old joking about virginity, once it's gone, it's gone and it isn't coming back.

We can say, if we talk about U.S. government credibility, either in bond market or dollar, how difficult would it be to restore that credibility for

the any U.S. government now.

LUCE: So, bond markets are very dispassionate. It's not like the stock markets. There's no casino quality to bond markets. This is a very cold

assessment of the ability of governments to repay debt.

And since we have a president, you know, who's believes that trade wars are really easy to win, and still does believe that. I think that this trust

that's taken decades -- well, generations, really, to build up, it can go very quickly.

And to restore it, well, that's a whole different question. I mean, we've got four years of Trump as president. The immediate horizon is the next 90

days, he's trying to do, supposedly, trade deals with 75 different countries, allegedly, that have come to have been asked for deals.

Normally, it takes a couple of years to do a trade deal -- a bilateral trade deal with one country. It took more than a year to renegotiate NAFTA

in Trump's first time with Canada and Mexico. The idea that he's going to just a fix these bilateral relationships, to the tune of 75 of them in 90

days? It's totally implausible.

QUEST: I'm grateful to you, sir, as always. Thank you for joining us tonight. I appreciate it. Thank you.

And that's our report for tonight. That's QUEST MEANS BUSINESS for tonight and for this week, I'm Richard Quest in New York. What a week it has been.

I'm so glad that you've made time and that we've made time for each other to come together for our nightly conversations, because whatever does

happen, at least here, we'll try and put it into perspective and give us something to look forward to.

Whatever you're up to this weekend, I hope it's profitable.

Coming up next, CONNECTING AFRICA. Have a good evening.

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(CONNECTING AFRICA)

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