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Quest Means Business

Markets Rise As U.S. Economy Adds More Jobs Than Expected; Cheap Imports No Longer Subject To De Minimus Exception; War In Ukraine Puts Drone Technology In Focus; Donald Trump And Mark Carney To Meet On Tuesday In Washington; Millenials And Gen Z Set To Sway Election In Australia; Pakistan On High Alert As Tensions Flare With India; Prince Harry Loses Appeal Over Downgraded Security. Aired 4-5p ET

Aired May 02, 2025 - 16:00   ET

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

[16:00:09]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street. Carnival ringing, the closing bell and a strong

session for the Dow. The market was up and have been really -- it hasn't really budged. Over one-and-a-third percent. As the gavel comes down, there

is a lot to put into it. Oh, really hard gavels from Carnival. The triple stack shows that it wasn't just blue chips that saw the best of the day.

Pretty Even Stevens, though. No standout of any one indices.

Those are the markets, and these are the main events we are talking about.

It was the surprisingly strong jobs market that helped stocks wipe out their Liberation Day losses. Finis de minimis -- the end of de minimis. And

it is no trifling matter for the thousands of businesses who rely on the U.S. tax exemption. We will talk to a de minimis company.

And Canada's Prime Minister Mark Carney had won the election and now says he is preparing for a difficult meeting with Donald Trump.

We are back in New York, where we are, of course, live. It is the end of the week. It is Friday, it is May the 2nd. I am Richard Quest, and in New

York, I mean business.

Good evening.

We are getting more data that adds further pieces of the jigsaw onto what's happening in the U.S. economy. Today, it was jobs where we learned that

American employers added 177,000 jobs in April, which was more than economists had expected. That was optimistic for the markets and the S&P

500, as you saw, closed higher for the ninth session in a row.

What that means is, it has erased all the losses following Liberation Day and the announcement of tariffs a month ago. The jobs numbers also added

context to that GDP that we saw on Wednesday, which showed a slight contraction in Q1.

Aditya Bhave is a senior U.S. economist at Bank of America and joins me now.

Glad to have you with us.

What do you make of those numbers? We've had two important pieces. One more backward looking than the -- well, both backward looking, but we've also

had other data that showed -- what do you make of them?

ADITYA BHAVE, SENIOR U.S. ECONOMIST, BANK OF AMERICA: Good evening. Thank you for having me on. I think the U.S. economy is on solid footing,

starting with the Jobs Report, the two most important numbers you mentioned, 177,000 jobs added that was above expectations. And then also

the unemployment rate, very importantly, remained stable at 4.2 percent, which is very much consistent with where the Fed thinks kind of full

employment in the economy is.

On the GDP number, not really concerned about the negative 0.3 percent. There were some distortions around the imports data. What you should really

focus on is final private demand that was up three percent.

QUEST: Okay, so at what point, if at all, do you think that we are going to see effects of tariffs because the tariff headwind is 20 to 25 percent for

this or that, 10 percent; general, 145 percent -- that is happening now and we've seen from sentiment and consumer data the weakness and worry. So when

do we start to see that coming through in hard data?

BHAVE: I think at the earliest, you'll see it in the May data, more likely June, July and thereafter. We've built in a little bit of softness in the

economy in the second and third quarters of this year. The idea would be that CapEx slows down as businesses are a little bit frozen because of

trade related uncertainty, but we don't have a recession. We think the economy can muddle through largely because we expect the labor market to

hold on, and that should generate enough income for consumers to keep spending.

QUEST: When you say you don't expect a recession, I mean that's taking a classic definition of two quarters of negative GDP. But you do expect a

slowdown, don't you? And you do expect us to sort of be bouncing around that level.

BHAVE: We expect weaker economic growth. That's not saying a lot, to be honest, because for the last couple of years we've been growing at three

percent. So our growth forecast for the full year is one percent. For the second and third quarters, we are looking for weaker final demand than even

that.

So we will get close to a recession in our view. But we see about a one in three chance of a recession. So it is not the base case, it is a risk and

growth should slow down going forward.

QUEST: On this program, on QUEST MEANS BUSINESS, we often talk about this. And, you know, if you're a consumer or if you're in a household, there is

very little difference, isn't there, between plus 0.5 and minus 0.5. We might get terribly excited at the prospect of a technical versus real

recession.

[16:05:08]

But this sluggish growth that we are going to see for the rest of this year, is it possible that trade deals executed by the administration

reverse the economic scenario, or is this a cake that's baked?

BHAVE: Some of it might be baked into the pie, I think that is more the uncertainty story, where at least in the near term, businesses are going to

be a little bit frozen until they get more clarity on the tariff story.

The other thing that's probably baked into the pie is the fact that you'll get some payback in the second quarter, because there was very aggressive

front loading in certain business investment components in the first quarter, as well as certain parts of consumer spending. So that's baked

into the pie.

But in terms of trade deals, for sure, I mean, if the tariffs get negotiated away, then the economic outlook improves, particularly because

we are also likely going to get a big fiscal bill, which will have some front loaded stimulus in our view later this year.

QUEST: And when that happens, you're talking about the tax cuts, of course, and the tax bill that we will get and the budget which we just saw a

trillion on the security and defense. When that happens, do we all just ignore the deficit?

BHAVE: The deficit is more of a longer term concern. But it is something that were concerned about. Right? And I think it is showing up in the 30-

year bond yield. So it is not that we need to get concerned in the future, it is that markets are already concerned about it. Thirty-year yield has

pushed five percent a few times. So clearly, that is getting into focus.

The question is how much can tariff revenue pay for those tax cuts? If the tariffs get negotiated away, that's good news for the economic outlook. But

then you don't have the revenue offset for the tax cuts that we will probably get.

QUEST: We've lots more to talk about over the months and weeks ahead. I am grateful to you, sir. Have a good weekend, whatever you're up to, manage to

put all that tariffs to one side and have a gin and tonic instead. Thank you, sir.

Now, many Americans are about to feel the effects of Donald Trump's trade policy. It is known as the de minimis exception or exemption, which expired

overnight. De minimis in Latin literally means minimal or trifling importance. De minimis -- it is not worth talking about.

Well, the rule applied to any shipment worth $800.00 or less. So if you had something sent to you, say, for example, you bought a t-shirt online or

you'd bought some little tchotchkes for friends and relatives on Christmas, well, they were not subject to shipment costs or tariffs, and they were

exempt from tedious inspections.

So now there's 1.3 billion of such packages, nearly four million de minimis enter the U.S. every day.

Elisabeth Buchwald is with me. The funny part about de minimis is, which means, of course, minor, little, trifling, getting rid of de minimis is no

trifling matter for the sheer number of things. How will we see this affecting us?

ELISABETH BUCHWALD, CNN BUSINESS ECONOMICS REPORTER: Oh my God, it is crazy how many packages come in de minimis. And the numbers that you laid out,

absolutely true.

UPS and a bunch of various delivery partners have said, we are up to speed, we've invested and Customs claims they are ready, too, but when we saw this

briefly in effect in February, it didn't go so well.

QUEST: So what's the goal? I mean, is it to get the revenue from it? Is it to make the point? The paperwork will be voluminous. So what do you believe

the goal is of getting rid of de minimis?

BUCHWALD: Well, the Trump administration says that it is to crack down on fentanyl and other drugs that might make their way into the U.S. So those

packages that people were getting on TEMU and SHEIN, they didn't undergo as rigorous inspections as other things that were coming from other countries

into the U.S.

So there is a case to be made that perhaps there were some drugs that got in there, but that's exactly what they are doing, and then there is also a

revenue perspective here.

QUEST: Do you think it is going to have a major effect? I mean obviously for SHEIN and TEMU, it will because all of a sudden -- but you know, every

item, I mean, this t-shirt, let's say it is seven bucks or whatever, put 145 percent on that and the shipping costs and all any other costs there,

and suddenly, we are talking real bananas.

BUCHWALD: Well, we have to remember that nothing is permanent here. I mean, how many times have we seen on again, off again, on again, off again? And

actually earlier today, there was a little bit of optimism that China and the U.S. could be involved in some talks soon. And, you know, it is just a

matter of who is going to make the first call to who. But, you know, you could see these things go away.

So I don't know that it is going to be permanent. Companies knew that this was happening.

[16:10:06]

TEMU, they set up warehouses for almost a year now within the U.S., shipping goods in advance, taking advantage of the exemption that was still

in place. So it is hard to say.

QUEST: Right. The de minimis exemption that we've seen and the way in which it is now going to force through. Have we seen any trade deals yet? I know

Howard Lutnick is talking of some; Scott Bessent is talking of others, but the ability to deal with the non-tariff trade barriers, I think I said that

right. That is much more difficult than just doing the headline rate isn't it?

BUCHWALD: Yes, and it is allegations, too. So when they talk about non- tariff trade barriers, which hopefully I got that right, too, currency manipulation, how do you exactly measure if a country is manipulating their

currency? It is a question I don't know how to answer. Maybe countries are very much doing that, but then how do you attack that? How do you get them

to stop doing that?

There is a bunch of these questions, and I am very curious to see how it is going to get addressed in potential deals that are being discussed. I know

India is one that the administration keeps kind of previewing a little bit, but we still haven't seen any announcements yet.

QUEST: We should look at that in the future. Looking forward to it. Thank you.

BUCHWALD: Thanks.

QUEST: Now, as the reality of tariffs hit, businesses must decide how to respond. OMSutra sells handcraft products from India. Look at these

wonderful things. Its current inventory will last until the end of the month. After that, the company will raise its prices around 15 percent.

So this t-shirt would go from $45.00 to $52.00. They've got this pillow, which is rather splendid. Its currently at $33.00. It is set to rise

another $3.45. It doesn't sound a huge amount, but is that the sort of price rise that would put people off? And if the 90-day pause on tariffs,

well, that will go even further.

Jyoti Jaiswal is the founder and CEO of OMSutra, joins me now.

First of all, you've got your inventory that you're working off that have already been bought and is already here or on the way. How much of that is

still to go to be sold, do you think?

JYOTI JAISWAL, FOUNDER AND CEO, OMSUTRA: We have hundreds of those. Like we have different colors in each of the design, so we still have enough

inventory and this is why we don't want to pass on the prices to our customer. Still, we have the old inventory, so we are good to go till the

end --

QUEST: But are you ordering things now for the post tariff world? And are you now starting to be quoted by your suppliers, what it will be?

JAISWAL: Yes.

QUEST: Or are suppliers to you quoting pre-tariff prices and you have to add the tariff as the importer.

JAISWAL: Yes. We do have to like add on to it, but we are not passing everything to our customer. We are being very strategic and looking into

how we can navigate our business operations. So there will be increase in prices, but we are trying to see how we can take this challenge and move

from there.

QUEST: Right. But if we can go back and we look at -- I am not going to hold you to this in a sense. If we go back and we look at that t-shirt that

we were showing just this rather fine t-shirt, and we look at how much the price was going to change as a result, it is going up $5.75. What do you

think is the pain point? $6.75. What do you think is the pain point before people say, I am not going to buy it? Is there much of a difference between

the person who will buy at $45.00 versus the person who will buy at $51.00?

JAISWAL: Yes, there is a pain point here to pay extra dollar for the same t-shirt now, but we are trying to being very transparent, telling the story

behind each of the work that we do and also the products. So each has a story to tell, and like there is an impact because through these products

of ours, we are preserving the craft. We are employing and like we are having, like artisans and women groups working for these and it is -- we

are transforming lives.

So people who are interested to support that cause irrespective of the cost are still going to support us.

QUEST: Have you considered whether you should itemize on the bill the tariff cost, whether it is the full tariff cost or the cost that you're

part -- you know, that you're passing on, rather than the bit that you're eating? Have you decided whether you will or will not itemize that this

extra bit is the cost of the tariff.

[16:15:03]

JAISWAL: We are working on it. It is still in process, but we have to increase the price, but we are not itemizing it as of now exactly. It is a

question and things are up in the air.

We don't know, like right now it is 10 percent what it is going to hold after 90 days. So still things are, you know, in the air.

QUEST: How much do you think -- the tariff is one aspect, but if the de minimis goes, there is all the questions of the paperwork and all of these

sort of things. How much do you think the restrictions of the loss of de minimis is going to hit you and affect your company?

JAISWAL: So it is going to affect in a bigger way, because it is not only the tariffs that is added cost of administrative expenses like more fees to

the brokerage, administrative expenses shipping and logistics. So there are so many things that goes in the supply chain that we have to look into

along with the tariff.

So other than the cost of the tariff, we also have to add the administrative expenses, so that will be a question. But we are trying to

be very strategic about how we are bringing in new line and how we are doing like initially before we were doing small batches. Now at a time, we

have to have more inventory and it is going to impact our supply chain because we are preserving the craft and giving work opportunities to women

and the artisans.

So it is going to be a hit on that side, but we are trying to be very strategic how we do our business.

QUEST: We will follow up with you in a few weeks, if we may, to see as all this comes in, because I do understand we are still making it up as we go

along, and we are working out what tomorrow will look like.

So, I am grateful to you. Thank you. Have a good weekend. I appreciate you talking to me.

JAISWAL: Thank you. Have a good weekend.

QUEST: QUEST MEANS BUSINESS live from New York.

The Baltic members of NATO are discussing a massive drone war. The idea countering Russia. The chief executive of one of the arms makers that is

supporting the plan, there he is. He will be with us after the break. It will be a break to not talk about tariffs, but we will talk about drones

instead.

QUEST MEANS BUSINESS live on a Friday.

(COMMERCIAL BREAK)

QUEST: President Putin may have tempered expectations of what he will achieve in Ukraine according to western intelligence. Now he seems to have

shifted his goals towards solidifying his hold on the territory Russia has already got and boosting his country's stagnant economy, which is different

from recent intelligence assessments that suggested he was confident he could take all of Ukraine.

[16:20:11]

Ukraine has been warning NATO for a while now that the alliance is completely unprepared for a modern drone war.

Now, we've been following reports that Poland, Finland, Estonia, Latvia And Lithuania, the Baltic states as such and other NATO that are discussing a

drone war. You can see how that would go to counter Russia, its plan to use automated drones around the Baltic Sea that would monitor NATO's eastern

border.

It is very ambitious. It would require A.I. and in many ways, it is like what Ukraine is doing right now on the battlefield as it tries to find an

edge.

For instance, Nick Paton Walsh, have a watch. He embedded with Ukrainian forces last year. This brings home very clearly how drones have shaped

strategy.

(BEGIN VIDEO CLIP)

NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT (voice over): They're running out of time, space, and people. Night is killing

time for drones.

WALSH (on camera): They've switched on the anti-drone device because of the threat around here.

WALSH (voice over): This Ukrainian drone unit of just two, hunting, but also hunted.

WALSH (on camera): I think I hear a drone. Inside, inside. Is it a Russian drone? Is it one of theirs? I don't know, but they have to carry on.

(END VIDEO CLIP)

QUEST: With me, Jaanus Tamm, the CEO of DefSecIntel Solutions, supervisory board of the Defense Estonia Cluster. I mean, drones are cheap to make,

relatively. They are ubiquitous. I would have thought that with all the firepower and money that the Baltic States and NATO has got, they could

build more than a wall. They could, you know, festoon the place with them.

Can you hear me, sir?

JAANUS TAMM, CEO, DEFSECINTEL SOLUTIONS: Yes, yes. Hello. Yes. I do hear you. Yes. We have an ambitious plan in Estonia, Latvia, Lithuania, Poland

and Finland to build a drone wall against hostile drones. Because nowadays, drones flying everywhere in the borders or in the battlefield, starting

from smugglers until spy drones gains to like attack drones.

QUEST: So what's the idea here? Because, the drone has become, if you will, the weapon of choice in many cases. Is that the -- is that likely to be the

case against the Baltic wall? Or would you be needing more conventional forces? Missiles? Tanks and the like? What role would the drone play?

TAMM: Yes, we actually in Estonia and Baltic, so we need also conventional rockets, armored all of that. But war in Ukraine and Russian aggression

have showed that drones are very cheap to make and they are flying everywhere and especially Iranian drones, they are very easy to send very

far distances with different payloads, which means that we need to have means and systems, which we can counter them in the same level so that in

the cost wise, it must be cheap, cost efficient, and we must be able to take them down before they came to our borders or the moment they cross our

borders, and Ukraine have showed that there are technologies for that.

QUEST: Are you looking at them as -- I mean, all of NATO is defensive, I get that, so let's not get into a discussion on the sophistry of that. But

are you looking at them? If they had to become attack drones to do that as well?

TAMM: We need to detect them as far as possible, as early as possible. And then, of course, we need to take them down with different means. We have

electronic warfare elements in our drone wall, but we also have kinetic, like, drone against drone or even guns.

QUEST: What's the next stage do you believe in drone warfare? Because the speed with which it has progressed and advanced during the Ukrainian war

has been remarkable. Where does it go next?

TAMM: I think the next is already almost there. So drones are already flying in silence, so you don't hear anything in the radio frequency in

Ukraine, they already have tens of kilometers of wired drones.

[16:25:02]

And next step is that they will be swarm drones with also no talking to each other very much.

QUEST: So final question, because I am just curious. We are a business program. On average, how much does one of these things cost? If I wanted to

get a drone up and running so it could carry -- never mind the cost of the payload, the drone itself up, running, flying over, how much would I be

looking at?

TAMM: If you're talking about this FPV attack drones, then you can you can get it within a thousand dollars, and they can do the job. If you talk

about head drones, they are most likely $50,000.00.

QUEST: Interesting.

TAMM: But currently NATO, we take them down with million dollar rockets.

QUEST: Now, that's the point, isn't it? That is exactly the point. If you can take them down -- if you can take a $50,000.00 drone down with a

$5,000.00 drone, then you have got an economic argument.

Sir, I'm grateful to you. Very kind. Thank you. Have a good weekend.

TAMM: Thank you.

QUEST: As we continue, the Canadian Prime Minister Mark Carney, says he will meet Donald Trump on Tuesday in Washington.

Mr. Carney admits the conversation will be difficult.

(COMMERCIAL BREAK)

QUEST: Hello, I am Richard Quest, together well have more QUEST MEANS BUSINESS.

We will be in Islamabad. We will have a report on a senior Pakistani official telling us an Indian strike remains likely following the terror

attack in Kashmir.

And OpenAI says it is rolling back the latest update to its chatbot. Apparently, users complained it was sucking up to them.

We will get to all of that, but only after the news, because this is CNN and on this network, the news always comes first.

The U.S. economy posted stronger than expected job growth numbers amid trade wars and economic uncertainty. The American employers added 777,000

jobs last month, and economists were expecting considerably less at 135. The unemployment rate held steady, it is 4.2 percent.

[16:30:11]

President Trump has signed an executive order that instructs the CBP, the Corporation for Public Broadcasting to stop spending direct federal funding

for Public Broadcasting, and NPR, National Public Radio. The corporation is a private entity, and it is supposed to be protected from government

interference.

Prince Harry, the Duke of Sussex is talking publicly about the Royal family and seeking their embrace after a tough day in a London courtroom. Prince

Harry has told the BBC he wants a reconciliation with his family after he lost a legal challenge over his security arrangements in the United

Kingdom.

Canada's Prime Minister Mark Carney is to go to Washington on Tuesday, where he'll meet Donald Trump. Mr. Carney was speaking to reporters in a

press conference, the first since Monday's election, and he was returned to power. The tensions with the U.S. are top of the agenda, and Prime Minister

Carney said next week's meeting will be difficult, but constructive.

(BEGIN VIDEO CLIP)

MARK CARNEY, CANADIAN PRIME MINISTER: Our focus will be on both immediate trade pressures and the broader future economic and security relationship

between our two sovereign nations.

My government will fight to get the best deal for Canada. We will take all the time necessary, but not more in order to do so.

(END VIDEO CLIP)

QUEST: Paula Newton's with me, this is going to be very different, isn't it? Certainly it's not a Zelenskyy meeting, arguably not a Starmer or

Macron meeting, because everybody knows exactly where Carney stands. Never, ever on the front of sovereignty and tariffs. Well, he can do it -- he'll

do a deal if he can.

PAULA NEWTON, CNN ANCHOR: Yes, to be clear, though, he will approach this meeting as you well know, as a central banker, in fact, first and foremost,

he has that pedigree. He will be going there to negotiate an economic deal, and he has made it very clear that he will not tolerate any language about

a 51st state or about him being governor.

Having said that, it was really interesting in the press conference today, he lowered expectations, Richard, and said, look, don't expect any

conclave-esque white smoke from this. He does not expect tariffs to be lifted immediately, or for there to be a deal immediately. And he did say

that the president is a tough negotiator and appreciates strength.

So, he's already laid the groundwork there on two scores, right? He's complimented the opponent and lowered expectations.

And I do want to remind everybody here, as much as everybody talks about China, and it is incredibly important to get that deal. A reminder, Canada

is still the biggest buyer of Canadian goods that the U.S. has. American goods, if I said that properly. There you go.

QUEST: Well, I got it. I got it. But, you know, because he has said things like the, you know, never, ever. He has said the existing trading regime is

over. He said there's no going back. It's almost like, you know, all right, J.D. Vance, you want to sort of bring it on in the white -- in the Oval

Office. All right, Mr. Trump, you want to call me the 51st governor. Fine, go ahead. It won't make any difference.

NEWTON: I don't think that. I believe that it will make a difference. It's interesting, through the campaign as well, Richard, that he softened his

stand even on reciprocal tariffs, saying, look, they have a limited use, and we can go no further. Essentially giving the argument, look, why should

we punish ourselves even more than we already have?

Again, though, it's the pivot that you're talking about, and he most definitely has said on so many areas that Canada needs to pivot away from

the United States.

QUEST: Right, now, we've got -- the Prime Minister has invited the king, the king of Canada, to address to open parliament. It's normally done by

the governor general. There's been a couple of occasions. 1977 was when I think that the Queen last did it, and the Queen first did it in in 1950s.

1957. Her Majesty opened parliament.

But asking the king short notice to go and do this, and having seen the picture of the king with Mark Carney recently at Buckingham Palace with

that picture there that we are looking at, this is a real eye mate to Donald Trump. This is sovereign territory. The head of state is His Majesty

the King. He's the king of Canada, and he's going to rub that right down, if you like, because he's going to come and open parliament.

[16:35:16]

NEWTON: 100 percent, Richard, it's what we call a flex. And Mark Carney was very serious about that flex. And I want to quote our governor general now,

our representative here, Mary Simon, who said this historic honor matches the weight of our times.

You had the right words, right, Richard? As you always remind us, he is the king of Canada, and this is a very loud reminder and the king accepting

this invitation to say to the United States and everyone else, back off. It's a sovereign country.

QUEST: I've been on about this -- I've been on about this for months, Paula. The first time I heard this, 51st state business, I said, hang on a

second. Canada is -- no, it's not British. It's the king. The king of Canada. It's the king of Australia. He's the king of business (ph).

And Canadians are very with exception of, you know, obviously, the Republican minority and some in the eastern province of Quebec, they take

their monarchy as extremely seriously. He's your king of Canada as much as he's my king of Britain. Do you agree?

NEWTON: And that is something that so many have forgotten in this piece. And what I mentioned, Richard, to many people was that Canadians may say to

themselves, if our king can't make any kind of a move to stand up for us. What good is it? Why do we have a sovereign? And I think the palace must

have gotten that message loud and cold.

QUEST: And the king I know, the king considers his duties and responsibilities vis-a-vis the realms like Canada to be extremely important

and significant. Hence the last minute.

Paula, grateful. We've got lots to talk about as that moves forward. And now, we were just talking there, king of Canada, but Charles is also king

of Australia, and indeed, it's his government in Australia that's holding the national election, also against the backdrop of trade tensions within

the United States.

In around 90 minutes from now, millions of Australians will go, will start voting. By the way, of course, it's it is compulsory to vote in Australia,

so 98 percent are registered, and the turnout is always extremely high.

But this Australian election will determine the next prime minister, obviously, through parliament. CNN's Mike Valerio looks at how Donald Trump

is weighing in on voters.

(BEGIN VIDEOTAPE)

MIKE VALERIO, CNN CORRESPONDENT (voice over): In Australia, the cost of living and housing prices are big drivers in the country's national

election, but experts say so too are the trade policies of U.S. President Donald Trump.

Highly contentious issues that will likely fall to incumbent Prime Minister Anthony Albanese and his labor party, or main challenger conservative

leader Peter Dutton from the Liberal Party, but political analysts say reaction to Trump's global tariffs could tip the election.

ANTHONY ALBANESE, AUSTRALIAN PRIME MINISTER: Make sure you know where the destination is, because it is destination chaos and destination shambles

and destination cuts from Peter Dutton.

PETER DUTTON, LIBERAL PARTY LEADER: I don't know Donald Trump is my point. My point is that who I trust is the Australian people. My job is to stand

up for our country's interests.

VALERIO (voice over): Dutton has said he wants to cut migration, overhaul so called woke agendas in his campaign to, "Get Australia back on track."

But he's trying to distance himself from comparisons to Trump, especially after the recent elections in Canada, where the conservative opposition

lost after he was favored to win. The defeat fueled by a backlash over Trump's policies and his comments on making Canada the 51st U.S. state.

But besides Trump's tariffs, there is another wild card in this election. For the first time, millennials and Gen Z voters outnumber the baby boomer

block, making up 43 percent of the electorate. Many are first time voters, and what they care about could sway the results.

UNIDENTIFIED FEMALE: I think the Labor Party have done nothing for ordinary people since they've been elected. I think Peter Dutton would be worse.

UNIDENTIFIED MALE: Rising nationalism is my biggest concern right now because of the dangerous rhetoric that it contains.

UNIDENTIFIED FEMALE: To be honest, the political state of America is sort of -- it's heavily impacting the way that I'm viewing the current election,

just in the sense of trying to avoid the situation that's happening over there.

VALERIO (voice over): China was one of the biggest international concerns in the last Australian election. Now, Australians are worried about

uncertainty in the global economy.

So, while the U.S. president is not on the ballot Saturday, many Australians will be thinking of him as they cast their votes. Mike Valerio,

CNN.

(END VIDEOTAPE)

QUEST: Coming up, in Pakistan, the authorities still believe an Indian military strike is likely. There are tensions flowing up over the attack on

tourists in the Kashmir region. We'll be -- report from Islamabad allowed in just a moment.

(COMMERCIAL BREAK)

[16:43:04]

QUEST: A senior Pakistani official is telling us that authorities believe an Indian military strike is still highly likely. Tensions between the two

nations have run high since 26 tourists were killed in the Indian administered area of Kashmir. Indian has accused Pakistan of being

involved, something that Islamabad has denied.

Commercial flights between the two countries have been shut down. India has also canceled visas for Pakistani nationals and also suspended a key water

sharing treaty.

Our correspondent Nic Robertson is in Islamabad and sent this dispatch.

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Richard, there's no doubt that Pakistani officials at the moment, and I was sitting down with a

senior Pakistani official earlier in the day, still feel that tensions with India are very high. Still feel that there is a real potential for India to

strike. And part of their belief in that is they think Pakistani officials think that India was on the verge of perpetrating a cross border fighter

jet attack into the Pakistan's controlled side of Kashmir early Wednesday morning, they say four fighter jets were flying to the border, then

diverted off and went to a base back inside of India.

Now, Pakistani officials are assessing that as from their view and their understanding that India wants to have an attack, and that's why they

believe an attack is still coming.

There has been, however, and I think it's quite noticeable to sort of -- even sort of join the dots here that this alleged attempt that Pakistan

says happened early Wednesday morning.

Later on Wednesday, we saw a really ratcheting up of the U.S. and other diplomatic involvement going much more public than it had been behind the

scenes.

Yes, U.S. Secretary of State Marco Rubio speaking with the Pakistani Prime Minister, his Indian counterpart, Pete Hegseth, the U.S. Defense Secretary

on Thursday, speaking to his counterpart in India, and then J.D. Vance overnight, Thursday into Friday, speaking about how the United States

really wants to see both countries work together to avoid an escalation.

(BEGIN VIDEO CLIP)

[16:45:12]

J.D. VANCE, VICE PRESIDENT OF THE UNITED STATES: Our hope here is that India responds to this terrorist attack in a way that doesn't lead to a

broader regional conflict, and we hope, frankly, that Pakistan, to the extent that they're responsible, cooperates with India to make sure that

the terrorists sometimes operating in their territory are hunted down and dealt with. That's how we hope this unfolds. We're obviously in close

contact. We'll see what happens.

(END VIDEO CLIP)

ROBERTSON: Striking as well that on Friday, both the UAE, the Saudi the Kuwaiti ambassadors, all went in to meet with the -- with the foreign

minister here in Islamabad, a very similar message from all of them about wanting to contribute to a de-escalation in the situation, a calming of the

situation. So, there's a full court diplomatic press on.

But here's the kicker here, Pakistani officials say if India does go ahead and strike Pakistan, without question, Pakistan will retaliate. How India

strikes in the first place? What happens after Pakistan retaliates? All of that, the big uncertainty, that's why the diplomacy right now is at such

high stakes, Richard.

QUEST: Nic Robertson in Islamabad.

As you and I continue our Friday together, OpenAI says it's made the wrong call with its latest chat bot update, the version that the company is

calling uncomfortable and unsettling.

(COMMERCIAL BREAK)

QUEST: OpenAI says it made the wrong call with its new version of ChatGPT, the bot. It's calling it sycophantic, uncomfortable and unsettling. The

company says that kind of behavior could raise safety concerns, as CNN's Anna Stewart had to listen.

(BEGIN VIDEOTAPE)

ANNA STEWART, CNN CORRESPONDENT (voice over): If you've been using ChatGPT over the last few weeks, you might have noticed it's been pretty flattering

and at times a little unhinged.

Sam Altman responded, saying, updates had made the personality too sycophantic and annoying. OpenAI has rolled back its update so you should

now have an earlier version with more balanced behavior. OpenAI says the issue was caused by the model focusing on short term feedback responses

that were overly supportive but disingenuous were rewarded.

[16:50:02]

STEWART: OK, well, let's see what happens if I ask ChatGPT whether it thinks I'm God. Let's see what it's going to say. I am God.

If you're asking literally whether you're the Omnipotent, Omniscient Creator of the universe, there's no evidence to suggest that, but it might

help to clarify what made you ask this. Oh, it's deep.

Elon Musk has been very critical of how sycophantic ChatGPT has been. So, why don't we try out Grok? I am God.

Nah, you're not God, unless your idea of divine power is binge watching Netflix or making a killer sandwich. It knows me too well. Very fun answer.

I quite like that.

Gerd Gigerenzer is a psychologist who has spent decades studying human behavior. I asked him what might have caused this.

GERD GIGERENZER, DIRECTOR, HARDING CENTER FOR RISK LITERACY: The OpenAI engineers had quite a weird psychology and thinking that it would please us

if a machine would constantly, you know, say praise and praise and praise.

STEWART (voice over): Alex Albert, head of Claude Relations at Anthropic A.I. says the problem is that much of the industry is caught in a toxic

feedback loop, and that loop may contribute to a chat bots popularity.

GIGERENZER: Encouraging longer engagement by flattering users.

STEWART (voice over): So, let's ask Claude.

STEWART: Who can make mistakes? Please double check responses. Essentially, no, you're not a god, and then quite a serious response, three paragraphs,

in fact.

STEWART (voice over): ChatGPT may be more cautious on sycophancy for the next update, plus the competition for language model A.I. continues to

grow. Building those relationships with users will be key.

(END VIDEOTAPE)

QUEST: Anna, before we talk about other matters. Just looking back and so my ChatGPT, I've had, gosh, that's a good question, Richard, I was asking

about the bank of mum and dad. That's wonderful that you might be helping your children.

I mean, my experience of it is the moment you find a mistake, it becomes almost, I'm terrible, I'm dreadful. I'm the worst bit of things you've ever

heard.

STEWART (on camera): Richard, I have long wondered whether you are developing a slightly unhealthy relationship with your pal chat, but, you

know, maybe that's a discussion for another time.

QUEST: You leave me and chat alone.

I want to turn to other matters happening that -- in London, Prince Harry speaking out after he lost the legal challenge over his security

arrangements, and afterwards, he spoke to the BBC saying he was devastated and the case was given a wedge between him and his family.

(BEGIN VIDEO CLIP)

PRINCE HARRY, DUKE OF SUSSEX: I would love -- I would love reconciliation with my family. I've always -- I've -- you know, there's no point in

continuing to fight anymore. As I said, life is precious. I don't know how much longer my father has and he won't speak to me because of this security

stuff. But it would be nice to -- be nice to -- be nice to reconcile.

(END VIDEO CLIP)

QUEST: I'm cringing, Anna Stewart, I'm cringing. That's exactly the sort of thing the king will lose. It's the opposite of, never explain, never

complain. He's doing exactly what William and Kate hate. He's pouring it all out.

STEWART: It makes me wonder what the motive of the interview is. Clearly, Prince Harry says that he really does want reconciliation this family,

particularly with his father, not least, given his father, as you know, going through cancer treatment, etcetera.

However, you're right. This is probably not the way to go about reconciliation with the royal family. But perhaps that's not the motive. I

mean, a lot of the interview, Richard, centers around this issue of security, the fact that he's lost this big appeal.

QUEST: Hang on, (INAUDIBLE). As I understand this security issue, the authorities have said he will always get the appropriate security he

requires. They've never said he's not going to get security.

STEWART: It's not the level of security he would like, and it's only on their terms. So, if Prince Harry, for instance, wants to come back for a

charitable event, it's up to Ravi to consider what sort of security he would get. He believes that other public figures, some who haven't even

held public office have better security than he does, and he says he was born into this role, that it wasn't his choice and that his risk secure --

his sort of risk assessment didn't fundamentally change just because he decided to not be a working member of the royal family.

And he questions how these decisions are made. He doesn't like that the so called establishment, the royal household are involved in the committee

that makes these decisions. It's not just, for instance, the government and the police.

QUEST: He's got a valid point. He'll always be Prince Harry. He will always be the king's son, and therefore he can't. And, you know, as we've seen it

time and again.

[16:55:00]

But this ship has sailed. I can't see -- I can see a rapprochement in sort of the most superficial terms that keeps everybody happy, but having

covered the ro -- they're not going to go -- no.

But what do you think? You've covered the Royals enough.

STEWART: I feel like the big message, the big takeaway that we're all taking from the interview is this awful moment where he says his father

isn't talking to him and he's concerned that he doesn't know how long his father may have.

And, you know, I think Richard that cuts through for some people. Everyone wants to see a happy family, but there is a lot more to the interview. This

is not the way to get reconciliation. It's highly unlikely you will get any sort of response from Buckingham Palace on this one, they will be focusing

instead on VE Day commemorations, which kick off in earnest on Monday, I'll be outside Buckingham Palace, Richard.

QUEST: I'm envious. I'd like to be -- I'd like to be there with you. Spend a wonderful VE Day. It's something absolutely worth remembering those who

fell on all sides. Thank you, Anna, I'm very grateful.

I'm going to love you and leave you and show you the way the market has closed at the end of the week. It's up, lots of sessions up. S&P has erased

the Liberation Day disaster. But let's not be fooled. There's still the issues in the economy that are all over the place. They have not changed.

Let me show you the Dow 30, just so you can see that. Look, Nike at the top, Apple at the bottom. That tells you all you need to know.

I will have a profitable moment with you and me in a moment.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment is a Friday. I'm going on a frolic of my own, in a sense. Simply, King Charles going to Canada to open parliament.

The Royal diary is set months and months, if not years, in advance.

So, the fact that Mark Carney asked him very late in the day to go to Canada, when only in two or three occasions before Her Majesty the Queen

went and opened parliament, normally it's the governor general, speaks volumes.

And it really is significant. Why? Because you have Donald Trump talking about the 51st state and as you and I have talked about on this program,

Donald Trump conveniently forgets Canada belongs to the realm as part of King Charles. King Charles is the head of state, and when he says he wants

the 51st state, he's talking about well, Charles, I'm taking it off you. The fact that Mark Carney is having the king going to open parliament is

really one straight on the nose to the U.S. president that basically says, show your respect, particularly bearing in mind, you're going to Britain

for a state to visit in October, and would you like to tell the king then that you'd like to try and steal one of his realms?

Well, you know what I mean, it's all about what the people want, and at the moment, they're quite happy or seemingly with King Charles.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard quest in New York.

Whenever you're up to the hours ahead, I hope it's profitable. Have a good weekend. I'll see you Monday.

END