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Stocks Plunge For A Second Day As China Announces New Tariffs; Fed Chair Says Higher Inflation, Jobless Rates Possible Amid Tariff War; Cambodia Reduces Tariffs On U.S.-Based Products Amid Global Trade War; Trump Pressures Fed Chair Powell To Cut Interest Rates; Trump Fires Director And Deputy Director Of National Security Agency; China Fires Back, Slaps 34 Percent Tariffs On U.S. Imports In Retaliation; ICE Temporarily Releases Kidney Donor. Aired 2-2:30p ET

Aired April 04, 2025 - 14:00   ET

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

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[14:00:54]

BRIANNA KEILAR, CNN HOST: An ominous forecast from the Fed, now warning the fallout from President Trump's tariffs will likely be significantly larger than expected. Bottom line, prepare for higher unemployment and rising inflation.

BORIS SANCHEZ, CNN HOST: Plus, two of the nation's top Intelligence officials and multiple National Security Council staffers have been fired just one day after President Trump's meeting with a noted conspiracy theorist who pushed for their removal. And it's a life- saving reprieve, ICE agrees to temporarily release a deportee, so he can donate a kidney to his brother. We're following these major developing stories and many more, all coming in right here to "CNN News Central."

KEILAR: Stocks rocked for a second day in a row, falling sharply after China's retaliation on President Trump's sweeping tariffs, but not everyone's fighting back, and there are signs of attempts to negotiate here. Trump posting just a short time ago that Vietnam wants to cut their tariffs on U.S. goods down to zero if they're able to make an agreement with the U.S.

SANCHEZ: At the same time, Cambodia announced it was immediately reducing tariffs on U.S. exports, but then came this. Fed Chair Jerome Powell saying, "The tariff increases will be significantly larger than expected." Powell then adding, "The same is likely to be true of the economic effects which include higher inflation." Let's bring in CNN Business Editor at Large, Richard Quest. Richard, how do you see this game of chicken between the White House and the Fed playing out?

RICHARD QUEST, CNN BUSINESS EDITOR AT LARGE: Not very well actually, because the Fed is in charge of monetary policy and the Fed is now in a very difficult position because on the one hand, there is going to be this much larger effect of the tariffs. There will be higher inflation, there will be a slowdown. I'm not suggesting we'll get to stagflation, although that -- some people are saying that's where you'll end up. And now, Jerome Powell is going to have to make that really tricky decision. Does he cut rates to keep whatever momentum there is in the economy going, or does he hold the line to bring down inflation?

We know where inflation is coming from, so to that extent that helps him deal with it. But there's no question the economic conundrums for the Fed have just got increasingly more difficult because these -- everybody to a person is saying this tariff increase is wider, higher, broader, deeper than anyone has expected.

KEILAR: And Richard, what's your reaction to the Fed Chair saying the impact here of the tariffs will be significantly larger than expected? Pretty much because the tariffs are significantly larger than expected.

QUEST: The market is going to have to price it in. The market is going to have to work out what Powell's going to do. And there are no easy solutions here. To be clear, the interest rates were coming down and were expected to continue to come down. And you may still need to bring them down because the U.S. economy is going to slow down as a result of these tariffs. And you're going to have inflation going up, growth going down. And I'm going to put that word on the table again because you're going to hear it quite a lot over the next few years, stagflation, stagnant growth with inflation. It's a very difficult recipe for economics, for policy makers to deal with.

And then you have this business with Cambodia and Vietnam. Now, this is really interesting. First of all, great that everybody is talking. But secondly, Cambodia doesn't exactly import a huge amount from the United States. It's about $320-odd million worth of goods, transportation, secondhand, all that sort of stuff. And the U.S. imports a huge amount, there you go, you see the number. Look at that, outbound $321 billion, inbound $12.7 billion.

[14:05:00]

Now, let's assume for the purposes that both sides agree to a new lower tariff. From the U.S., it'll go from 40 percent to say five percent; from Cambodia, it'll go from 35 percent to say, so let's say 5 percent, just argument's sake. But that doesn't address the real problem with Cambodia, Vietnam, and China. It is not the headline number guys, that's the problem. It is these things that is in the U.S. government report, the so-called non-tariff barriers, the government procurement role. The local text rules, the rules about how many partners you've got to have, who can buy what. That's the impediment. Change the headline number, good on you. You have to deal with these if you really want to get growth moving or exports moving.

KEILAR: Yeah, such a good point. Richard Quest, thank you. And today, there are still questions over what President Trump's tariff end game is. You heard Richard talking about it there. Trump posted this morning, 'To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before.'

SANCHEZ: Just last night though, Trump suggested he's open to making deals with countries on tariffs. (BEGIN VIDEO CLIP)

DONALD TRUMP, (R) PRESIDENT OF THE UNITED STATES OF AMERICA: Every country has called us. That's the beauty of what we do. We put ourselves in the driver's seat. The tariffs give us great power to negotiate, always have.

(END VIDEO CLIP)

SANCHEZ: CNN Chief National Affairs Correspondent Jeff Zeleny is traveling with the president. He is in Palm Beach, Florida for us. So Jeff, how open is the White House to deals right now? What is the pain threshold from consumers and markets?

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: Boris, it's clear that President Trump's phone is open and he is been talking to some world leaders as well as others who are deeply concerned about what they're seeing in the markets. One example is Vietnam, as you mentioned earlier. The president saying on Truth Social earlier that he had a conversation with the Vietnam. Of course, that is one of the countries where the reciprocal tariff, if you will, is scheduled to go into effect next week. So clearly, signaling there is room for negotiation.

But that is one of the big contradictions and really confusing aspects of all of this because so many of the president's advisors have been saying day after day after day from Commerce Secretary Howard Lutnick to Peter Navarro, the Trade Advisor, that the president is not open to negotiation. So then this raises the question, what's the purpose of all of this? Is it to use tariffs as a negotiating tool, or is it to raise revenue for his tax plan? Or is it a mix of both? But one thing that is clear that is getting under the president's skin and is worried about the idea of inflation is the Chairman of the Federal Reserve.

So, President Trump just a few hours ago, directly trying to pressure Jerome Powell to lower interest rates. And we heard him say that, at least for now, the Federal Reserve is going to be in a wait and see attitude. But the president is saying this directly to a Jerome Powell. He said this would be a perfect time for Fed Chair Jerome Powell to cut those interest rates. He is always late, but could now change his image and quickly. The president goes on to say, energy prices are down, interest rates are down. He said a big win for America would be to stop playing politics with this.

But look, Jerome Powell has resisted and ignored the criticism of the president before and there's every bit of indication he will do that again. But as the president is still on his golf course here in West Palm Beach, obviously working and talking with people as the day goes along, the central question, Boris, is that pain threshold. The president has always talked about there would be some short-term pain here for these massive changes in the trade policy. The president is not likely to run again for re-election, of course. He is -- this is his second term. But at least politically speaking, the pain threshold for people in his party may be a better question here, even as these retaliatory tariffs like from China, for example, start coming into sharper focus. Boris and Brianna?

KEILAR: Yeah, that is the question. Jeff Zeleny, thank you. Diane Swonk is with us now. She's the Chief Economist for accounting giant, KPMG. Diane, thanks for being with us. What do you think about the president calling on Powell to cut interest rates even as the Fed Chair is stay the tariffs, the effects that are expected from the tariffs are larger than they thought they were going to be and likely to generate at least temporary inflation?

DIANE SWONK, CHIEF ECONOMIST, KPMG: Well, at the end of the day, the Federal Reserve is an independent institution and that is why they operate the way they do. The job of the Fed ultimately, is to keep inflation down even though they have a dual mandate to both keep employment up and inflation down. That doesn't work if inflation erodes purchasing power and causes more employment down the road.

[14:10:00]

So at the end of the day, the Fed will do what it needs to do. And this is not new for this Fed Chairman to deal with criticism coming directly from the White House. Many White Houses have tried to influence the Federal Reserve. One of the reasons that we keep hearing leaders of the Federal Reserve actually evoke the cautionary tale of the 1970s is the stagflation that took place, but also there was interference from the White House. The Nixon administration back then had forced the Federal Reserve Chair to stimulate to ensure the 1972 election, his 1972 election bid, which then laid for very fertile ground for the stagflation that erupted as OPEC cut production in 1973.

So, this is something the Fed is not -- it's familiar with. It is institutionalized. It is part of their DNA to be able to, in a period like this, actually stand firm and deal with ultimately inflation, because they don't -- the lessons of history are very clear. If you preemptively cut when the embers of inflation are still smoldering, you could ignite a much more severe bout of stagflation, which is rising inflation and rising unemployment. Any improvement you got in unemployment by cutting would quickly be erased by more inflation.

KEILAR: Diane, we know technically the president is supposed to only be able to fire the Fed Chair for cause, but President Trump and his administration have fired a number of prominent officials who were only supposed to be fired for cause. They've also fired tens of thousands of federal employees allegedly for cause, when it is clear in many cases there was no cause. So, do you think that Powell may be on the chopping block?

SWONK: At this point in time, Jerome Powell reiterated today that he intends to stay in through May 2026, which is when he hopes to retire. And I think that is where the Fed feels they have legal standing. Nothing can be predicted, as we know, uncertainty is part of what I think this administration likes to play into. That does have a cost. Uncertainty in the economy and uncertainty about the independence of agencies over time does undermine confidence and acts as its own tax on the economy as well. And that's something we have to take into account. And I think that's one of the issues that is weighing on the economy, is the extreme surge in uncertainty that we've seen in recent weeks as talk of tariffs have ratcheted up and the ability to do so with the stroke of a pen via executive order in the magnitude we're seeing, which right now, if taken out to where they renounced on April 2nd, even with negotiations, could be the highest tariff levels since the early 1900s.

KEILAR: Diane, you're seeing Cambodia and Vietnam reacting to these tariffs put on them by the Trump administration by saying they're open to reducing their tariffs on U.S. goods in order to get a reprieve. They clearly want to negotiate here. We don't know where that's going to go, but what we do know is that Trump hates trade deficits, right? The so-called reciprocal tariffs that the U.S. put on these countries, they're not actually based on what tariffs those countries are putting on U.S. goods. They are based on trade deficits, right?

SWONK: Right.

KEILAR: Not -- and we need to be very clear about that. So, as he maybe seeks to diminish or abolish trade deficits, what would that do to the global economy to do that?

SWONK: Well, sadly, I mean, part of the reason we have trade deficits, the administration views them as a weakness. They are actually a reflection of, from economic standpoint, our relative strength. I mean, you think of us relative to a small country like Cambodia or Vietnam, where it's a very poor country. It just has begun to really see exports pick up and there's just no way they could possibly import enough American goods given where they're at economically, and even be able to begin to afford them. And of course, they're a very cheap producer as well.

So, the idea of eliminating a trade deficit, to do that, you would have to really hammer domestic demand which is driven by U.S. consumers, much more concentrated in the top 10 percent of households than it was in the past, which is inequality. To do that, you would exacerbate inequality and have to really hammer domestic demand hard, which would mean a deep recession in the United States and globally. A global contraction in trade can't be ruled out if you really took it to the extremes that the administration has talked about.

KEILAR: That sounds terrible, Diane, I will tell you. Diane Swonk, thank you so much for your insights. Really, really appreciate it.

SWONK: Thank you.

[14:15:00]

KEILAR: Still to come, while the world reels from President Trump's tariffs, there's at least one industry that is cheering, many of them actually. But we're going to be talking to a shrimper who says he has been thrown a lifeline.

SANCHEZ: Plus, was a noted conspiracy theorist able to persuade President Trump to fire top intelligence and national security officials, where our sources are telling CNN about Laura Loomer's White House meeting. And there's a new twist in the Republican standoff over allowing lawmakers to vote remotely after having a baby. All this and much more coming up this hour on "CNN News Central."

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[14:20:17]

SANCHEZ: The Trump administration has fired the Director and Deputy Director of the National Security Agency, the United States powerful Cyber Intelligence Bureau. Sources tell CNN, that General Timothy Haugh, who also leads U.S. Cyber Command, the military cyber unit, and his number two Wendy Noble, were let go in a major shakeup within the Intel community. Their ousting comes at the same time that four staffers on the National Security Council were also fired.

Sources tell CNN they were terminated at the urging of far-right activist and conspiracy theorist, Laura Loomer, after she told President Trump they were disloyal during a meeting at the White House earlier this week. The president was asked about Loomer's influence last night.

(BEGIN VIDEO CLIP)

TRUMP: Laura Loomer is a very good patriot. She's a very strong person. And I saw her yesterday for a little while. She has -- she makes recommendations of things, of people, and sometimes I listen to those recommendations like I do with everybody.

(END VIDEO CLIP)

SANCHEZ: We're joined now by Josh Rogin. He's the Lead Global Security Analyst for the Washington Post Intelligence. Josh, thanks so much for joining us. Your reaction to the firings of these Intel and national security officials?

JOSH ROGIN, LEAD GLOBAL SECURITY ANALYST, WASHINGTON POST INTELLIGENCE: Right. Well, Boris, this is just the latest in a series of ongoing purges of national security officials, really any federal officials, to be honest, that are deemed insufficiently politically loyal to Donald Trump and the MAGA movement. And while Laura Loomer is a very influential person inside that movement, she's not working on these purges alone. There's an entire faction of people inside the White House who are trying to battle with another faction. It's a turf war, but it's also a part of these ongoing sort of political loyalty tests that are meant to keep everybody who works for President Trump in the national security system, looking over their shoulders all the time to make sure that they stay loyal. And that's part of what's going on here as well.

SANCHEZ: There are a multitude of scenarios you can easily imagine that can come of basing the strength of having someone on a national security team based on loyalty. Right, Josh?

ROGIN: Right. Well, for the most part, over the past 200 years or so, we've had this idea in our country that national security officials can put country over party. And many, if not most, if not all of the people who were fired over the last two days would say that's exactly what they were doing. By the way, most of them were Republicans. The one in the NSC, they are people who went to vote -- went -- decided to work for Trump in the first place. But again, they weren't part of the faction that Laura Loomer is part of, so they had to go.

And yeah, the risk, I think that you're alluding to, Boris, is that when you choose people based off of political loyalty instead of competence and experience and loyalty to the country, it ends up going very badly for national security a hundred percent of the time because you don't get decisions made in the interest of the country and national security. You get decision based on whatever it is that they think that Trump wants, which is a moving target and which they're also sort of racing to try to figure out themselves. So it's kind of a mess.

SANCHEZ: I also wonder what reported evidence she is presenting that these folks are disloyal. Do you know what that's about? This vetting that she has described?

ROGIN: Right. Well, you know, I didn't see her dossier, but the -- most of it's on X. You could just follow her X feed and you could see almost all of it. And it's a mix of guilt by association, slander, false accusations, incorrect information, like little bits of like, oh, this person was related to that person or knew this person or worked at there, therefore they must be disloyal to President Trump. Some racism thrown in against ethnically Chinese-American officials who happen to be against the CCP and working for America.

But put that aside, so when you, when you have that sort of like noxious mix of sort of like, I won't use the word disinformation because nobody likes that word, but let's just say smear campaign, an APO (ph) research file. Yeah, it's all over X. It's not a mystery what they're accusing these people of, most of it's not true.

SANCHEZ: Yeah. Pivoting, Josh, given your expertise over Asian affairs, I wonder what you make of how some of the United States allies and adversaries in Asia are responding to this tariff rollout. And specifically with China, there's 34 percent retaliatory tariff on the U.S.

ROGIN: Right. Well, it's really interesting because they're all responding differently in their own way.

[14:25:00]

Some of them, the small countries, they're looking to try to make a deal, make concessions. If you're Vietnam or Cambodia, yeah, you're going to get in there and try to do what you have to do because your export markets are so dependent on the United States that you really have no choice and you can't go head to head with the United States if you're a small market. Now, China is different. It's big, it's powerful. They've got their own economic advantages, their own technological advantages. So, they're fighting back and they have a lot of tools to fight back. And we're going to see how that goes. And then you have our allies like Japan and Korea, which is like, they're like, why are we getting attacked? We signed trade agreements in the last administration, we thought we already went through this. And they are democracy, so they have to respond to their public. So, they're inclined to fight back too, but they're caught, they're stuck in the middle. So, it's bad for all of our Asian allies and partners, but they're all in a different position of leverage. And the China thing, that's the biggest thing. The U.S.-China trade war is going to have the most collateral damage for China, for the United States, and for the rest of the world.

SANCHEZ: Josh Rogin, appreciate the expertise, as always.

ROGIN: Anytime.

SANCHEZ: Still ahead, it is quite literally a life-saving decision. ICE agreeing to temporarily release a deportee, so he can donate a kidney to his brother, their story coming your way in just moments.

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