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Presidents Trump And Macron Holding A Presser This Hour As The G7 Wraps Up; Trump Flips The U.S. Markets After Saying The Chinese Called; G7 Leaders Agree To Tackle The Amazon Fire Crisis. Aired 9-10a ET
Aired August 26, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's your need to
know. The Final Act: Presidents Trump and Macron holding a presser this hour as the G7 wraps up. The trade hotline rings: Trump flips the U.S.
markets after saying the Chinese called. And help is on the way, G7 leaders agree to tackle the Amazon fire crisis. It's Monday. Let's make a
move.
A warm welcome to the show this Monday. Never mind FIRST MOVE this morning. We've already had at least 50 moves already from the G7 over in
France. The upshot though, is investors are calmed, at least for now. Why? Well, let me take you through it.
President Trump says China called and wants to get back to the trading negotiating table. China's press might be disputing that right now. But
China's Vice Premier, Liu He said that he did oppose further escalation. President Trump also suggesting he could delay some of the tariffs, too.
Well, what a difference 72 hours makes.
There's also more good news, too. The U.S. President dropping large hints that the U.S. and Japan are moving towards finalizing a trade deal and the
French Finance Ministry confirming an end to the digital tax dispute. An issue that risks seeing tariffs slapped on French wine imports into the
United States. Now, that would have been a real disaster.
The bottom line for the markets, so deals are better than disputes. The U.S. majors last well over two percent on Friday amid the tit-for-tat
tariff barrage, but context again always important here, losses for the week totaled around one and a half percent. The S&P 500 still less than
six percent from record highs, up 13 percent year-to-date. Important to point that out.
Most European markets benefiting though from the positive trade noises, but coming too late in the session to save Asia. Losses of one percent or more
for the majors there. As you can see, we also saw the Chinese currency falling to an 11-year low versus the U.S. dollar. Plenty to discuss.
Let's get to the G7 and unpack some of this.
The G7 Summit wrapping up in around half an hour's time. U.S. President Donald Trump joining French President Emmanuel Macron for the closing news
conference. Stay tuned. We will bring you that live, but it's been a busy morning in Biarritz already where the U.S.-China trade war continues to
dominate the broader conversation.
Jim Bittermann is in France and Matt Rivers in Beijing for us to give us all the details. Jim, it was always going to be a lively press conference,
Jim. But as far as trade is concerned, the sentiments seem to turn on the idea that there had been a call between U.S. and Chinese negotiators. But
we can't clarify if indeed that did happen. Talk us through the details.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Exactly, Julia. It's what some of my colleagues in the background here in the press room
are calling whiplash messaging because we're hearing different signals from the White House practically every hour. Well, not quite. But it's at
least twice yesterday and then again this morning. There's been some problems.
It started yesterday at breakfast with Boris Johnson and Mr. Trump was asked if he had any second thoughts about the tariffs on China. And he
said he always had second thoughts.
So people interpreted that to mean that perhaps he was talking about his position on China. When the White House read that, they tried to walk it
back. And they said, no, what he was trying to say, and he didn't understand the questions -- what he was trying to say he regretted not
raising tariffs higher. So that was one take on it.
Then this morning, Mr. Trump said in his photo op with the Egyptian President, he said China called last night. He said that the call was
productive. And he said that the sort of thrust of it was, let's get back the table. "They want to make a deal," said Mr. Trump, "They want calm.
That's a great thing, frankly."
So where it lies exactly with the White House, it's anybody's guess because frankly, it's been both ways over the last 24 hours -- Julia.
CHATTERLEY: Yes, absolutely. And I think you make a great point here, Jim that it is down to interpretation here perhaps over what the President
meant. But of course, the White House then came out and took a really firm line.
Just come in here, Matt to talk to me about the Chinese side here because we did hear from Liu He saying, look, we don't want to escalate this
further. But at the same time, elements of the press over in China saying, "Uh-uh, a call didn't take place," as far as they know. What do we know
here?
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Well, officially the line, Julia from the Ministry of Foreign Affairs at a press conference earlier
today was that they didn't confirm or deny that one or more calls took place.
That's not a huge surprise. We usually hear from the Ministry of Commerce here in Beijing when it comes to confirming any contact between trade
negotiators on both sides between the U.S. and China, but Chinese government, at least for now, not confirming whether a call took place.
If we do hear something from the Chinese government, it'll likely be from the Commerce Ministry.
[09:05:25 ] RIVERS: But you know, going off Jim's point here, the constant whiplash that we've seen back and forth, I think it's really important for
our viewers, you know, if you're trying to figure out where is this going, you simply cannot rely on the rhetoric coming out of the White House and
from the President of the United States, simply because it changes so often.
What you can look at, though, tangible actions, where do we stand right now? It was on Friday that China raised tariffs on $75 billion of American
imports here, things like oil, agricultural products, automobiles, then it was the Trump administration following up saying they're going to raise
rates from 25 to 30 percent on $250 billion in tariffs that are already in place.
And by the end of the year, there's another $300 billion worth of tariffs coming on with Chinese imports to the U.S. Those rates are going to go
from 10 to 15 percent.
So rhetoric, that's all sounding maybe better right now and the President signaling yet again, that maybe he's more in favor of a deal, or maybe
times are good. But if you're looking at what is actually happening, there are tariffs that are in place on both sides that are set to be raised, and
until substantive action takes place to stop that from happening beyond mere words, that is where we are with this trade war. We are a long way
away from it not being struck.
CHATTERLEY: Matt, you make such a great point. And I do think we have to take a step back here in what I see from both sides here amid all of the
rhetoric is two sides that are very unwilling here to give any ground. No one looks like or at least wants to be perceived that they're struggling
with their economy that they're suffering in some way and therefore have to concede ground here.
Both sides want to make this a win, and that's going to be the challenge in reaching a deal here. What we did see on Friday was the President
comparing enemies, asking whether Jay Powell or Xi Jinping was the greater enemy here with the United States.
I want to ask you how that went down. Because again, perception is everything in China, too. The idea that the United States is calling Xi
Jinping an enemy here.
RIVERS: Yes, I mean, you know, you have the President of the United States calling Xi Jinping an enemy, which is kind of more in line, I guess, you
could say with traditional U.S. foreign policy, which looks at China as an adversary. But then earlier today, you have President Trump tweeting that
President Xi is a really great leader. So which is it?
And I think if you're -- it's not just those of us in the media following this, if you're in Beijing, you get whiplash on this, too. You know in
terms of what rhetoric is coming out of the White House, and how does Beijing respond to that.
But what you have seen from Beijing is a very consistent message. That's one thing that China has done from the beginning here, they accuse the
United States of being the rational partner here, of being the one that started all of this.
They don't talk about the fact that, you know, the United States has a lot of legitimate grievances with the way China does business, and then they
soldier on and they continue to get rhetoric -- nationalist rhetoric -- out in their state media here, the public statements are more measured, calling
the U.S. to get back to the negotiating table to get back to rational discussion, calm, you know, de-escalation to solve this problem.
But you know, it's not just the media. It's not just politics in the United States that is causing, you know, they're feeling this whiplash from
the President. It's also Beijing in the way that, you know, they have to be forced to respond to lots of different messages out of the White House.
CHATTERLEY: Yes, absolutely. The path to a deal here looks increasingly complex. Matt Rivers, thank you so much for joining us on that. Jim, stay
where you are, because I also want to bring in the other hot topic, of course at the G7, which was Iran.
French President Emmanuel Macron inviting Iran's Foreign Minister Javad Zarif, as a surprise guest. It might have been a surprise, but G7
watchers, but the U.S. President Donald Trump said that the French leader had run the idea by him first.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I knew everything he was doing and I approved whatever he was doing, and I thought it was fine. And
I think it's too soon to meet. I didn't want to meet. I said I don't want to meet right now. But it's truly a great time to meet with Iran. And
it's going to be a great thing for Iran, they have a great potential.
(END VIDEO CLIP)
CHATTERLEY: Coming on this, of course, the French President seemingly trying to play mediator here between the United States and Iran, but there
are broader tensions hereto. What progress if any, do we think was made as a result of bringing the Foreign Minister in here?
BITTERMANN: I would say at this point, Julia, none. The fact is that the Foreign Minister, Zarif had been in France last week and met with basically
the same people he met with yesterday. He met with Macron and with the French Foreign Minister. They talked things out last week.
And at that point, apparently, the idea came up with then inviting Zarif to yesterday's meetings. He came and the question we have, of course, the
overall objective here for Macron is to lessen tensions between the United States and Iran. But what we don't know is what the objective was
specifically yesterday, what was he trying to do?
[09:10:10] BITTERMANN: Was he trying to get Trump to meet with Zarif? If that was the case, it wasn't on. Basically, the President said no comment
when he was asked about the potential for a meeting with him.
And some people around the President like what his former advisor Nikki Haley said, it was disrespectful of the President for President Macron to
fly in or invite in Mr. Zarif. Trump said that that's not the case, said it wasn't disrespectful.
But nonetheless, I don't think that the ball was moved forward at all in terms of relations with Iran, although there is going to be a joint
declaration on Iran basically saying that all the members here, the G7 members don't believe that Iran should be allowed to get -- to obtain
nuclear weapons -- Julia.
CHATTERLEY: Yes, so some agreement at least, but, not that much. Jim Bittermann, thank you so much for joining us from the G7 there.
All right, and a stark reminder of the ongoing tensions, the Iranian government announced it has deployed warships to the Gulf of Aden. Joining
us now to talk about that and Macron's Middle East diplomacy, John Defterios. John, great to have you with us.
I'm sure you were just listening to that, too. What's your assessment of this situation because again, clearly, President Macron trying to play
mediator here, but we know the stark contrast in not only the handling of many of the nations here versus the United States over the nuclear accord,
but how to tackle the situation with Iran going forward.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, I have to suggest, with President Macron, it was a pretty audacious move to bring the
Foreign Minister of Iran. He did give his G7 partners, including the United States and Germany a heads up, but not a lot of heads up. So it was
quite a surprise. And then meeting in the City Hall of Biarritz.
We have to remind our viewers that it is the Europeans who are trying to keep that 2015 agreement alive, not very successfully, in fact, the
Iranians have criticized the European Union for not doing more economically here. But he did pull it off, and he did put Iran back onto the agenda
that is very important, but a sober assessment by the real power in the European Union. That, of course, is Angela Merkel of Germany, even though
she is probably in her last year in office.
She said -- and this is a quote, "There are big interests in solving the conflict, but it is a fragile and difficult process." Now, it's also
interesting to see what the Iranians are doing and Zarif left France, went to change planes and is on his way to Beijing to participate in the Belt
and Road Initiative in China. And then he sent a tweet out suggesting he is going to Japan and Malaysia next.
I don't want to read too much into this, but this is clearly an effort to re-engage with Europe, and potentially re-engage with Asia and a pivot here
to try to boost growth because the U.S. sanctions are so very painful. Ironically, the sanctions are also on Zarif from the United States. And
the fact that Macron invited him, we cannot overlook the diplomatic maneuvering by the French President.
CHATTERLEY: Absolutely not, and I don't believe in coincidences of timing either with this. Talk us through the decision by Iran at this moment to
shift what they're calling their most Advanced Destroyer to the Gulf of Aden here to protect Iranian vessels.
DEFTERIOS: I think I should call it the great push and pull of Iran politics. Iranian politics are very complex. On one side, you have the
diplomats and the President Rouhani giving Zarif cover, suggesting it was a good opportunity because the hardliners are criticizing Zarif for going to
France and to the G7.
On the other side, we have the Army Chief of Staff making that declaration, the Advanced Destroyer going to the Gulf of Aden. I don't want to become
cynical here, but the official line is that Iran is protecting its vessels in the Middle East.
This is a power play by Iran to exert influence in the broader Middle East, and if you look at the map here, the Red Sea feeds into the Gulf of Aden.
We have the East West Pipeline in Saudi Arabia going from the big fields Dhahran across the country in Saudi Arabia, to the Port of Yanbu, and then
loading huge tankers that come out of the Gulf of Aden.
I would assess that what Iran is doing is going to conflict with Saudi Arabia and its American allies, of course, trying to protect the Middle
East. This will ratchet things up.
The oil market is recovering, Julia, but not because of this, but because we see perhaps -- perhaps, as you were discussing with Matt Rivers there, a
truce on the China trade front, and this is helping perhaps demand going forward. But it's very early days, as you know, with the U.S.-China
dispute.
CHATTERLEY: Yes. And the tone -- the tone on these talks, changes minute by minute, quite frankly, John, as you well know.
DEFTERIOS: Yes, for sure.
CHATTERLEY: John Defterios, thank you so much for that. All right. And you need to stay with CNN because we will bring you the Trump-Macron press
conference, the moment it begins. It is set to start in around 15 minutes' time.
All right. Let me bring you up to speed now with some of the stories making headlines around the world. Iran denying any of its forces were hit
by Israeli airstrikes in Syria on Saturday. Israel has released these images. It says they show Iranians in Syria carrying a drone.
[09:15:10] CHATTERLEY: Israel's military says its air strikes foiled a plan of drone attack on Israel by Shia militia and Iranian forces.
More than 80 people have been arrested in one of the most violent weekends in Hong Kong since mass protests began back in June. On Sunday night,
several police officers drew their pistols and one fired a warning shot into the air. Water cannon was used for the first time in the city.
Chinese state media signaled Beijing is losing patience with the protesters.
G7 leaders in France held a working session on climate change and agreed to help countries affected by the Amazon fires as quickly as possible. In
just the last few moments, the President of Brazil tweeted an angry response calling Macron's attacks gratuitous as if Brazil were a colony.
We will bring you the latest on the fire as soon as we get it.
All right, we're going to take a quick break here, but coming up on FIRST MOVE. The curtain falls in Biarritz. We're waiting for the final act of
the G7. Presidents Trump and Macron will hold a joint news conference shortly and the curtain rises on Wall Street, fallout from the Summit sets
U.S. futures alight. We'll be discussing. Stay with CNN.
(COMMERCIAL BREAK)
[09:20:00] CHATTERLEY: Welcome back to FIRST MOVE and we're still looking like a positive start to the trading week here on Wall Street as the U.S.
and China turn down the trade rhetoric. Futures have been sharply lower earlier today. They quickly turned around when President Trump said China
is ready to resume trade talks. No confirmation yet from China that the two sides talked by phone, but investors aren't waiting around here. Trump
also said that he could delay fresh tariffs on China.
We could hear more from President Trump on trade when he holds a news conference with French President Emmanuel Macron very soon.
In the meantime, at China's lead trade negotiator is calling for a quote "calm resolution" to the dispute. Joining us now, Douglas Holtz-Eakin. He
is the President of the American Action Forum and Economic Policy Center. He is also a former director of the Congressional Budget Office. Douglas,
fantastic to have you with us.
There's clearly a lot of noise -- conflicting -- coming from the G7 on trade here. What specifically are you listening to here? And are you
comforted by the noises that we're hearing?
DOUGLAS HOLTZ-EAKIN, PRESIDENT, THE AMERICAN ACTION FORUM: I'm not particularly comforted by today's rhetoric. You know, we've seen this
movie before. The President is very attuned to financial markets, the stock market in particular, Friday was a very rough day. And it was
unsurprising to me that he set out over the weekend to try to calm investors. And I think it's important to step back and look at the
substance.
The Chinese from the beginning has said, if you put tariffs in place, we will respond commensurately, and they've done that. And last Friday, they
responded with, you know, tariffs on $75 billion, with the same dates as the U.S. tariffs, and the President escalated in two ways.
He compared Jerome Powell, the Fed Chairman to Xi Jinping the Chinese President, both his enemies and he -- and you know, putting in more
tariffs.
So when you get to the reality, we've got increasing tariffs on both sides, no particular progress on the trade deal. And I don't think any great
reason to be comforted by the state of affairs.
CHATTERLEY: You made a great point on Friday of last week. You said that China chose to announce their response, around an hour before Jay Powell
was set to speak in Jackson Hole. That then precipitated an angry response, and you referred to that tweet comparing who is the greater enemy
here? Jay Powell or Xi Jinping here?
Do you feel like that was a strategic response by China and unfortunately, President Trump sort of fell into the trap?
EAKIN: I do think that's what happened. China's response was, as expected. When they chose to do it, I thought was very strategic. The
President has been very critical of the Fed in general. He has been particularly upset that they have not cut rates, strengthened the U.S.
economy and in particular, financial markets in the midst of the trade war.
He wants them to back him up, and to basically have monetary policy driven by his negotiating tactics. The Fed of course has a mandate to look at the
broader economy and is not going to do that.
I think the Chinese are well aware of both of these things, and they've decided that this would be the best way to respond, by not only inflicting
some economic pain, but inflicting a little political damage as well.
CHATTERLEY: You know, one of the other things that came out to the G-7 was the interpretation of the second thoughts when the President was asked if
he had second thoughts about the escalation of the trade situation with China, he said, "Look, I -- of course, I have second thoughts." And people
suggested that that perhaps he was thinking that he had done the wrong thing here.
And then the White House came out and clarified and said, "No, actually, we regret not escalating further here." You get a sense that on both sides,
everyone is afraid of showing weakness here. Do you think we're still underestimating how focused the President is here on tackling China, at the
risk of a weaker economy here. He is willing to sacrifice a bit of growth here, perhaps, to tackle China?
EAKIN: I think it's important to recognize that throughout his career as a businessman and now as President, he is extremely willing to undertake
risks, even to the point of being reckless.
And I don't think you should underestimate his willingness to have the U.S. suffer some economic damage in the pursuit of trying to win this trade war.
I think that's been true from the beginning.
I also think, as a characteristic of this President that, you can never tell what is an assessment of the facts, and what's a strategic statement.
And so you often get this situation where he says one thing that appears to contradict himself, someone in the White House is cleaning it out --
cleaning it up. And you don't really know if this is just part of the negotiating tactic or a genuine error.
And it makes it very difficult for the Chinese in particular to figure out how to make progress toward a deal because he keeps them off balance
constantly. It's been a frustration of theirs from the beginning.
For many days, they didn't even know who they were negotiating with, much less the demands of the United States. So this has been a difficult
negotiation on both sides. It is taking an economic toll. I don't think that can be disguised. It has harmed the U.S. It has harmed China. It's
harmed the global trade and global growth and resolving it should be the top priority.
[09:25:10] EAKIN: And resolving it quickly would be better. I don't think that's how the President views the problem.
CHATTERLEY: You know, it's interesting, one of the barometers that we're using here is the stock market, both of the likelihood that a trade deal
gets done the week of the markets go, the more likely the President will ultimately want to make a deal, but also for the U.S. economy here. And I
do think it's important that we separate these two things.
Would you agree with that? Separate the markets in the U.S. economy, because while we're seeing some weakness in housing, in farming, in the
manufacturing sector, the bulk of the economy is the U.S. consumer and consumption. And actually, that remains pretty strong here.
EAKIN: I think that's a crucial point. The President focuses a lot on the stock market. The President is the person many people take their cue from
and so you see a lot of attention on the stock market. But the stock market is not the U.S. economy.
As you point out, there are pockets of weakness. The housing markets has been in a slump for two years. We've seen agriculture and manufacturing
harmed by the trade war itself, and they're near stall speed right now.
But the remainder of the economy, in particular, the household sector, which is 70 percent of GDP, is in very good shape and has grown
consistently at about 2.8 percent for three years.
Unemployment is very low, wages are rising. We even got another good report on the business sector today in the form of capital goods order.
So there is good news out there if you look past the stock market, and the fluctuations it suffered. And that's the thing that should matter. For
those worried about the 2020 election and a recession, for those worried about the capacity of the U.S. to keep the global growth going.
CHATTERLEY: Yes, such a crucial point. Douglas Holtz-Eakin, sir, thank you so much for joining us. The President of the American Action Forum
there.
EAKIN: Thank you.
CHATTERLEY: All right, the opening bell is next. Stay with us. Plenty more to come on FIRST MOVE.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. I'm Julia Chatterley. You're watching the opening bell downtown at the New York Stock Exchange.
We were anticipating a higher start for U.S. stocks this morning and we have it.
We're awaiting, of course President Donald Trump's G7 press conference with the French President, Emmanuel Macron. That's expected to start in around
an hour's time. A slight delay there.
We could get more clarity from the President on where trade talks stand with China. The President says China called the United States and signaled
that it wants to get back to the bargaining table. China has not yet confirmed.
This version of events -- the major U.S. averages right now gaining back some of Friday's sharp trading losses. Tech stocks were hardest hit and
they fell some three percent. So expect them to bounce back at least for now. Tough to call on where we go throughout this session. Await that
press conference and any further details.
So let's return to that and our top story, of course in Biarritz, we await the two Presidents set to speak. Let's get the thoughts of someone with
decades of experience in deciphering international affairs and economics and events like this.
Bob Hormats is Vice Chairman at Kissinger Associates, and a former U.S. Under Secretary of State. Bob, fantastic to have you with us. Always a
pleasure to have you on FIRST MOVE. What a relief you are with us, too, because hopefully you can make sense of all the noise that we've got from
the G7 over this weekend.
BOB HORMATS, VICE CHAIRMAN, KISSINGER ASSOCIATES: I'll give it a try anyway.
CHATTERLEY: Good luck with that. So your assessment, where are we right now? And let's talk trade perhaps first?
HORMATS: Well, Julia, I think, it's -- first of all, thank you for having me. Second, it's very hard to make sense in a clear way of what's
happened. There are some positive developments, possibly emerging from the conversations here. One, President Trump has indicated that agreement in
principle has been reached with Japan on a bilateral trade arrangement. The Japanese have not used that term. They've said more progress needs to
be made.
And now we have this morning, indications that things are perhaps moving ahead again in talks with China. But we've heard positive news before, and
that is something we really need to see confirmed, not just in rhetoric, but actually in movement on the substance. And so those are positive, but
we really need to see what emerges from the actual conversations in fact.
The other elements of this Summit seemed to me to be a combination of a confusion because we're really not sure that what happened in the meetings
is what is being reflected in a lot of the narratives that heads of state use coming out of the meetings, diversions and division, because a lot of
the issues that were supposed to be resolved, really are not resolved, at least to the average viewers eyes now.
CHATTERLEY: Yes, it's quite fascinating, isn't it? If we go back 24 hours that the message coming from the White House and Larry Kudlow, in fact, was
that any confusion over whether the President had second thoughts on the current state of relations with China was just that he was sorry that he
hadn't escalated tensions with them further and perhaps raised tariffs further.
I just feel like we're clutching at straws here, and it's just difficult to understand what the path here is to a trade deal when one President
suggesting that another President is an enemy, and what we've seen, actually, in the last 72 hours is a ratcheting up of tensions rather than
anything else.
HORMATS: Well, that's why I use the word "confusion." I mean, you are absolutely right. The fact is that we've been getting different signals.
Did he want to do less in terms of tariffs? Did he want to do more, as Larry Kudlow has recently indicated? Do the Chinese -- did they call?
What was the content of the calls?
I hope that there is progress, I think it would be a very positive thing. But for the market to get euphoric. Until it sees a higher level of
evidence, A, that they're going to sit down and B, that if they do sit down in the near future, they are actually closer to a substantive agreement.
This is all very much in the ether at this point, very hard to determine. So to have a big rally on the basis of this, it seems to be somewhat
premature.
The Japanese talks, I think, are important. I know they were making some progress, and perhaps they will actually reach an agreement. We've seen a
lot of conversation about agreements with other countries. We get up to the finish line and then a lot of details derail things or they do reach
agreement and then somehow they're pulled back.
[09:35:10] HORMATS: So in the area of trade, this level of uncertainty, not only is it, I think, destabilizing for markets, but for people who have
to make investment decisions as CEOs of companies, the lack of clarity is troublesome.
I'm hoping, and I'd like to be an optimist, I'm hoping that the things move ahead on China and Japan. But I really on the basis of the past need to be
convinced that that is, in fact, going to happen.
CHATTERLEY: Bob, I just wonder how much discussion is going on and happened at the G7 with regards to the protests in Hong Kong, because I'm
not sure that we were discussing enough, the fact that China is in a situation here, at least, Mainland China and Beijing where they face
protests right on their doorstep here and the risk of looking soft in handling of that, or in fact, soft in the handling of any outside aggressor
like the United States on the trade deal here is an increasing risk for them. They have to play hardball here to look strong, to look powerful.
HORMATS: Well, I don't know that Hong Kong was discussed at the G7. It probably was not discussed in any depth. But the broader point, you make,
Julia is exactly right, and that is, the Chinese indicated, and we saw this on Friday, they indicated that they were not going to simply accept tough
American actions on trade. They were going to counter with actions of their own, which they did, by imposing tariffs on $75 billion worth of
American goods.
So the Chinese have underscored repeatedly that whatever agreement is reached has to be a balanced agreement. That they were not going to be
intimidated into what they would consider a lopsided agreement or unfair agreement, or an unequal agreement, to use terminology they frequently use.
They want it to be balanced.
So they are taking a very firm position and not caving into the kinds of pressures that I think America thought they might give in to. And also I
think it's important to realize, the 17th Anniversary of the founding of the People's Republic of China is on October 1. President Xi wants to go
in and stand tall and say, "Look, we are a strong country, we've come a long way. We're not going to be pressured by other countries to do things
that are not in our interest."
CHATTERLEY: Yes, you know, the other thing to throw in here as well is when you look around at that G7 table, there are a number of different
countries there whose economies are slowing. They're all challenged, and many of them could point to the trade battle, and even some of them did
quite sheepishly like Boris Johnson, pointing out that there's a slowdown going on here, perhaps as a result of the broader trade war here.
I think one of the key questions we're grappling with as well as how material a slowdown President Trump is willing to accept in the United
States economy despite what's going on elsewhere, in order to tackle China here and whether that puts his own election risks, or his own prospects in
the 2020 election at risk. What's your assessment of that, Bob, at this stage? What are you telling clients?
HORMATS: Well, this is where the Fed comes in. The reason he is putting so much pressure on the Fed is that he now, I'm sure, he is told by Larry
Kudlow and others who are good economists that the trade war is adversely affecting the American economy -- you can -- and will in the future, if in
fact, these additional tariffs that are now planned, are actually implemented.
So he is putting a lot more pressure on Jay Powell and the FOMC to lower rates substantially to offset some of the weakness that's caused by this
trade conflict.
So in addition, his view is that that would push the dollar down, which would again help boost American exports, which helps the economy as well,
and also would be used to put pressure on China.
So I think he is hoping that the Fed in his mind has his back and will avoid any substantial weakening. The question is, A, will the Fed do that?
And B, even if the Fed does lower rates a lot, how much will it help to really offset not just the disruption from higher tariffs, but the
uncertainty that the business community faces, and the fact that a lot of supply chains for farmers and a lot of exporters, high tech exporters are
going to be disrupted, and you may not be able to get those back anytime soon. So it may have a long tail when you when you look at what the longer
term implications of this are.
CHATTERLEY: Absolutely. Some could argue if the President stopped asking quite so loudly, the Federal Reserve might be a little bit more willing or
able. That's it. We'll leave it there, Bob Hormats.
HORMATS: Yes.
CHATTERLEY: Sir, thank you so much for joining us.
[09:40:08] HORMATS: The Fed will do its job. The Fed has a good focus. Jay Powell, I have a lot of confidence in him and his team.
CHATTERLEY: Yes, I agree. Thank you, sir. Great to have you with us.
HORMATS: Thank you.
CHATTERLEY: All right. Coming up on FIRST MOVE, a landmark ruling in Oklahoma, as one judge decides if Johnson & Johnson is responsible for the
state's opioid epidemic. We are live in the State with the latest, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and a look at the global movers right now. Shares of GM and Apple are rebounding a level of suffering
steep losses on Friday.
Apple in fact, falling more than four percent. GM fell more than three percent when China announced fresh tariffs against the United States.
President Trump then said he could order U.S. companies to leave China.
Now 1.4 percent of GM's total revenues come from China. Apple booked nearly $52 billion in sales from China in its most recent fiscal year.
Shares of tech services company, Pitney Bowes are rallying about nine percent. It is selling it software solutions company to data firm,
Syncsort for some $700 million. So watching that one. It is higher as you can see by 8.3 percent.
Shares of Lyft meanwhile trading higher. Guggenheim Securities raised its rating on the ride hailing app to a buy. It says Lyft could become
profitable as soon as 2021. Right now, that stock up some 2.6 percent.
All right, also in focus, Johnson & Johnson today, an Oklahoma judge will decide if the pharmaceutical giant is responsible for the state's opioid
epidemic or at least contributed to it, whichever way it goes, it going to be a landmark ruling. For more, let's bring in Alexandra Fields. She
joins us now from Norman, Oklahoma.
Alexandra, great to have you with us. Just talk us through it, because this is going to be a landmark decision for Johnson & Johnson, but also
more broadly for other companies perhaps deciding whether or not to settle sooner. Talk us through it.
[09:45:09] ALEXANDRA FIELD, CNN CORRESPONDENT: Absolutely. Julia, you really nailed it there. Look, this is something that everyone is going to
be watching because this is really the first trial of its kind. You've got dozens of states that are looking to sue pharmaceutical companies who are
actively in the process of trying to do that, blaming them essentially for creating or fueling the opioid crisis that has swept this country killing
hundreds of thousands of people in the last 20 years or so. But Oklahoma is the first state to make it to trial.
They squared off against Johnson & Johnson and its subsidiary, Janssen. They allege that the marketing and sales of two of its prescription drugs
fueled the crisis right here. Now, they're going after Johnson & Johnson for $17.2 billion.
For its part, the pharmaceutical company says they have no part in any wrongdoing. They say they're being used as a scapegoat for what is a much
broader social problem, and they don't believe that this case is going to hold up in court. We will have the answer, though, in just a few hours --
Julia.
CHATTERLEY: I mean, they fought all the way along here, Johnson & Johnson, we've seen Purdue Pharma fall by the wayside. What happens if this goes
against Johnson & Johnson today in terms of a further appeal, perhaps, and then for other companies that are also impacted here?
FIELD: Yes, I think you can count on the fact that there will be an appeal after this. It's interesting to point out that if the judge sides fully
with the state, and allows that $17.2 billion monetary award, that would be the largest monetary award from a bench trial in the history of the United
States.
It also, certainly, will have other pharmaceutical companies watching closely because in just a few months, later this fall, we are set to have
the beginning of a Federal trial, which includes some 2,000 cities, communities, municipalities and tribal lands who are all alleging that
pharmaceutical companies have played a role in fueling this opioid crisis.
CHATTERLEY: Yes, no surprise, it's being compared to the tobacco wars, of course of the 1990s. Alexandra Field, great to have you with us. Thank
you so much there for joining us from Oklahoma.
All right, coming up on FIRST MOVE, the British Prime Minister turning on the charm at the G7 as he pushes for a post-Brexit Britain. Stay with us.
We will have all the details.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Remember when Donald Trump threatened to put new tariffs on the French wine? Well, the good news for
American wine connoisseurs is that the United States and France have come to an agreement about the dispute that led to that threat. And it's all
about a French tax on tech companies.
Hadas Gold joins me now. Hadas, huge relief. Never mind the details. That's all I can say. Talk me through what the solution is here.
HADAS GOLD, CNN BUSINESS REPORTER: The solution, Bordeaux and peace, Julia.
CHATTERLEY: I know. It is going to be like imports from ASAP quite frankly. Go on. Do give us the details here.
GOLD: Well, Julia, this is all about that digital tax that the French President signed into law just recently where it's about a three percent
tax on revenues of companies who earn either a certain amount in France or globally.
[09:50:10] GOLD: Now, American companies have contested this, it unfairly targets American companies like Amazon and Google, and Facebook. There
have been hearings in the United States, the U.S. Trade Representative even launched a Special Section 301 investigation as to whether this was unfair
practice.
But it seems as though, a compromise has been reached today in France during the G7. Apparently, this compromise, they will be signing it later
today. And what it means is that France has said that they will repay these companies the difference between their tax and this OECD plan that's
in the works that is supposed to completely overhaul how global tax is determined, and it's supposed to completely put everybody on more equal
footing when it comes to digital services.
The issue that I'm still not clear on, Julia, is actually how this will work out because the French digital tax is already in effect. But the OECD
plan, we haven't even gotten sign off on it, let alone how long it will take to get it technically implemented. That's going to be at least
according to experts I've spoken to, about five years away. So we're still not quite sure what we're going to be doing in the interim.
I've reached out to Amazon and Google and the likes to get their reaction. And so far, I haven't heard back from them on this compromise. And whether
they're happy with this agreement.
CHATTERLEY: I mean, talking about 36 different countries trying to come up with an agreement that they're all happy with, which is another challenge
just to throw into the mix here. What's the size of this digital tax? What are we talking about here? And if we had any hints from the OECD about what kind of size tax they're
talking about, because that at least will help us gauge potentially what the difference could be if the French are too aggressive with their
version?
GOLD: Right. So we don't have like total specific numbers right now. It's more of a question of specifically where you can be taxed and by whom?
Because that's the whole question when it comes to digital services.
Google might be, let's say, a U.S. based company, but if they're making money in France, but the company that's buying their ads from them that's
targeting people in France is actually in Germany, there's obviously a lot of complicated issues there to keep in mind. And that's what the OECD plan
is trying to overcome.
But we don't quite know exactly what the final numbers might be, and that's why this compromise agreement, while good news for French wine lovers, for
example, doesn't give us a lot of details on exactly what the difference will be, how much France will possibly have to repay, and whether these
companies are happy with it.
Amazon said just last week at a hearing in Washington that they will pass on the price for that digital text to their third-party sellers starting
October 1st. This is something that these companies are dealing right now right here and I don't know if they will be happy to wait for the OECD plan
to come into effect to get that difference in taxes.
CHATTERLEY: Yes, quite fascinating. I make that a win for France on this point, perhaps the loss of consumers if prices go up. Interesting. Hadas
Gold, thank you so much for that.
All right, Boris Johnson also have been on the charm offensive at his first G7. The British Prime Minister used the meeting to try to foster trade
relationships ahead of Brexit which he has promised will happen by the end of October. Anna Stuart is in London.
Anna, I have to say though, I was looking at some of the lines from Boris Johnson. This one was great. "Look, I just want to say I congratulate the
President on everything that the American economy is achieving. It's fantastic to see that, but just to register the faint sheep-like note of
our view on the trade war, we're in favor of the trade peace on the whole and dialing it down if we can." Sheep-like? But he still said it, Anna.
Got to be careful when you want a big trade deal.
ANNA STEWART, CNN REPORTER: Well quite, but you know what? It seems to have gone down all right, because what we've had here is lots of good news
obviously about a trade deal between the United States and the U.K.
The President saying once again, we're going to do a -- and I quote, "very big trade deal with the U.K." They are saying that, you know, the E.U. has
been an anchor around Britain's ankle. I'm going to play you the soundbite because it is fantastic. Boris Johnson using the opportunity for a very
gentle rebuke. Take a listen.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: Look, I just want to say I congratulate the President on everything that the American economy is
achieving. It's fantastic to see that, but just to register the faint sheep-like note of our view on the trade war, we're in favor of the trade
peace on the whole and dialing it down if we can."
(END VIDEO CLIP)
STEWART: A faint sheep-like objection that frankly was delivered so fast, one quite wonders whether the President actually heard it. It certainly
didn't seem to disrupt the dialogue at all, despite having a face to face criticism over the trade war.
And Boris Johnson has been on lots of different bilats focusing on trade post-Brexit, of course another one today with the Australian Prime
Minister, Scott Morrison. Lots of headlines saying "BoJo met ScoMo," and 10 Downing Street Alex is saying that, "That was a very enthusiastic chat
talking about the future relationship."
What Boris needs here is to come back to the U.K. with some good news -- Julia.
CHATTERLEY: Yes, that line was so sheepish that President Trump appeared to miss it or dismiss it -- one or the other. How did he go down? As I
pointed out, that was his first G7 and I think a lot of us watched the videos or saw the pictures of him first getting out of the car and seeing
Emmanuel Macron and his wife as well, the First Lady of France and comparisons were made to "The Office" and David Brent, but for anyone I
think who has interviewed Boris, he is a charmer. You know, he is amusing. What is the U.K. press making of that -- Anna.
[09:55:15] STEWART: Well, you're looking at the pictures now. It was an absolutely fantastic moment where he gets out the taxi, misses the Macrons,
and then, so it was an incredible point.
But this is what's going down in the British press, it is the incredible optics. You know, Boris Johnson has star power. He has charisma. He has
warmth and we have seeing that time and time again, whether it's with President Trump, the Macrons -- it's such a far cry -- Brits -- many Brits
would say from the last Prime Minister, Theresa May, who of course had a slightly more -- what some would say, wooden performance.
But also he's even managed -- and this is incredible -- to charm the other Donald, Donald Tusk, the European Council President. They were actually
seen slapping each other on the shoulders and laughing -- Julia.
CHATTERLEY: Yes, something else Theresa May wouldn't have laughed about that. Anna Stewart, thank you so much for that.
And stay with CNN. President Trump and Macron, of course expected to speak soon from the G7. We will bring you that press conference as soon as it
begins. But that's it for FIRST MOVE, time to make yours. The G7, up next.
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