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Quest Means Business
Iconic Fashion Designer Karl Lagerfeld Dies at 85; U.S. Lawmakers Investigate Reports of Flynn-Backed Efforts to Export Nuclear Technology to Saudi Arabia; British Teen Who Joined ISIS is Being Stripped of Her British Citizenship; Macron Condemns Vandalism of Jewish Graves; Catholic Officials Ashamed of Sex Abuse of Children; Honda to Close U.K. Plant, Wiping Out Thousands of Jobs; Trump Says He's Open to Postponing March 1st Deadline to Complete Negotiations with China; Stocks Waver Ahead of China Trade Talks; U.S.-China Trade Talks Resume in Washington; Bernie Sanders Launches Second U.S. Presidential Campaign; President Trump Declares America will Never Be a Socialist Country; Wall Street Keenly Monitors Trade Talks. Aired 3-4p ET
Aired February 19, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We're in the last hour of trading on wall Street. The market opened after the Presidents' Day
holiday, and you see an interesting day. Lower down in the morning, but in the afternoon, picking up speed. Now up 72 points. Best almost of the day
so far. Look at the breakdown on the Dow 30. The one to note is Walmart, we'll spend some time talking about that tonight. It's the best gainer of
the Dow so far. And the reason for all these moves? This is what's moving the market.
Walmart's earnings leading the Dow, strong results. How it's reacting with all the other retailers. Donald Trump says there's no magical date as the
China trade talks return to Washington, and a blow to the whole British economy. Honda makes it official, it's closing its U.K. factory. Live in
the world's financial capital, New York City, sparkling late winter day on Tuesday, it's the 19th of February. I'm Richard Quest. I mean business.
Good evening. He's been described as a giant, a genius, and a great inspiration. The fashion world is remembering Karl Lagerfeld. Lagerfeld
blew the dust off Chanel taking over as Creative Director in 1983. He is credited for saving the brand and building it into a behemoth. The company
reported nearly $10 billion in sales in 2017. Karl Lagerfeld redefined what's fashionable not just at Chanel, also what you and I are wearing.
CNN's Jim Bittermann looks back at Lagerfeld's life and legacy.
(BEGIN VIDEO TAPE)
JIM BITTERMANN, SENIOR INTERNATIONAL CORRESPONDENT, CNN (voice over): Amongst the kings of couture with his signature monochrome suit, dark glasses and white ponytail, the iconic Karl Lagerfeld was a fashion
designer, publisher and photographer synonymous with Chanel, best known for reviving the French brand after becoming Chief Designer in 1983. He also
produced collections for Fendi and his own label. Recognizable for his wit and carefully crafted persona.
(BEGIN VIDEO CLIP)
KARL LAGERFELD, ICONIC FASHION DESIGNER: Never make an ugly dress because somebody can buy it.
(END VIDEO CLIP)
BITTERMANN (voice over): His preferred material however may come as a surprise.
(BEGIN VIDEO CLIP)
LAGERFELD: It all starts with paper. I sketch, I design, it becomes a dress. I photograph it and print it on paper again, if you see it like
this, you know, and my favorite material in life is paper. Paper, paper, paper.
(END VIDEO CLIP)
BITTERMANN (voice over): The German designer's family built his fortune importing condensed milk. But Lagerfeld moved from their home in Hamburg
to begin his fashion career in Paris under Pierre Balmain winning his first design contest in 1954, alongside another aspiring designer and future
fashion competitor, Yves St. Laurent.
He later worked for the House of Patou and Chloe before being hired by Fendi in 1967 as Consultant Director responsible for modernizing the design
house's fur lines. His decision to run Chanel founded by Coco Chanel turned him into one of the most celebrated fashion designers of the 21st
Century.
(BEGIN VIDEO CLIP)
LAGERFELD: You can teach the craft, but there has to be little more there in the eye, the wish, the desire and to think also that fashion is
important without being too serious about it.
(END VIDEO CLIP)
BITTERMANN (voice over): Revered in the esoteric world of high fashion, he combined artistic instinct with a refusal to look backward.
(BEGIN VIDEO CLIP)
LAGERFELD: That is why I like fashion because fashion is about changes.
(END VIDEO CLIP)
BITTERMANN (voice over): Not afraid to break with tradition during his later years, he worked with high street brand H&M in 2004 in a move that
raised eyebrows among the fashion elite. Though it was quickly copied by others. He then became an unlikely champion of models' rights arguing
against the retouching of photographs.
Rumors swirled about his health after his absence from the Chanel show in January this year, due to what the company described as fatigue.
Reflecting on the industry, he did so much to craft, he delivered a timeless message.
(BEGIN VIDEO CLIP)
LAGERFELD: Fashion is not needed. There are other problems in the world that may be more important, so this is not a problem. But it's an
industry, and you know, fashion has to go with time. If fashion doesn't go with time, fashion would be lost.
(END VIDEO TAPE)
QUEST: Lagerfeld revealed his designs to the world in elaborate fashion shows like this. The Grand Palais in Paris transformed into a beach, a
rocket launch pad or an elaborate garden of one description or another. Suitable settings for his designs before they hit Chanel stores.
And well before they were copied by designers everywhere, you'll recognize these. The tweed dress which of course made him famous.
[15:05:03]
QUEST: Lagerfeld kept reinventing this Chanel classic, and then the two- tone shoes. It was another Lagerfeld reimagined in different colors copied endlessly. And of course, the quilted handbag. An item of desire around
the world.
Appropriately, John Colapinto is with me. Good to see you, sir.
JOHN COLAPINTO, WRITER: Hi.
QUEST: You spent two months with Karl Lagerfeld writing a profile for "The New Yorker." You join me now. We have the padded bag here.
COLAPINTO: Yes. Nice.
QUEST: When you look at his contribution, so massive as it is, how do you manage to distill it to what its essence?
COLAPINTO: You know, he was a man easily bored the way a lot of fashion designers are, but he was a boredom detector of acute power and he was
constantly ready. He knew when the change had to come. So when he was very young and was initially in couture, he thought this is dull and boring
and he went into ready-to-wear stuff, and then later when he took on the Chanel brand in 1983 --
QUEST: Which others didn't want him to do, his friends said, "Do not do this."
COLAPINTO: Correct. Absolutely. They said these are boring. This is dull. These little sort of suits and Karl just went, "Hey." I mean, he
started to put wrappers, chains on them. He made the "C" logo huge. He did all these things that were tasteless seemingly but they were totally
hip for young people.
And yet the guy was pretty old. So he just had this infallible sense of the now and he just simply refused to age in his mind and imagination.
QUEST: Did he save Chanel?
COLAPINTO: Yes. I guess I would have to say he did. Because we could really see that if the wrong person takes over one of these legacy brands,
they can drive them straight into the toilet, so to speak.
QUEST: And it was risque and risky what he proposed as you said with Chanel. But if you look at the way he worked with Fendi and then you look
at all the other houses that he -- I mean, we can see that today by Bernard Arnault from LVMH's tribute to him. He was -- he worked with many and was
loved by all.
COLAPINTO: Yes, absolutely, and had sort of a different idiom, a different voice for each place that he worked. It was extraordinary. He
took on the DNA of Chanel but then twisted it and changed it. Did Fendi which was a different kind of look, had his own label, a different thing
again. So, yes, he just was a genius of the fashion vocabulary somehow.
QUEST: And when we look at things like these, these bags, the double "C" which he made so large, some would say rather vulgar, but his inspiration
for all of these, they are originals, by the way in case anybody thinks we just popped out to Canal Street. They are originals. How important were
the accessories like the bags?
COLAPINTO: Oh, I mean, tremendously important. Those in a way support the whole label. Also, as do cosmetics and perfumes and so on. So it's
not only that spectacular dress you see coming down the runway, but -- and then, of course, bags were so huge in that period when Karl took over, and
I think he partly made them huge, that idea of the clutch or the bag that the woman is holding in the '80s and '90s. The "it" bag. So tremendously
important.
QUEST: He loved knowledge.
COLAPINTO: Oh, yes.
QUEST: He loved knowledge, but he wasn't an arrogant snob.
COLAPINTO: Indeed, not at all.
QUEST: In the sense, he kept it to himself, but could destroy you with a good fact.
COLAPINTO: Oh yeah. His learning was deep and really quite extraordinary. I mean, again, what he would do when he would read books,
which is one of my favorite details about him because it spoke to how he never looks back. So he would tear out the page that he finished and threw
it on the floor so he literally could not look back through the book, and it's a perfect metaphor for how Karl just was always moving forward and
that's why he was so good at fashion and anticipating when people were going to be as bored as him.
QUEST: We are a business show, so even on the moment of sadness, we put it into terms of -- has he built -- has he built a stable that will survive
and thrive?
COLAPINTO: What a great question. What a great question. I mean, you know, I don't know that you can. I think you take the -- it's a little
like asking did Paul McCartney build a stable that was going to let The Beatles survive after he's gone, let's say. The answer is, no you kind of
need Paul and you need John and you need George and Ringo.
When a creative force like Karl dies, I'm not really sure what they do. They just have to find another genius real fast. I suspect.
QUEST: Any out there?
COLAPINTO: Boy, I mean, I don't really know. No name pops to mind that equals Karl.
[15:10:05]
QUEST: Right. Absolutely. Finally, one thing -- I only met him once, but the one thing I do remember whenever you see pictures, always
immaculately dressed.
COLAPINTO: Yes.
QUEST: You know, there's no popping out for a pint of milk on a Sunday in your sweat pants.
COLAPINTO: He would be -- he would just be appalled that I'm wearing a sweater right now instead of a proper jacket.
QUEST: But he would approve of my pin stripes?
COLAPINTO: Well, would he, ever. No, absolutely. But I got this call last minute, otherwise, I would have been up to the Karl mark. I would
have at least worn a Karl jacket. No, he was all about, you know, appropriate presentation.
QUEST: We're very glad you came in, sir.
COLAPINTO: What a pleasure.
QUEST: Thank you very much, indeed.
COLAPINTO: Thank you.
QUEST: As we continue, there is no way the U.S. can be crushed. Fighting words from Huawei's founder who says the world can't quit Huawei
as a tech giant, in a moment.
(COMMERCIAL BREAK)
QUEST: Earnings are moving the markets and that means we must move to the earnings share case. Now, this is where we track the change in
company's share prices in the 24 hours after a reports earnings. It's the best gauge of what investors think the company's results and its outlook.
Paul La Monica is here. Paul, watch carefully.
PAUL LA MONICA, DIGITAL CORRESPONDENT, CNN BUSINESS: I'm watching where you're going to put Walmart and HSBC.
QUEST: Paul, you're right. It's Walmart and HSBC, and it's HSBC first. HSBC down 4% in London. It's Europe's largest bank. We'll put it down --
oopsy-daisy. I am not as young as I was. Down 4%. And HSBC has warned about global growth, but look at their competitors. JPMorgan Chase when it
reported was unchanged. Citi was actually up 4%. Goldman was up 6% plus and Bank of America.
So HSBC seemingly with the exception of maybe Wells Fargo is a bit on its own in the banking sector being so far down. Walmart, Walmart, Walmart.
It's what the day has been about in the markets. And Walmart is up 3% on strong holiday sales and they rolled out a grocery pickup. Digital sales
up 43%.
Now, whether this means they are taking on Amazon and succeeding, bear in mind Walmart was up 3% today. Amazon was down here where it reported down
6%. So Paul La Monica, if we look at those numbers, let's put HSBC to the side for a moment.
[15:15:08]
QUEST: Walmart, has it got the digital strategy right?
LA MONICA: I think they have. It's really impressive growth, Richard. They have done a lot of acquisitions to really help get the urban consumer
to buy online, and also to have suburban consumers buy online and then pick up at the store. So I think that they've got the best of both worlds right
now. They have sites like jet.com which cater to city dwellers and maybe some younger shoppers that may not necessarily go to a Walmart because we
all know there's no Walmart here in New York City, but you can still buy from jet.
QUEST: So where are they getting their groceries from and all of that? Because it is groceries pickup, and I mean, obviously Amazon bought Whole
Foods. But Walmart has traditionally had a sort of grocery version.
LA MONICA: Yes, Walmart has always had a grocery in their stores. They obviously own Sam's Club as well and that's something that has helped them
as well as Target. What is really interesting though now is that Walmart is stressing to its consumers, "Hey, no one likes necessarily shopping in
the grocery store, so order it online, come pick it up at the store curbside." It's already bagged for you. Then you get it, you don't have
to necessarily wait for it to be delivered, but you don't have to actually do the shopping yourself.
QUEST: Which makes a very good -- I mean, we get just a proportion of a few of that in New York, but in the rest of middle America where you want
the best of both, you don't want to wait in, but at the same time, you don't want to be there waiting and bagging.
LA MONICA: Exactly. I think it is a perfect solution for Wlmart customers to be able to still be e-commerce shoppers but not have to then
wait for that to be delivered. Because you don't want to wait for food necessarily.
QUEST: But we'll need a few more quarters before we can see whether --
LA MONICA: Well, they've already had a couple of quarters of solid growth. I think the question is going to be, can Walmart and Amazon
continue to gain share from the rest of the retail business?
QUEST: Thank you very much, indeed.
LA MONICA: Thank you.
QUEST: See you. Walmart's strong performance today means its one-year performance for its shares turned solidly positive, and if you look at the
graph of Walmart versus Amazon over that period, there's a tortoise and a hare feel about it. Amazon has long outperformed Walmart. Look at the
yellow growls up and then it falls back down again. Now Walmart seems to be catching up.
Greg Portell is a partner with A.T. Kearney in Chicago and with me. I'm wary of making too much of sort of this Walmart resurgence because we've
seen it before and it didn't follow through.
GREG PORTELL, PARTNER, A.T. KEARNEY CHICAGO: Well, I think what you're seeing play out now is one of the great competitive stories of business
history. You're seeing two possibly three or four large competitors really take aim at each other in creative and new and inventive ways.
So from a management standpoint, I think there's a lot to look forward to going forward from both sides.
QUEST: Right, but do you see -- I mean, I understand it's not a Walmart or Amazon - both can succeed, I guess the question is which or who can --
who succeeds fastest?
PORTELL: Well, it's going to come back to who can innovate the retail experience faster. We saw Walmart take an edge this time around with their
click and collect, their pick of up groceries. Now it's time for Amazon to come up with their next innovation to see if they can match that momentum.
QUEST: Walmart is the largest retailer in that sense, in terms of number of employees, absolutely. Is it your -- same question to you that I asked
Paul La Monica, is it your view that they have found a digital strategy that will grow and be sustainable?
PORTELL: The results suggest they have found it, and more importantly, I think we've seen them adjust and prove the agility in that channel. So
they're able to quickly adapt, sense, and pivot to what they're seeing consumer demand indicate. So I think the muscles they have built suggests
that even if this strategy starts to slow down, they'll find positive momentum somewhere else.
QUEST: On Amazon, the stock got to $20.30 or so, at the height of November of last year. It fell very sharply, small resurgence, and then
falls off again as you can see from the graph on the back of the whole New York debacle. What's holding Amazon's price back?
PORTELL: Well, I think Amazon is still struggling with what to do with the entire supply chain and physical distribution network they picked up with
Whole Foods. When they first came out with the acquisition and they were able to get some momentum and integrate the channel a little bit, everyone
got very excited.
[15:20:09]
PORTELL: But now, they're struggling with the same challenges that many of the other physical retailers are. How do you move product? How do you
price dynamically? And we haven't seen them quite figure that out yet.
QUEST: Good to see you, sir. Thank you, Greg. I appreciate it.
PORTELL: Thank you very much.
QUEST: Programming note to bring you. On Wednesday, I'll have an exclusive interview with the Federal Reserve Vice Chairman Richard Clarida.
It airs on Wednesday at 3:00 p.m. in New York, 8:00 p.m. in London. It is exclusive and it is only on "Quest Means Business."
There is no way the United States can crush Huawei. Huawei's founder and father of the company's -- the arrested Chief Financial Officer. He pulled
no punches as he took on Washington's attempt to shut the company out of the world's 5G networks.
(BEGIN VIDEO CLIP)
REN ZHENGFEI, FOUNDER, HUAWEI (Through a translator): There's no way the U.S. can crush us. The word needs Huawei because we were more advanced.
Even if they persuade more countries not to use us temporarily, we could just scale things down a bit and because the U.S. keeps targeting us and
finding fault with us, it has forced us to improve our products and services.
(END VIDEO CLIP)
QUEST: Now, I want you to get out your phones and go to cnn.com/join. Tonight's question, what do you think is the main reason behind the U.S.
campaign against Huawei? Is it security as Donald Trump and the administration claims? Is it politics? Is it something to do with
protecting American business? Or something entirely different? In which case you can send me that on Twitter. Go to cnn.com/join. Security
concerns, politics. In other words the U.S. just wants to bash China. Business, the U.S. wants to protect U.S. corporations, or something
completely different?
So far 100% of you are saying it is politics. The lines are open now. Samuel Burke is in London. The statement by Huawei's founder is throwing
the gauntlet down to the U.S. administration.
SAMUEL BURKE, BUSINESS AND TECHNOLOGY CORRESPONDENT, CNN: What really struck me from his interview was the fact that he was so in this long-term
big picture state of mind. You might think he might be startled, the fact that his daughter is out on bail in Canada, but what he was really focused
on was the business side and this political aspect making it very clear that if he could vote, he would be pushing politics down there.
The people that I talk to, the heads of telecom's companies, for instance, people in government feel that it's really maybe all of these, Richard, and
they feel that the lines were completely blurred once the U.S. President said that he might use the daughter of the founder of Huawei as leverage in
the negotiations with the Chinese.
QUEST: So what happens here? We can go around in circles about whether it's one or the other. But real decisions, practical decisions have to be
taken, and I remember the Verizon, one of the senior executive there when I mentioned about Huawei smiled, raised an eyebrow and said, "You won't find
anything from them in our network." Similarly with other companies, but B.T., for example, in the U.K. is stuffed with the stuff.
BURKE: I don't think we actually have to wait long for the answer no matter what happens with the daughter or the trade talks, already, these
few days have really shown a tide change in what companies and countries are saying.
New Zealand, for instance, all of a sudden the Prime Minister there is saying, well, we haven't made a final decision yet. No surprise. Where do
the Kiwis want to send their milk? The Chinese are their top export recipient. Then you have the Germans, all of a sudden, a report in the
"Wall Street Journal" today saying that the Germans are reconsidering their position.
There has been a campaign behind the scenes to get telecoms companies to speak up. They've already invested, Richard. They don't want to lose
their return on investment and they're getting their countries to speak up on their behalf now. This isn't just happening out of the blue. There are
people behind the scenes who are finally starting to say, "Well, I don't want to lose any money on this if I have to take Huawei out of my system."
QUEST: Is there a legitimate risk here?
BURKE: Of course there's always going to be a risk. But you could also argue that there is a risk from American equipment. We've seen for
instance a back door that the U.S. government had in the Microsoft Windows Systems that created the WannaCry attack that we reported on extensively
here on "Quest Means Business." There's always risk, it's just trying to figure out how big that risk is, and what I think we're starting to see is
some countries might be willing to take that risk.
QUEST: Are you surprised 57% say politics, only 27% say it's security with 15% saying business?
BURKE: The only thing I'm not surprised by is the part that says that it's not business from the way your viewers are voting because what's
always vexed me, Richard, is the fact that there is no natural American company to take over Huawei.
[15:25:10]
BURKE: If you think that Donald Trump is doing this out of protectionism for his own companies in the United States, I think you might be wrong
because there is no other American company there or Finnish companies for example and Swedish companies that are the natural successors to Huawei's
equipment being taken out of place. So it looks like your viewers are just as smart as we thought they were.
QUEST: Absolutely. Good go. Thank you. Samuel Burke. Still to come tonight, another blow, a bitter blow this time for the U.K. car industry.
Honda announces it is closing its Swindon factory. We'll hear from some of the people affected. Three and a half thousand jobs are at risk and now,
what is likely to be lost.
(COMMERCIAL BREAK)
QUEST: Hello, I am Richard Quest and there's more "Quest Means Business" in just a moment. When workers at Honda's only British factory are left
stunned after it shuts down weeks before Brexit. And he seems almost radical in 2016, Bernie Sanders says the rest of America has caught up with
his economic vision.
As you and I continue this evening, you are watching CNN and here, the facts and the news always come first.
President Trump says he would like North Korea to denuclearize, but he isn't laying out a timeframe, but there are report at the White House that
he isn't in a hurry, but he looks forward to meeting with Kim Jong-un in Vietnam later this month.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Well, I'd just like to see ultimately denuclearization of North Korea. I think we will see that
ultimately, but I'm in no rush. There's no testing. As long as there's no testing, I'm in no rush. If there's testing, that's another deal.
(END VIDEO CLIP)
QUEST: Tributes are pouring in as the fashion world mourns the iconic designer Karl Lagerfeld. He died on Tuesday in Paris at the age of 85. He
was the creative director for three of the best known fashion house in the world, Chanel Fendi and his own Lagerfeld label. A U.S. House Committee is
investigating a whistleblower reports about a lucrative attempt effort by the Trump administration to export nuclear technology to Saudi Arabia.
Former national security adviser Michael Flynn reportedly had a key role in the plan. The whistle-blower says White House aides ignored repeated
warnings that they could be breaking the law.
A British teenager who left home to join ISIS in 2015 is being stripped of her citizenship according to her family's lawyer. Shamima Begum recently
gave birth in a camp in Syria, and has been pleading to return to Britain. Family's lawyer says they're disappointed with the decision and are
considering all legal avenues to challenge it.
There's outrage in France after 80 Jewish graves were desecrated at a cemetery in a suburb of Strasburg. Nazi symbols were painted on the
graves, the French President Emmanuel Macron condemned the vandalism and visited the cemetery to inspect the damage.
An organization that represents Catholic nuns and priests has issued a statement admitting to terrible errors in handling sexual abuse of children
by clergy. The statement says the leaders of the organization are ashamed of the abusive efforts to cover it up. On Thursday, Catholic leaders will
gather at the Vatican for a conference about ending sex abuse in the Catholic Church.
The 3,500 employees in Honda's only British plan had their fears confirmed today. The facility is to close and relocate back to Japan in 2021. For
30 years, Honda has been an integral part of the local economy in Swindon. CNN's Anna Stewart spent the day in Swindon and spoke to those affected.
(BEGIN VIDEOTAPE)
ANNA STEWART, CNN REPORTER (voice-over): They came into work only to be told to head back home. And in two years, they'll be leaving for good.
Honda management confirmed the news they're closing the doors here, their only U.K. factory.
UNIDENTIFIED FEMALE: And I found out from work yesterday, saying, you do know your husband doesn't have a job in two years time.
STEWART: Honda says it's leaving the U.K. due to unprecedented change in the industry. It wants to push ahead with making electric vehicles and
it'll do so from plants in Japan, China, and North America.
UNIDENTIFIED MALE: It's a blow to the whole British economy.
STEWART: The decision has nothing to do with Brexit according to the company. But locals here in Swindon find that hard to believe.
UNIDENTIFIED MALE: I'm disgusted the way they've handled everything. The government, the parliament. It's just disgusting. It should have been
sorted weeks, months ago. Terrible.
UNIDENTIFIED FEMALE: Yes.
STEWART: The plant is one of the biggest employers in the region. And most found out about its closing on the news.
(on camera): You found out not from your employer, go home --
UNIDENTIFIED MALE: No.
STEWART (voice-over): Frederick Sellier(ph) works at the quality control end of Honda's production line.
UNIDENTIFIED MALE: A lot of people that work for Honda lives in Swindon. And with Honda gone --
UNIDENTIFIED FEMALE: I mean, how are people going to pay their mortgages?
STEWART (on camera): How are we?
UNIDENTIFIED FEMALE: How are people going to pay their mortgages? I mean, it's just -- it's a disaster really.
STEWART (voice-over): It's two years until the factory will close, but finding another job in this U.K. auto sector could be difficult.
(on camera): Jaguar and Land Rover have said they're cutting 4,500 jobs worldwide having already cut 1,500 last year. Ford have said their
operations in the U.K. where they employ 13,000 workers are at risk from a hard or no deal Brexit.
And then there's Nissan who said they are no longer going to make a new model of car, the X-Trail at their British plant. And things here could
get worse before they get better.
(voice-over): A new EU-Japan free trade agreement has reduced the need to make cars within the block. All this has ripple effects beyond the big car
makers. Thousands of people work in companies in the automotive supply chains up and down the country.
UNIDENTIFIED MALE: This is going to be the end of Swindon. It's going to be the end of Swindon.
STEWART: Anna Stewart, CNN, Swindon.
(END VIDEOTAPE)
QUEST: Coming up next, China's negotiators are returning to Washington for another round of trade talks. President Trump says he's open to pushing
out the March, the 1st deadline to reinstate higher tariffs.
[15:35:00] (COMMERCIAL BREAK)
QUEST: So to the QUEST MEANS BUSINESS trading posts. Still have no records, but we do have three -- well, the Dow is up, the S&P is up, not
much, but it is up. Nasdaq same and FANG was up as well more than 1 percent. So Josh, the lighting buzz, I think -- yes, thanks, even this
will do it.
Never get a chance to invite you. Green across the board, investors are waiting clear outcomes on U.S-China trade talks. Now that the Fed has put
aside interest rate rises, it is the trade talks that's the last remaining piece of the market or concerns at the moment.
Now, a new round of trade talks began in Washington today. "Bloomberg" says that the U.S. is seeking a pledge from China that it won't devalue its
currency. A moment ago, President Trump suggested he's open to moving the March 1st deadline for a tariff hike.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The talks are going very well. Our group just came back, and now they're coming here. I can't tell
you exactly about timing, but the date is not a magical date. A lot of things can happen. The real question will be, we will we raise the tariffs
because they automatically kick into 25 percent as of $100 billion, $200 billion worth of goods that they send.
(END VIDEO CLIP)
QUEST: Steve Orlins is the president of the National Committee on U.S.- China relations. Good to see you, sir.
STEVE ORLINS, PRESIDENT, NATIONAL COMMITTEE ON U.S.-CHINA RELATIONS: Good to see you.
QUEST: I guess you're pretty busy.
ORLINS: We are very busy these days.
QUEST: Relations are not good.
ORLINS: Our relations are deeply troubled. Some based upon facts, some based upon fiction.
QUEST: Right, but what's your understanding of the latest position on the trade talks?
ORLINS: I think we're going to see an extension. I think we may see an agreement with respect to soybeans, corn, machinery, energy is going to be
a big part of that deal which is going to deal with the bilateral trade deficit that the United States experiences. But I think that's an
intellectual fallacy.
QUEST: Right, but the -- well, the bilateral deficit is a real thing.
ORLINS: That the -- that, that is going to solve anything.
QUEST: No, I mean --
ORLINS: A bilateral trade deficits are not a measure of anything.
QUEST: Right, and the -- well, except in the president's mind --
ORLINS: In there, exactly --
QUEST: He wants to see a zero some gain.
ORLINS: Precisely --
QUEST: In that sense, but --
ORLINS: But it doesn't make any sense.
QUEST: But is it likely that -- I mean, the Chinese will do the usual trick of offering up more -- we saw that with, well, barely half a trillion
dollars worth of soybeans between now and eternity. But that doesn't address the sort of IP, the theft of the requirement for joints ventures,
all those sorts of issues.
ORLINS: Yes, so what we -- I think we're going to see is a pathway towards solving these issues. The Chinese already have a plan which can solve
these issues, which is called the program laid out in the third plenum of the 18th party Congress which was six years ago.
[15:40:00] QUEST: But they're not doing it --
ORLINS: They have people -- precisely --
QUEST: They're not doing it.
ORLINS: They are not doing it. So what the Trump administration, what Ambassador Lighthizer, Secretary Ross, Secretary Mnuchin are trying to do
is to hold their feet to the fire to get a commitment to do it and to make sure they do it.
QUEST: The Chinese know what the U.S. wants.
ORLINS: Yes.
QUEST: The Chinese know what it's going to take. And if they are so willing to open up, and are so in favor of all of this, then why are they
doing it?
ORLINS: It's incumbent protection. You know, when I was an investor at Carlisle, I used to love kind of monopolies. It was a great thing, you
could make more money, you didn't have to work so hard, it was terrific. So those incumbents, those who are benefitting from investment
restrictions, those who are benefitting from tariffs are fighting hard to make sure that these plans are not implemented.
And they because most of them are state-owned enterprises have a lot of political oomph within the Chinese government.
QUEST: Is it -- let's talk about Huawei if we may -- if we may for the moment. This is a really nasty and difficult one because the U.S. is
basically telling its allies, do not buy Huawei's equipment. Huawei's founder said to the "BBC" only yesterday, I don't care, I will survive
anyway. We may have to slow down a bit, but the U.S. can't crush us.
ORLINS: And it sounds like your country and the Germans seem to be agreeing with Huawei. But the British seem to be leaving open a door to
buying Huawei 5G equipment, the Germans is certainly opening that door.
QUEST: But how they --
ORLINS: But there seems to be a split in the alliance.
QUEST: But this is very dangerous for U.S-China relations particularly when you start to involve the rule of law as you do with the CFO, the
daughter who's a lot -- who is on bail in Canada. And you've got Canadians who are locked up in China. I mean, this is a --
ORLINS: This is a downward spiral.
QUEST: That's the phrase I was looking for.
ORLINS: Precisely, it's a downward spiral and leaders need to break that downward spiral. What I had hoped was as President Trump overflies China
on his way to Vietnam at the end of this month, he would stop in China. He's apparently deferred that for some time until late March.
When I expect the two leaders will meet, and some of these issues will get resolved.
QUEST: Does it --
ORLINS: The structural issues -- you have to remember the structural issues reform are in the interest of the Chinese people. This is good for
the majority. It's bad for the incumbents but it's good for the majority.
QUEST: Right, so does Huawei have the potential to blow this thing out of the water?
ORLINS: If it's mishandled by the Chinese government, by the U.S. government, by the Canadian government, it can really be damaging to U.S.-
China relations, and Canadian-China relations. As you noted, there are Canadians, they didn't retaliate against U.S. citizens --
QUEST: Right --
ORLINS: They retaliated against Canadian citizens and holding them is a real bad thing for China -- for China.
QUEST: But here's the problem. The two sides are playing by totally different rules, and I don't just mean different legal systems. Canada is
going to have to decide on the extradition on the basis of the rule of law in Canada. There could be no -- how they're treating us in that sense.
The Chinese holding the Canadians might be a very different matter, you know.
ORLINS: Well, clearly, I mean, in the old days with the Russians, we used to have these retaliatory --
QUEST: Yes --
ORLINS: Arrests, we're experiencing these retaliatory arrests. I think they are not in the interest of China in the long-term. What they're going
to do is they're going to have a lot of businessmen from Canada, from the U.K., from the U.S. who are afraid to go to China because they're fearful
of being detained.
It's a terrible Chinese policy, mind you. This is not one which is -- maybe in their short-term interests, it's not in their long-term interests.
QUEST: Finally, you spend your life looking at these issues. Why should we be optimistic? Why should we be optimistic with a president that is
mercurial, with China that's digging itself in and a really nasty issue --
ORLINS: Because in the long-term, the threats that confronts the United States and China are the same. It's climate change, it's terrorism, it's
economic policy, it's pandemics. And the people are ultimately going to insist that the governments have a constructive relationship with China.
QUEST: Thank you --
ORLINS: People in the United States and China.
QUEST: Come back again, sir, and talk more about this, very grateful.
ORLINS: My pleasure.
QUEST: Thank you very much. As QUEST MEANS BUSINESS continues tonight, feeling the Bern all over again. Bernie Sanders enters the crowded race
for the White House. He's banking on a radical socialist agenda to get there. Socialism in America! It's unthinkable.
[15:45:00] (COMMERCIAL BREAK)
QUEST: In 2016, Bernie Sanders ran as an outsider for the Democratic presidential nomination. Today, he's joining the race again as a front
runner. The socialist economic policies championed by the Vermont senator three years ago are somewhat mainstream in a liberal to the left Democratic
Party.
Sanders has called for an overhaul of the rules governing Wall Street. New limits on share buybacks, he wants to break up banks which are deemed too
big to fail, and he wants to raise the minimum wage to $15 within five years. Progressive policies weren't enough to win him this Democratic
nomination in 2016. Now, he claims, the party is gradually come around to his way of thinking.
(BEGIN VIDEO CLIP)
SEN. BERNIE SANDERS (D), VERMONT: You may recall that in 2016, many of the ideas that I talked about, Medicare for all, raising the minimum wage
to $15 an hour, making public colleges and universities tuition free. All of those ideas, people said, oh, Bernie, they're so radical, they are
extreme. The American people just won't accept those ideas.
Well, you know, what's happening now over three years, all of those ideas and many more are now part of the political mainstream.
(END VIDEO CLIP)
QUEST: Ryan Nobles is in Washington. Ryan, the president says he admires Bernie Sanders, doesn't agree with his views, but he basically says Donald
Trump in the last hour said -- no, actually, Bernie Sanders is a good man who's just misguided and wrong.
RYAN NOBLES, CNN CORRESPONDENT: Yes, in fact, Richard, he even said that the two of them likely agree on issues like trade. So they're not all that
different as it comes to certain economic policy issues. But to your point, what I think is interesting about the Sanders campaign is that some
of his biggest strengths that made him a surprise political force in 2016 could end up being his biggest weaknesses in 2020.
He was kind of a unique special candidate in 2016 because he was talking about these things like Medicare for all and a $15 minimum wage and free
college tuition. Well, now a bunch of Democratic candidates are saying that. And there really isn't all that much different from Bernie Sanders
than he was in 2016.
And then furthermore, let's say he wins the Democratic nomination, now he enters the general election as a candidate that's pretty far to the left of
mainstream America even if the Democratic Party has moved left, that doesn't necessarily mean that the rest of America has.
And you've already seen Republicans attempting to shape this race in those terms. You know --
QUEST: Right --
NOBLES: Tying Bernie Sanders to that label of socialism, even going as far as to say that if Bernie Sanders became president, the United States would
become Venezuela in short order. So you know, this is a delicate dance that Bernie Sanders is playing right now.
But make no mistake, Richard, he comes into this race as a front-runner, he's going to raise a lot of money and he still has a rabid support --
QUEST: All right --
NOBLES: Among a certain group of American people. So he will be a force to be reckoned with in this Democratic primary.
QUEST: Ryan, thank you. Ryan Nobles setting the scene of Bernie Sanders whose brand of Democratic socialism is gaining widespread appeal among a
new breed of hard left -- politics is rather hard left by the standards of the United States.
[15:50:00] "The Economist" weekend herald did "The Rise of Millennial Socialism". The most famous poster child of that is of course the
Democratic Congresswoman Alexandria Ocasio-Cortez, AOC as we'll sure refer to her for the rest of the program.
Those support for her is far from universal. Her green new deal is proving divisive even among some Democrats. President Trump is using those
divisions to his advantage. He hit out socialism during the State of the Union and repeated that criticism in Florida on Monday.
(BEGIN VIDEO CLIP)
TRUMP: The twilight hour of socialism has arrived in our hemisphere, and frankly in many places around the world. To those who would try to impose
socialism on the United States, we again deliver a very simple message. America will never be a socialist country.
(END VIDEO CLIP)
QUEST: I'm joined by CNN's chief political analyst Gloria Borger. Good to see you.
GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Good to see you.
QUEST: So America, are the Democrats turning socialist?
BORGER: They're turning more lift. Kamala Harris, another candidate was asked the other day, are you -- are you a Democratic socialist? She said,
I'm not. I'm a Democrat, period. But the policies of the Democratic Party, the ones that we've seen so far in the candidates seem to be
progressing more and more to the left.
And what Donald Trump is doing is using the word socialism which as you know is a bad word, has been a bad word in America to try and scare voters
and say, you vote for Democrats, they're going to take away your money.
QUEST: Right, but Kamala Harris, to the left, Elizabeth Warren, absolutely --
BORGER: To the left --
QUEST: To the left of the left.
BORGER: Right --
QUEST: Bernie Sanders, so far left.
BORGER: Grandfather of the left.
QUEST: Absolutely, Cory Booker, on the leftish.
BORGER: On the leftish.
QUEST: You know, this is all fine and good. But in a polarized -- you know, Donald Trump goes to the right.
BORGER: Right --
QUEST: The Democrats go far to the left.
BORGER: It's a problem. It's a problem. It's a problem. Amy Klobuchar just on CNN --
QUEST: Yes --
BORGER: Last night, Amy Klobuchar goes, you know, I can't promise everything. The green new deal is aspirational. We can't get it done
right away. Medicare for all, we can't afford it right now. So she is positioning herself as a candidate that is sort of in the middle --
practical --
QUEST: Why are they -- why are they taking these fairly strong left-wing views? I understand they've got to win their party's --
BORGER: Yes --
QUEST: Nomination --
BORGER: Right --
QUEST: But they know that the election is won in the middle.
BORGER: Well, a lot of Democratic voters, particularly, the millennials you were just talking about are with those policies. And socialism is not
a dirty word to a lot of younger voters in this country.
There have been polls taken on it. And they believe that, in order to win, they have to appeal to those young voters, and then they will move to the -
- don't forget, in the primaries, you say a lot of things in this country because you want to win.
But then you tack one way and then you move back to the middle. If you're a Republican, you tack to the right, and then you move back to the middle -
-
QUEST: Right, let me show you the words of Elizabeth Warren --
BORGER: Right --
QUEST: She says, "we need to prepare in the hands of the workers and take on Wall Street so that the big banks can never again threaten our security
of our economy."
BORGER: Well, she's been saying that for years. And that is not unpopular. The banks are not really popular in this country, they're too
big to fail, remember all that?
QUEST: Yes --
BORGER: Not popular in this country. She's a consumer protection advocate. Very popular in this country. Is she too far to the left to win
independent voters? Maybe --
QUEST: Right --
BORGER: Absolutely.
QUEST: So let's look at Kamala Harris. She said -- I mean, you know, painting this picture of words --
BORGER: Right --
QUEST: That will be thrown back at them --
BORGER: Right, exactly --
QUEST: If they wouldn't. Voters want to know that whoever is going to lead them understands that in America today, not everyone has an equal
opportunity and access to a path to success. We've got to correct that course. And we'll stay with Cory Booker.
"Federal policy over decades", he says, "an upside-down tax code that he benefits on the very rich, and big corporations have grown, the gap between
those who have and those who have little." Now --
BORGER: That's not new for Democrats, by the way.
QUEST: It's not new for Democrats.
BORGER: No.
QUEST: But Donald Trump has proven that he won by shifting enough to the far enough right to win --
BORGER: Right.
QUEST: Is there evidence that they're all shifting back and would be attracted by this sort of Democratic socialism?
BORGER: Well, look, I think that there are a lot of Democratic voters in this country who feel that they've been left behind during the last couple
of years. That the tax cuts were not aimed towards them. That there have been tax breaks or corporations, et cetera.
[15:55:00] You can't argue about whether that was good or bad. And that what the Democrats are playing to right now is this class division in this
country where they're on the -- they're populist, they want to be more populist than Donald Trump is or says he is.
QUEST: Just jumping in there --
BORGER: Yes --
QUEST: Are you looking forward to the next two years?
BORGER: Oh, my God, I take it day by day because on Fridays, I can't remember what happened on Monday. That's how quickly these weeks evolve.
Good to see you --
QUEST: Come back and join us.
BORGER: I will --
QUEST: And then --
BORGER: When I'm here.
QUEST: When you're here --
BORGER: Yes --
QUEST: And I'll be there.
BORGER: OK --
QUEST: Thank you very much indeed. All right, markets, they're about to close. The gains have dwindled, but Wal-Mart is still up 2 percent,
laggard is Nike, Coca-Cola also at the end. Really, you've got to look at the big picture of the day.
Red in the morning, 11:30 gains, but the best gains dwindling away as you get a bit of books squaring, so we are positive and we have just breached
25,900. Let's see if we can hold on to that when the closing bell rings in a couple of moments after I've given you a profitable moment.
(COMMERCIAL BREAK)
QUEST: It is early days, tonight's profitable moment. But as you heard in our discussion with Gloria Borger, America could be heading to an election
next year with very different views. If the Democratic Party moves towards that sort of Democratic socialism of which they are so popular or seeming
to be.
Kamala Harris, Bernie Sanders, Cory Booker and the like -- Elizabeth Warren to be sure. And then on the other hand, Donald Trump in his effort to keep
his own base, might become more right-wing and more hard lined.
And what happens to that big in the middle? What happens to the Midwest? What happens to the south? Is there sufficiently the old Reagan Democrats?
Would they move back towards the Democrats? The whole idea of the social welfare net that brought Medicare and Medicaid?
It's going to be a fascinating time. We've got a whole year to think about all of this. I promise you, we'll continue watching, particularly this
idea of socialism in America. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York.
Whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
The Dow is just barely up, the bell is ringing, the day is done.
END
