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Trump: Tariffs On Canada And Mexico To Begin Tuesday; Europe Moves To Take Control Of Peace Negotiations; At Least Two Killed After Car Rams Crowd In Manheim, Germany; Trump Unveils "Crypto Strategic Reserve"; U.S. Set To Impose Tariffs On Its Top Three Trading Partners; Trump: Tariffs On Canada And Mexico To Begin Tuesday. Aired 4-5p ET
Aired March 03, 2025 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:07]
RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on wall street. Fairly awful day on the markets. We will get to the
whys and the wherefores of what has been happening, but the market is sharply down. It is just off the lows. It was nearly 700 down earlier in
the session.
The reasons are clear. Hit the gavel and we will bring this misery to a close. The day is over. The trading day is over.
Those are the markets and the events that you and I are going to be talking about.
On the brink: President Trump says tariffs on Canada and Mexico will start tomorrow. That's one reason, of course, the markets have fallen.
European leaders are rallying around Ukraine's leader as President Trump continues to seethe at President Zelenskyy.
And Germany's political transformation, Fred Pleitgen will be with me tonight and we will be talking about how to explain this public opinion
shift to the right, because tonight, QUEST MEANS BUSINESS, we are live from Berlin on Monday. It is March the 3rd. I'm Richard Quest in the German
capital, as elsewhere, of course. I mean business.
And a good evening to you from berlin, the German capital. We are live here tonight at a pivotal moment, not only for this country, but also for
Europe, and how this country can play its full role in the future of the continent. The questions over Ukraine rank first and foremost, whilst the
German government is tried to be put together following the federal election.
Now there are cracks in the long standing alliance with the United States that are showing up left, right and center. An economic crisis here in
Germany has shaken the country and the people to, seems, its very core, creating great self-doubt and worries.
After the new election, a government must forge a path forward and while fending off the resurgence, of course, of the far right. So much to discuss
which we will get to, I do promise you.
We must start, though, with the breaking news from Wall Street, where shares have fallen very sharply second or third day in a row, I am starting
to lose count after Donald Trump confirmed that one of the largest tariff increases in U.S. history is only hours away.
The President was at the White House when he said there is, "no room left for Canada and Mexico" to avoid the tariffs that he promised that would
take place on March the 4th. That, of course, is tomorrow. The comments reverberated across the Street. The Dow dropped sharply in the mid
afternoon after the press conference.
The President says he will impose, you ready for this -- 25 percent tariffs on Mexico and Canada and double some existing tariffs on China from 10 to
20 percent, and bearing in mind, of course, that they were tariffs from the last Trump administration that are still in place.
When there are times of crisis like this, who do we turn to? Mohamed El- Erian, of course, the chief economic adviser at Allianz and the President of Queens College at Cambridge University, joins me now.
At one level, of course, the markets falling so sharply, it makes perfect sense. The one thing you want is certainty. You want an investment strategy
upon which you can rely on, but this is just an ever shifting change of sand when it comes to tariffs.
MOHAMED EL-ERIAN, ECONOMIST AND ADVISOR, ALLIANZ: It is, Richard and the market were expecting something to happen that would mean that the tariffs
wouldn't be implemented and that's why you got this sharp reaction.
It comes on top of a strong whiff of stagflation, meaning lower growth and higher inflation that has been apparent in a number of data releases. And
as we know, tariffs would just accentuate the smell of stagflation.
QUEST: So these tariffs, first of all, we have the economic, seemingly against the orthodoxy that they are non-inflationary. You can't have price
rises of 20 percent and that not be inflationary. No importer can afford to withstand and eat that sort of margin, can they?
EL-ERIAN: You know, it is a big debate because you have to assume what will the importer do? You'll have to make assumption about what will the buyer
do, the consumer. But evidence suggests that they tend to be inflationary. But they also tend to reduce overall demand.
[16:05:07]
So you get lower growth, higher prices and that is the one thing that policy has enormous difficulty with, and that's what you see, why you see
the markets being so nervous about this.
QUEST: Because we are starting from a level of high valuations. I mean some would say absurdly high valuations, particularly on A.I. It is almost as if
the U.S. economic policy at the moment, short to medium term, is doing everything it possibly can to make investors' job as difficult as it
possibly can be.
EL-ERIAN: I think the image I have, whether it is for investors or whether it is for companies, is trying to drink from a fire hose. It is coming at
you so quickly that the temptation is to step aside and you have five big areas that are in play.
We are talking about trade, but let's not forget also what's happening with DOGE and the budget. Let's not forget what's happening on energy, on
immigration, and on deregulation.
These are five big areas that are all in play. The Trump administration has hit the ground running, and the result of that is this fire hose. So
companies are increasingly in a wait and see attitude and now, investors are in a wait and see attitude.
QUEST: So one of the things we are looking at is where does the system. What should we look at for the system breaking down? In a sense, we've had
small examples. The nuclear inspectors that were fired and then had to be rehired, the peanut butter in Georgia.
We've got these isolated examples of where the plumbing of the government is starting to show strain, but what we are all really looking for is
because of that fire hose, the inability of government -- of the system of government to withstand this level of change. What would you be looking
for?
EL-ERIAN: So I would distinguish between the journey and the destination. The destination is a slimmer government, a more efficient government. The
journey is really complicated because two things happen in the journey. One is you interrupt payments, you interrupt contracts and that tends to
disrupt activity.
And then the second thing is you make federal employees highly insecure about their future income, about their jobs and that also has a negative
effect.
So the journey that is being navigated here is both problematic within the government and with anybody that has relations with the government.
QUEST: And Mohamed, let me just, for our dear viewers around the world, give us some free advice. What does the investor do in this scenario?
EL-ERIAN: I think the investor has to recognize there is a lot of uncertainty in the system. When you have so much uncertainty, the
possibility of a mistake goes up. No one wants to make a mistake, but if the world is so uncertain, you tend to make mistakes.
Most mistakes are recoverable in investments, some are not. So investors have to be very honest with themselves. What is a recoverable mistake? What
is an unrecoverable mistake? If, for example, you're using your grocery money in the stock market right now and it goes -- that's an unrecoverable
mistake. So you've got to be very honest with yourself in terms of what is recoverable and what is unrecoverable and what's recoverable, just wait,
because this will pass.
What is unrecoverable, you should be careful not to lose the money you absolutely need.
QUEST: I am grateful to you, sir, for that. Send the bill to the usual place. I will pay it with interest, as always, Mohamed El-Erian joining me.
I am grateful indeed. Thank you.
We continue tonight here in Berlin. European leaders are scrambling to find a path towards peace in Ukraine after Friday's contentious meeting between
Presidents Trump and Zelenskyy.
The British Prime Minister, Sir Keir Starmer, said Europe will have to do the heavy lifting and he suggested the possibility of European boots on the
ground, planes in the air, all part of the security guarantee. You'll remember, of course, that Sir Keir hosted the European Summit discussing
Ukraine's security, there, President Zelenskyy was welcomed, was given a warm welcome indeed as well by the King.
The tone from the White House has grown increasingly negative. It seems, as Europe wants to embrace President Zelenskyy, President Trump is now
accusing him of wanting to prolong the war, and warned that the U.S. will not put up with it for much longer.
Nick Paton Walsh is in Kyiv for us.
[16:10:10]
Nick, we have much ground to cover. Firstly, everybody is arguing over Ukraine and what should happen and shouldn't happen, and conveniently
almost forgetting that it is in Ukraine where the fighting is taking place.
But Nick, it is not just peace at any price, as the U.S. would seem to want. It has got to be peace with security guarantees, as Zelenskyy wants.
NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT: Yes, I mean, look, it is important to accept there are two visions really here
about peace. One is the Trump administration think that peace is potentially something applicable in a matter of days or hours if the right
deal is struck, and that that will be durable and last.
Essentially, Trump thinking that Putin would never cross him in a deal and that deal will hold.
And then you have the Ukraine fighting the war and all of European allies of Ukraine who insist, really, that there need to be security guarantees
and some sense in which Ukraine is strong enough that if, as has happened, Ukraine says 25 times in the last decade that Russia agrees a ceasefire or
a peace deal and then violates it, that Ukraine is strong enough to be able to repel that rejuvenated, refitted Russian attacking force.
So a big difference in what a peace vision looks like. Zelenskyy today insisting that they are pro-peace. The quote that Trump seized upon in that
social media posting was a singular statement about peace being very, very far away, I think he was referring Zelenskyy to the broader idea of Russia
not being an aggressor. He also said that Ukraine wanted peace, frankly, not just today, but at the start of the war. They never wanted this to
happen.
Trump's tone in his recent comments suggesting Zelenskyy needed to be more appreciative, also striking a tone where I think he tried to sound like the
Trump administration was tougher on Russia than any of its predecessors. A lot of mixed signals there, but perhaps a discomfort from Trump at the idea
that some Republicans might see him as being soft on Russia.
And also, too, an interesting statement in which he said he hadn't discussed freezing aid on Ukraine, but then he suddenly said, were there
are discussions happening now in the Oval Office, and what I am saying could be being obsolete.
So holding that idea out potentially as a threat. We've been seeing this intense pressure on Zelenskyy now for 10 days, and the remarkable meeting
in the Oval Office. Since then, intense pressure from Cabinet members around Trump that maybe Zelenskyy isn't the right guy to continue leading
Ukraine.
We've had a look as to exactly what would have to happen if indeed, it seems highly unlikely that Zelenskyy would actually agree to step aside if
that did happen. You're looking really, at best at political chaos for months.
(BEGIN VIDEOTAPE)
SEN. LINDSEY GRAHAM (R-SC): He either needs to resign and send somebody over that we can do business with.
MICHAEL WALTZ, WHITE HOUSE NATIONAL SECURITY ADVISER: President Zelenskyy truly did his country a real disservice.
REP. MIKE JOHNSON (R-LA): Or someone else needs to lead the country to do that.
WALSH (voice over): It is not what you need in wartime, but buoyed by Europe's London Summit, President Zelenskyy seemed unmoved.
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): It is not enough to simply hold elections. You would have to prevent me from
participating in the elections.
WALSH (on camera): Now, if Zelenskyy were to resign and that's a big if, the Constitution says the Speaker of here, the Parliament takes over his
job with pretty much all of his powers until there is new elections.
That is this man, Ruslan Stefanchuk. His personal approval rating, it has not recently even been measured., So they would need a vote fast and to do
that legally, to lift martial law and so a full peace.
WALSH (on camera): How chaotic would elections be if they were called right now?
OLHA AIVAZOVSKA, OPORA: It is impossible because it will be unconstitutional. Everything what we have because of war, we need to change
before elections. We need to reload all freedoms, freedoms of movement, freedom of speech. We need to have competitive electoral process.
WALSH (voice over): Ukraine's Deputy Elections Chief, asked by us five days ago, said they would need in peacetime a minimum of six months to
technically arrange a vote.
SERHIY DUBOVYK, DEPUTY HEAD, UKRAINE'S CENTRAL ELECTION COMMISSION (through translator): We could hold elections, but these elections would not meet
internationally recognized standards and could call into question the results obtained in these elections.
I would like to appeal to our foreign partners when they talk about elections in Ukraine, they should take into account the necessary
preparatory period. This is a country under martial law, a country where everything is aimed at defense.
WALSH (voice over): She added the money used to reform and prepare often came from USAID, which is in doubt now, too.
And then there is the question of if the nightly drone strikes and violence stops. Who gets to actually vote?
There are an estimated seven million Ukrainians abroad who would need to cast ballots, and a million in the military, who would need peace to leave
their posts.
[16:15:05]
Finally, Ukraine has a tortured history of Russian electoral manipulation. In 2004, during the Orange Revolution, was the first rejection of Moscow's
meddling in elections, with peaceful protests forcing a rerun and pro- western democratic reform in the future.
AIVAZOVSKA: Without strong legitimacy, this state will not survive because Russia will destroy the reputation of the legitimacy, and then we will be
the failed state.
WALSH (voice over): Another instance of disconnect between Washington's vision and Ukraine's actual plight.
(END VIDEOTAPE)
WALSH (on camera): And it is just really another example of exactly how the reality hits home with the vision at times, and I think it is obviously for
Zelenskyy's survival, important that his position stops being a White House talking point. They enable themselves to get back into the possibility of
healing the relationship between himself and President Trump, and obviously this rare earth minerals deal.
Trump made a reference to news about that maybe in tomorrow's speech that could help get things back on track. But look, this has been such
extraordinary whiplash and seesawing here now for 10 days. I feel that any sense of good news could be met 24 hours later with the opposite --
Richard.
QUEST: Nick Paton Walsh in Kyiv. Thank you.
Now, stocks in European defense companies soared on Monday following the calls from leaders to urgently boost defense spending. Germany's
Rheinmetall, Italy's Leonardo and others jumped more than 10 percent.
The European Commission President said the continent needs a massive surge in defense spending.
Germany's likely next chancellor says Europe should try to keep the U.S. on its side. Friedrich Merz said he thought President Trump's argument with
Zelenskyy was likely a manufactured escalation.
(BEGIN VIDEO CLIP)
FRIEDRICH MERZ, LEADER, GERMANY'S CHRISTIAN DEMOCRATIC UNION PARTY (through translator): For me, this was not a spontaneous reaction to the
interventions by. Zelenskyy, but seemingly, a manufactured escalation in this encounter in the Oval Office.
Usually, these press appointments only last a few minutes. Friday was different. And yes, I must say, I was somewhat astonished also by the
mutual tone. This was not beneficial to the matter.
(END VIDEO CLIP)
QUEST: Now, before we discuss German and European policy much further, I need to address the domestic tragedy that took place here in Germany today.
At least two people were killed after a car rammed into pedestrians in the southwestern German city of Mannheim. Police say a suspect is now in
custody after a large scale manhunt took place. Authorities have not yet said whether they think the incident was a deliberate attack. In other
words, we don't know all the details, but of course it comes as Germany celebrates Rose Monday, a carnival held before Ash Wednesday.
Joining me now, Norbert Rottgen, is a German MP with the Christian Democratic Party. He used to chair the Bundestag's Foreign Affairs
Committee.
Sir, you're with me now.
First of all, commiserations at the awfulness of the events in Mannheim today. We don't know all of the details. Are you able to tell me more than
we know?
NORBERT ROTTGEN, GERMAN MEMBER OF PARLIAMENT, CHRISTIAN DEMOCRATIC PARTY: No, we don't know the details, so I would say it is not responsible to talk
about it before knowing what really has happened.
Of course, it is irrespective of the tragedy and the suffering that has happened to people there. So, it is really -- it is a catastrophe.
QUEST: Let's turn to our agenda of firstly putting together the government. How long is it going to take?
ROTTGEN: I think we have to go beyond the traditional rituals. We are under pressure. We have to deliver for Europe. And so Germany is under pressure
to create a new government very quickly. So I would say, it is a matter of weeks, it has to be and not as a matter of months as it has been all the
years as the case before.
QUEST: And once that government is formed, how do you see it fitting in? For instance, with the Macron-Starmer plan? I mean, is Germany ready to
play a greater role in the leadership of this new Europe?
ROTTGEN: I think there is really no doubt that our new chancellor, who has yet to be elected, Friedrich Merz, is ready to assume a leadership role,
which means leadership means to initiate European action, to contribute to European unity and the action in the field of security. Yes, he is ready to
do that.
QUEST: But I would put it to you, sir, that European institutions, the Council, the Commission, the Parliament, the member states, subsidiarity
onwards and upwards, it is ill-equipped, arguably not fit for purpose, to deal with something like Donald Trump.
You're still sending things to the Fourth Directorate Committee to consider before the Parliamentary blah, blah, blah. He has already imposed his
tariffs.
[16:20:00]
ROTTGEN: So on the one side, this European Union has created a unity and a capacity to act unprecedented in our history, particularly in the field of
trade.
On trade, we are a world power. When it comes to security, my prediction is that we are going to see a much more intergovernmental action. The action
of cooperation among member states, not so much of the E.U. institutions, but of member states like Germany, like France, even stretching beyond the
European Union and including the Brits.
QUEST: And then, of course, we are talking about things like the nuclear deterrent, and we are talking about the sharing, in a sense. It is one of
the things Germany is going to be looking at.
ROTTGEN: Yes, yes. But of course, we have to start with conventional defense. This is where our security now is challenged. And from my point of
view, we should not touch upon the matter of the nuclear sharing with the Americans as Friedrich Merz said, our interests have not changed, we want
to have the Americans inside, and so we should not question that.
QUEST: But Friedrich Merz is very deliberate in what he said the other day. The unthinkable, he said on television that the Transatlantic Alliance, we
are going to have to do it alone. We are going to have to be on our own. The days of expecting or looking to a grand alliance, seemingly, if not
over yet. They are well and truly badly damaged.
ROTTGEN: But his first statement was we want this alliance to keep on living, to be active. Our interests haven't changed, so we are here in
front of the Brandenburg Gate. This is a symbol of what this alliance and the American commitment to European security has brought about.
But he says, of course, we have to be realistic and we have to prepare for doing it and going it alone. And in any case, we have understood that we,
Europeans have to organize and to finance and to fund European security.
QUEST: Can you do it? Or is it just -- but how do you say that? But does it just end up in a sort of a long going backwards and forwards and committees
and meetings and discussions?
ROTTGEN: No, no, no, no. It is not about words and actions and meetings. It is about deed and action and we have eventually understood there are some
people I would -- count me among them who are telling this for years now. Now I think we have understood there is a new situation not only in Moscow
but also in Washington.
So we have to do it alone.
QUEST: In your deepest of fears, do you think the U.S. President would prefer a much tighter alliance with Russia? I am not necessarily saying a
security alliance, but a much greater economic -- he seems to have much greater respect and admiration for President Putin than for the liberal
western democracies of Europe.
ROTTGEN: No, it is not my fear because we, the European Union member states, are economically 10 times as much as Russia. What could America win
from a closer partnership with an authoritarian dictatorship than with the free countries and members of the European Union?
QUEST: You know, you raise a good point, sir, as we finish. We are standing here with the Brandenburg Gate. Over there behind me is the U.S. Embassy.
Over there is the French Embassy. And just behind us is the Adlon Hotel, where we are presenting from tonight --
ROTTGEN: Yes.
QUEST: The British Embassy.
ROTTGEN: Yes. There couldn't be a better place to do this interview.
QUEST: Absolutely. I am grateful to you, sir. Thank you. The weather has turned nice, though, so we --
ROTTGEN: Absolutely. Sunny in the day.
QUEST: Sunny in the day, cools in the evening. Thank you, sir.
ROTTGEN: Cool evenings.
QUEST: Thank you, sir.
ROTTGEN: Thank you so much.
QUEST: Thank you sir.
As QUEST MEANS BUSINESS tonight continues, we are live from the Adlon Kempinski Hotel, which is just as we were saying, it is opposite the
Brandenburg Gate. It is one of the most historic hotels in Berlin, more than a century old. Just like anybody and everybody has stayed here except
me, by the way.
Overlooking the Brandenburg Gate, the view in Berlin doesn't get much better than where we are today. Sandwiched between embassies and the gate
itself.
In a moment, our correspondent here, Fred Pleitgen, is with me. When we return, we will discuss Germany's current identity crisis. My words, not
his necessarily. And where the likely new chancellor fits into it all.
QUEST MEANS BUSINESS live in berlin.
(COMMERCIAL BREAK)
[16:26:55]
QUEST: Welcome back.
QUEST MEANS BUSINESS live tonight from Berlin.
A pivotal moment for Germany in itself. Olaf Scholz's government is on its way out, if it isn't already gone. He is set to be replaced as chancellor,
likely by Friedrich Merz, who will take his place and Mr. Merz leads Germany's Christian Democratic Union Party.
He is up against a shrinking economy, an energy transition and a resurgent far right at home; and abroad, he faces increasingly complex situations, of
course, with the war in Ukraine.
Fred Pleitgen is with me.
You're going to be -- before -- we will hear from you more in just one second. We went for a walk earlier. We went to somewhere --
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Around Brandenburg Gate.
QUEST: Brandenburg Gate, and you actually bought me a coffee.
PLEITGEN: I did.
(BEGIN VIDEOTAPE)
PLEITGEN: There isn't really much of an economy here. You have politicians, you have artists, but you don't have big businesses here. All
the big German companies are situated in Cologne or situated in Frankfurt, in Munich, in Bavaria.
So it is, a fairly I feel, slow paced capital as far as other capital cities go, if you compare it to places like Paris.
QUEST: Is that changing?
PLEITGEN: So, it is changing a little bit. There are more people who are coming here.
QUEST: In the 20 years I've been coming here. I mean, everyone talks about the Bohemian --
PLEITGEN: Yes. That is still there.
QUEST: The clubbing scene.
PLEITGEN: The clubbing scene is still very good. I mean, I am a bit older now, but I hear, it is still quite good.
QUEST: That's what we've got to do one night.
PLEITGEN: But one of the things that is changing, for instance, is that the rents are definitely on the rise and that's because a lot of people are
moving here from other places that in parts have become too expensive for them.
People from London, people from New York, for instance, moving here.
QUEST: Everybody has got a story of an apartment that they wish they'd bought in Berlin 15 years ago.
PLEITGEN: Yes. I have many of those. Yes, it was -- when you came here, let's say, in the year 2000 or 1999, I remember going into a beautiful
apartment and there was no one else even wanting to look at it and I didn't take it because I didn't like the area and now, it is worth millions.
QUEST: Let's go and have a chat.
PLEITGEN: Okay.
QUEST: Why has Germany gone into this massive introspection of, you know, are we right? Is it good? What's going on?
PLEITGEN: I think Germany right now is in an identity crisis. So Germany came from a time where it felt like no matter what they did, it was always
right. If there was a crisis going on across Europe, economies were falling apart, but Germany was always doing well.
And there were certain things that underpinned that. One of it was economic growth, especially through trade with China. The other thing was energy
from Russia and security from the United States was the third thing.
And so all of that is falling apart, right? Security in Europe has become a problem, but especially energy from Russia is not there anymore.
And one of the things that I hear from politicians here in Berlin is do not ever underestimate the role that cheap energy played for Germany's economic
growth in the 2010 years, because I think it sort of peaked at 2012-2014, this economy.
And then of course, now with the war in Ukraine, that alone has caused a lot of instability. And I think right now the country just isn't sure how
to get back on the right track.
[16:30:11]
QUEST: But people are always saying the Germans are unsure. The Germans are --
PLEITGEN: Are negative about it.
QUEST: Or just -- they're not sure of their role.
PLEITGEN: Well, that is definitely the case. The Germans -- I think they found their role to a certain extent. I mean, if you look at the beginning
of the war in Ukraine, it was almost unfathomable for Germany to provide weapons into a war zone, let alone one in the former Soviet Union, you
know, where Germany caused so much harm and so much hurt and so that now they're the second biggest provider of military aid. So, they have come a
long way in that, but they're still not happy with that role.
QUEST: So the likely new leader --
PLEITGEN: (INAUDIBLE)
QUEST: At one time, it's more -- it's a shift. It is a decided shift but it's also a shift you might have thought towards a more Trumpian view on
the world, but he's also now saying Germany -- well, Europe has to stand on its own.
PLEITGEN: Yes. So if he were to say that he has a Trumpian view of the world, he wouldn't be the next -- I'm pretty sure that here that wouldn't -
- that wouldn't get you very far. But he certainly is someone who is a more conservative brand of politics, not just compared to Olaf Scholz, but also
compared to the Christian Democratic Union of Angela Merkel. He was Angela Merkel's main nemesis in the early 2000s and she sidelined him.
And I don't think that he ever really overcame that. He felt very bitter about that, I think, for a very long time. And so, he's moving the
Conservative Party back to more conservatism, and that also in the economic sphere, trying to cut down some of the social welfare programs, trying to,
you know, cut down some of the investment in -- generally, in the social sphere. And, of course, immigration is a huge topic as well.
QUEST: Do you feel a change?
PLEITGEN: I think that a lot of people are quite happy with the outcome of the election. And I think that to have a government that at least on paper,
will be more stable than the last one, is helping people a little bit. But they also know that the tasks are immense right now.
QUEST: Where are you off to next?
PLEITGEN: I assume I'm going to be in Russia fairly soon. Again. I might -- heads to Brussels as well but --
(CROSSTALK)
QUEST: The weather is getting better.
PLEITGEN: The weather is certainly getting better. I mean, it feels like spring almost. Isn't it?
QUEST: Springtime in Berlin.
PLEITGEN: Yes.
QUEST: I think there's a song about that.
(CROSSTALK)
(END VIDEO CLIP)
QUEST: Well, I spoke too soon. It was springtime and lovely, but it's cold in the evening. You were listening to the M.P. there a moment or two ago.
Are the Germans fooling themselves about what role they're going to play here? Can they -- can they -- can they elevate their diplomacy --
(CROSSTALK)
PLEITGEN: I think that elevate is exactly the right word. Because I think that in the last 10, 15 years, Germany has actually taken a step back as
far as being on the international stage, as far as far as diplomacy is concerned. If you look back to the years of Gerhard Schroeder and Joschka
Fischer, they were taking lead roles, for instance, in Afghanistan, but also, for instance, not going with the U.S. into Iraq.
That was also something that was seen as diplomatic maturity here. And now they have to -- they have to be real personality again and they're going to
have to really have a military to be able to do that as well. And that that's going to take a little bit.
QUEST: Tariffs. BMW. Mercedes Benz, there a lot of them.
PLEITGEN: I think there's no country that has benefited more from free trade in Europe and in the world than Germany has. Globalization has been
great for the German economy, great for especially German automakers. So, I think right now, that would probably be the worst thing that could happen
to them. But on the other hand, if you look at, for instance, BMW, they are one of the biggest auto exporters of the United States.
They export from the U.S. to other places. The whole German SUV lines, be it Mercedes, BMW, but they're all created in America. So, from that vantage
point, you know, maybe it'd be a win-win for both the Trump administration and maybe the Mertz administration when it takes over to not have tariffs.
QUEST: Thank you, sir. I'm very grateful you braved the gold and even bought the coffees earlier. Thank you very much indeed.
QUEST MEANS BUSINESS. Coming up in our program as we continue. Donald Trump's announcement that tariffs against the Canada and Mexico will take
effect on Tuesday, that tanked the market. I'll talk to the Peterson Institute's Adam Posen to discuss the potential economic fallout in just a
moment. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:37:45]
QUEST: Hello. I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS in just a moment. We'll be discussing the tariff turmoil with the renowned
economist Adam Posen and delving into President Trump's new strategic crypto reserve, trying to understand what it means. But we'll only get to
that after we've done the news headlines because this is CNN, as you know, on this network, the news always comes first.
President Trump is turning up the heat on his Ukrainian counterpart to make a deal to end the war with Russia. Donald Trump has suggested on Monday
that Volodymyr Zelenskyy might not be around very long if he doesn't work toward reaching a peace agreement. Mr. Trump says he doesn't think a
proposed deal involving rare earth minerals in Ukraine is dead.
A car rammed into a crowd in Mannheim in Germany, killing at least two people and injuring several people. Police arrested a suspect after a large
hunt. The motive remains unclear. The authorities have not said whether it was believed to be a deliberate attack.
Pope Francis has suffered two episodes of what's been described as acute respiratory failure. On Monday, is now alert and resting. The Vatican says
the incidents were caused by a buildup of mucus, which has caused the Pope's airways to narrow. Pope been battling double pneumonia since
February, and has been given oxygen masks to aid his breathing.
Anora won five Oscars and the 97th Academy Awards, including Best Picture. Mackie Madison was named Best Actress and it -- and also won Best Editing
screenplay and director, all for Sean Baker. Adrian Brody won Best Actor for Israel in the brutalist Dune: Part Two, won Best Visual Effects. No
Other Land won the Best Documentary.
Returning to our top story. Markets entered the day sharply lower after Donald Trump confirmed tariffs on Mexico and Canada would take effect on
Tuesday. He said there was no room left to negotiate.
[16:40:06]
Speaking alongside the president, the Commerce Secretary Howard Lutnick encouraged companies to avoid tariffs by moving production to the United
States. Adam Poseman is the president of the Peterson Institute for International Economics. It is the Peterson. Adam, you have done much --
your Institute has done much work on tariffs. We've talked to you before, but now they are coming left, right and center.
And it's the ability of economies to withstand this firehouse of tariffs and uncertainty, which is extremely difficult. How difficult is it going to
be this time round?
ADAM POSEN, PRESIDENT, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: I think this may be the tipping point, Richard. Thank you for having me back
to discuss further, because, as I wrote the foreign affairs in the fall, you can do what's called the Batman theory, foreign policy or trade policy
and threaten things, but at some point you have to make good on your threats to be credible.
And there was a lot of chatter about whether or not would actually make good on this tariff, which was this just negotiated position. And even as a
negotiating position, you still have to do so. I think though, people should recognize that if these tariffs are sustained in Canada and Mexico
and compounded by the tariffs that steal (INAUDIBLE) which particularly affect Canada. We are essentially taking our peaceful, fully integrated,
legally protected by USMCA, military ally, Canada, and making everything more expensive for them (INAUDIBLE)
And it's just a very disruptive policy. For this reason, I think people expect that Canada and Mexico will capitulate some sense of trauma. These
tariffs won't last, but I'm worried that this will set the precedent for other countries and other industries.
QUEST: It is difficult to see, though, how anybody can respond to these tariffs, particularly in the kinds of Mexico cases, they were fentanyl and
migrant related. There's no way, in this short period of time there could have been a dramatic change in the situation that would -- that would take
these tariffs off. So, they're coming, and I don't really know, for example, I'm here in Berlin tonight. One assumes Europe's next, somewhere
down the road.
POSEN: I have two responses. The first thing is, you're right about the adjustments, Richard. Mexico already, quietly, with the Biden
administration the last six months, did a lot to stem migrants coming to the U.S. border. I mean, already the flows were down by hundreds of
thousands. And so now they're just publicly claiming that the fentanyl, it's ridiculous, as it's always been in the U.S. to say it's all a question
of supply, whereas it's an issue of our domestic pharmaceutical industry, Artemis, medical industry, domestic consulting industry that creates the
demand.
It's also demand is there somebody will try to supply it. But I think the thing about Europe being next is actually really important, unlike Canada
or Mexico, Europe doesn't get to fold in a visible way and they are in locked into things as your segment from the hotel Adlon (INAUDIBLE) says
this is a turning point.
QUEST: Right. Adam, if the goal here is to fundamentally change the terms of trade for the United States, eventually the tariffs will work. I mean,
we know that they will shift, but companies can't build new factories in matters of weeks or months. And so, I just wonder how long you think it
will take for those terms of trade to child to alter.
POSEN: I want to push back the characterization. It eventually will work Richard, because there are things like mining rare earths or reducing
pharmaceutical generics as opposed to innovating cynicals which are just completely cost and effective to do inside the U.S. And so, if it works to
force production of these kinds of low-end things in the U.S., it will impoverish people in the U.S. So, it can work. And then, but not legally.
QUEST: We have a long way to go with this, sir and you and I will talk many more times and I'm always grateful that you give us the time and attention
to speak to us. Adam Rosen joining us from Washington tonight.
Donald Trump is revealing new details about his proposed strategic crypto currency reserve.
[16:45:02]
Posting on Truth Social, if the reserve will include Bitcoin, Ethereum, XRP Cardano and Solana, all five spiked on the announcement and have since
retreated. He started the process of creating a reserve back in January when he proposed potentially using seized assets. Allison Morrow is in New
York. Alison, do you understand how this is actually going to work, because I don't?
ALLISON MORROW, CNN BUSINESS SENIOR WRITER: You're in great company, Richard. I don't understand it, and much of the crypto industry doesn't
seem to understand it either, which is part of the reason you saw a lot of pro crypto, even some pro Trump people, speaking out today saying this is a
bad idea, and we need More details. That initial spike that we saw in those crypto assets has fully come back to Earth.
And, you know, this was just one social media post that the President is so is so fond of, and we just don't have details.
QUEST: The -- look it's taken -- I mean, crypto is whether or not it's an asset is still being debated. Whether or not it is a reserve currency, most
people saying not, a store of value potentially but highly volatile. So, what is the end game by including it as a part of the reserve?
MORROW: Well, I think a lot of critics have been pointing out on social media that there are clear conflicts of interest here. The inclusion of the
three tokens that people haven't really heard of, the ones that aren't Bitcoin or Ethereum, is a very strange choice, and it really surprised the
industry. So, there are existing holders of those tokens who would naturally stand to benefit from their sudden price increase and from their
inclusion in the reserve.
But ultimately, critics are saying this is just a way for existing holders to juice their holdings. And the White House has not responded to our
requests for comment on that.
QUEST: Yes. Well, bearing in mind, Cardano is down 23 percent, Solana's down 20 percent. Clearly, whatever strategy was behind it hasn't been
terribly successful. Excellent writing, as always, Allison. I look forward to reading your commentaries and your articles on that. Thank you for
joining us tonight.
QUEST MEANS BUSINESS. It's a bit chilly tonight. Beautiful day. Absolutely spectacular day here in Berlin during the day and tonight. I'm freezing the
bits off. QUEST MEANS BUSINESS live from Berlin.
(COMMERCIAL BREAK)
[16:50:42]
QUEST: Donald Trump says he'll impose 25 percent tariffs on Mexico and Canada. It'll happen on Tuesday. Canada's bracing for what's coming its
way. Paula Newton is in Ottawa. They hope they got away with it. They thought they might have done they clearly haven't. What's the reaction in
Canada this evening?
PAULA NEWTON, CNN INTERNATIONAL ANCHOR: The reaction, as I've been telling you for weeks, Richard, is that they say they are ready and prepared. Now
look, this is not a fight that Canada wanted and it will clearly hurt its economy, at least in the short term. And when I say short term, Richard, I
mean months or years. The problem is this is much closer to a seismic shift even in the way economies have behaved.
Those economies of allies, and Canada is at the pointy end here, Richard, when we're talking about a 25 percent tariff, Canada says it will retaliate
with, eventually, in the next few weeks, $155 billion in retaliation of its own. We're waiting to see what that list is, but they say it will be
targeted towards, certainly, imports into Canada from mostly Republican states. At issue here, though, is the fact that this is war on.
It's a trade war, Richard. It is now, if they go through with this at midnight, as the White House is indicating we have now in the midst of a
trade war between allies.
QUEST: And I think you just summed it up. We have vacillated, we've obfuscated, we've danced around this for so long, Paula, but you're right,
this is a trade war, and it gets underway tomorrow between the North Americans. By the way, let's forget about the USMCA, which is supposedly
supposed to prevent this sort of thing. Is anybody even talking about that anymore?
NEWTON: You know, at issue here, Richard is the fact that the President is tearing up a trade agreement that he negotiated and signed in 2020. It
doesn't matter at all, Richard, whether you're Canada or Mexico, you know that if you try and go to arbitration on that if you win, it will be years
and is it enforceable, likely not. What they were trying to do is prove that they had had some kind of action at the border.
As your previous guest says, yes, Canada is trying, the Mexico is trying, but it was never going to do what Trump wanted it to do. Many people here
in Canada believe it really was just masking an overall trade war that the President was intent on starting.
QUEST: Paula, grateful you've got your busy day 24 hours ahead. We'll talk to you tomorrow night. I have little doubt.
U.S. stocks finished the day sharply down and we can tie it all to the President's announcement on tariffs. The S&P 500 was off just under two
percent. The worst day since December, and it's now negative for the year. All three of the indices are lower since President Trump came into office
and the inauguration. Paul R. Monica, Guru La Monica is with me. Senior markets analysis writer. Oh, I mean, how much -- this is sort of Jenga,
isn't it? This is classic Jenga, with the markets that just pulls one bit out, pull the next bit out and eventually see what happens.
PAUL R. LA MONICA, SENIOR MARKETS ANALYSIS WRITER, BARRON'S: Yes. I think, you know, obviously the animal spirits that everyone was hoping for, yes,
there's an animal spirit on Wall Street. It's a bear, Richard, because investors are very worried about these tariffs and that's why you saw this
massive sell off in the stock market. And a flight to safety dividend payers. You look at the Dow, Verizon, Coke, J&J, P&G, those were some of
your few winners.
That's not the type of market we've been accustomed to, where the banks and big tech have been leading the way. So, I think investors are very, very
nervous, and rightfully so, because it doesn't look like President Trump is blinking in this potential trade war.
QUEST: OK. So, let's be more optimistic here. If the President, if the administration of Washington did an about face or sold the tariffs and said
we're not going to do that, we're going to do -- would the market rally back up again or is there uncertainty? Because, as Mohamed El-Erian said on
this program at the beginning, the worry now is stagflation.
[16:55:12]
LA MONICA: Yes. I think investors have every right to be concerned that inflation pressures may creep higher again, particularly because of
tariffs. And then if you have some of the recent jobs numbers, which have been, you know, not awful but not as great as they were a few months ago.
That does raise some concerns about stagnant growth, obviously, the stag part, and inflation roaring back and that would be something that would be
a nightmare for the Fed.
It's very difficult for central bankers to deal with stagflation. I think, though that Richard that the hope is that, yes, once again, maybe Trump
comes to a deal with Canada and Mexico, similar to a few weeks ago but there's still China and then there's still the threat of potential tariffs
on the European Union down the road, that would also be very problematic, to put it mildly.
QUEST: Briefly, Paul, at the end of the day, what we are seeing in the market is not irrational. It makes perfect sense, the way I look at it. The
uncertainty that investors dread is being heaped on in spades and so, we can honestly say there is rationality to what we are experiencing.
LA MONICA: Oh, I agree with you. 100 percent valuations are still rich. We're not that far from all-time highs. Yes, the market has been excited
about the hopes for tax cuts and deregulation and other "good economic policies" from, you know, the President, the Republican Congress, but all
we've been getting are talk of tariffs and none of the stuff that made people so excited shortly after the election results last November.
QUEST: I'm grateful to you, sir. Guru La Monica, as always. Thank you.
And tomorrow night, we'll be live again in Berlin. I'll be attending the ITP Convention, the tourism, one of the largest in the world's conventions
here in Berlin. I'll be speaking to the three main contenders who want to lead the World Tourism Organization, the U.N. WTO or now, as it's called
U.N. tourism as well as tourism ministers from Thailand and Indonesia, all of that on tomorrow night's QUEST MEANS BUSINESS. We will have a profitable
moment after the break. Good evening from Berlin.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. It is a treat and a delight to be here in Berlin on a cold evening, but a gorgeous day. Unfortunately, the same
can't be said about the economics of the world at the moment. Tariffs are coming, and they're coming sooner rather than later. We now know that
Canada and Mexico will get walloped tomorrow. The threat must be against Europe, and who else knows?
It's not surprising, then, in this environment, that the markets are so uncertain. The one thing I've been told banging on about for years, markets
want certainty, and as Mohamed El-Erian said, the crucial thing if you're an investor at the moment is don't make an irrecoverable mistake. Don't do
something that you're going to regret, but how not to do that when there's so much fright and worry in the world and in the investment world at the
moment?
That's why calm minds, calm decisions and sometimes just sit on your hands and wait for things to get a little bit better.
[17:00:02]
When that'll be? I just can't tell you tonight. But I can tell you, that's QUEST MEANS BUSINESS for this Monday night. I'm Richard Quest in Berlin.
Whatever you're up to in the hours ahead, I hope it's profitable. We'll be back in Berlin tomorrow.
END
