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Quest Means Business
China, Canada Retaliate After Trump Enacts Sweeping Tariffs; Iowa Farmer: We're Not Going To Have Any Fun With Tariffs; Trump Pauses Military Aid To Ukraine; U.S. Businesses, Consumers Brace For Impact Of Tariffs; Wall Street Closing Lower Amid Escalating Trade Tensions; Thailand Sees Tourism Growth. Aired 4-5p ET
Aired March 04, 2025 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:10]
RICHARD QUEST, CNN INTERNATIONAL HOST: Closing bell ringing on Wall Street and not a moment too soon for investors.
If you look at the Dow, you will see just what a dreadful sort of moment it has been. The market -- oh, let's have the gavel first and then I will tell
you. Yes. There we go.
The market was down sharply. It rallied back up again and about half an hour ago, for some inexplicable reason, it just literally turned turtle and
we are now almost at the low point of the day, down one-and-a-half percent. We will get to the reasons why in just a moment.
The market and the main events of the day: Let the trade war begin. Canada, Mexico and China vowing to fight back after Donald Trump unleashes tariffs.
BlackRock agrees to buy the two ports on either end of the Panama Canal. It ends a situation that irked the White House..
And here in Berlin, where ITP is underway, tourism back at pre-pandemic levels. Now is the time to buckle down and prepare for the industry for the
future.
Again tonight, we are live in Berlin. It is Tuesday. It is March the 4th. I am Richard Quest and in the German capital, as elsewhere, of course, I mean
business.
Good evening.
We begin tonight with the targets of Donald Trump's tariffs retaliating as the U.S. President has launched his trade war against some of America's
closest allies and trading partners.
Canada says it is imposing 25 percent tariffs on $155 billion worth -- Canadian dollars' worth of American goods. Mexico says it will respond in
kind. China is announcing up to 15 percent tariffs on U.S. agricultural products.
The leaders of Canada and Mexico have spoken. They both sharply reject the basis for the American tariffs.
(BEGIN VIDEO CLIP)
CLAUDIA SHEINBAUM, MEXICAN PRESIDENT (through translator): On the night of March 3rd, last night, the White House published an offensive and
defamatory statement without substance about the Mexican government that we categorically deny and condemn.
JUSTIN TRUDEAU, CANADIAN PRIME MINISTER: Let me be crystal clear, there is absolutely no justification or need whatsoever for these tariffs today.
(END VIDEO CLIP)
QUEST: Donald Trump is not backing down. He is threatening to increase the reciprocal tariffs on Canada, and he is expected to lean into tariffs
during his address to Congress, which takes place in just a few hours from now.
Our comprehensive coverage: Kevin Liptak is in Washington at the White House; Paula Newton is in the Canadian capital, Ottawa; and Gabriela Frias
is in Mexico City.
Kevin, you're going to take a back seat for a second. I just want to get a brief round view.
Paula Newton first, then Gabriela off the back. Just how angry are Canadians and Mexicans?
Paula, first.
PAULA NEWTON, CNN INTERNATIONAL HOST AND CORRESPONDENT: Mad as hell seems to cover it, Richard. I mean, the Canadian Prime Minister pretty much spoke
for the vast majority of Canadians that do not understand why President Trump would begin this trade war with an ally, which they say the
Canadian's claim with someone -- a country that he has a fairly balanced picture of trade if you take out energy.
And the point is that Justin Trudeau did everything but call Donald Trump a liar in speaking today and saying that, look, this issue of fentanyl, when
it comes to the northern border, because Donald Trump has made this a National Security issue, saying that the reason he started this trade war
was because of fentanyl.
Well, Richard, I could carry the fentanyl seized at the northern border in 2024, in my own two hands. It is not a lot. Having said that, Canada has
come forward with a border security plan almost $1 billion. It has mattered nothing to Donald Trump.
Right now, Canada retaliating, but also saying that it will do more if it must.
QUEST: Gabriela, Mexico's view.
GABRIELA FRIAS, CNN ESPANOL ANCHOR: Richard, President Sheinbaum has kept and asked everybody to keep calm and just pretty much carry on like some
English people would say.
[16:05:07]
But President Sheinbaum this morning did take offense with the White House statement on tariffs against Mexico and Canada. It is a three-page
document, but it reads Mexican drug trafficking organizations, the world's leading fentanyl traffickers, operate unhindered due to an intolerable
relationship with the government of Mexico, a statement President Sheinbaum described as offensive, defamatory and baseless about the government of
Mexico that we strongly deny and categorically condemn.
But she has said before that her government has a Plan A, a Plan B, a Plan C, and a Plan D to respond, although today, she announced that she will
announce the retaliatory measures on Sunday from Mexico City's main square, the Zocalo, and has convened her supporters exactly for that next Sunday.
QUEST: Kevin, I mean, let's not enmesh ourselves into the reasons why the President has started this trade war, but he seems ready to escalate it.
Now, Canada and Mexico have retaliated.
KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: Yes, he is promising that he will put his own retaliatory tariffs on to Canada. This is literally the
definition of a trade war. I think, it is fair to say that its well underway, but I don't think across Washington everyone is fully on board.
I am told Republicans on Capitol Hill have been on the phone to the White House all day today, trying to get a hold of the Chief-of-Staff Susie Wiles
trying to make the case that this is not necessarily good for the American economy, particularly from some of these states, which have a lot of
farmers in them.
You know, just yesterday the President told these farmers that they would be able to sell more of their products inside the United States.
He literally told them "have fun." That is not sitting well with a lot of them. You know, there isn't really a market, for example, for soybeans in
the United States. They sell most of those abroad.
And so you are starting to hear a huge amount of concern from some of those places in the American economy, those sectors who could be significantly
impacted by this.
QUEST: Paula, back to you.
I noticed one of the things Justin Trudeau said today was he found it extraordinary that the U.S. was doing this to closest allies whilst cozying
up to Russia and Putin, which he called a murderous dictator.
NEWTON: Yes, and he ended that line with "make sense of that."
The point here, Richard, is that as Justin Trudeau was just in Europe, he was at that Summit, in fact, in the U.K. with Keir Starmer, he is looking
to allies of Canada to say, look what the United States and Donald Trump is doing is much more serious than just the economic relationship.
He is saying that the United States very clearly is turning its back on its allies, both politically and economically. And we should note, Justin
Trudeau, essentially a lame duck Prime Minister. He is only going to be in office a few more days. He had nothing to lose, Richard, by being as blunt
as possible.
QUEST: And that Gabriela follows on into Mexico. I mean, I understand tonight, of course, that there have been complaints to the WTO, the World
Trade Organization, because there is this treaty known as the USMCA, the successor to NAFTA. Gabriela, it is just about being torn up and thrown in
the garbage.
FRIAS: Yes. Pretty much. People are wondering if that's exactly what we are going to hear, probably April the 2nd, or if we are not going to hear
anything like that, but we are going to see it happen, and that's the doubt that companies and analysts have.
Now, let's talk about what will happen so far. It depends of course, the big question is how long will this tariffs will stay in place. Moody's
Analytics says if tariffs are kept, the Mexican economy, which grew 1.4 percent last year, will take a plunge and will contract 0.8 percent.
Remember, Mexico is the largest trading partner. Over 80 percent of goods exported from Mexico going to the U.S. market. And also, let's remember,
Richard, there are other dates in the calendar, March 12th with steel and aluminum tariffs; but also lets talk about agricultural products, Mexico
and Canada as well are the largest supplier of agricultural products.
So this is only one day in the calendar. The tariff calendar or the threat to tariffs calendar.
QUEST: I get the point. I am going to say, thank you, Gabriela. Thank you, Paula.
Kevin, stay with me for the last question.
Kevin, why? Why?
I've heard Donald Trump say a thousand times after God, wife, country, et cetera, tariffs is the word he loves. But does he not realize that they are
unleashing a chaos on the global economy, the like of which we've not seen since the 1920s?
[16:10:13]
LIPTAK: Yes, well, if he doesn't realize it, he is about to find out, and certainly, the markets today were probably the best indicator for that to
the president, and obviously, he is someone who has looked to the market as a barometer for his own performance in office.
And so, you know, I think it has clearly been explained to the President how these tariffs will work, what the potential effect on the economy will
be. But I think the President views this from the point of view of a transactional businessman. He sees these tariffs as a way to bring these
other nations to the table, to try and reach some sort of grand deal, whether it is Canada or Mexico on the issue of migrants and fentanyl, but
probably more particularly China.
He is in pursuit of Xi Jinping to try and come back to the negotiating table to strike this grand trade deal that he wasn't necessarily able to
execute during his first term in office, and I think that is the perspective from which he is viewing all of this. It will be interesting to
hear how he explains this in his speech tonight.
In a lot of ways, this is a more complicated explanation than I think any politician wants to make to an American public who is facing high prices,
but it will be that task that he faces when he heads up to Capitol Hill.
QUEST: Kevin, I am grateful, as always. You lead me, grande elegante into our next part of this tale tonight.
Kevin Liptak at the White House, because China responded with tariffs on U.S. farm products, putting the state of Iowa in the crosshairs.
Now, Iowa is a magnificent state, absolutely. I've driven across it several times, and it is right in the heart of the U.S. Heartland.
The presidential race typically begins here, with candidates visiting ahead of the very famous Iowa Caucuses. Agriculture is the core of the economy.
Its top three exports are soybeans, corn, and various pork products.
Aaron Lehman is the President of the Iowa Farmers Union, fifth generation family farmer growing corn, soybeans, oats and hay, the very backbone of
U.S. agriculture joins me now.
I don't expect you to be able to make sense of these tariffs, but you're going to feel the effect as China et al retaliates with tariffs of their
own. You must be ready for that.
AARON LEHMAN, PRESIDENT, IOWA FARMERS UNION: Yes, and I can tell you, we are not going to have any fun. It is really putting farmers right in the
middle of a lot of harm.
QUEST: Do you have any reason why these tariffs, which everybody seemingly except the administration accepts are inflationary within the United States
and serve little purpose in the long run? What do you make of it, sir?
LEHMAN: Well, it -- you know, farmers rely on fair trade. You know, as you mentioned, you know, about a third of our main crops and farm products are
exported and retaliation against this is coming, and it is sure to come even more. It just means lower prices for farmers, and not only that, for
the products we buy, especially potash fertilizer, but others, it means higher prices for the inputs that we have to purchase to grow our crops.
So we are getting hurt on both sides of our bottom line.
QUEST: Do you fear that this could break some farms and they'll go out of business?
LEHMAN: Well, eventually it will. You know, it has both short term and long term impacts. You know, the short term is that all the improvements and
repairs and maintenance that farmers need to make, we are going to have to put those off and that hurts our farm manufacturers in Iowa.
We are probably going to see more layoffs from John Deere and our local manufacturers of machinery, because farmers simply don't have the money to
deal with the economic impact.
QUEST: Can we just widen it -- our discussion to another point here, and that is the various other aids, that financial aids that farmers receive,
either from the Department of Agriculture or contracts from USAID or all those various other financing that farmers were getting and when I say
preferential financing, you know what I mean, the various programs put in place.
Now, of course, they are not happening or they are happening too slowly. Farmers can't get the necessary guarantees that they've had before to buy
seed and the farming communities are hurting because of the speed with which these have taken place.
[16:15:09]
LEHMAN: Well, that's absolutely right. You know, this the time of year when we are preparing for the growing season. We are meeting with our farm
creditors, our bankers, our lenders to line up financing, and to be honest, all this uncertainty means is that we can't tell what we can rely on with
the partnerships that we have with the government for conservation programs, for improvements with our infrastructure. All of these hopes are
big question marks.
Contracts that farmers signed with the faith that they were going to have a good, reliable partner in the USDA, they feel like the rug is being pulled
out from under them. And so in the meantime, that means it is harder to line up financing for the coming year, to make plans for the coming year.
And in the long term, it really hurts our relationships overseas. Our trade relies on good relationships, and it is built up over time. Farmers invest
in building these relationships. It is farmers money that goes into building those relationships.
And if our trading partners overseas don't see us as reliable partners, that really makes it hard for us because they are going to go to somewhere
else in the world to buy their grain, buy their farm products.
QUEST: Sure You know, farming was never easy. The fact that it has become that much more difficult, I take my hat off to you, or I would if I was
wearing one. But I take my hat off to you, sir, for the good work that you do. Thank you for joining us.
We will check in with you as the year moves on, to see how things are going.
QUEST MEANS BUSINESS tonight from Berlin. You can just see the huge agenda that we are covering.
Ukraine's President Zelenskyy now extending the olive branch to Donald Trump. Now, will the U.S. President take it? We will talk about that when
we return.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Welcome back to Berlin.
President Zelenskyy is now asking for, in his words, respectful dialogue with the United States.
In a video message on Tuesday, he addressed his fiery Oval Office exchange with President Trump, which led, of course, to the U.S. President cutting
off U.S. military aid to Kyiv.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): What happened in the White House instead of our talks is regrettable, but we
need to find the strength to move on, to respect each other as we have always respected America, Europe, and all our partners, and to do
everything together to bring peace closer.
(END VIDEO CLIP)
[16:20:19]
QUEST: Jim Sciutto is with me.
Jim, if the White House and Rubio et al are looking for an apology, that wasn't it.
JIM SCIUTTO CNN ANCHOR AND CHIEF NATIONAL SECURITY CORRESPONDENT: I mean, who knows? In a way, right? It is almost impossible to know what will
satisfy this President in terms of words of regret or apology from the Ukrainian President, and it is a sliding scale, right, because or I should
say a moving target because until a few days ago, the requirement was only, though quite significantly, that Ukraine sign this deal to share its
minerals, right, with the U.S.
And by the way, with no guarantee attached to that of security against a further Russian invasion backed by the U.S. So, you know, it is almost a
parlor game to try to figure out what is going to satisfy, I suppose the proof will be, do they get back to signing that deal? And does Trump at
least say that I am willing to talk to the Ukrainian President.
But I will say, Richard, you know, when you think about how much President Trump has shifted America's relationship with Ukraine, it is dramatic,
right? It is dramatic where we are, and the other piece of that Oval Office encounter, beyond the tension between those two gentlemen, was Trump
repeating Russian talking points about how this war started, who is responsible, even going right back to Russian interference in the 2016
election.
I mean, that piece is not changing regardless of what Zelenskyy says.
QUEST: This idea that I am now starting to see written about that substantially, I mean, what Donald Trump wants is a greater alliance with
Russia, possibly, and probably to the detriment of NATO and western liberal elites or democracies.
Do you buy that? And particularly bearing in mind what Trudeau in Canada said today, you may have heard, you know, he says, make sense of the fact
that he is beating up allies, close allies, and he is cozying up to a murderous dictator like Putin. Square that circle for me, Jim.
SCIUTTO: Listen, I spoke to the Canadian Foreign Minister a short time ago. That interview will be on my show at six o'clock. I asked her, do you take
the 51st state talk seriously? And she said, yes, we do and she referred to it as an existential threat. That's a remarkable phraseology for a U.S.
treaty ally neighbor and its largest trading partner to use about the U.S. President, that they view it as an existential threat, that the U.S. will
try to somehow tank the Canadian economy to annex Canada.
So when you add up Trump's antagonizing of Canada, of Mexico, of Denmark over Greenland, of Panama over the Canal, he is signaling to Europe that
its security is largely its own right now and the way he parrots Putin's talking points, that adds up, at least in the view of several of his own
former senior advisers that I speak to, to an entirely new way of America addressing the planet, which is basically a 19th century spheres of
influence approach.
Russia, you have your patch; China you have yours, and we have ours in the Western Hemisphere. I mean, it is a remarkable turn from what had been
well, you know, the post-World War II order for 80 years.
QUEST: You and I need to explore that thought a little bit more in the future.
Michael Ignatieff was writing about it, the former liberal leader in Canada, exactly that point.
Jim, looking forward to the show this evening at six o'clock.
SCIUTTO: Thank you, sir.
QUEST: And we will be playing some of your interview a little later in QUEST MEANS BUSINESS.
SCIUTTO: Appreciate it.
QUEST: The investment firm, BlackRock is set to buy two major ports on the Panama Canal, Balboa and Cristobal sits at the either end of the waterway.
They have been run for years by C.K. Hutchinson, a company based in Hong Kong, become a major complaint for Donald Trump.
The President accused China of running the Canal, and he has been threatening, in his words, to take it back.
Patrick Oppmann is in Havana.
How did they put this deal together for BlackRock to take over? I mean, China was never running the Canal. These companies really had the contract
to operate at either ends of it, but is this going to satisfy the U.S., do you think?
PATRICK OPPMANN, CNN CORRESPONDENT: Well that is really the major question, but what a deal in $24 billion. And it is not just these two ports on
either end of the Panama Canal. We are talking about more than 40 ports, controlling interest in more than 40 ports around the world.
[16:25:07]
But of course, these are the two ports that Donald Trump has been fixated on for months repeatedly coming out with misinformation saying that C.K.
Hutchinson is run by the Chinese military and that the Canal of Panama is under Chinese military control when we are of course, talking about ports
on either side of the Canal that provide services to ships going in and out of the canal, that's certainly important, but that does not give them
control over the canal.
So does this provide a badly needed off ramp to Panama, which of course does not have a military, has been under increasing U.S. threats to push
out China and this would appear to do that, Richard.
Of course, you know, Donald Trump, what he was talking about is that the Canal would be American again, that U.S. ships would not have to pay, U.S.
military ships would not have to pay any tolls, which are not very significant, but something he has been really fixated on that they would
not have to pay to transit the Panama Canal.
So, it is not entirely what he said that he wanted, but it certainly would give the Trump administration a win in this case by pushing out a Hong Kong
company that Donald Trump claimed without any real proof is controlled by the Chinese military.
The issue, though, is Donald Trump, when it comes to Panama has been so unpredictable over the last several months that it really is a question
mark of whether or not this is enough, or does he go back and say that, no, that they need to have a reduction in tolls for U.S. ships, but a mega deal
that would certainly change the face of how the Panama Canal is run, and that at the end of the day, of course, is the point here.
Four percent of maritime traffic goes through the Canal, so this has really been an unwelcome distraction for shippers and of course, for the country
of Panama that really is holding its breath, hoping that this is the end of what has really been a disagreeable episode with the United States, which
still wields a lot of influence when it comes to the Panama Canal.
QUEST: Patrick Oppmann in Havana. Grateful, sir. Thank you.
QUEST MEANS BUSINESS from Berlin.
Coming up, President Trump has said Americans won't pay for tariffs. Some major U.S. companies are warning that's exactly what is going to happen.
Higher prices are on the way as a result of tariffs coming in.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:30:27]
QUEST: Hello, I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS tonight. In a moment we're going to talk about Target and Best Buy, the
companies that say they'll have to raise prices in the wake of the Trump tariffs. And half a decade after the pandemic, the travel industry is
finally well and truly on a firm footing with good numbers. I'll speak to the Thai tourism minister about the comeback.
We'll all -- we'll get to that and more only after the news headlines because this is CNN and on this network the news always comes first.
President Zelenskyy says his contentious Oval Office meeting with Donald Trump was, in his words, regrettable. He also says that Ukraine is ready to
negotiate a peace deal. The olive branch comes as after Mr. Trump ordered a pause on military aid to Ukraine.
Chaos has erupted inside Serbia's parliament on Tuesday after opposition lawmakers threw smoke grenades in protest against the government. Two
members of the ruling party were hurt. One suffered a stroke. Serbia's political crisis was triggered by the deadly collapse of a train station
canopy that took place back in November.
Arab leaders have adopted Egypt's plan for the reconstruction of Gaza. The proposal excludes Hamas from a post-war government. Instead, the enclave
would be run by an independent Palestinian committee for six months, and after that, the Palestinian Authority would take over. It's an alternative
to President Trump's call to redevelop Gaza as, as he put it, a Middle East riviera.
The Canadian Prime Minister Justin Trudeau is calling the U.S. tariffs on its neighbors that went into effect very dumb. Justin Trudeau announced
retaliatory tariffs against the United States, while Mexican President Claudia Sheinbaum says she'll unveil tariffs over the weekend.
The new trade wars posing a real threat to not only the U.S. economy but others as well. To understand why, let's look at how tariffs work. The so-
called tariffs 101. It starts when goods are produced abroad that are shipped to the United States. When those goods arrive the importer, it is
the importer that pays the tariffs. It's up to them whether they eat that as part of the margin, the cost, or pass it on to the ultimate consumer.
President Trump is hoping exporters cut their prices to stay competitive in the U.S. market. U.S. shoppers will hit, will feel the hit. The CEO of
Target says his company could raise prices this week. Other firms are now being hit with retaliatory tariffs, too.
Myron Brilliant is a senior counselor at TJ Albright Stonebridge Group. Before that, he was executive vice president of the U.S. Chamber of
Commerce, joins me now.
Who do you think is going to bear the brunt? Will it be the exporter lowering prices? The importer paying the tariff and eating the margin, or
the consumer having the whole lot passed on to them, or a combination of all three?
MYRON BRILLIANT, SENIOR COUNSELOR, ALBRIGHT STONEBRIDGE GROUP: Richard, it's great to be on. There's a lot of confusion, chaos and concern today.
I'd say a little bit of all. Certainly the American consumer will see price increases, whether it's dealing with autos and auto parts that come into
this country at higher prices, whether we see it with avocados that I like to eat. We're passed the Super Bowl but those are staples in American
economy, whether it's electronics because of the increase in tariffs on China.
Look, there's going to be a profound impact in the American marketplace. And you're right, I think retailers are going to increase prices. It's
going to be through the supply chain. It's going to hurt businesses that are exporting overseas that are facing increasing retaliatory actions.
QUEST: Right.
BRILLIANT: So, look, at the end of the day, importers will have to pass on some of the costs to the American consumers. And if I'm President Trump, I
worry about three things.
[16:35:02]
I worry about market volatility. I worry about the consumer and public opinion, and I worry about business investment.
QUEST: All right. Let me -- on those three points, the market has already given its view. I mean, if we look at the way the Dow traded today, it was
down. It then had a sort of a rather half-hearted rally back up again. And then this dramatic fall off in the last hour of trade. And we can expect
more of this volatility, if for no other reason than why would it rise when there's such uncertainty?
BRILLIANT: Well, I think there is going to be market volatility as long as the president and the Trump administration moves forward with more tariffs.
Right? We still have other plays or other acts to follow. Right? We've got increasing pressure on steel and aluminum prices. We're going to see it on
copper. We're going to see probably tariffs potentially imposed upon the Europeans with the final act has not been drawn on China.
There's a lot of uncertainty in the market. Some of that is baked into the prices that you see in the market today. But some of that is still to be
determined. And again, what's the end game here? Is it to use tariffs as a negotiating tool for short-term gains, whether it's the border security,
curbing fentanyl exports into the United States? Or is there a secondary purpose which is to deal with unfair trade practices or purpose, which is
to attract revenue to offset our budget deficit?
So we still don't know what the plan is. We know aspects of it. And that's part of the challenge for the economy.
QUEST: We'll watch. We'll have more tariffs and we'll talk to you to understand them. Thank you, sir.
It's been a rocky start to the week. We've just been talking about in terms of the U.S. markets, the major indices are all closing down. We'll dissect
it in just a moment. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:40:09]
QUEST: Welcome back. Canada is fighting back after Donald Trump launched his trade war against his -- U.S. trading partner. The Prime Minister
Justin Trudeau said his country would have preferred to work with the United States. Launching a trade war was, in his words, a very dumb thing
to do. Canada's foreign minister spoke to Jim Sciutto and explained how the country is responding.
(BEGIN VIDEO CLIP)
MELANIE JOLY, CANADIAN FOREIGN MINISTER: We will be united and we will fight back and we will win. And that's why today we announced $155 billion
worth of tariffs against American merchandise coming to Canada. We're targeting products from the U.S. that are linked to our friends within the
Republican Party that can make pressure to the Trump administration. And we don't want to do this. We want this to be over. But at the same time, we
are under an existential threat.
(END VIDEO CLIP)
QUEST: Now you can see the rest of that interview at 6:00 Eastern Time on CNN NEWSROOM with Jim Sciutto. That's in an hour and 20 or so.
The trade war has caused a roller coaster in the stock market, as we have talked about over the last few days. Down for a second day. It attempted to
pare the losses, but simply couldn't in the weight against it of tariffs. So now the Dow has shed more than 1300 points in the last two days. The
sentiment shifted sharply last month. The Trump bump following the inauguration disappeared.
I asked Mohamed El-Erian yesterday how investors should approach investing in this market.
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, ADVISER, ALLIANZ: So investors have to be very honest with themselves. What is the recoverable mistake? What's 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's recoverable, what's unrecoverable and what's recoverable, just wait because this will pass.
What's unrecoverable, you should be careful not to lose the money you absolutely need.
(END VIDEO CLIP)
QUEST: Art Hogan is with me, chief market strategist at B. Riley FBR. Art is going to make some sense of it all.
The recoverable versus the irrecoverable. I understand as we know what Mohamed is talking about, but it's very difficult to do because you're
sitting, watching -- you're sitting and watching gains disappear in the market. You don't want to sell. And if you will lock in a loss or a taxable
event. But the level of uncertainty is just everywhere.
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY FBR: It certainly is, Richard. I think Mohamed made a great point about grocery money. The problem is that
basket of money has to get larger as the price of groceries gets larger. I think one of the things you have to think about in this market and what's
really been moving us around is that we came into this this year thinking that this new administration would be pro-growth and pro-business.
But unfortunately, they unleashed all the negative parts of what they'd like to get accomplished first. So there's no tax cuts. There's no, you
know, cuts in regulation. It's just the immigration and tariff piece. And a lot of folks that look at this market were saying, well, let's go back to
'18 and see how that played out. And the problem with that analysis, Richard, is that we, in 2018, we had just done a corporate tax cut, the Tax
Cut and Jobs Act was in 2017.
So corporations had a lower tax rate. At the same time inflation was below 2 percent. So we had a buffer for the inflationary impacts of tariffs. At
the end of the day, those tariffs were largely against China and not on consumer goods. What's being proposed right now is the opposite of that. In
a place where we already have high inflation, we've got the problem with even higher inflation with tariffs.
QUEST: And those tariffs, I mean, compared to '17, '18, '19, which were very specifically targeted on certain countries and certain products. But
this is general. It's across the board. And it seems to me that the president is wanton and determined regardless of what comes back. He wants
to -- it seems to me he wants to prove the point on tariffs. And in that case, I don't know how the market withstands that sort of pressure.
HOGAN: Yes, I think that's true. And I think that, you know, the explanation or the goalposts continue to be moved, whether it's immigration
and fentanyl as being one thing, whether it's, you know, unequal trade balance or reciprocal tariffs, that's another. Or is this a potential
revenue generation, which, you know, doesn't have a lot of economic sense to it?
[16:45:02]
So at the end of the day, you know, unless and until we know what those goalposts are and what the end game is, there's going to be a great deal of
uncertainty that has manifested itself and uncertainty around consumers, uncertainty around corporate leadership and certainly uncertainty around
investment. And I think that's why we've frozen up in this market. And we've been on a downward trajectory for about a month, wiping out, as you
mentioned, all of the gains we saw post-election.
QUEST: All right. Good to see you, sir. Art Hogan joining me.
HOGAN: Great to be here. Thank you.
QUEST: You know, the one thing I know, Art, is you and I are going to talk many more times on all these issues, and we're always grateful that you
give us the time.
We're live tonight in Berlin. ITB is the big conference that takes place here. Travel is officially back to pre-pandemic levels in many countries.
We're going to be talking to the tourism leaders, and we'll be talking to a man who wants to be the next president of the Seychelles. Joining me us
Alain St Ange, will be with us after the break. So much to talk about with tourism.
QUEST MEANS BUSINESS in Berlin tonight.
(COMMERCIAL BREAK)
QUEST: Tourism is back to pre-pandemic levels, according to the latest numbers from IPK International. Outbound travel grew 30 percent year on
year. Asia saw the best growth in many ways and higher prices didn't weigh on travel demand. Excuse me. No better to talk about all of this than here
in Berlin, the home of ITB.
I spent the day at the world's leading travel show along with tourism leaders from around the world. One such leader is the former tourism
minister from the Seychelles, Alain St Ange. He now runs a tourism consultancy business and is making a run for the presidency in the
Seychelles. Alain is with me now.
Good evening to you, sir.
ALAIN ST ANGE, FORMER SEYCHELLES MINISTER OF TOURISM, CIVIL AVIATION, PORTS AND MARINE: Good evening.
QUEST: Thank you for joining us today. So as we look at what's happening in tourism there is -- we know that the pent-up demand is back. People want to
travel. They love to travel. But the industry still is facing overtourism, angry residents and a whole raft of problems.
ST ANGE: I think yes, we are ready for tourism. This is clear. The world wants it, the traveler wants it. But I think there is a dilemma that the
world is facing today. One is we have the pricing of airlines, which is today a major, a major issue for the world. But also we must realize that
tourism is an industry. It's not just an activity. And when we realize that, then we embrace it and make it work.
[16:50:06]
QUEST: One of the big problems, of course, that we have is that tourism, the U.N. secretary generalship is coming up for grabs this year. Zurab is
standing for a third term arguably against the rules. And there are several other candidates. Where is -- what are people saying in the industry about
what's happening with the UNWTO?
ST ANGE: I think if today the secretary-general of the U.N. decided to run for a third term, everybody will cry foul because it is not acceptable.
Zurab is a classic case when you don't have somebody from the industry that made it to this office. I remember well that election, I was part of it,
and we have to accept the post of SG of the UNWTO, U.N. tourism today is the highest office of a minister of tourism.
QUEST: So how contested is this battle going to be? And by the way, let me tell you, you'll be hearing from the two other leading candidates as well
as Zurab over the next few days as we put this into context.
ST ANGE: I think it will be a very contested election. I support fully Gloria.
QUEST: This is Gloria Guevara, the former minister from Mexico.
ST ANGE: And we had chatted during the last elections, and she's partnered with an African tourism personality, Mohamed Faisal. So it is a perfect
team for tourism this year.
QUEST: Why do you want to be president of the Seychelles? I mean, there's no reason why you shouldn't want to be. You're very well-known name there,
but why do you want to be the president?
ST ANGE: You know, when you were in Seychelles after the last elections, you made one declaration. Too much power in the hands of one person will
cause an issue. And today, what we have is a president that also controls the parliament. And that is the issue that we are facing, which is why a
group of us have come and placed ourselves in the middle to try and say, let's have this oversight, let's -- the parliament be able to be the
oversight of the presidency.
QUEST: What's your chances?
ST ANGE: I think everybody cannot rely on the 2020 elections. The craze of the last elections was we must have change, and change has come to the
country. Today everybody is looking the way forward. What is better for the country? And we will know on the 27th of September.
QUEST: But you see, the interesting thing about the -- I mean, I've been very fortunate over the last two years. I've visited the three famous
islands, the Seychelles, Mauritius and the Maldives. And in some shape or form, you're all pretty much selling a paradise dream with different areas.
But the Seychelles is probably the biggest.
ST ANGE: Seychelles is the real dream. I think --
QUEST: Oh. You've just ignited a fury.
ST ANGE: It is something we have to accept.
QUEST: Right.
ST ANGE: We are smaller than Mauritius.
QUEST: Yes.
ST ANGE: We have the Maldives same culture, except our diversity is greater than Mauritius. But we all promoting sun, sea and sand to the maximum.
QUEST: Sun, sea and sand. Good to see you, sir, and good luck with your presidential bid. I'm very grateful to you. Thank you very much. Alain St
Ange joining me.
Still at ITB and Thailand says it's focusing on India as its top new market for tourism. I spoke to the Thai tourism minister and asked him how his
country is addressing the really serious problem of overtourism.
(BEGIN VIDEO CLIP)
SORAWONG THIENTHONG, THAI MINISTER OF TOURISM AND SPORTS: We try to expand other tourism destination to the second tier, third tier province and what
we try to do is connect them with the main destination, with more convenient transportation and the logistics.
QUEST: Where is the growth for Thailand?
THIENTHONG: As more people come.
QUEST: Yes.
THIENTHONG: More spend.
QUEST: Yes.
THIENTHONG: Longer stays. That's what we try to do.
QUEST: Do you want to grow Thai tourism for people going to slash live work? Do you want people -- you know, obviously medical tourism, all these
things. Are these areas you want to grow?
THIENTHONG: Yes. It's a big market actually. It's a big market. Our wellness tourism. Even the -- what you say, the medical. If you are in a
part of the world, the medical is not that feasible for you.
QUEST: So finally, I know you don't play the numbers game anymore, but what do you expect the numbers will be in 2012?
THIENTHONG: Well, we try to reach the number before the pandemic. 39 million. We hit 36 last year. We tried 39 this year, but we also concerned
about the spending, which the prime minister have given us the number that we have to try to reach at 3.5 trillion baht this year.
[16:55:06]
QUEST: And what does that mean in terms of number of days stay or the amount spent?
THIENTHONG: Well, it depends on what market you're looking for. India is the new market for us.
QUEST: Really?
THIENTHONG: Yes. We hit two million, 2.1 million last year, and we're aiming for more India this year. They come and they spend a lot. They host
their wedding in Phuket, in Samui. And a lot of high spending.
QUEST: What's the number one nation?
THIENTHONG: Still China.
(END VIDEO CLIP)
QUEST: That's Thailand's tourism minister. Some of you have been commenting when you've seen the wider shot at these rather nice, they're not biscuits,
they're chocolates on the Adlon Hotel. I don't know why they decided to -- we're outside the Adlon just by the Brandenburg gate. And these are some
rather tasty chocolates, which I don't move them sharply enough. The cameraman will eat them all, and the producer will finish off the rest.
The markets have been down very sharply. That much you've seen already. But we will take a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." From the day I started as a wing- nipper (PH) financial reporter, it's -- by the way, it's about 40 years ago. I was always taught tariffs are a bad thing. Well, we had the GATT, we
had the World Trade Organization. We had the failure of the Uruguay round. But always the message was tariffs are bad unless they are targeted and
they have a specific purpose to level out trade.
And that's been the rubric for decades. Now of course tariffs are the norm or they seem to be and we are in the middle of a full throttle trade war.
There's no getting around it. We can't obfuscate the facts. We're in a trade war. The United States has launched this against Canada, Mexico and
China. And we probably will find the E.U., arguably the U.K. Who knows if Australia, Uncle Tom Cobley and all any other country?
It's arguably whether of course Russia will also be part of this at some stage. Or is the whole purpose to try and cozy up as close as you can to
Russia? It doesn't really matter. The fundamental fact is tonight we can say, without fear of contradiction, that the global trading system is at
war and there is no obvious way that anybody is going to get out of it any time soon. Remember the old rule, tariffs are quick to put on, very slow to
take off.
And that QUEST MEANS BUSINESS for this Tuesday night. I'm Richard Quest in Berlin. Whatever you're up to in the hours ahead, I hope it's profitable.
END
