Return to Transcripts main page
Quest Means Business
U.S. Markets Plunge Again As Trade War Escalates; Vietnam And Cambodia Seek Negotiations With U.S.; Toy Manufacturers Warn Price To Rise 30 Percent; U.S. Markets Plunge Again As Trade War Escalates; Supreme Court Allows Donald Trump To Freeze Teacher Training Grants; A Brief History Of Tariffs In The United States. Aired 4-5p ET
Aired April 04, 2025 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
RICHARD QUEST, CNN INTERNATIONAL HOST: Closing bell ringing on Wall Street. Safe Bulkers, I think we're okay with them. Safe Bulkers ringing the
closing bell, I bet they are not that delighted to be doing it, particularly today.
The market is in a terrible mess. The Dow Jones is off at the worst point of the session down 5.5 percent. I will show you the triple stack in a
moment. Where the -- oh, there you are. Thank you.
The NASDAQ is off 5.8, the S&P is down 5.6 percent between friends. Let's see the gavel. Let's see the gavel. Go on. Put us out -- one, two, three.
Yes, it is appropriate from Safe Bulkers. Safe Bulkers. Anyway, never mind.
Those are the markets, horrible day. These are the main events, and they're not much better.
China strikes back. Beijing is matching trumps tariff rates with a 34 percent tit-for-tat charge.
The Fed Chair, Jerome Powell, is warning the new trade policy will stoke inflation.
And brace for higher prices on the morning latte. Colombia's coffee industry ready for tariffs and they'll pass it on.
Live from New York, Friday, April the 4th. We are at the end of the week, and not a moment too soon, if you ask me.
I'm Richard Quest and I mean business.
Good evening.
On Friday, investors ran for cover as the retaliation against the U.S. tariffs began. The Dow Jones sold off, it is the second day in a row, off
more than 2,000 points. You can see the number, and that is, I believe in, and as Jake corrects me, that is the lowest point of the day. Its fallen
more than 14 percent from its recent highs only a few weeks ago. Correction not bear.
The S&P has fallen six percent and the NASDAQ has officially entered a bear market, trading more than 20 percent lower than its record close back in
December.
Today's selloff obviously continued from the tariffs, but it was the China retaliatory move that really just kept everybody down. Beijing says a 34
percent levy on the U.S. imports will kick in on April 10th, it matches tit-for-tat those that Trump has put on.
And if you want evidence that there is going to be wide economic implications in the United States, we got it today.
The Federal Reserve Chair, Jerome Powell, warned us of higher inflation as a result of Trump's tariffs, and the Fed Chair said the tariffs would cause
a slowdown in growth.
(BEGIN VIDEO CLIP)
JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: Looking ahead, higher tariffs will be working their way through our economy and are likely to raise
inflation in coming quarters.
While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected, and the same is
likely to be true of the economic effects, which will include higher inflation and slower growth.
The size and duration of these effects remains uncertain.
(END VIDEO CLIP)
QUEST: Rana is with me on a Friday. Rana, good to see you. Thank you.
When I listen to Jerome Powell, I almost can see sort of "The Simpsons" duh. Tell me something I don't realize or know, but it is important because
it is the official stamp that this is where this is going. There can be no doubt now Jerome Powell has told us.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: A hundred percent, and you know as well as I do, Richard, that the way that he spoke those words, even
though he sounded calm, I mean, that's as tough as it gets in Fed speak. Tariffs larger than expected, things very uncertain. It means buckle in,
this is bad.
And, you know, I am worried, frankly, this puts Jerome Powell in a bit of a pickle because he may be forced to raise interest rates if inflation starts
to bite at a time when the dollar and the markets are down, that's going to put him in a very hot political seat.
QUEST: Does it matter? And I am never quite sure where inflation is concerned where we can see the cause of the inflation? In other words, it
is not systemic. It is as a result of an exogenous event.
Is that a sort of less likely to try and cure it in a sense? Because I suppose then you're looking to see whether it is feeding into the economic
cycle of higher wages, et cetera, et cetera.
FOROOHAR: You're spot on and I love the way you're thinking. I am not sure that the Fed is completely on board with that way of looking at things yet.
I think it is the way of the future, to be quite honest. But I think it is going to be tough if we start to see inflation numbers going off.
You know, I hope they parse it and I hope they take into effect the idea that, you know, this could change radically tomorrow, next week. We don't
know.
It is going to be an incredibly dicey time to be making policy right now.
QUEST: Anna Stewart, in a moment is going to tell us all about Colombia -- sorry, Cambodia and Vietnam and all of these places where they are
negotiating, but let's just assume they do negotiate these individual bilateral tariffs away.
[16:05:10]
I am not sure I think that makes much of a difference, "A" in terms of U.S. exports, they're very minor, "B" it doesn't deal with the bilateral non-
tariff barriers, and "C" isn't the damage already done?
FOROOHAR: Well, the damage is indeed done --
QUEST: It could be your broker. It could be your broker.
FOROOHAR: Oh sorry. Let me start again, the damage is indeed done in terms of trust. I mean, who is going to look at this President and make any kind
of a deal that they believe can be lasting?
You know, the market is sort of lurching. You're seeing certain retail stocks go up on the idea that, well, maybe Vietnam tariffs will go down.
But I mean, that's momentary stuff. That is you know, very, very knee jerk kind of almost wishful desperate thinking.
I am very worried about what comes next because I just -- if I were a trading partner, I would not trust anything this President says.
QUEST: That phone call you've just got sent to voicemail. That could have been your broker warning you of what's going -- you might regret this.
FOROOHAR: That was Jerome Powell saying, I am worried I am going to get fired.
QUEST: Last one, the jobs number. Look, it was better than expected. It is a backward looking number. It doesn't take account of what we've seen. Do
we ignore it? Well, no, let me rephrase that. We don't ignore it because it starts -- it shows us the base from where we are starting to add in this
turmoil.
FOROOHAR: Yes, I mean, in a way, it is a very poignant number, Richard, because it tells us we were in a pretty good position until this President
decided to upend between 50 and 70 years of globalization, depending on where you put the marker.
That was then, this is now.
QUEST: Have a drink from me for the weekend and enjoy your weekend if you can.
FOROOHAR: A stiff one for sure. See you.
QUEST: One for the road.
All right, the White House slapped some of the highest tariffs on the low income nations, those like Cambodia and Vietnam and those nations, not
surprisingly, they don't have the stomach or the strength or indeed the size to stand up to the United States, so they are negotiating.
President Trump placed a 46 percent duty on Vietnam. Its leader, To Lam, called the U.S. President today and said Vietnam would drop its tariffs in
exchange for the U.S. doing the same.
Cambodia same story, this time, 49 percent, where the Prime Minister of Cambodia is asking Trump to negotiate as soon as possible.
Anna Stewart is with me.
The trump administration is going to say, look at it. This is -- this is what we expected was going to happen. They are lining up to do deals.
ANNA STEWART, CNN REPORTER: This is what we -- this is what the U.S. wanted. So you have China retaliating, and they are saying oh look, Vietnam
and Cambodia, they're negotiating. More people will come to the negotiating table.
But really, what are they going to get out of even zero percent tariffs from Vietnam and Cambodia? Because the trade imbalance is really, frankly,
quite huge. You know, if we look at Cambodia and I've got the printouts from the U.S. President's Office, they've given us a sort of country
breakdown of tariff and non-tariff issues and the U.S. exports $321 million to Cambodia, it imports $12.7 billion.
So there is a huge imbalance here, and then you get into the fact that if we learned anything from Liberation Day in the Rose Garden, it wasn't just
about tariffs, it was about all of the unfair non-tariff trade barriers. I mean, for Vietnam, it was things like import bans and restrictions, product
registration.
In here it says, it is unhappy about a ban on offal and phytosanitary barriers. The U.S. wants to be sending Vietnam chicken innards, Richard. So
it needs more than the just headline tariff figure here. But maybe the U.S. is just going to see this as a victory, and you can see some kowtowing from
various countries and that's what they want.
QUEST: Turn to the E.U. and they are still deciding and thinking. They're just about -- I mean, they haven't even put on the tariffs for the steel
and aluminum. From what you're understanding, what is the thinking in the E.U.?
STEWART: Well, Richard, it won't surprise you to know that the E.U. is moving quite slowly on this, but they do represent 27 member states and we
are quite used to that.
Next week, we expect to get retaliation for, if you can, you remember back, the tariffs on steel and aluminum from mid-March. They still -- that's
about $28 billion. We are still expecting them to come to some sort of a decision on retaliation against auto tariffs before they even get to the
latest round of 20 percent tariffs across all products.
Now, will they retaliate? Will it be tit-for-tat? That's the big question. Some countries have very strong fighting talk particularly President Macron
and in Germany, but will they have the stomach to go, the whole hog remains to be seen. But it could be pretty spicy next week.
[16:10:03]
QUEST: We will talk more next week. I am grateful. Anna Stewart in London.
Daron Acemoglu is the Nobel Prize winning economist and professor at MIT, Massachusetts Institute of Technology. His academic work covers a wide
range of areas, including the developing nations.
Sir, it is good to see you on a busy day.
DARON ACEMOGLU, NOBEL PRIZE WINNING ECONOMIST AND PROFESSOR AT MASSACHUSETTS INSTITUTE OF TECHNOLOGY: Great to be with you. How are you?
QUEST: Good. Excellent. Never better. Never better, as they say.
ACEMOGLU: Well, you have a lot of news to talk about, right?
QUEST: What do you make of it? I mean, you know how -- now you've seen the numbers and you've seen the effects or you know the effects? What do you
make of how bad the damage is going to be?
ACEMOGLU: Well, the damage is going to be bad. It is definitely a frontal attack on the global trading order that's going to have negative effects,
including for U.S. companies, which heavily depend on their globalized supply chains.
You know, we are 40, 50, 60 years into a very rapid process of fragmentation of supply chains, globalization, offshoring and that's the
background against which we are having these massive tariffs, but also, this is more than economics.
This is concentrating more power in the hands of the President, which is the agenda. You're seeing that domestically and now you're seeing that
internationally. He decides whether to retaliate further or to forgive some of the nations. It is all these transactional approach, but even worse so
with huge new instruments in President Trump's hands.
QUEST: This idea of retaliation, China is big enough to say, we are doing it, and we can stand the pain. Cambodia, Vietnam has to negotiate and even
if they get their tariffs in their export tariffs down to zero, it doesn't -- I mean, these are nations that have tariffs for a reason in a sense
because of their developing nation difficulties.
ACEMOGLU: Absolutely. But even more so, they are really not dependent on tariffs or restrictions on U.S. exports because U.S. exports so little to
these countries. It doesn't really matter. They can make concessions there. And that's truth of the matter for China as well.
You know, the background to some of President Trump's complaints is that China imports so little from the United States relative to how much it
exports. So what are you going to do? You know, it is not as if you can suddenly boost U.S. exports to China by cutting tariffs or non-tariff
barriers.
QUEST: You see, the real problem is the non-tariff barriers, because let's say you go down to zero on the nominal rate. We don't know how they came up
with their numbers. We are aware that their numbers are somewhat dodgy at best, but unless --
ACEMOGLU: Yes.
QUEST: But unless you go into very long, protracted negotiations on non- tariff barriers, which is exactly the whole WTO area, you're just going to take off a number, but not make any difference in the actual result.
ACEMOGLU: One hundred percent, one hundred percent and it is like -- it is not as if, you know, U.S. producers can export that much to China either.
You know, the U.S. has its comparative advantage in chips, A.I., finance and some of the other high tech services in healthcare and so on. Many of
those are not easy to export to China or we don't want to export them.
QUEST: Right.
ACEMOGLU: You know, the A.I. knowledge and some of the other high technical knowledge and, you know, yes, we can export them bourbon, but that's not
going to really make a dent to the U.S. trade deficit, bilateral deficits with China.
QUEST: So Donald Trump's goal and ambition of rewiring the global trade network, more manufacturing back into the United States, opening new
plants, making cars, I guess you would even say making shoes back in the United -- whatever it might be. Are you telling me it can work or it is
unrealistic?
ACEMOGLU: I would say it is unrealistic.
Look, I think if the U.S. had tariffs that didn't go down to zero through the most favored nation and WTO accession for China in the early 2000, that
would have slowed down the deindustrialization of many industrial towns and the disappearance of apparel, textile, furniture, toys, assembly, et
cetera.
But once these industries have left, bringing them back via tariffs is not easy, and if you bring them back, you may bring production back, but not
jobs, because the new production may take place with robots and other advanced machinery, with a few workers and the other issue here is that
these tariffs are going to hit U.S. manufacturing firms.
U.S. manufacturing firms depend on parts and components from abroad.
[16:15:09]
QUEST: Finally, I just want to get your thought. We are going into the weekend, have you ever seen anything like this?
ACEMOGLU: Well, I mean, we've had many turbulences. I don't know whether at the end this is bigger than the financial crisis or the panic around COVID.
Economically, it is a huge deal, but my emphasis throughout this last two- and-a-half months has been, let's not lose sight of the politics.
The big agenda here is political, to increase the power of President Trump and the executive and tariffs legislate -- rather than legislate it,
adopted via executive order and in this bilateral way are hugely boosting President Trump's power.
QUEST: I am grateful to you, sir. Have a good weekend. Enjoy a drink.
ACEMOGLU: Always great to talk to you. Thank you, Richard. Bye-bye.
QUEST: Quest MEANS BUSINESS tonight. Trump's tariffs are anything but child's play. The CEO behind some of the world's biggest toy brands, and a
warning that prices could spike up to a third, in a moment.
(COMMERCIAL BREAK)
QUEST: There are 265 shopping days to Christmas, and this year, whether it is Christmas or birthdays, the gift that you give if it is a toy is likely
to be more expensive.
The trade group, The Toy Association, is predicting American shoppers are going to pay around a third more for those toys made in China. Why? Because
the 34 percent tariff, and it is estimated three-quarters of all toys sold in America are made in China.
The biggest and the best, Little Tikes LOL Surprise and Bratz Dolls. Now, they are manufactured by MGA Entertainment.
Isaac Larian, the chief executive, is with me. We spoke the other day. I apologize, it was Wednesday and the President was walking out into the Rose
Garden while we were talking to you, and we had to break off.
Were you as surprised or were you shocked when you heard the tariffs that are coming or came?
ISAAC LARIAN, CHIEF EXECUTIVE, MGA ENTERTAINMENT: Thank you, Richard. Thanks for having me.
Yes, of course, President Trump, who I love is more important than me, so I appreciate you having me come back again.
Yes, I was shocked. I am still shocked. Tariffing toys is like taxing childhood joy. MGAs Bratz builds confidence, Little Tikes builds motor
skills and imagination. This Miniverse product teaches art and craft and all these toys build memories.
[16:20:18]
President Trump, who is very smart, spared toys for a reason the first time. You don't mess with Santa's supply chain. And don't be the Grinch --
don't be the Grinch that stole Christmas.
QUEST: Right. So let me ask, what will you do to avoid -- I know you've got factories elsewhere, and you can shift production to a certain extent, but
to avoid the worst of these tariffs, what can you do to mitigate?
LARIAN: Well, let me explain.
Okay, Richard, we have the largest 60-year-old toy factory in Hudson, Ohio. We make Cozy Coupe. We make Turtle Sandbox, et cetera. Toy Association got
20 countries, including Japan, China, Vietnam to reciprocate and have zero tariff on toys from America going to those countries.
And now, frankly, this thing is going to backfire, because if you make Cozy Coupe, if you go to China, it has to be at 34 percent higher price and
they're not going to buy it, and we have to lay off people. There is nothing we can do.
It is absolutely impossible to make certain toys in America. And if you could, it will take two or three years and those jobs are going to go to
robots, frankly, not to people.
QUEST: Right, but are you -- actually by the way, that's a point that our previous guest just made as well.
Are you going to try and shift production maybe to countries out of China or Vietnam or wherever, where the tariff might be less, where it might be
at 10 percent tariff? Or is that simply not feasible? It is not realistic because it takes too long.
QUEST: Richard, Christmas is always on December 25th and it doesn't change. It is too late, at least for this year, to make any changes.
Please, I ask President Trump, let the kids play and keep tariffs off toys. No way we can make a change this late in the game, 260 some days left to
Christmas.
QUEST: What's going to be the number one seller for you this Christmas?
LARIAN: The number one seller toy which is made in China is this, it is Story Dream Machine, which basically tells stories to the children when
they're sleeping, and I've got to tell you, it is made in China and it is $50.00. Next week, it is going to go up to about seventy to seventy-five
dollars.
QUEST: I will buy one before it goes up. Sell me a non-tariffed --
LARIAN: Please hurry up.
QUEST: Sell me a non-tariffed one. Good to see you. We will talk more as this goes on. I am grateful to you, sir.
LARIAN: Thank you, Richard.
QUEST: Have a good weekend.
LARIAN: Thank you for having me. I appreciate it. Thank you, Richard.
QUEST: Just think of a Dream Machine, something that tells me stories while I am asleep. Knowing my luck, it will turn into nightmares.
Coffee? Where is it? Where's my coffee? I can't get a decent cup of coffee anywhere here.
High prices, even more once tariffs -- you know the story. The world's largest suppliers of raw coffee beans face duties up to 46 percent. I guess
that's going to cost more to me for my coffee and the U.S. is a major consumer, and frankly, coffee can't be grown here, and therefore you're
stuck one way or the other.
The majority of coffee is grown along the equator between the Tropics of Cancer and Capricorn -- Brazil, Vietnam, Colombia -- the largest exporters
in the world.
Stefano is in Bogota. Oh, I am so envious of you, sir. Look at that. Real decent coffee.
STEFANO POZZEBON, CNN CONTRIBUTOR: My friend, I was so much looking forward to speaking about this story with you today, because you're probably,
Richard, the only person at CNN that drinks more coffee than I do. But here we are. Let's talk business.
This is the warehouse where Colombia stores its coffee. It is Colombian gold, frankly, before sending it to America. And about 40 percent of these
sacks every year go to the United States, which is the largest buyer of coffee from Colombia.
And that's why this tariff is causing a lot of concern down here, because we are talking about a small tariff. We are not talking about a 25 percent
on aluminum or the cars, but this is a commodity that first of all, everybody consumes every single day. If you're like me, you consume it
multiple times a day, and like you as well.
[16:25:03]
But it is also a commodity where hundreds, if not millions of lives depend on here in Colombia.
If you could read where this coffee comes from, this is from a region called Huila, and instead this one is from another region called Santander.
Colombia has coffee regions all over its territory, and about 550,000 families are members of the Colombian Coffee Federation that export coffee
around the world, and these are good paying jobs.
And of course, 10 percent is not that much of an increase, but we are talking about a 10 percent increase on every single cup that you might
drink up in New York. And so that's why, there is there is --
QUEST: I am just going to jump in here because I need to ask you, all right, so Colombia has the standard basic rate of 10 percent, but it is
going to be very difficult for them to get rid of that. Because one of the issues with Colombia is what they call non-tariff barriers as well, and
that's going to be involving a lot more negotiation, a lot more discussion.
So how -- what is the strategy of the Colombians to try and get tariffs down to zero?
POZZEBON: Well, the Colombian Coffee Federation has been in touch with the National Coffee Association up in the states to ask, there was a letter
that was leaked to the press a couple of weeks ago from the head of the NCA, which is the National Coffee Association in America, to ask coffee to
be exempt from these tariffs because, just like you said, it is not like the United States can start growing coffee or harvesting coffee in Florida
or Arizona. You need to import it one way or the other.
And so, that's why here, they are confident that in one way or another, they will still be able to export. It will be more pricey. But who will pay
for that price? Because here, coffee is still very cheap and I am enjoying this one, but maybe coffee might be getting a lot saltier for you up there
in New York.
QUEST: Sir, what are you? Are you a cappuccino or a macchiato? A double espresso? What's your choice?
POZZEBON: Espresso. That's how it is made.
QUEST: Espresso.
POZZEBON: That's how it is properly done. Italy, come on, Richard, you know me.
QUEST: Stefano, great to see you. Have another cup for me. Good to see you, sir. Thank you.
President Trump's tariffs have sent markets plunging around the world. The turmoil, but who is the most photographed man on Wall Street? Who is it?
There he is. It is Peter Tuchman, my good friend. We will be with him after the break.
(COMMERCIAL BREAK)
[16:30:46]
QUEST: Hello, I'm Richard Quest. Together, we'll have more QUEST MEANS BUSINESS.
Economists, some of them say the new effective tariff rate is at the highest in a century. I'll speak to an economic historian.
The president extended a deadline for TikTok to find a buyer. Before that though, here's the CNN and here the news is always first.
Without a cease fire, Israeli attacks in Gaza are continuing this week. The Ministry of Health in Gaza say 86 bodies and nearly 300 wounded have been
brought to hospitals over the last 24 hours. The authorities say an Israeli air strike on Khan Yunis today killed at least 25 people. CNN has reached
out to the Israeli military to get more details on the strike.
South Korea's highest court has officially removed President Yoon Suk Yeol from office. It follows months of the president briefly declaring martial
law in December. It's a court found to be in violation of the Constitution. The country now has 60 days to hold a general election and choose a new
president.
A series of storms in the southern United States has caused widespread flooding. The Mississippi Valley has been hit by a level four of four high
risk flooding rain.
On Friday, more than 200 flood warnings were issued across 14 states, Tennessee, Missouri, Indiana and Kentucky have been particularly hard hit.
A U.S. judge has ordered the Trump administration to return the man who has mistakenly deported to El Salvador, Kilmar Abrego Garcia was taken from
Maryland, sent to El Salvador's notorious mega prison. The administration claims the mistake came from an administrative error.
The trade war may have been started by the U.S. president, but it's the markets that are feeling the collateral damage. Look at this, the Dow
another 2000 points off today, six percent since Monday. The S&P fell more than four percent to close the week. It's 15 percent off since the
president took office. And the NASDAQ is now officially a bear market, down more than 20 percent from recent high.
Peter's with me. Peter Tuchman, senior floor trader of TRADEMAS. Good evening to you (INAUDIBLE). Well, Peter, look, I saw you last night after,
you and I had a chat after Erin Burnett, when you were on, friend. And you said to me, this wasn't over, and you were right.
PETER TUCHMAN, SENIOR FLOOR TRADER, TRADEMAS: Yes, you know what. What I did say to you, Richard, was that history tells us that when markets close,
when we're on a downward spiral, and markets close on the lows of the day, very often you will see a market gap down the next day and continue to
sell. It just means that the selling is not over.
The unfortunate part of this, I wish I could give you a little silver lining is we closed down 323 handles on the S&P today, and we are now
trading down 350.
So, even after today's complete decimation, another six percent on on the S&P and another you know, what is it? $5 trillion over the last two days,
we are still not done selling, even after we close on the absolute low of the day.
QUEST: Why? Why do you think we're not done selling? Why?
TUCHMAN: My hope was that today, with the economic news that came out, right, because the numbers that came out this morning, payroll numbers were
better than expected. Unfortunately, the unemployment number ticked off to 4.2 which that was not a good thing.
My hope was that we were going to have a bit of a capitulation, right, which is just sort of a fast and furious continuation of the sell side. And
then that would be sort of signified by a little, what we call bottom feeding at the end of the day, where people at the end of this -- look, six
weeks, first of all, and then the last four days of this aggressive sell side that people would start to buy on the close on Friday, sort of
signifying that we were going to turn the momentum and continue to go higher. And that's not what I'm seeing.
We are not getting any clarity out of Mr. Trump. It's almost a complete this -- I mean, it's just this disconnect.
I mean, when Mr. Trump, after yesterday's market closed down, 1,600 points and 300 points on the S&P, when asked what he thought about the market, he
tried to relate it to somebody who was going in for surgery, and that the surgery went well and that they were going to be sewed up and they were
going to be in healing mode. And that was -- that's where we were in this cycle, we were now starting to heal, and that the market was going to boom.
[16:35:22]
In my opinion, I think the surgery did not go well, and to me, it looks like the patient is bleeding out.
QUEST: OK, so, what's it going to take? I mean, is it going to take negotiation and various tariff deals? Is it going to take certainty when
we're clearly not going back to record highs in the near future? But what would it take to create that bottom rather than further capitulation?
TUCHMAN: So, I mean, I think the first thing we need to do is try and understand what is Mr. Trump's motivation by doing this.
I mean, it just said, I just noticed, you know, Richard, I'm actually standing where you and I used to do our reports for so many, many years
together. I'm surrounded by T.V. sets. And over there on Kudlow, it says, that his attempt at working tariffs was a way of rebalancing the United
States position in global trade.
I don't -- I don't really get it. I don't see what goal he's accomplishing by throwing out these crazy numbers. We know that people like Jeremy
Siegel, people way smarter than me. I know I look like Einstein. I'm not that smart. Are saying that the numbers were figured out basically by trade
deficit, imports versus exports, minus 10 plus three. Throw a couple M&M's (ph) in there, two kids playing around in the playground, and then they
come up with a number. None of that is making any sense yet.
So, the first thing that I think will help us get some clarity, as if we saw today that Vietnam threw in the towel. They said, OK, I can't fight
this fight. I am cutting all tariffs. Israel yesterday said we are cutting off all tariffs.
My goal is that this is an ego and a power play, as you and I spoke last night, right? And so, if everybody crumbles under the weight of this
aggressive power play by Mr. Trump, and they all go, you know what? We're going to cancel all tariffs. We're going to cancel all tariffs, and every
one of our trading friends and foes, not many -- not many friends left, throw in the towel. Then maybe that will be the beginning of some kind of a
recovery.
QUEST: Peter, I'm good -- great to see you, my dear friend. We'll catch up. And thank you. I'm grateful. Thank you.
Some breaking news to bring to your attention. The U.S. Supreme Court is allowing President Trump to freeze millions of dollars in teacher grants.
It's the administration's first win.
Paula Reid is in Washington. I think that for our global viewers, Paula, the significance here is not necessarily the detail of what they you know,
the grounds, per se, it is the fact that the Supreme Court has voted in favor of the administration. Do we know the breakup of the vote? Do we know
why, what their reasons were? What can you tell me?
PAULA REID, CNN CHIEF LEGAL AFFAIRS CORRESPONDENT: Yes. Well, let's set the stage for what exactly happened here. This is the first big win for
President Trump at the Supreme Court since he returned to the White House, and here the Supreme Court is going to allow him to freeze roughly $65
million in Department of Education funds.
Now, the reason these were targeted by the administration is because they, in part, support DEI initiatives.
Now, this is significant, because this is one of the first times that the Supreme Court has upheld action the administration has taken to reshape the
federal government and this case pushed back on DEI initiatives.
Now, you asked about the breakdown, we know that the Chief Justice John Roberts sided with the liberal justices, but so this was a five to four
decision.
Now, this is significant, because just a few hours ago, I was talking to a Justice Department official who was lamenting the fact that they're losing
a lot of cases, getting a lot of press for the fact that they lost cases, but they were hoping that maybe they would have a win or two today.
QUEST: Paula, can I just take you down there a different -- an interesting road on this? Because the bit you told me, so, Chief Justice Roberts is
tipping his hand, in a sense, as to where he thinks it goes on the five by going with the liberals, but it's a clarification that they need one more.
We always thought it was going to be someone like Amy Coney Barrett. It's not going to be that straightforward, is it?
REID: Yes. I mean, this is a conservative super majority, and the Trump administration always expected but they would lose a lot of these cases, a
lot of these challenges to what the president is trying to do at the lower courts, which is what happened here. They put a block on this attempt.
But they said once these larger questions get before the Supreme Court, because they have that super majority, that they were confident that a lot
of these policies would ultimately be upheld.
[16:40:01]
Now, this one is -- it's one of the lesser known challenges that has made its way up there. It's not clear he's going to win on things like
birthright citizenship for his sweeping use of wartime powers to facilitate deportations.
But here this is -- this is a significant win. And again, the Chief Justice signing with three liberal justices dissenting from. This specific
decision, but that doesn't necessarily tell us where he will land on some of these other challenges that are either pending before them or certainly
headed that way.
QUEST: I'm grateful to you. Thank you for coming to us so quickly to bring me up to date. Thank you very much.
This is CNN. This is QUEST MEANS BUSINESS. We'll be back in just a moment.
(COMMERCIAL BREAK)
QUEST: Fitch says the tariff rates now the highest level since 1910. The U.S. has had a love affair with tariffs pretty much since the start, the
Tariff Act of 1789. The government financing itself with taxes on imports.
More duties in 1828, the South relied on trading, calling it the tariff of abominations. The McKinley Tariff of 1890 raised the average duty to nearly
50 percent and those fell when income taxes were introduced two decades later.
And then, in 1930s you had the (INAUDIBLE), the Smoot-Hawley Act, which made the Great Depression much worse and the U.S. moved pretty much to a
free trade ever since.
Professor Douglas Irwin, is with me, professor of economics at Dartmouth. Good to see you, Professor. Is there an example that you know of where
tariffs -- in recent memory, where tariffs worked?
DOUGLAS IRWIN, JOHN FRENCH PROFESSOR OF ECONOMICS, DARTMOUTH COLLEGE: Well, it depends on the objective, but if it is to help the domestic industry in
the short term overcome import competition, you can provide a little bit of relief, but it's not going to provide -- it's not a recipe for long term
success. (INAUDIBLE), go ahead.
QUEST: Yes, so we talked about the solar panels and the aluminum last time, but if you're talking about broad based Macomber tariffs, Smoot-Hawley
tariffs, all of those. There's no oppo -- there's no case where actually, over the long term, they actually worked.
[16:45:12]
IRWIN: Well, once again, the definition is what works that's helped producers, but will it harm consumers? And then how do you trade those
things off?
So, we've protected the steel industry for decade upon decade. That's helped the steel industry, to be sure, but steel users, if you're talking
about Caterpillar or Ford or GM, they pay a higher price for steel, and their competitive position is harm.
And so, you may be losing jobs in downstream industries, even if you gain them in upstream industries that are protected.
QUEST: I don't know whether you heard the president doing his tariff announcement back on Wednesday. You may have seen reports of it, but he did
do a review of tariff history. He went through the 1890, he went through all of these things and lamented the arrival of the income tax. What did
you make of it?
IRWIN: Well, actually, he's reasonably well versed in history. Knows some facts that most presidents don't know, that we had this tariff commission
in the 1880s to review the tariff.
But the introduction of the income tax, I did think that was a little bit odd the way he said that was he lamented that, because what it did is
substituted a tax code, namely tariffs, which are very regressive, which hurt lower income households more, they pay the higher price, higher income
households can afford it.
And it substituted a progressive tax system, namely the income tax where, at the time, the Vanderbilts and the Rockefellers would pay more because
they earn higher income. So, you're going from a regressive to a progressive tax system. And maybe he doesn't like that.
QUEST: I was lo -- I was looking at the tin tariffs that were back in the - - in the 19th century. And one of the reasons that those tin tariffs were introduced was to promote and to increase domestic tin production.
But what I found interesting was it took 15 years for those tariffs to work. And as you're right, you know, in the meantime, industry was paying
higher price for tin, and you saw that, you saw the price of tin go up, but it did take 15 years before you could safely say that a domestic industry
had been created.
IRWIN: And the reason the tariff worked in that case is that it forced Welsh tin miners and tin makers to migrate to the United States.
So, it's not like we had the indigenous capability to make tin plate. It was the migration from Britain and shutting down the industry there and
moving it to the U.S.
But you're right. In fact, we would have gotten the industry about 15 years later. The reason we didn't have it is because they were handicapped by
very high steel prices. They had to pay the tariff on steel. They didn't get much of a tariff on tin plate, and the McKinley tariff rectified that,
but it succeeded by making Welsh miners moved to the U.S.
QUEST: I've been trying to -- you know, you'll be well familiar with this when we talk about tariffs, eventually you just want to hit your head on a
brick wall, because everybody can find -- you know, I hear the arguments from the administration, and I hear the pros and the cons, and I just don't
know where the truth lies in a sense. Solar panels in the last administration, did it help solar panel production? Did it make solar
panels more expensive? Did more get -- you just go in circles.
IRWIN: You do, and that's a clear case where you had a conflict between trying to protect the domestic industry, solar panel producers and clean
energy goals and having people install these.
And by raising the price in the U.S., we really affected consumption, and we slowed the green transition, and we really didn't get much of a
production response domestically, because it's really hard, and the cost advantage for Chinese producers is so great.
QUEST: OK, now this is not a political question. All right, let me be clear on that. I'm asking for an academic answer. When you heard these tariffs,
these broad based rewiring of the global economy, tariffs, what did you think?
IRWIN: I sort of thought, oh, my God, because these are not just incremental tariffs designed to help us steal industry here, help the auto
industry there. These are, as you said, designed to remake the world economic system, and that's why you're seeing the pain in the markets. This
is a very difficult thing to do. We've had this system for a long time. Consumers have benefited a lot from it, and yet he seems determined to
impose these very high tariffs.
I mean, my first reaction was, when have we seen this in history? And as you mentioned, the Smoot-Hawley tariff, this is greater than Smoot-Hawley
in terms of the scope of imports. It's covering the importance of imports in the U.S. and the height of the tariffs.
So, we have not done this for a long, long time trying to remake the world economic system.
QUEST: I'm grateful to you, sir. Thank you. Have a good weekend, and we'll talk more as this goes on, as history is made in front of our very eyes.
Thank you, sir.
It is QUEST MEANS BUSINESS. Stock markets just horribly the way they fell. We'll take stock in a moment.
(COMMERCIAL BREAK)
[16:52:43]
QUEST: Wall Street, the numbers are just horrible for today. The Dow Jones sold off for the second straight day, 2200 points. It's now fallen more
than 10 percent from the December and 12 percent sell off made worse by the retaliatory tariffs from China.
Paul's with me. Paul La Monica, Senior Market Analysis Writer. What -- pull some strands together for me, of where we are and how we get out of it, in
a sense.
PAUL LA MONICA, SENIOR MARKET ANALYSIS WRITER, BARRON'S: Yes, it's troubling to put it mildly, Richard. I mean, yesterday, as bad as the
selloff was, there were at least some pockets, the usual kind of safe haven trades that did well, you didn't really have that today. The market breadth
was awful. One Dow stock was higher, Nike. You had only two stocks in the NASDAQ 100 finishing green. One of them was Microstrategy, and that's
because that's a company that's betting on Bitcoin, and Bitcoin actually was up a little bit today.
It is hard to find any good news when there are so many concerns about what these tariffs and, you know, retaliatory moves by China and potentially
other nations are going to do to the U.S. economy.
QUEST: So, this idea that somehow -- and we're looking at the Dow 30, this idea that somehow it's all going to be well, that the tariffs may or may
not bring in large amounts of money, and blah, blah, blah, it's all it's all going to be well, it's going to be great. And that element of trust and
faith is very difficult to have at the moment.
LA MONICA: Yes. I mean, remember Richard after the election, we had a brief but pretty significant rally in the markets, and that was because everyone
was talking about new animal spirits, the notion that we would get deregulation and lower taxes and extension of the taxes from, you know, the
prior Trump administration, and investors are still hopeful that that is yet to come.
But clearly this is the president and an administration that is almost myopically focused on trade right now and then, maybe to a lesser extent,
immigration reform, which is also probably negative for the economy.
[16:55:03]
QUEST: Right. But if we look at some of the key stocks, I'm going to bring them up. You can't see them. I'll go through them. You can see, though,
we've got stocks like Apple, Nvidia, Tesla, Intel, Boeing, Caterpillar, it's a broad range. They're all down anywhere between seven and 12 percent
because even though they're manufacturing Boeing, Caterpillar, Apple, whatever, some of pure tech, Intel, Tesla, motor transportation, they're
being hit in a diff -- in a million myriad of ways from all of this, aren't they? Whether it's production costs, whether it's consumer worries, whether
it's government targets, just the difficulty of which they're being hit.
LA MONICA: Yes, it is, without question, problematic for just about every major multinational company, but then also even small caps, the Russell
2000 getting hit very hard. The whole notion that, you know, companies that rely more on the U.S. consumer would hold up better.
The U.S. consumer is rightfully worried right now because of what they're seeing in the stock market and all of these headlines about tariffs driving
prices even higher than they already were, inflation is not going away. You have worries about, you know, a downturn, a recession, and it's the
stagflation conundrum, which no one wants to deal with, least of all, Jerome Powell.
QUEST: Good to see you, Paul. Thank you for putting the strands together, even if we're not exactly as cheerful as it might be. Paul La Monica.
Profitable moment next.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. We had two guests on the program that gave us some insight into what is really all about. The Nobel Prize winning
economist Daron Acemoglu says that this is really all about presidential power, the power grab this time on the global economic stage by the U.S.
president. Look what I can do. Look how I can do it. I'll make you all bend at the knee on tariffs.
And Peter Tuchman from the New York Stock Exchange saying it was about ego power and how far we can push it.
I think both gentlemen are right. And why I say that is because there are a million among different ways you could have redressed world trade. You
could have done it bilaterally. You could have done it through the WTO. You could have threatened a lot more and therefore just negotiated away from a
different strength.
But instead, the president went for the absolutionist way, which is all or nothing. And now the rest of us, whether it's in higher prices or lower
retirement funds, the rest of us are going to pay the price.
And that's QUEST MEANS BUSINESS for this Friday night. I'm Richard Quest in New York
Whatever you're up to in the hours ahead, I hope it's profitable. Have a peaceful weekend.
END
