CNN’s Richard Quest and Jim Sciutto discuss consumer confidence, the China-US trade war and how negotiations may play out. #CNN #News
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00:00Wall Street really being rocked here as they're watching what is happening in this trade war
00:05between the U.S. and China. Many, many concerns as we see this escalating trade war. This is
00:13a top investor writing in a new report. In the last few days, we have had many conversations
00:19with macro fund managers and their concern is that the White House is not acting rationally,
00:24but rather on ideology. Those words dropping as the White House just moments ago had this to say
00:31about the escalating trade war with China. The president, as I said from the podium just a few
00:38days ago when I was up here, would be gracious if China intends to make a deal with the United
00:42States. If China continues to retaliate, it's not good for China, but the president has made it very
00:47clear he's open to a deal with China. Why is he optimistic that China is going to make a deal
00:51or wants to make a deal? If they're not talking, where's that optimism? He's optimistic.
00:56The White House not giving much more than just the president is optimistic. The basis for that
01:01still unclear. Here is where the trade war stands right now. 145 going up against 125. These are the
01:08tariffs between the world's two biggest economies. And here's another number, 4,700 or about $400
01:15per month. That is how much more money Yale's now estimating, the Yale Budget Lab, that President
01:22Trump's tariffs are going to cost average households each year. And with just hours left in trading,
01:28the Dow right now up. You're seeing that swing here going into the afternoon, up almost 650 points.
01:36But it was up and down there throughout earlier in the day. With us now, we have CNN business editor
01:40at large Richard Quest. We have CNN chief national security analyst Jim Sciutto as well. Richard,
01:46a key economic gauge, the consumer sentiment now at its second lowest level on record, going back to
01:521952. Why? We shouldn't be surprised with all that's coming out and all the worries about tariffs.
01:59It's not just that, it's the complexity of everything else as well. The changes within the federal
02:04government, the worries about job losses, the worries about a slowing economy, higher inflation.
02:10And eventually you get these, what's known as soft data. They're surveys like the Michigan survey,
02:16consumer sentiment. And it's a really worrying number because at some point, these sentiment
02:22surveys feed into hard data of real consumer spending. And we know this from history and precedent,
02:29that's what happens. So when we see a number as bad as this one, it is only a matter of time,
02:36unless anything else changes that would suddenly make people more cheerful. Look at that chart.
02:41I mean, just look at it. Unless people suddenly become more cheerful, why would this not translate
02:47into spending? You see that consumer lab, the lab from Yale, that number of 4,700,
02:56that is providing you don't start substituting goods. In other words, pre-substitution. If we just
03:05continue as we are now, but of course people will start to substitute. They will find other goods. And
03:12as the Christmas Tree Association said a moment or two ago, it's going to be very difficult to find
03:18substitution of many things that we currently get from China. Yeah. You'll be surprised just how much
03:25we get exclusively from China. And Jim, I'm really curious to get your perspective on the White
03:29House's handling of the situation. Not so much the tariffs that have been announced, but this
03:34reporting that the White House, that officials have made clear to Beijing that they want Xi to ask for
03:42a call with Trump. Trump hasn't reached out directly. What do you make of that approach?
03:48And the White House saying they want Xi to reach out for it. Can you get any more high school
03:51in matters of state? It's ridiculous. He's got to call me, Jim. Yeah. And listen,
03:56what's interesting is, as I was reporting yesterday, the Chinese impression is that they are willing to
04:02at least negotiate, not necessarily on Donald Trump's terms, but to talk. But their impression
04:06is that the U.S. has not opened channels and not made an effort to open up channels to allow that.
04:11So now you have the U.S. president say, well, you know, I'm not going to open those channels.
04:14China has to open them first. It's kind of ridiculous at the end of the day, because you
04:19are playing with the interests of American consumers, Chinese consumers, etc. The other
04:25point I would make about China's reaction today in not quite meeting the U.S. tariffs, 145 percent,
04:32U.S. China goes to 125. And in Xi's statement, he says, we're going to 125 in response. That's as
04:38high as we're going because this is getting a little ridiculous, right? And that's both a signal to say,
04:44we're not going to get caught up in this tit for tat to the degree that the president is. But it's also
04:50an opening to say, OK, we're capping this for now. And that perhaps offers a way forward that we could
04:57begin talking about how to bring these down. You've lived in China. You've covered China for some time
05:04now. As we're looking at this question of who's going to blink first with two very different
05:11political systems, what is your gauge on this? Well, different systems, listen, one's a democracy,
05:16one is not. One's a single-party state, very much not a democracy. But China does have politics. And
05:23Chinese leaders do not want to be seen, we were talking about this yesterday, I believe,
05:27do not want to be seen as capitulating to America. That is not good politics for a Chinese leader.
05:34Long colonial history to go back until we could talk for hours. But they don't want to be seen as
05:40kowtowing to the West here. So the browbeating is not a great diplomatic strategy. And we've seen that
05:47in the past as well. Now, we should say Donald Trump mixes in with the tariff browbeating, some
05:52comments about how good a friend he is with Xi. But we'll see if the door has been closed for now
05:59or if there's a little bit of an opening and perhaps they start opening those channels. Richard, it's
06:03interesting to explore the power that the EU has now because they can tip the scales in terms of how
06:10impactful these tariffs will be for either nation, depending on where negotiations land.
06:17So you've got the Spanish prime minister in Beijing. You've got the EU basically saying, well, we're going
06:23to start looking at other markets. I think this will most certainly give a huge boost to China-EU relations
06:33to try and complete some form of trade agreement because everybody is now wanting to circumnavigate
06:40the United States. Now, you can't up to a point. There are certain things, there are certain
06:46inalienable bonds of trade between the EU and the US. That doesn't mean to say you can't reduce it,
06:54your reliance. And just as much as the US is now saying, we want to reduce our reliance on China,
07:01we want to make sure we are no longer strategically dependent. The EU absolutely is saying,
07:08is there a deal to be done with Brazil and Mercosur? Is there a deal to be done with ASEAN,
07:14a stronger one? Jim, can I ask, can I just ask Jim, do you think, sorry guys, but do you think
07:20that the Xi statement is actually a sort of a, not a white flag, but just a sort of an olive branch
07:28that both sides can now take to move forward? I think it has two sides to it. One, it's a bit of
07:34a message to the US to say, this is silly. This is getting silly. We're not going to play this game
07:39of chicken, but Xi Jinping also by not going right up to the level of US tariffs. I think one can look
07:47at that as, as, as a small opening for discussions. Both of them want to talk. Now the question is,
07:53I suppose, who picks up the phone first? That's where we are. You see, Boris, Brianna,
07:57that's what happens when you get two anchors who are also your guests. We'll just hijack the whole
08:02thing. She did it, by the way, just so you know. I only answered. No objections here over who calls
08:08who first or who asks what question. We're all friends. It's a fun conversation and we appreciate
08:13it. Richard Quest, Jim Shootout, thank you both.