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tv   Power Lunch  CNBC  April 6, 2018 1:00pm-3:00pm EDT

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example to what o'leary was saying this is an example -- i think the trade war will be settled. >> of course i'm not immune. >> i'm enumerating what was sai before, it is not affected i like it. >> everybody have a great weekend. "power" starts now. >> welcome to a special edition of "power lunch. i'm michelle caruso-cabrera and we're minutes away from steven mnuchin in an exclusive interview and we'll talk trade and tariffs and the dollar and much more. what began as $50 billion in tariffs against china on tuesday has quickly escalated into a tit for tat between the two nations. the president surprising most last night and saying he would be considering adding another $100 billion in tariffs. and all of that leading to a very wild weekend on wall street the dow traveling nearly 3500 points in just four days
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and today has already been a ride so we'll start off with bob pisani at the new york stock exchange. >> we are off the lows but the damage -- two groups sustained damage, financial and industrial the regional banks, many are down 3% at the lows. they have rallied back a little bit. about half a percent but still lower rates a problem for the banks. the big industrial names may shock you but boeing is up for the week but overall still down every time we get the trade war things, these drop about 2%. markets very defensive and that is why we're not down as much this week. so reits like eqr, kellogg in the consumer space, con ed utility and frontier in the telecom space, these are all holding up and if you look at the sector for the week, defensive names in the dow jones industrial average, mcdonald's, coke and johnson&johnson to the upside. we'll see how we close at end of the day. >> thank you president trump's latest
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tough comments on trade sending the markets lower as you heard and once again this morning the brand-new economic adviser larry cuddly trying to put out the fire on his way to work. kayla is live in washington with the comments. >> reporter: good morning. five days in and it is now become a daily occurrence for larry kudlow, denying a trade war is brewing and nothing has gone into effect yet but you would be forgiven for thinking otherwise because over the last week escalation has affected the markets and china is punching back as the president raised more action on monday they met the tariffs with $3 billion in active tariffs against wine and fruit and nuts and on tuesday unveiled 1300 chinese products from tv to golf carts subject to property tariffs. china hours later unveiled the tariff on $50 billion on autos and soybeans leaving u.s. farmers up in arms and then last night trump directing the study
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of tariffs on another $100 billion in products a number that goldman sachs now said is too high for china to respond in kind without targeting all u.s. imports but said it could put more painful appreciate on the u.s. than just tariffs alone. like devaluation its currency to soften the blow of tariffs and selling treasuries or further limiting u.s. companies access to the chinese market and those are long-term and very strategic type of retaliation we would see. the administration has said there are talks ongoing. secretary mnuchin said a couple of weeks ago he was in touch with his counterpart in china but today larry kudlow said negotiations have not begun. so perhaps we'll hear from the treasury secretary today exactly what is going on behind the scenes back to you. >> well on that note, let's get right to the big newsmaker of the hour secretary steve mnuchin. and steve liesman joining us.
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>> and joining us now steve mnuchin. thank you for joining us. >> it is great to be here with you. >> the let's talk about the end of march, mr. secretary you hoped to avoid a trade war with china. in that period of time, the chinese have put retaliatory tariffs on $50 billion of u.s. goods. and the president last night threatened an additional tariffs on additional $100 billion of u.s. goods is this now a trade war, mr. secretary? >> no, it is not and our objective is still not to be in a trade war but let me be perfectly clear, president trump has been from day one very clear on we are going to defend free and fair trade. and a year ago at mar-a-largo president trump and president xi discussed trade. we've been working with them over the last year and on the one hand, we're willing to continue negotiations on the other hand the president is absolutely prepared to defend our interests. >> mr. secretary, there was an article in the "wall street
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journal" on the 26th of march that said there were quiet negotiations going on. today a chinese official said that it is absolutely wrong there are negotiations going on behind the scenes and larry kudlow said negotiations haven't begun yet. wonder if you could square that circle for us. are negotiations going on and how are those negotiations going if the two things that i just mentioned just happened, which is the retaliatory tariffs and threat of additional tariffs from the president >> well let me just put this in perspective. so we've been very clear the 301 is in the works for a long period of time we're very clear that $50 billion on potential tariffs that we put on 301, about 10% of the goods that we buy from them, it is $500 billion of goods. china responded with $50 billion against us we think that was unfairly targeting our industry as that is 38% of what they buy from us. so as a result of that, the
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president responded with potentially another $100 billion so on the one hand, as i said, we're willing to negotiate we are in communication with them regularly i'm not going to comment on the specifics of the negotiation. >> so you say we're willing to negotiate. are you saying we're not yet negotiating on the topics, as you know mr. secretary this is critical importance to the markets which are down 332 points in part based on this latest trade comments from the president. so is there negotiations going on right now have they been going on behind the scenes or not been going on? >> again, what i would say -- i want to be careful because -- >> i get it. >> -- any time you are negotiating, we are not going to do this and lay out our negotiations in the public domain so i am in communications, i --' not commenting where we are in the negotiations the vice premier came here last month and we had discussions
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again, let me just be clear in that president trump is actively involved in the discussions with me and ambassador lighthizer and others on the one hand, we absolutely are willing to negotiate and not get into trade wars. but on the other hand, the president is perfectlywilling to defend interests. so this is a clear strategy -- >> understood -- >> -- and as it relates to agriculture, we're going to protect our farmers. the president ininstructed the cabinet to protect our farmers' from marketing. >> and how policy is formed in the administration, can you tell us -- did you know about the president's threat of $100 billion of tariffs before he announced it? >> of course i did i've been an active discussions with the president almost daily on this. along with ambassador lighthizer and the rest of the economic
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team, larry kudlow and others. this is very well organized. our strategy is very clear and we've been very clear in describing our strategy to china in what we want. >> and can you tell us what you told the president about the potential economic effects of this additional $100 billion of tariffs, of tariffs on goods >> again, i think from our perspective and our analysis, again first of all we haven't announced what the next $100 billion will be on. but again, i think that we can manage this without significant difficulty to the overall kpli there is obviously certain sectors if we did get in a trade war china could target and we'll deal with that, specifically agriculture, we have ways of dealing with that. i won't get into the specifics of negotiation but the president is daily involved in these conversations with the economic team
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and on the one hand he's absolutely willing to defend our interests. so let me be clear, this is before free and fair trade china's been able to do trade freely in our country. our companies have been limited. there is forced technology and joint ventures and president xi and president trump had a very good relationship. they speak regularly there is clear understanding we have mutual interest in reducing the trade deficit, something that china has agreed with us. and as i've said before, i'm cautiously optimistic to work this out. >> mr. secretary, just homing in on your comment that we are not in a trade war if this is not a trade war, what is does a trade war in the administration's view look like? because the markets believe we are in a trade war when you look at individual stocks, that could be caught up in a trade war, like caterpillar and boeing and deere each lost 6% in the last month and it feels like atrade war to them
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and what would a trade war look like if this is not beginning of one? >> i did not say it is the beginning of one. >> so it is the beginning of the trade war? >> so again, right now we've initiated a plan, the tariffs will take some period of time to go into effect they'll be public comments so while we're in the period before the tariffs go on, we'll continue to have discussions but there is the potential of a trade war. and let me just be clear, it is not a trade war. the president wants reciprocal trade. so right now china buys about $130 billion of goods from us and we buy about $500 billion of goods from them. that is not reciprocal free and fair trade. >> mr. secretary, it is sara eisen. you once told us this is a mark to market business and you look at the marks to see what they think of the policy. so how are you processing what we've seen, the worst start to a second quarter since 1929, what message are you getting and do
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you not care as much about the marks these days >> i think when i referred to that, i specifically was referring to also kind of economic growth and gdp. so as you know, our economic policy, we've been very focused since the campaign on achieving 3% or closer on the gdp. the economic plan from day one is a combination of tax reform, regulatory relief and trade. i think the president has bebeen successful on the first two areas and now we're focused on trade and if we are successful this will be a great benefit to u.s. companies have free and fair reciprocal trade around the world. >> a lot of guests believe the reason the market is down so much and this is michelle. the reason they think the market is down so much this quarter is because of this brewing trade war. do you think that is the reason why the market is down what would you say to a market participant wloz are very, very
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concerned about a trade war? >> well the first thing i would say is that people who will invest in the market should be focused on where it is in the long-term. i continue to think the prospects for the u.s. economy are very strong. the prospects for u.s. companies are very strong and in terms of areas to invest around the world, the united states is still the best place to invest where the market is in the short-term, we've obviously had a lot of volatility and different things impacting that and in the short-term, i think we're in a period of greater volatility as i've said before some of this has to do with the way electronic trading and other things work. but the sprez ve-- the presiden focused on making sure we have the proper long-term growth and we're very pleased the tax plan is just beginning to kick in and seeing the benefits of that and the benefits of many international companies investing in the united states as a result of changes in the tax plan. we're seeing workers get more
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money in their paychecks so we're very pleased with the results so far. >> do you not care that the market is down so much >> again, i don't really focus on where the market is every single day again, i think part of the correction was reasonable in the sense that the markets have still been up a ton since the election so if you look at where the markets are, people still have very, very big gains and again, i think people should be focused on where it is in the long-term, six months, a year -- >> but that very point, mr. secretary, it is melissa, the marks are a forward-looking mechanism and the market is telling us it is worried about the impact of a trade war down the line it is worried that china could decide, hey, i'm not going to buy boeing aircraft, i'll buy airbus aircraft or that china could decide to put tariffs on goods out of the tech sector, particularly semiconductor which relies on china for a quarter of
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the annual revenue could you tell the markets they should not be worried about the long-term possible consequences because that is what they are focused on >> well what i would say is that the markets first of all aren't always efficient so one of the great opportunities is there arin efficientencys in the market and that creates opportunities for investment and i would say -- i understand that there is a level of risk that we could get into a trade on the other hand we're continuing to be willing to negotiate and look at that but again i want to focus on more goods around the world. the fact that china buys $130 billion of goods, that is less than all of our major trading partners so again, this is a terrific opportunity for us companies if they are treated fairly and we have free and fair reciprocal trade. not forced joint venture or technology being forced to move
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over -- so i think these are all long-term positive things that the president is willing to defend u.s. irnnterests and tha is he's focused on. >> thank you for being here. it is four-on-one i would like to point out and so the viewers know that. i want to turn the topic here to the issue of the economy and policy there has been talk about making the tax cuts permanent the individual tax cuts permanent. do you favor that and how would you deal with the deficitesques from making the permanent -- the individual tax cuts permanent? >> well, i do favo i do think that the personal side of the tax cuts are a very important part of the plan that is something that we are in discussions with -- with congress about and something we'll consider i think we need to see the economic growth that we expect that will get people comfortable, that we can pay for that but i think as you know, the reason why we didn'tmake them permanent was really a function
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of we needed to use reconciliation because we didn't have democrats on board. but i would hope that the democrats will eventually support what have been the middle class tax cuts. >> what about the deficit implications >> as we said before the deficit implication if we get the growth, we can afford this -- >> and so you think -- >> i don't think this is something we'll have right now in the short-term obviously before mid-term elections. but we'll deal with that later in the year. and i think we'll have the growth to show that we can afford that. >> economic adviser peter navarro said he was frustrated by raising rates without inflation. are you puzzled and is it appropriate to be commenting on policy from the administration >> well from my perspective, i won't comment. i did respect the feds' independence i have a lot of confidence in j. powell as chair and the rest of
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the board and i think they'll book at the economy and make decisions going forward. but i have great confidence in him and respect their independence. >> mr. secretary, it is melissa lee again. just pivoting a touch, regarding amazon, the president said that he does not believe amazon pays enough taxes could you elaborate on what enough taxes would be? >> well i think what the president is focused on is amazon collects to pay sales tax on their own account but not on the third party business we don't think that makes sense. and by the way, when you talk about sales tax and most states these are sales and use taxes so they rally -- they should be paid and it is easier for it to be collected by the seller than have the consumer do this. but i think the issue is it is unfair relative to the retailers. >> if you make the thirty party seller collect taxes or well or amazon collect on the behalf of the third party sellers it would put them at a cost -- or selling
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cost disadvantage to amazon itself and those third party severals are mom and pop businesses so there could be -- terrible repercussions in terms of small businesses in america. >> i don't understand how that is putting them at a disadvantage it is putting them at a level playing field with every other retailer required when they do business in states to pay sales tax. and that is money, by the way, the states need for infrastructure and very, very important for the states' economies. >> is the president going after amazon because he's not satisfied with the coverage he gets in the washington post and bezos owns the post >> absolutely not. okay, the president is focused on amazon and the economic issues that are impacting retailers all around the country. i think as you know -- >> but he is going after one specific company what message does that send to american companies and industries that he says he is fighting to protect? >> well again, in the case of
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amazon, they've absolutely dominated the retail business. they've put tons of retailers out of business so that is what the president is really focused on but i think as you also know the president is focused on the post office and we're in discussions with the post office and looking at that very focused on the postal reform as well. >> we've been looking at the finances of the post office and they need it and you also sanctioned a number of russian oligarchs this morning and russian companies whax is t -- what is the message there and they are mostly energy companies. is this connected to the administration's policy toward trying to export more energy, more l&g which by the way would help out the trade deficit that the president hates so much. >> i think there are independent issues but i do think that -- that we've been talking about sanctions, this is part of katsa and working on these for the last couple of months with
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congress we came out with a report earlier on that had a confidential access, a classified annex and we said we'd koum out with sanctions and that is what we've dop and these have tremendous support in congress one of the few things passed 98-2 by congress and we're busy at treasury working on the sanctions and these are targeted at oligarchs and government officials, very specifically targeting certain behavior. >> just a final question here, mr. secretary, you are currently issuing a lot of debt, can you talk about what is going to happen to the debt maturity? it seems like it will be heavily tens and 20s and 30s and the market hasn'tie -- yet digestedi and are you concerned having this be-- this trade with china about trade.
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>> that that could affect yurp debt on the long end because china is such a large purchaser of u.s. debts. >> i'm not concerned about there are lots of buys around the world for u.s. debt. and without commenting on what we'll do, i say we are targing the wham to remain relatively constant so we look at the weighted average mature of the government's debt and we're targeting keeping it reasonably consistent. >> what can you tell us about talks on nafta will the president have a preliminary deal to present next week >> ambassador lighthizer and others are working very hard and again i think as you know this is a big focus of the president. he wants to renegotiate the deal but he's also very determined that we get specific points. so negotiations are underway again, i would just highlight this as the president is focused on a lot of different economic
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issues and we're simultaneously negotiating all of the deals and we're pleased -- we made progress south korea as you know we're making progress on nafta we're making progress with the steel and aluminum tariffs in exempting many people from that. so i think on the economic front, there is just a lot going on and the president is extremely focused on all of the issues and making sure that they are good for american workers and american companies and the economy. >> you've highlighted a number of times that we only export $130 billion worth of products to china because of that, if they keep ratcheting up, they do the tit for tat and meet what the president is doing, they actually run out of stuff to put tariffs on from the u.s. and so goldman sachs has reported out today about what are the other things that they could do you say you are not worried about them not buying as many treasures which they talked about but they could do other
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thicks -- more things and have you gained out what happens if you get beyond the $130 billion of what they could do with tariffs? >> we have thought through these issues but let's focus on the positive instead of the negative. the positive is this is one of the largest economies in the world. okay it is tremendous opportunity for u.s. businesses to the extent that we can compete fairly, openly, with free and fair reciprocal trade so again, this is about a level playing field. if we can create a level playing field and we create -- for financial services, for services in general, for our manufacturers not being forced to do joint ventures, this is one of the largest opportunities for u.s. business and by the way i, think this could be a win-win for china and us by china opening their economy -- i think they'll see a tremendous transformation and great growth and something very
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good for their people and ours. >> i'll use the prerogative to ask the final, final, final question and i appreciate your bearing with us. i've covered the treasury for many years interviewed almost every treasury secretary and honor to interview you and travelled to china and covered the g-7 and the g-20 and the rule is you don't publicly ex cory ate the chinese and it leads to them -- digging in heels eve and you always dealt with you l your -- your allies against china and never alone. there is confusion as to why those decades of experience of doing things which did result in the chinese stopping to keep the currency from appreciating against the dollar, it has resulted in some reforms in china. why your way doing it individually, with threats of tariffs why not -- what is a better way to do it >> well, again, president trump, think, has best relationship
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with president xi of any president. i think they're in constant dialogue i think that at all levels of the government we've had very good dialogue. we've made a lot of progress over the last year and -- but the president is determined. and we've been very clear from day one, there is no surprises here, there is no issue in terms of what we are trying to do, we are trying to create a level playing field and the president said we didn't get overnight so the fact that we have such a large deficit is a result of years and years of different things with china and the president just wants to change that so again, i'm cautiously hopeful that we'll reach an agreement with them. this could be good for us and good for them. and the president is very interested in defending and making sure we have level playing field. >> secretary, thank you so much for joining us. >> thank you treasury secretary steven
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mnuchin. >> let's get instant analysis to the treasury secretary with katie nixon and joe leave orn as well as a cnbc contributor steve, are you sticking around >> i am sticking around. katie, you listened to the whole darn thing what stood out to you? >> well first of all it is good news to hear a trade war is not a desired outcome but we have to listen to what the market is telling us and the market is telling us something different and they are telling us there are various mechanisms for what is going on. some are very direct some of them are h-- indirect. and the kons kweconsequences oft we've heard, they've been trumped in the decline in market cap that we've seen. a traction of what the tax reform binges to the table so there is something else when you see these kinds of gyrations in the market and it is more about the indirect effects and we talked a bit and the questions were geared on the
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communication strategy and what we're seeing now is a sort of private sector negotiating posture played out in a public way and in a way unconventional and think the market is telling us that that amps up the level of uncertainty so you're seeing sentiment in the market decline and investors very nervous and that is just one of many transmission mechanisms that we're seeing unfold here with the market movements. >> joe, your thoughts? >> that is some of it. but to me most of the market move is really about the fed and t and the removal of liquidity and the tightening the fed tells us we'll get over the next two years. so when markets don't like what is going on, it is against the back drop of policy normalization and 50-year period -- last year was a weakest year in 50 years for volatility so i would argue almost any fact or any kind of negative shock
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would be greeted negatively. but my view is this is still saber rattling and there will be a deal and markets will move higher base on the fact i don't think the fed will be that aggressive but people are trying to make this a bigger deal with the trade wars than will be the case. >> and one more point about the structural point about what we just did here. the treasury secretary stood toe to toe for minutes and we didn't get a holler to end the interview and that is an important part of the process and they will appear to be off the cuff or ad hoc but the idea they are out there and answering questions an not shying away from defending the policy -- >> or are they out there -- >> what is that? >> to water down the market response after the freak out. >> eventually have to put up or shut up -- pardon the language on these negotiations.
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i was unclear as to the actual existence of the negotiations having questioned i think it was three or four times and then melissa tried to follow up brai -- bravely. >> and i have one thing. the treasury secretary did not say anything incendiary. he was very even handed and left there room for negotiation and none of us are purview to what is going on behind doors but they laid out a scenario where both parties can come to a amicable solution. >> did i conclude from what you said earlier, get the impression that the selloff is not do to with the trade but it is due to the fed. >> again we can't prove a fault positive but if we had this last year i'm not sure it would have a big effect on market the moving away from the liquidity with the fed raising rates has changed investor risk
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appetite and that is the reason volatility is back not that the other factors are impactful and if we have a trade war that is impactfuls but we are pricing the trade war in the worse case scenario. >> you -- >> it is all about the trade war. we saw the futures trade off last night just as the announcement of the $100 billion tariffs came across the tape so it is about the trade war and it is important to say -- to recognize that the -- and you said this many times, the economy is not the market. the market is not the economy. this may have a small economic impact but there is a deep impact on corporate earnings which is what will drive -- >> hang on because jay powell speaking this hour >> headlines crossing right now. jay powell the federal reserve chairman speaking at the economic club of chicago and said further gradual rate hikes are best to promote the fed goal and balance sheet reduction and he said so far is going smoothly
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and has a patient approach to fed rates and the risk -- even handedly about raising rates too quickly or slowly, so you don't hear powell forwarding and he said he seeds steady income gains and rising wealth and an elevated confidence and the market will expect inflation to pick up in a couple of months a comment on the job market, sees the strong job market drawing people back into the work force that is what he's focused a lot on he sees only moderate wage growth and it has picked up. the absence of strong wage gains is the labor market not too tight. so he is not looking at this tight labor market and seeing a reason to pick up the pace of rate hikes he does expect wages to pick up and he said the labor market is at or near the neighborhood of maximum employment we'll pick up the q&a on this speech in a little bit. >> which is interesting, further
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dig in on the question of three rate hikes and we'll take you there live as soon as the chairman starts taking questions and how the treasury secretaries comments are being checked and for that we go to rick santelli. what do you see? >> i don't see too much to be quite frank here i'm sorry i'm pulling out of shot just want to make sure, 279 and i think a neater way to look at this is that the first of the tariffs was spoken and addressed around midday on the first of march. okay so i'm going to go to the previous day settlement on some markets. which would be the 28th of february on that particular day, if you look at where the dow was and word is now we're down 3.6% from where the dow closed the preceding day before all of this came out i don't know if we're in a trade war i think it would be worth more than 3.6% ten year note yields now at 2.79 and they are lower and we talk about the vix and it is obviously proof that everybody is quite nervous about the trade war.
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the vix was 20.7 on the 28th, it is now 19.85 i'm not saying that all of this can't blow up or go badly. because it can but on the other hand, what is in people's brains that are truly potentially dealing with these issues outside of the light of the camera is unknown to most of us. and markets are forward-seeing streets bas street -- instruments and how this lined up for the wallet it doesn't give you an out come to policy that truly is kind of one off, tackling china on contracting the issues we've been so gracious globally for them to have them get to a point to help their people so i think that is important as this issue is. i really do think that we're making more out of it and i think even the market seems somewhat okay with it. that isn't a rubber stamp in any regard as to how it will all turn out one thing i could say for sure,
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if you really want people to feel some inside knowledge of this policy, send larry kudlow on the road more >> good idea we'll take him rick, thank you. i don't know -- i don't know how okay markets are we're still looking at 1% decline and what i learned from the treasury secretary interview is the president has competent spokesperson when it comes to defending the policy he took a lot of tough questions an explained them and did a good job and that is his job. he has to defend the president we got the deregulation and tax cuts and so good for the economy and the markets. and i think they'll have a tough time continuing to explain this if the pressure continues to build on both sides and the tensions continue to heat up. >> so it looked like we had a conflict between katie and joe why the market down. is it down because of trades -- >> and industrials were the worst performers this week. >> i'm not sure they are that
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different. when we had peter book var on this week who said, when you start to remove liquidity from the market, it becomes vulnerability. and i'm not sure joe is wrong and if you go back a year ago and the fed is active and qe is very active, would you get the same reaction in the market, i'm not convinced. >> but the first bout of volatility happened in february before we were worried about tariffs coming down the pike so the market is assessing risk, risk from rising rates because of the fed, risk from a potential trade war and they're re-evaluating valuations and it is no coincidence that a stock like boeing sees a big decline -- >> because of the technology -- it was very high. >> relative to its historic evaluation -- >> and technology performing low. >> it makes the bad news sting more maybe >> coming up, how the u.s. dollar is reacting to the potential trade war with china plus a lot of what we buy is made in china. so what kind of impact will the
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tariffs have on the retail industry and capture opportunities. we enable you to reach global markets much more "power lunch" coming up much more "power lunch" coming
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back to trade and the growing fears that the job owning and tough talk on tariffs could have an impact on retail here now is steve oddland president of the committee for economic development and former ceo of office depot and auto zone good to have you here. we just had the secretary on and his intention is said they will not want to get in a trade war are we there already in your opinion? >> no, i don't think so. and the secretary ross said the same thing so everybody is out saying, look, we don't want a trade war, we're not in a trade war and we won't have a trade war and every time the markets burp burp and then a couple days later they fire the next sal vow and the world is not accustomed to seeing -- anybody would dealt with commercial real estate
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developers is used to this negotiation but it is a lot of bluster and it is rattling the marks but i don't think they want a trade war they're committed not to have it so the question is then how is it going to affect the trading partners because they don't want a trade war either. >> say you are the ceo of office depot once again, i would imagine they bought some stuff from china would you be worried -- i understand that we can say it is not a trade war, et cetera but if you are in the sweet suite and plan for things and foresee the potential that could royal your business, would this be one of them. >> look, as retailers, whether you are amazon or bricks and mortar, you don't have any choice where your stuff is coming from. so most of what we're -- selling seems to come from china not all but a lot is coming from china. so both sides are intent on not having a trade war so all of the ceos in the retail industry talking to the
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administration behind the scenes and i've heard of it and they are saying please don't have a trade war and saying there is unfair trade and china has been very unfair about this so pleaseaddress that. so it is a dichotomy in terms of short-term versus long-term. i will say that most of the purchases are done way far in advance. so we're talking six or 12 months in advance. prices are locked in so if there is some sort of gap in it the trade situation, it is not going to immediately ripple through the market and it won't affect supplies, just a matter of price and probably would be down the road but i don't think anyone who is very close to this actually expects there to be a true trade war. >> whether the tariffs go into effect or not, steve, do you worry at all about the reputation of american products? we've heard for instance on social media bashing of made in america already, do you think there will be damage done to consumer brands and other
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american brands and in overseas markets like china which is such a source of growth for so many american companies. >> i think you are hitting on an important point which is brand america. not just american brands but brand america and what i hear from european and asian ceo's and more european and lastin america than asia but they are saying this is damaging the u.s. it is viewed that america is causing this in fact, though, it is china who has been doing the bad behavior for a number of years. u.s. business people, european business people have been saying it so it is interesting that the impression is that it is now currently being caused by america. remember, also, the eu started the tariffs back last may and the tariffs are higher than the aluminum and steel tariffs so they took the first shot saying that it was totally unfair and we were later in that so impressions are not necessarily reality and impressions matter but i think this is -- this is hurting
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america so i think they are not accustomed to this style of negotiations or diplomacy. they are more comfortable -- we are in the business world. >> they are not diplomats. like you said, he's a real estate developer from new york city raised in queens. it is a very different style you talked about all of the stuff that retailers import from china and one of the complaints is the reverse direction how about with wh retailers want to go into china and establish stores are they force to do joint venture and handing off back information in a way that is taking away the intellectual property that is one of the criticisms that we hear about investing in china. there is no reciprocity. >> that is what u.s. business people have been facing for the past three decades, two decades intensely. where you are forced to go into a joint venture if you wanted to go into retail, you were charged astronomical rates for rent in those locations -- >> and that is still true today?
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>> it is less -- it is less true today because they have allowed wholly own subsidiaries about but we are still losing over $100 billion worth of ip so there is concern about ip protection in the technology, not so much in retail or soft lines and that sort of thing so these are real issues american business people have been complaining about and the administration is trying to deal with it in the way they think best what they say is, look, we've tried it the diplomat way for the last several administrations and nothing has happened and here we are to try it differently but don't want to give away the negotiation tactics but secretary mnuchin didn't say ignore the man behind the curtain and this is just negotiation. he can't say that. but these are negotiation tactics. >> i will say something that will get a lot of flack on social media but what the heck. >> bring on the haters. >> what the heck, steve. it is interesting that everybody said china is forcing u.s.
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companies into joint venture to do business in china they are forced to hand over the secrets. it is terrible that we are losing that much money in intellectual property every single year. s an american i'm against that but at the same time, nobody forced these companies to go into china if they thought the deal was so bad, they wobts ha-- they won'te gone in. isn't there a level of irony, do you think gm would say i'm not going to make cars in china and sell in china, because i have to be this china through a joint venture? >> no, the allure of 1.3 billion people is nothing to ignore. >> and the companies have made a lot of money. >> every company is differentch but they lost a lot of money for a long period of time. they are making money now. we've graduated to more of a level playing field than we ever had before even though it is still unlevel, it is more level than it has been before. so you are right, and it is a
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huge market, it is a developing middle class and ripe for american products and we want more of it but if we're going to have unfair trade through this thing, it is not good for the long-term. so people are saying let's fix the long island a-term and taket now. >> and that was the message today. thank you, steve good to have you on. so as we've been talking about all morning, president trump saying he wants even more tariffs on chinese product and creating a huge backlash there eunice is live in beijing for us >> reporter: well what we've been hearing here is something that is really surprising because the -- today is a chinese national holiday and most chinese are out there sweeping the tombstones of their ancestors. sots fa-- so the fact that the commerce ministry scrambled today a press briefing on this day is highly unusual and goes to show just how seriously the chinese are taking this
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response this is what they had to say today. the congress ministry said china is well prepared if the u.s. releases its new list of $100 billion in products, we'll immediately fight back without any hesitation we won't rule out any option the ministry also wanted to clarify the two sides were not having behind the scene negotiations as has been suggested by washington on the trade issues the ministry said china has noticed negotiations from various american officials but this is not what has happened. recently u.s. and chinese economic and trade officials haven't had any negotiations on trade issues the ministry at the press briefing was asked what they would do if things escalate and they said with our bottom line in mind, we are prepared for the u.s. to take further action and have drafted detailed counter
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measures the chinese are always serious minded and if we say we're going to do something, we will and that is the type of resolve that we have seen in the state press over the past several days the messaging has been that the chinese will really hunker down and be able to survive any trade war that is started by washington >> it may not be a trade war but it is already a war of words thank you. live in beijing. so while china is locked in a trade war with the u.s also a major player in the global supply chain as the world watches, the two largest economies go back and forth competing with tariff packages what will the impact be on the global currency market and joining us from the floor of the new york stock exchange. glenn wynn when this is a first area to look at when we get the threats back and forth, especially when they lap after the stock market is closed and it has been sell the dollar why is that the trade when trade
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tensions heat up >> well, when you are the country the source of all these tensions and turmoil, it is hard to make a case for buying your assets i'm not saying it is a disaster for the dollar, for u.s. assets but to me there is no compelling reason there is one thought that there is tariffs in the u.s., prices will go up and the fed will be hiking more. but i don't buy that we've had officials saying, look a trade war is uncertainty in the economic out look. so it is ral -- really not much to hang your hat on in the dollar rally in the aspect. >> but here is the thing, when they cut taxes and it was good for the economy, we didn't see a strong dollar reaction i was confused by that i thought we would see an even stronger dollar until this whole trade situation -- and it didn't seem to be responding to what everybody thought was a strong economy. >> that is right again the fed is has been clear -- before the whole trade tensions, the fed is clear they are going to hike three times --
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three or four times next year and the market is believing them so that should lead to a stronger dollar but i think the uncertainty and the tour oil out of the u.s. is weighing on the dollar investors like predictability and transparency and that is something we're not getting from the u.s. officials right now to put it mildly. i think one thing -- >> i was going to say the weaker dollar is helpful for the exports and trade policy >> yeah. >> i just want to -- >> one thing i'll say -- >> while we have you, we're limitedond time. about the chinese currency there are threatens that china can sell treasuries or devalue the yuan and it rattled markets including u.s. stocks. is that a big threat >> i would say that is a nuclear option everything is on the table but at this point china is happy to go tit for tat in trade the chinese officials don't have the same kind of con trastraints
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that the u.s. does and not facing mid-term elections and they don't have to answer to soybean and pork farmers in november so for now this is -- i think the preferred method to me the selling of treasuries weaking the currency, treasuries, that's a nuclear option i don't think we're anywhere near that, but the way things are going, it's not good and not good for markets very bad for emerging markets. any pressure on global trade, if you're in the emerging market, you're on the front line i'm nervous about e.m., despite my negative, somewhat negative dollar view. >> win, thank you. win thin joining us from the new york stock exchange. we want to check on the markets. right now, we're at session lows it appears the market is responding to what jay powell is saying in his prepared remarks his speech indicating he thinks the economy is still strong enough for rate hikes in a path the fed had already been on. the pay roll number earlier today threw into question whether or not the fed would be
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full steam ahead with its planned rate hikes, and the market took some comfort on the back of that, but here we are, we have the s&p down by 1.75%. the dow is down 500 points, two full percentage point drop, and nasdaq down by 1.7%. steven mnuchin, the treasury secretary, whom we just spoke to, also said effectively he wouldn't say this wasn't the start of a trade war, either, opening the possibility that the administration could be embarking on one which could be another reason why the market is jittery. >> he made it clear they were committed to affecting change in china's behavior and that means that things are going to get more difficult before they get easier, right? it's that simple >> they continue to go with the line that we are hoping for negotiation here instead of actually seeing these tariffs. one big question for powell, and we'll take the live questions, can you continue your trajectory of raising rates as trade tensions rise? when does it become a sentiment problem? when does it become an impact on
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the economy? hiring has been good could this impact hiring decisions by executives. capx has been up spending on capital equipment. >> at the same time, tariffs can be inflationary. so they conflict those two goals they have. >> it could complicate the first year as chairman >> the yellen fed was always plugged into what the markets were doing and actually let it be one input in policy making it would be interesting to see the powell fed also takes what the market is saying about what is going on, the economic situation, the tariffs, and plugs it in as well. >> i would think so, wouldn't you? not even an economist, he's a banker >> he would be even more intune. >> the man who appointed him in his role pays close attention to the markets as well, president trump. >> industrials the worst performing sector right now, at market lows, followed by financials, health care. all weak, so we'll be continuing to monitor this. and of course, as sara mentioned, the fed chair is about to take questions from the
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audience at that event in chicago. we'll take you there live, and we'll take you there live, and that's next on "power lunch.ant. and if that's not enough... we should move. our home team will help you every step of the way. still not enough? it's smaller than i'd like. okay... then we'll have her cleanse your house of evil spirits. we'll do anything, (spiritual chatter) seriously anything to help you get your home. ally. do it right.
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the board. all 11 s&p 500 sectors are lower right now. industrials, financials, and health care are all leading the declines all 30 dow stocks are also lower. and that is being led lower by caterpillar, boeing, nike, and goldman sachs. 2% declines there across the board on all of the major averages >> don't move because we have a potentially market moving event coming up. we're awaiting fed chair jerome powell's q&a, and we'll bring it powell's q&a, and we'll bring it to you live when it happens. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. you set it. nasdaq. rewrite tomorrow.
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welcome to the second hour of "power lunch. a big day on washington and on wall street. we have team coverage of the stories moving your money. plus, bob pisani watching the markets which are taking a big hit today. also, fed chair jerome powell is about to take questions. we'll take you there live as soon as it begins because it appears his comments did move the markets moments ago. let's get to bob pisani. what are the traders saying? >> melissa, we did indeed take a leg lower at 1:30. let me show you the s&p 500. we had mr. mnuchin on at the same time, he talked about the
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potential for a trade war. not his preferred outcome. mr. powell's written testimony came out, much more important is the q&a. we'll keep an eye on that. all throughout the day, two sectors, financials, industrials, have been underperforming the market lower rates, bad for bank stocks regional banks have all been weak sitting near the lows for the day. down 2% or 3%. sun trust, zions, same situations, boeing is basically flat, slightly up on the week, but all these names, again, clearly moving in relation to trade and tariff issues here defensive names, generally doing a lot better, but that has been the case all throughout the week where you have companies like campbell's soup, pg & e, all doing better defensive names in the dow this week, all are fractionally to the upside mcdonald's, koch, j & j, up. on this whole issue about what has been causing the drop recently, issues on the fed or trade and tariff
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i would point out, it's true the jobs report numbers and the wage inflation was the initial cause for the drop in february, but it has been extremely choppy ever since the steel and aluminum tariff talk picked up. and on days when you get a lot of discussion about trade and tariff issues like today or yesterday, those are days that are much more volatile the intra day swings are higher. i have to say, it's pretty clear the trade and tariff issues move the markets on an intraday basis when they're topics of conversation >> a good chart. thanks, bob. >> president trump ramping up the trade rhetoric again, and in the last hour on this show, treasury secretary steven mnuchin trying to talk down fears of a trade war kayla tausche is live in washington with the latest >> the treasury secretary described the president's unpredictable moves on trade as part of a larger strategy, exerting more pressure on china and extracting better terms in private talks.
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he said repeatedly he's in communication with china but declined to say where the negotiations stood currently >> president trump is actively involved in these discussions with me and ambassador lighthizer and others. on the one hand, we absolutely are willing to negotiate and not get into trade wars. but on the other hand, the president is perfectly willing to defend interests. so this is a very clear strategy >> challenged about the noticeable declines in industrial and agricultural stocks and whether the marked is interpreting this as the beginning of a trade war, the treasury secretary said this >> i didn't say it's not the beginning of one i said we're actually not in a trade war. so again, right now, we have initiated a plan the tariffs will take some period of time to go into effect there will be public comments. so wile we're in the perio before the tariffs go on, we'll continue to have discussions
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but there is the potential of a trade war. >> the secretary said instead of focusing on the negatives of retaliation, we should focus on the positive investors looking at both. back to you. >> thank you >> fed chair jerome powell is taking questions right now after his speech to the economic club in chicago let's listen in. >> i think in our conversations, we have lots of conversations with business leaders around the country in preparing for a meeting to help us think about the state of the economy we did hear from a number of business leaders around the country that changes in trade policy had become a bit of a risk to the medium term outlook. you know, to answer your question a little more directly, you know, tariffs can push up on prices but again, it's too early to say, to really say whether that's going to be something that happens or not. >> so another area that can affect gdp growth and inflation,
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specifically wage inflation, could be immigration so how does that factor in to those as well? >> i think it's been hard to find a connection between immigration and wage inflation, actually people look for that, and it's not easy to find in the data i mentioned, you know, that the labor force is growing very slowly and you know, if you look around the country, these days, read the newspaper, there are a lot of states that have unemployment now below 3% you're reading more and more about labor shortages. again, people have looked for that connection between wage inflation and immigration. i haven't really seen it >> let's switch gears to regulation so both houses of congress are working toward dodd/frank type rollback how might these deregulatory efforts impact the economy, and what risks do you see? >> well, let me start by saying that in 2008, 2009, we had a big shock to the financial system,
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and the financial system really wasn't strong enough to hold up against that shock and had to be, a number of institutions needed to be bailed out by the government, so we set to work to make sure that doesn't happen again. and we look back now, and we've got a much stronger, incomparably stronger financial system with higher capital, higher liquidity, better risk management, and better governance, and all of those things resolution planning. so we feel good about the strength of the financial sector now. but the time has come where we can now look back over that handiwork and ask ourselves, are there ways we can be more efficient about that, particularly for small and medium sizes institutions. we're looking at smaller institutions and working our way up to the larger institutions and asking if we can make things less burdensome without undermining safety we're doing quite a bit of that, and you mentioned the
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legislation that's passed the senate the sense of that is that for certain institutions, whose failure could threaten the financial stability of the united states, we have the legal authority to impose what are called enhanced prudential standards on them. the threshold was set at $50 billion. there's wide agreement and it has been the fed's position that's too low an institution of that size is not likely to threaten the financial stability of the united states. so congress is looking at raising it to $250 billion, but giving us the authority we need to reach below $250 billion, and we don't write these bills but we have told them that that does give us the tools we need. >> so i told you on the phone, i recently elected board member of jpmorgan and i have not gone to my first meeting, but i have been immersing myself in lots of materials around banking regulation for fun and one of the things that i
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noted is that there is, when it comes to the regulation of large banks in this country, so we have been dealing with, i think the words you used in one of your documents was clean-up. we're doing with some of the legislation on the smaller end on the big end, there's a gold standard on banking regulation that affects the big companies my question is, does that gold standard foot what the rest of the world in terms of the standards that are there, and do you believe it could potentially, that gold standard, which is truly a gold standard, could that disadvantage the big american banks in any way? >> first, you're right our expectations of the largest, most complex systemically important firms are the highest, and they're very high. and they're going to remain very high is it -- so as you look around the world, u.s. banks are competing very, very successfully they're very profitable. they're earning good returns on
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capital. their stock prices are doing well so i'm looking for the case for some kind of evidence, and i'm open to this, some kind of evidence, though, that regulation is holding them back, and i'm just not really seeing that case as made at this point. again, we're -- you know, we're open to what evidence comes in >> so there's been a lot of discussion about the deficit we have seen very rapid growth of the national debt since the beginning of the century and a large producted budget deficit going forward, so we have increases in projections. what are the ramifications for this borrowing for the fed policy and the u.s. economy in your view? >> the u.s. federal budget is not on a sustainable path. that's widely understood and accepted we need oo do those things to put it on a sustainable path, and this is a good time to be doing that because the economy is strong. government revenue is strong
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this would be a good time to be doing that that's a longer run problem, though that's a problem associated with health care costs and with the aging of the population. you know, what the fed does is much more at a business cycle frequency. so that unsustainable is not an issue for us as we think about how to conduct monetary policy or financial supervision in the near term. it's more of a long-run thing. of course, we don't have a voice in fiscal beyond what i said >> but does it affect some of your groelth wth expectations >> only at the margin. when we talk about potential growth, we're talking about the next five or ten years really, if you look back at that chart, the u.s. debt to gdp the way we measure it is in the high 70s and it's going to move up to 100% in the next two decades it's a bit further out it doesn't today affect what we think about potential growth over time, it will be very
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important. it's something we need to address as a society >> do you think we take a long enough view in some of these assumptions? i come from a company that has a turtle as a logo i hear that in china, they talk about quarter centuries and we talk about quarters. do you thing that that five or ten-year look is the right look at this point? >> well, so we're the fed. and our job is stable prices and maximum employment and we have the tools we have, and the financial stability has always been a part of our mandate. so that's kind of our -- i mean, from the fed's standpoint, that's our job as a society, it's a good question democratic societies have performed well over a long period of time even though there is a fair case to be made that there's some short sightedness associated with the election cycle. nonetheless, i remember -- when i was young, i remember clearly people were very worried that russia with its planned economy, we just can't compete with that.
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well, maybe not. so - >> you talked about stable prices as one of your key areas of focus and we have talked about inflation. i wondered how do you think about inflation being affected by the web so specifically, people talk about the amazon effect. you obviously in china, you have alibaba. in many ways, the ability to comparative shop in most everything has driven prices down companies used to brag about pricing power. and now companies in many ways you talked about the cell phone bills as an example, are trying to show and trying to create more accessibility and affordability in order to expand their client base. so what role does the online aspect of our economy, which didn't exist in this way 20 or 30 years ago affect some of this inflation conversation
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>> you know, it makes all the intuitive sense in the world that the ability to price shop like that would give price setters a bit of a pause in raising prices and it may very well be part of the psychology of our time it just makes so much sense. it's very hard to prove it to the economists you have to be able to conduct some kind of natural experiment where or to look at a place which didn't have the web and then did, and you can see how that is. so it's very hard to prove that. but i have to say, it's -- it almost has to be true. i also think the other one that we think about a lot is globalization. we know now that pretty much anything can be made, anything physical can be made in a very cheap labor location, someplace around the world, that has to somehow overhang price setting in advanced economies and here in the united states again, it's very hard to find it, though, because it's hard to
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prove it intuitively it feels like it's right. >> so i want to ask you about the fed itself in terms of it's so, in many ways, mysterious to us and hard to understand. someone likened it me, they said it's like the supreme court in some ways. we know it's super important, but the actual match nashzs of it every day are a little ephemeral. let me ask you a very specific question of you. what is the difference and how does it feel different to be chair versus a member? you have a been a member since 2012 >> yes you know, so i have been there for almost six years and you know, i know everybody, and they know me so in a sense, and i have done all the jobs i chaired most of the committees during my time, so it's very natural transition, very comfortable. but it's a very different job. it's a very different job. so i chaired the committee that oversees the reserve banks and the boards operations and the committee that oversees supervision of the banks and the one that oversees the payment
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system i handed all of that off, so my focus is on the economy, monetary policy, and the institution. so it's a much -- you know, it's a different thing. >> so you're sitting at your desk reading and thinking? how does that -- how does that actually come out in a day-to-day - >> i actually do have more time to read and think. it was common when i had all those jobs, it was common to have eight or nine hours of meetings a day >> wow >> it was crazy. but now, i don't have eight or nine hours of meetings, but i have lots and lots of time to read and think and talk to people and actually, alan greenspan famously said that you should set aside a significant amount of time for reading and thinking i thought, i wish. then i went into the job and i realized, it's there to be done. >> let me also ask you, the fed somehow is not like the rest of washington that we're hearing about today. we don't hear about back biting. we don't hear about leaks. we don't hear about drama in the
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fed. how is the governance structure really lending itself to the kind of collegiality and consensus nature you have? >> the culture, i love working there. i love this culture. really, it's nonpolitical. it's not bipartisan. it's apolitical. so people bring their best thinking, economists, noneconomists bring their best thinking to these things it's very collegial. there's a strong shared sense of mission among people who work there. and you know, a lot of smart people working really hard on these problems just admitting there's tremendous amount of uncertainty about the economy, so it's -- i find it a really great place to work and you know, also, the things that we do are important they have real effects on people's lives we're very, very mindful of that, and feel very fortunate and honored to have those jobs so that's what the culture is like and it's kind of always been that way i gotta say, i really like it,
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and i'm proud of to be part of it >> what could make it better >> well, the thing we're always working on is to become more diverse. i'm a big believer that you get better outcomes when you have diverse views around the table and my private equity career, i always felt like the best thing you could hope for is to have somebody really smart tell you why this is a bad deal before you invest $300 million of the client's money on it before much better than after and you know, so we get that with the reserve banks, they have their own, 12 reserve banks, they have their own economists, really good top economist staffs they come in with their own views. that's really healthy. we also work hard to have other kinds of diversity, and i really think we're working very hard at it and you know, you want to get people in who are diverse. you want them to have a real shot you want to give them the training and support they need, you want to hold on to them, and you know, i think institutions
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that succeed at that have a plan and a strategy, and they stick to it over a long period of time i have seen that work for a lot of private sector companies over the years, and that's our strategy >> ladies and gentlemen, not enough time. so many questions. but please help me in extending a very, very warm thank you. >> fed chair jerome powell wrapping up his comments at the chicago economic club. the markets have taken a leg lower. let's bring in tom, and chris wolfe, chief investment officer with first republic private management, steve liesman here as well. chris, we're getting weaker and weaker by the moment why? >> a combination of things the first is it's friday still winter vacations going on. not sure people after all the news want to be long going into the weekend. number two, looks like we're going to get higher rates, maybe even a bit higher not only this year but next year as well that brings in the cost of alternatives >> you got that from jay powell.
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>> just now. and the last piece is the trade issue. it's likely if nothing stops to get a bit more asymmetric. >> what do you mean? what does that mean? >> you made a point earlier on the show that we're going to run out of things or chienga will run otoff things to create tariffs on only $130 billion of tariffs on. >> tom, are you -- you think that's the correct assessment of why we are selling off again here on a friday >> yeah, look. i think we'll get it, right? and as we have been saying, we think this idea of trade will punctuate the backdrop for the foreseeable future people have to understand what it actually means. in a worst case scenario, you subtract about a half percent from growth. what i do know is basically subtracts all of the good from the tax cuts and even a little more look, if that's the uncertainty that the market is latching onto, which i would say is fair, that's fine. but i think you have to keep in mind, when the dust settles, if we do go down the worst case scenario with china, you're
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talking about a 2.5% trajectory instead of a 3%. >> steve, what we just heard from chairman powell, what stood out to me, he did mention tariffs. took a question on it, said they could push up on prices but it's too early to tell. we're not get aglot of urgency there. the fed seems determined to go on with its rate path. then earlier, we heard from steven mnuchin who made it clear they're willing to risk a trade war. he said maybe that's not the outcome we're hoping for, but this may go there. the lack of urgency and the sort of acceptance that we could get in a trade war with the second biggest economy in the world, that could be pretty worrisome >> i think so. i think that was interesting i also think it was still unclear, and i think i asked him three times and melissa asked another time, which is are there negotiations going on? he said there were communications going on. i think the market would feel a whole lot better if there were actual negotiations going on i wish they could put up a tale of the tape. i guess they have that up, kind of interesting what's happened this afternoon you had the market down a little bit on what mnuchined.
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i want to say it was call it 10 points on the s&p, and then another leg down on powell my take on powell is he didn't say anything we didn't know, and all i can think is it's like a double thinking, triple psychological backflips here on what the market was thinking was that there were some people out there who thought either the combination of the trade spat, war, battle, whatever you want to call it, along with the soft jobs report, might prompt the fed to be a little more dovish than they otherwise were what powell did is came on and said exactly what we knew already. and i think those people who had those hopes are not necessarily paying attention, because one thing i think we know about the powell fed and the yellen fed is this they're not going to front run fiscal policy or trade actions you'll note when the tax cuts were well in train, the fed did not move until after the tax cuts passed. i think they're going to -- they have the same attack on tariffs. >> i agree completely with
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everything you said. on top of it is i think the market was hoping, too, that the fed would acknowledge the increased volatility we have seen in the market, not just now but since february and input that into their tricks and make it even less as another factor as to -- right. >> i think they have a little bit. >> you think so? >> i can't remember which one, but a couple fed officials have noted, this is their euphemism for volatility, a tightens of financial market conditions. a couple guys have pointed out, that's their way of saying interest rates are up, and volatility is up and equities are down. a tightening -- they have noted that >> hasn't shown up in the data >> it showed up in the changes in market prices and market levels that's a factor. i think the fed is onboard or on track with these two rate hikes this year, and i think what we're looking for is major shifts in the data in order to
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alter that track >> i'm sorry, i would simply say to steve's point, it would take a heck of a lot to move the fundamental b al backdrop in a negative way we have been writing about this forever, it seems at this point. there's very little in the high frequency data that lends itself to holding anything other than a constructive view on the backdrop right now so i would say if that's what the market is waiting for, if that's what the fed is waiting for, i think that we'll be waiting in vain. we see, i would say it this way, i think 2018 is virtually locked down at a near 3% growth rate. 2019 and 2020 are totally different conversations. but if we're talking about the fed and their reaction function, i think it's easy for the fed to raise rates another three times. >> the stock market and the economy are not the same thing the economy might be okay, might be able to handle 3% rate hikes, but the stock market derives about a third of its economy outside of the u.s so changes in the dollar, changes in policy, tariffs, have
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a disproportionate impact on stock market earnings than they would on the economy in some industries it's incredibly large. >> i want to know who's going to take $100 out of their pocket right now and put it on the table and tell us by the end of the day, we won't be at zero or positive >> we could have a reversal. >> we could have a reversal. i have over the past several months had one idea for a story at 10:00 coming on air at 11:00, and the market has completely flipped on that -- in that time period this is a special time of volatility i don't know what's going to happen sbl special hours of the day on a friday ahead of a weekend. you really want to be long >> i think you're not going to put the $100 down. >> watch, question, but not conclude that's the way to think about it >> thanks, guys. tom, chris, thanks for coming in steve liesman as well. >> straight ahead, former u.s. treasury secretary larry summers win join us. he'll weigh in on mnuchis n' comments, tariffs, taxes, and much more. stay with us on "power lunch."
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breaking in the last few minutes, facebook rolling out new policy changes ahead of mark zuckerberg's testimony before a house committee on tuesday julia is live in l.a. with the details. >> facebook will require
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authorization for the purchase of any issue related ads and authentication of pages with tens of thousands of followers facebook is still working out the details of how it will authenticate and authorize >> mark zuckerberg writing these steps by themselves won't stop all people trying to game the system, but they will make it a lot harder for anyone to do what the russians did in the 2016 election and to use fake accounts and pages to run ads. consumers can expect a lot more disclosures, identifying political and issue ads as well as information about who paid for them this, of course, as facebook rushes out a range of changes ahead of zuckerberg's testimony next week. the latest attempt to show policymakers it has the platform under control. back over to you >> stem that tide of criticism thanks >> straight ahead, we'll take you to bethany, missouri, talk to the owner of a working farm on the impact tariffs could have on his business. power lunch is back in just a few mnltsz that's a live shot very cool, don't often see cows on "power lunch. >> get to hear them, too
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let's begin. yes or no? do you want the same tools and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts?say? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online.
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i'm courtney reagan and here's your cnbc news update for this hour.
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former south korean president was convicted and sentenced to24 years in prison on corruption charges. this comes a year after she was driven from office and arrested. she didn't attend the sentencing >> a teacher strike in oklahoma is now in its fifth day. and a state union leader says it may extend into next week. teachers demanding better pay and an increase in education funding for their classrooms the state senate is expected to consider different bills to generate $40 million to fund those demands. >> and ultimate fighting champion conor mcgregor escorted from the brooklyn police station in handcuffs on his way to a court appearance he turned himself into police after video surfaced of him 33ing a hand truck through a bus window he was charged with three counts of assault >> dunkin' donuts is testing a new $2 snack menu in the boston area among the new items featured, doughnut fries, because why not? customers can also order pretzel bites, chicken tenders and a
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gluten free brownie. that's the cnbc news update for this hour. back over to you >> sounds yummy. >> thank you >> stocks are selling off into the afternoon. we're near session lows. trade fears fed chair jerome powell and his comments hitting the markets and spooking investors. the dow jones industrial average is off its low, we had been off by more than 600 points. still, that's a decline of 2.5%. the s&p is down more than 2%, and nasdaq is lower than more than 2% or 150 points. all 11 s&p sectors are in the red at this hour with industrials, materials, financials the biggest loser caterpillar, boeing, if you're worried about a trade war, expect those at the top. nike, jpmorgan, also your dow leaders when it comes to declines >> also a lot of damage for oil this week. the market is closing for the day. let's go straight to jackie at the cnbc commodity desk. >> good to see you you can see crude oil prices down more than 2%, alongside the stock market today increased fears of a full-blown
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trade war, the lackluster jobs report this morning, two key issues we have been talking about this for the last few weeks crude's correlation to equities. that relationship is continuing here session high today was just under 64 session low, $61.81. breaking away from the $63 sticking point a little bit. if the trade war theme continues, expect crude prices to move lower even at a time where they should be creeping up for the week, crude off by about 5% >> thank you >> as we have been hitting, stocks near session lows as trade and interest rate fears grip the market. joining us, mark, president and ceo of the national urban league and the former mayor of new orleans. also with us, ron christie, the ceo of christy strategies and former assistant to george w. bush good to see you both >> good to be with you >> we got a headline number on jobs still, if you look at the average and the overall trend, it's pretty decent do you worry that this heightening and escalating tit for tat with china could weigh on what we have seen, which is a
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solid fundamental picture on the labor market >> that was for you, ron ron a ron, go ahead. >> there's several points to look at. for one, obviously, the jobs number wasn't as strong as we hoped. if you look at 2016, 2017, that beat any monthly average for the last two years i'm very much encouraged by the gain of manufacturing jobs and finally, the lowest number in the last 50 years of african-american unemployment. there's much to be enthused about. at the same time, as you just mentioned, with the ongoing trade discussions with china, which looks like this could turn into a trade war, also based on what secretary mnuchin said earlier, this does give me concern about what that would do for the longer term for our markets and our stability. >> mayor, would you agree with that assessment? >> this report concerns me, the job report kearns me greatly, particularly because construction lost jobs last month. and either this is going to stand as an aberration or the
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beginning of a trend of lower monthly job creation numbers so i'm concerned about it. i don't necessarily like this report secondly, i just want to comment on the black unemployment rate the black unemployment rate came down from over 16% down to just below 8% under president obama it's now come down about a point under president trump. it's not time to spike the ball. >> hang on >> the black unemployment rate is still twice as high as the white unemployment rate, and the black home ownership rate and the wealth cap are as bad as they have been in 40 years so you can't look at the unemployment rate and simply say that's a picture of the economy in black america >> well, it's at 6.9%. it was at 3.6% a year ago. clearly, there's more work to be done and it's not at the level of the broader unemployment rate, but with 58% of the african-american population at wurx, that's the highest we have seen in a long
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time there is progress as the job market continues to tighten, mayor. >> i just want to be clear that there's bane lot of talk about this that it doesn't tell the complete picture of what's happening. we're in the post-recession america. so i'm not displeased that the unemployment rate is down to where it is, but what i'm saying is still twice as high as the white rate and the other economic indicators, which are really important, the wealth gap and home ownership levels, are as bad as they have been for 40 years. i'll concede the point, but let's look at it in context. that's the important thing, not to isolate one number and say okay, good let's celebrate that, but to look at this in context. >> and just very briefly, to say to that, mayor, look, we can look at this in context, and we should celebrate it doesn't matter whether you're republican or democrat, we can look at this as americans and say this is a great statistic. this show ongoing progress, progress moving for years in the right direction, and i do
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believe that president trump's tax cut and the pro-growth agenda we see going on right now has also led to a decline. but i also can see the point - >> the problem, ron, a year ago, ron, you wouldn't give president obama an iota of credit for bringing the black unemployment rate down over 10% so i'm not going to take anything away from what's happened in the last year, but let's be consistent. with respect to this there is a lot of shared, if you will, credit for what has happened the fed policy brought this rate down president obama's policies let's look long term and see what happens now is the time to confront the more difficult issues of where the home ownership rate has gone, not just for black americans, but for all americans, and also this continuing problem of stagnant wages. that's my point. if we're going to have a serious conversation about the economy, we can't look at it in isolation and say, rah, rah, rah, spike the ball as low as it's been in 50 years. that's okay, but look at it in a
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broader context if we're going to have a complete discussion so the viewers understand what's really going on. >> it's an important point, and we have to leave it there. but thank you both for weighing in, as always. >> good to see you >> you too >> more breaking news out of the white house. eamon javers standing by >> sarah huckabee sanders just wrapped up her briefing here at the white house. she was asked about the stock market decline we're seeing this afternoon. asked whether or not it gives the president any pause to see the stock market down, at that point, more than 500 points. potentially as a result of his actions. here's what she said >> we're focused on the long term economic principles let's be clear, the tariffs that we're talking about with china have not been implemented and are month away the president has cleared the way for a strong economic environment through the tax cuts, through deregulation we're going to continue pushing forward on long-term economic principles, but at the same time, we're not going to allow a
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country like china to continue to have these unfair and illegal trade practices. >> sanders was also asked whether or not the president bears any blame or thinks he bears any blame for the stock market declines that we have seen so far this year. she didn't want to respond to that question. she said simply that the president has been responsible for the strength of the overall economy. i can also tell you that larry kudlow, the new economic council director held a brown bag session for reporters in the roosevelt room just before the sanders briefing he had a lot to say, including he said he's not a tariff guy. he said the president is a free trader but he said ultimately, sometimes tariffs are necessary. he defended vehemently the president's actions saying that the chinese simply need to be dealt with the ip theft over decades was not dealt with proermently, and in the long term, the united states simply has to deal with it, saying china is now a first-world country, not a third-world country anymore, and he said they need to start acting like one.
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kudlow very confident today, said it was day five, but joking that he wants to beat anthony scaramucci's 11-day tenure he said skaur mucaramucci is a u he has to beat that. >> there are headlines also that kudlow is estimating the china dispute could be resolved in three months, which seems like a curious statement to make given the treasury secretary was on the air saying the negotiations with china have not yet started. to put a timeframe on it when nothing has gone on between the two parties seems bizarre. >> kudlow saying two things simultaneously one, he was asked is the president bluffing he said definitively, no, the president is not bluffing here he also went out of his way to point out there are no tariffs currently in effect. there may not be any tariffs at the end of what he called a process here kudlow seeming to suggest that this is a negotiation with the chinese between the president and xi jinping, and they hope to have a more satisfactory
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outcome, kudlow said he said the administration found the chinese response to the initial round of proposed tariffs to be unsatisfactory so clearly, there is a lot of politics going on in this geopolitical and geoeconomic debate >> absolutely. now we're looking at the dow, down almost 700 points stocks near session lows across the board. treasury secretary steven mnuchin coming on the program, defending president trump's proposed trade tariffs and that hard line he's taking with china. now joining us on the cnbc news line to react, someone who has been in the chair in mnuchin's shoes, larry summers, former treasury secretary under president clinton. thank you for joining us >> very good to be with you. >> you called these tariffs dangerous. what about the fact that treasury secretary mnuchin did tell us that there's a possibility, but that's not the objective, having a trade war, and he hoped negotiations would continue with china, that president xi and president trump have a very good relationship. and that he's cautiously
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optimistic >> well, i'm glad he's cautiously optimistic. unfortunately, most outside observers to the administration don't share his optimism you can see that in the markets over the last ten days, whenever it looks like the administration is pushing ahead more strongly with its policies, the markets collapse a bit and when the administration looks like it's retreating, the markets rally. usually it's not a good idea to have policies whose abandonment is happy news for those trying to judge the future of the economy. look, there are real problems with china but the right way to take those problems on is together with other nations. not in a way that is so truculent, so inconsistent with international norms that we drive the rest of the world to siding with china. which has been the effect of the
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approach that has been taken here and not to do it in a way that damages the interests of more american firms than are helped the problem is that the tariffs we're going to put on are tariffs on inputs to what american firms produce, steel into cars, for example so when you put a tariff on an american firm's importing, but there isn't a similar tariff in germany or korea, you make the american firms less competitive, not more competitive so this is a policy that's in the stop or i'll shoot myself in the foot category. >> the counterargument could be it would bring the chine to the able, and every administration has wanted to level the playing field with china, but it's not like president obama was successful in bringing china to the table. >> really? why do you say that? can i just ask why you say that?
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china has 8% of gdp trade surplus, and that was identified by the united states and by observers in both parties as being the major problem with china. and china reduced that 8% of gdp trade surplus from 8% to 1.4% by more than 80%. so i don't know why one would regard that as having been ineffective. it did that by working globally through diplomacy, to bring pressure on china. >> i guess i'm referring to the -- i'm referring to the fact that american companies still complain about the i.p. theft and other problems with doing business in china, how the chinese state favors their own companies, for instance, makes them enter joint ventures when it comes to doing business in china, and the list goes on and on >> we certainly have not resolved every dispute with china. we had identified five years ago the trade surplus as the major
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problem. president trump talks constantly about the overall trade balance. everyone except president trump looks at the global surplus rather than just the one that's bilateral, which is pretty misleading because of trade through hong kong and other things but yes, we have intellectual property issues. no question about it so do the europeans. so do the japanese so do other asians, and if we approach the chinese collectively, in terms of our common interests, threatening common consequences for the chinese, we would have an effective strategy but when every time we make a threat, our own stock market collapses, kind of seems unlikely that's going to be a lot of leverage against the chinese.
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>> i'm interested in that reaction that you bring up about the markets. it confuses me a little bit, mr. secretary, because the europeans actually did big time tariffs on steel last year and there was no crime i'm not even sure we talked about it a lot yet this time around, it seems the u.s. is going it alone, when actually, the whole world seems very, very frustrated by the overcapacity in china. all the things you suggest, it feels like that's what we have been doing for 30 years, and those issues of reciprocity, of i.p. problems, still exist >> i don't know quite why you keep saying that it has all been a failure. let me go back 8% of gdp surplus reduced to 1.4% that does not feel like a failure to me. huge increase in american
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exports to china that does not feel like a failure to me. >> but still smaller than to most other european countries. and sara kind of answered this question, but again, the lack of reciprocity, the forced jvs, the intellectual property transfer those are things that everybody is still very frustrated about >> there's no question there are real frustrations. but if you ask, for example, if you ask the major software companies how much theft there is of products like microsoft windows, they will tell you how much theft there is of disney movies, they will tell you that there's much less than there used to be this idea that we have accomplished nothing just doesn't square with either the macro figures or the experience of a number of individual industries do we need to do more? absolutely, we need to do more do we need to keep pushing yes. but this is the first time when
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we have started making threats that seem to be boomerangliing against our own economy. the stock market is boomeranging against our own economy. the ceos suggest they're boomeranging against the u.s. economy. the representatives of even the republican representatives of the heartland of our heartland of our country, the north central manufacturing protest. >> with the markets down nearly 700 points, certainly, they agree with you on that boomerang effect thanks so much for joining us. we really appreciate it. sorry to cut you off >> we do have a lot to cover, including this market sell-off right now, we're just off our session lows the s&p 500, this is worth noting, 2593 is the 200-day moving average we're just hovering above that that's going to be a key level to watch into the close today.
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the dow jones industrial average down 693 points. 2.8% is the loss s&p down 2.6%. nasdaq is down a loss of 2.4%. straight ahead, a look at how the trade war is playing out down on the farm we have cows for you here on "power lunch." my time is thin, but so is my lawn. it's been worn down to ugly thin grass!
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so, markets are continuing to sell off. we are off more than 700 points, 23,794, below the 25,000 level for the dow jones industrial average. we're looking at a decline of 3% investors continuing to react to fed chair jay powell's fed rate hike and increasing tensions joining us live from his missouri cattle farm is casey
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guernsey good to have you on, sir >> thanks for having me. it's a little chilly i apologize. >> cattle farmer tell us, china is threatening tariffs on u.s. beef they only just started buying it back in june after a 13-year absence. how important is the chinese market to the beef industry in the united states? >> well, yeah, i mean, right now any market is a very important market we've not had our beef available to the chinese for a while i believe we've sold about $31 billion worth of beef since it's been open. it increases every moo considering all the negotiations and talks taking place surrounding nafta, we can't afford to lose any trade partners and that's only ever going to be increasingly important because we have such a high number of cattle right now in the united states to be put on the market >> you are a former republican
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member of the house of representativ representatives. republicans used to be pro free trade and now the message has gotten a little more muddled what do you -- if you were back in power in congress, what would you think right now or how would you vote if there was something to vote on >> vote on nafta, is that what you meep >> on anything related to tariffs that would increase pressure on china. >> so, i own part of an organization called americans for farmers and freedom. and we're very much in favor of renegotiating nafta. that's where we want the focus to be. we're not in favor of more of these retaliatory sort of tariffs that are being considered and talked about. we support president trump and his efforts to increase income to all americans we've seen it here on the farm with tax cuts, with reforming a
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lot of the regulations we're not in favor of continuing down this path of increasing any tariffs on products because we're going to feel it in real time on the farm very quickly. where we think there is progress to be made and where the focus needs to continue is on these talks with -- on tariff because our trading partners with canada and mexico is worth millions of dollars a year >> got it. thanks so much for joining us. same last night as a famous type of cow good to have you on. >> thank you we've got much more on this market selloff when we come right back the dow is now down 700 points the s&p 500, by the way, just under the 200-day moving average by half a point. by half a point. all 30 dow members lerow
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feel that? that's the beat of global markets, the rhythm of the world.
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but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. stocks continuing to sell off this afternoon let's head straight to the nyse. kenny, you were on with us earlier in the week. you said, be patient, be calm. are you still feeling calm dow down 700 into the close. >> i said that on wednesday when the market was rallying. i said patience is a virtue. we're on friday, into the weekend. we started out negative this morning. mnuchin's comments certainly didn't help the market at all. i'm not sure jay powell's
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comments had any effect because he said everything we've already heard, right the wage number was not out of line so, therefore, he just reiterated his comments. i think this is all a direct of trump's chatter overnight, mnuchin's comments, yes, there could be a trade war when for weeks they're saying, no, there could be a war and he comes out and says, yeah, there could be a trade war now we're going into the weekend and there's risk-off mentality there's not a lot of volume. when you get comments like this that are made, the algorithmic trading, the buy side drays up when the sellers come through, the stocks get pushed further than they should i'm not necessarily sure it's going to be the end. i just think we're still stuck in this trading range. we're just about to kiss and test support once again and that will be key. >> looking at some of the other markets here, the dollar, it's off a little about half a percent against the yen. treasury yields are a little lower.
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thank you, kenny guys, it's not necessarily the huge risk aversion we are seeing most of it in stocks >> off more than 700 points again. wow. what a week, month >> thanks for watching "power lunch reque lunch. >> "closing bell" starts right now. >> announcer: this is cnbc breaking news. market selloff >> yeah, quite a selloff it is hi, everybody. welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> i'm wilfred frost good afternoon stock sinking down more than 740 points at the low of the session. we're just fractionally above that level at the moment now >> exactly this has just happened in the last hour or so. we can attribute it to maybe some comments coming out of the white house. we'll get to all of that, though let's see where we stand the dow and s&p are having their worst day in two weeks with nearly 3% drop for the dow down


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