Dow Tumbles After Trump Tweets On China And Federal Reserve Chief; E.U. Leaders Holding Jair Bolsonaro's Feet To The Fire Threatening To Block A Trade Deal Unless He Takes Action To Protect The Amazon; Stocks Tumble as President Trump Lashes Out at China
ZAIN ASHER, CNN INTERNATIONAL HOST: The market has been on a downward slide ever since around 11:00 a.m. this morning after China and now $75 billion worth of tariffs on American cars and also you now have the U.S. President asking American companies to look for alternatives to China. Stocks are deep in the red. The Dow is off 550 points near the lows of the day. This is what investors on watching. A major escalation in the trade war. President Trump is pledging to respond to new Chinese tariffs this afternoon. And an extraordinary Twitter assault on the Fed Chief, President Trump asks if Jerome Powell, his own Fed Chair is a bigger enemy to the U.S. than Chinese President Xi Jinping. And taking action on the Amazon. European leaders threaten to block a trade deal with South Americans unless Brazil protects the rain forest. Live from the world's financial capital here in New York City. It is Friday, August 23rd. I'm Zain Asher in for my colleague Richard Quest and this is QUEST MEANS BUSINESS. Hello, everyone. I'm Zain Asher. We are in the final hour of trading, a day full of market moving events. The losses are accelerating as I speak. The Dow is off more than two percent. Volatility is way, way up and market sentiment is firmly in extreme fear mode. A look at the broader markets, the NASDAQ is the worst of the three major indices right now. Every single sector -- every single sector is in the red. Tech shares are suffering the biggest losses. Intel shares are down four percent. Apple down five percent. Investors are reacting to some pretty extraordinary tweets by U.S. present Donald Trump. He has pledged to respond today to new tariffs imposed just a few hours earlier by China on $75 billion worth of American goods in the latest escalation of this ongoing trade war between the U.S. and China. President Trump is now ordering U.S. companies to find alternative to production in China. That is something American retailers say simply isn't practical. It's not practical, even if the President were empowered to issue such an order. The President's tweet on trade came just minutes after another with President Trump launching a blistering attack on his own Fed Chair, Jerome Powell. Mr. Trump writing, "My only question is, who is our bigger enemy? Jay Powell or Chairman Xi?" Sarah Westwood is joining us live now from the White House. So the fact that the U.S. President is referring to Jerome Powell as an enemy of this country, what does that tell you about the sorts of pressure President Trump is facing in terms of his belief that a recession in this country could be underway, and he needs Jerome Powell's help them that?</s>SARAH WESTWOOD, CNN WHITE HOUSE REPORTER: Well, Zain, today was another major complication in the White House's efforts to project confidence in the face of a potential economic downturn. That's something that White House aides and allies have been doing all week. They've been working overtime to try to downplay these fears that the incredible growth that the President has seen in the economy for the first two years of his presidency, could be slowing down. Of course, the President's favorite economic scapegoat here is Chairman of the Federal Reserve, Jerome Powell. He has repeatedly taken shots at Powell. He thinks that the Fed did not cut interest rates quickly enough. That they didn't cut them by enough margin, and he has been putting pressure on the Fed to do everything it can to grease the wheels of the economy. Of course, many analysts, investors, consumers, they believe that the tensions we've seen in the economy over the past couple of weeks are due to the President's trade war with China. And so today, China imposing these retaliatory tariffs are not going to do much to boost confidence in the economy at a time when the President and his advisers, Zain, are really trying to push this message that everything is fine.</s>ASHER: And obviously Donald Trump issuing quote, unquote, "an order" to American companies to look for alternatives to China. Can the U.S. President really issue such an order?</s>WESTWOOD: Zain, it's not clear what authority the President believes he has to tell private companies where and how to do business, but that is really all we've seen of the reaction from President Trump was that series of tweets that he fired off this morning. Also, he issued a decree to mail carriers that might accidentally end up receiving shipments of fentanyl from China. Fentanyl, an aspect of the U.S.-China trade relationship that President Trump has focused heavily on, as he has ramped up these talks with China, but keep in mind, the President imposing these tariffs, the President delayed the implementation of tariffs last week on goods to December.</s>WESTWOOD: But that was not necessarily an olive branch to China. Even though he delayed the implementation of some of those tariffs, that was really to take the pressure off American consumers heading into the Christmas shopping season. There had been a relative ceasefire between China and the U.S. over the summer following President Xi and Trump sitting down at the G20. But earlier this month, Trump threatened to impose those very tariffs that he had suspended and that is what got started this latest round of back and forth with China that culminated in China retaliating this morning -- Zain.</s>ASHER: All right, Sarah Westwood live for us there. Thank you so much. The U.S. Chamber of Commerce has reacted to new tariffs imposed by -- imposed rather on U.S. goods by China saying the move is quote, "unfortunate," but not unexpected. The business group is calling once again for both sides to return to the negotiating table. The fresh tariffs are between five and ten percent. It will hit $75 billion worth of U.S. goods from September 1st. There will be duties of 25 percent placed on U.S. car imports. President Trump has promised a response this afternoon. Daniel Russel is a former Assistant U.S. Secretary of State for East Asian and Pacific Affairs and Vice President of International Security and Diplomacy at the Asia Society. Mr. Russel, thank you so much for being with us. So when you have China announcing these tariffs on $75 billion worth of American goods, what sort of effect do you anticipate that will have on the U.S. economy?</s>DANIEL RUSSEL, FORMER ASSISTANT U.S. SECRETARY OF STATE FOR EAST ASIAN AND PACIFIC AFFAIRS: Well, this is clearly going to hit consumers, hit retailers, and also hit farmers and commodity producers in the United States. There's a geography to the Chinese application of tariffs also. They're pretty experienced in the U.S. political calendar, the U.S. political system, so they know that they can hit Michigan, they can hit Ohio, they can hit Iowa. And that these are important states in terms of the Electoral College. So it's a combination of, of trade and politics in their calculation.</s>ASHER: So there was supposed to be a Chinese delegation coming to Washington, D.C. next month. Given all of the sort of tit-for-tat announcements we've seen today, I mean, is any kind of truce on the horizon completely off the table?</s>RUSSEL: No, the Chinese very much want a truce, albeit not on any terms. And in fact, the terms that the U.S. could perhaps get from the Chinese have worsened significantly in the last two or three months as a result of the tough tactics that President Trump has pursued. The Chinese would like to send their Vice Premier, Liu He to Washington sometime in September, and in a way this imposition of tariffs is a way of creating some leverage in support, in advance of those talks. From the Chinese point of view, this is a pretty measured, pretty balanced form of retaliation. It's non-escalatory or so they think. They're matching what --</s>ASHER: That's not what Peter Navarro believes.</s>RUSSEL: Well, what Peter Navarro believe is not always rooted in reality. The reality is that the Chinese are saying, "Okay, you hit me, we will hit you," but they're not just using a poker metaphor, they're seeing Donald Trump but they're not raising him. They're not trying to escalate. September 1 tariffs from the U.S., okay, September 1 tariffs from China, December 15th from the U.S., December 15th from China.</s>ASHER: Okay, so when President Trump quote unquote, "orders" American companies not to do business with China anymore, or look for alternatives, I mean, it's unclear the President could even order American companies do anything in terms of that, but how -- that is supposed to, I assume, beat China into submission. Clearly, that's not going to work?</s>RUSSEL: Well, it kind of makes you wonder if he realizes, who is the head of a democracy, and who is the head of a one-party authoritarian system? The President can't just decree to U.S. companies that they may not trade or manufacturer in China. It's delusional. It certainly is alarming, as we see in the markets already to U.S. businesses because President Trump has injected a really wild note of uncertainty and inconsistency into the equation. And I know that it makes it very hard not only for American companies, but for businesses and nations throughout the world and in particular, the Asia Pacific to calculate what comes next. The impact of a U.S.-China trade war, which is really like a mutual infliction of pain, neither side is big enough and strong enough to completely force the other aside into submission. It has very negative consequences for the third countries that are impacted by this battle.</s>ASHER: Right. Mr. Russel, thank you so much for being with us. Appreciate it.</s>RUSSEL: Glad to join you.</s>ASHER: Investors had expected today would be dominated by Jerome Powell's annual speech in Jackson Hole. Let's take a look at what the Fed Chairman said specifically. The key takeaway is that he did not -- not -- give any indication about what might happen at the next rate setting meeting in September. He did acknowledge, quote, "significant risks" from a global slowdown and the trade war. He also promised to take quote, "appropriate steps" to support the U.S. economy. Lindsey Piegza is the Chief Economist at Stifel Financial Services firm. She joins us live now from Minneapolis. So, Lindsey, how did you interpret Fed Chair Jerome Powell's comments today?</s>LINDSEY PIEGZA, CHIEF ECONOMIST, STIFEL: Well, it was pretty much as expected. The Chairman continued to reiterate a generally positive and upbeat assessment of the U.S. economy, but he also tempered that expectation by acknowledging increased risk, particularly from abroad, stemming from uncertainties regarding policy issues, including trade, Brexit and more recently, policy protests in Hong Kong. So he did say that while things were still on moderate footing here at home, the risks of contagion to the U.S. outlook continue to ramp higher since meeting last month at the July FOMC meeting. So really setting the tone for potential additional policy adjustments if in fact, the committee continues to see these risks weighing on the outlook.</s>ASHER: How does the Fed Chair go about sort of juggling, supporting the economy here without looking as though the Fed is capitulating to what the market wants?</s>PIEGZA: Well, I think the Fed is doing a pretty good job of doing that. They did meet the markets demands to be fair in terms of a near term policy adjustment at the July meeting, but they also offered just a very minimal rate reduction, 25 basis points. The market would have been much more pleased with a 50 basis point cut. And certainly the administration was looking for 75 or 100 basis points. And by continuing to maintain this very middle of the road rhetoric, acknowledging the positives, but also reiterating a willingness to step up to the plate, they're continuing to walk that fine line really not cowing to either side of the administration or the market pressures that are very clearly weighing out there in the marketplace. So I do think the Fed is doing a pretty good job of walking that fine line.</s>ASHER: Okay, so maybe a good job of walking the fine line, but given the sort of volatility in the markets, given the fears about a possible recession on the horizon in the U.S. economy, given fears about global slowdown, given you know, what President Trump is saying. I mean, is it all but certain at this point that there will indeed be a rate cut in September?</s>PIEGZA: Well, I do think we will see a rate cut in September, but I do think that's going to be entirely based on the evolution of the data. We are seeing, as you pointed out, mounting evidence of weakness abroad, as well as further evidence of deteriorating activity here in the U.S. We see a slowdown in manufacturing, housing, business investment, even confidence has peaked and had begun to trend down suggesting the consumer will be on increasingly fragile footing in the second half of the year. So right there, there's enough support for the Fed to take action, which has nothing to do with the pressure from the White House.</s>ASHER: So is the U.S. economy though resilient enough to withstand this escalating trade war between the U.S. and China, do you think?</s>PIEGZA: I think unfortunately, it's going to put some a serious downward pressure on an already extended expansionary period. So the U.S. economy at this point has been going through the longest expansion in history, but it's also been the weakest with an average growth rate of just 2.3 percent. Typically, when the U.S. economy is coming out of recessionary times, we talk about a sustained growth rate of four or five, even six percent. So this time around, we were already on relatively moderate footing. Now, you layer on the fact that we are seeing a number of these uncertainties and risks stemming from a policy front and I think that will simply exacerbate that downward trend that we're already seeing in some of the fundamentals here in the</s>U.S. ASHER: All right, Lindsey Piegza live for us there. Thank you so much. E.U. leaders holding Jair Bolsonaro's feet to the fire threatening to block a trade deal unless he takes action to protect the Amazon.