[Jim Sciutto, Cnn Anchor:] A very good Friday morning to you. I'm Jim Sciutto in Washington.
[Poppy Harlow, Cnn Anchor:] And I'm Poppy Harlow in New York. And we do begin with major breaking news. The trade war embroiling. The two biggest economies on earth just got a lot more intense. And a critical day of negotiations is about to get underway. Overnight the Trump administration drastically increased tariffs on some $200 billion worth of goods that we import from China and this morning he seems to be claiming that those tariffs are a win in themselves. Not just a means to an end, Jim.
[Sciutto:] Yes. It's a claim the president has repeatedly made, writing this morning, "Tariffs will bring in far more wealth to our country than even a phenomenal deal of the traditional kind." It's just not true. Again we point out, even as this year's economic report of the president acknowledges.
[Harlow:] Right.
[Sciutto:] Tariffs are paid largely by American importers and therefore, you and me, American consumers. It's a tax basically.
[Harlow:] Yes.
[Sciutto:] China is promising to retaliate. Our coverage begins this morning with CNN chief business correspondent and "EARLY START" co-anchor Christine Romans. So, Christine, how did we get to this point? Because White House officials are saying this morning very clearly that they do not expect a deal today. And what happens next?
[Christine Romans, Cnn Chief Business Correspondent:] You know, it's looking grim. And it looks like it was not a bluff, Jim and Poppy. President Trump jacked up tariffs on thousands of goods, dishwashers, frozen fish, baseball caps. Right now about half of the products China sells to the U.S., about half of them, now carry an import tax. So how did we get here? Three rounds of tariffs last year, first the U.S. put tariffs on all foreign steel and aluminum, including from China. Then in July the U.S. singled out Beijing, slapping tariffs on $50 billion worth of high tech Chinese exports. China hit back right away with tariffs on $50 billion in U.S. goods, mainly Ag products, and that has been devastating for American soybean growers in particular. But the biggest round yet was in September, $200 billion in Chinese goods. This included consumer goods like luggage and handbags and hats. Beijing hit back with $60 billion worth of U.S. exports in response. Now that $200 billion right there, that $200 billion net in September that was originally taxed at 10 percent. Today at midnight tonight it became 25 percent. And remember it is U.S. importers, not China who pay those tariffs. Now experts warn this will have consequences. That Trump's tariffs will disrupt smaller American companies. One analysis finds it could cost the equivalent of about 900,000 jobs and raise prices for the typical family of four by $767 a year. Higher costs for everything you put in your shopping cart. And the trade war is not over here. President Trump says he has started the paperwork for 25 percent tariffs on everything else, $325 billion more in Chinese exports. That would be everything that you shop for at Walmart and Target and wherever you're going to spend your money. He also has this date, the 18th of May, to decide whether to impose auto tariffs if he declares that car imports are a national security risk Poppy.
[Harlow:] This is remarkable, it's going to hit especially some of his base incredibly hard like farmers.
[Romans:] Already hitting his base hard.
[Harlow:] I don't get it. Help me understand why.
[Romans:] So the president had a tweet storm this morning including something he deleted about buying soybeans and giving them away to impoverished nations that he then deleted. So it's unclear if he knows that already that America's farmland you know, heartland is going to be hurt hardest by this. But he did say one thing that has really resonated this morning. You don't pay tariffs if you make it here. And that I think is the core of what he's trying to do here. You know, he says make it in the United States.
[Harlow:] Yes. All right.
[Romans:] I think you're and I think on the autos, I mean, the early indications are that the president sees autos as another big part of the U.S. trade deficit. Between autos and China that is where their tariffs lie.
[Harlow:] Right. You convince Americans to pay double for their T- shirts and everything else, you know, and then you can make it in America, but until you do that you've got a problem.
[Romans:] The $325 billion that he hasn't put on yet, that's going to be things like sneakers and pants.
[Harlow:] Yes. Yes.
[Romans:] Those are things that people will feel right away Poppy.
[Harlow:] OK, Romans, thank you so much.
[Romans:] You're welcome.
[Harlow:] We appreciate it. Jim.
[Sciutto:] Poppy, it's a great point, right? You know, whether it's clothes, TVs, refrigerators, washing machines.
[Harlow:] Yes.
[Sciutto:] Make them here, absolutely.
[Harlow:] Sure.
[Sciutto:] Consumers would have to be prepared to pay a lot more for all those products.
[Harlow:] Yes. Totally.
[Sciutto:] That's the essential question. There are no simple solutions here. Well, President Trump is showing no signs of diffusing this tense, increasingly tense standoff with China. Joe Johns is at the White House this morning. So the president appears to think he has an upper hand because the U.S. economy is strong right now. Does that hold, I suppose, is the question and are there concerns in the White House that he is overplaying his hand?
[Joe Johns, Cnn Senior Washington Correspondent:] Well, that's been the continuing argument from White House staff including some of his economic advisers that the U.S. economy is very strong, that tariff war here between the United States and China would benefit the United States and hurt China more. So as you look at the tweets this morning it's pretty clear what the president is trying to do. Number one, he's blaming China and Xi for the breakdown in the negotiations that occurred over the weekend. The president and others have said that China essentially was seeking to change some of the language that the United States had an understanding had already been negotiated and agreed upon, but he's doing a couple other things, too, I think. He is essentially trying to tell the American people that there is really no rush here because he says the tariffs are going to benefit the United States. So what happens next, that's anybody's guess. Of course, the president did say last night that he got a nice letter from President Xi and he was asked if there would be a call between him and President Xi anytime soon. He didn't say when that might occur, however, the suggestion is it could occur today. That's not on the schedule, nonetheless I talked to one adviser who suggested it's possible. Back to you, Jim.
[Sciutto:] Well, he got a lot of nice letters from Kim Jong-un, that didn't lead to a nuclear deal. You've got to make you've got to negotiate and make an agreement.
[Johns:] That's right.
[Sciutto:] Joe Johns, thanks very much.
[Johns:] You bet.
[Sciutto:] Let's speak now to national political correspondent for "The New York Times" and CNN political analyst Alex Burns, and chief economist at Moody's Analytics Mark Zandi. Mark, I want to ask you first. First of all, so set aside the idea that somehow tariffs make us money, you and I pay for it, folks at home, $767 a year for an average family of four. Let's talk about what China will do now in retaliation. What kinds of U.S. products it will target and how will that hurt U.S. companies selling those products in China?
[Mark Zandi, Chief Economist, Moody's Analytics:] Well, the Chinese have already raised tariffs on most of the products that we ship to them, that we sell to them, about a hundred, a little over $100 billion a year. What they could do is they could increase the percentage of the tariffs. So most of the tariffs are now at 10 percent. They could raise them to 25, they could go even higher to 35 percent. They could make life very difficult for a lot of American companies. I mean, the most obvious would be the most visible would be Apple. Right? So Apple produces a lot of iPhones in China, they could make life very difficult for them and other American companies. You know, they could manage their currency, the RMB, they could allow their RMB to fall in value vis-a-vis the dollar and that would offset the effects of the tariffs on them. So there's lots of things they could and I suspect if the president keeps pushing here they'll do them.
[Harlow:] All right. So, Mark, let me read you from page 496 of the president's own as Jim stated at the top, the president's own economic report, the economic report of the president talking about the tariffs. Offsetting these benefits are the costs paid by consumers in the form of higher prices and reduced consumption. There is a lesson here, Mark, isn't there, in history and this Mood- Holly Act, when you imposed tariffs, and then in retrospect we see that it precipitated and made the great depression prolonged and worse. So is there anything in history that tells us this is a good idea?
[Zandi:] No. No. Tariff wars are a really bad idea. They put the burden on us, the American consumer, the American businessperson. I mean, tariffs have increased, they've doubled since the trade war began a little over a year ago. That money, that $35 billion increase in tariffs is born by us when we go to the store to buy things that come from China, when businesses buy things to use in their production processes. So it's borne by us and, you know, now that the tariffs are going to have a higher percentage and if the president follows through and increases what we're imposing a tariff on all Chinese imports, that's going to hit us as consumers more directly. I mean, you were talking about apparel very clearly, consumer electronics. So American consumers are already paying, they just don't really know. It's kind of a stealth tax, but it's going to be become a very obvious tax not too far from now if this continues.
[Sciutto:] All right. Alex Burns, so let's stipulate here that China is a bad actor. It puts undue burdens on U.S. and foreign businesses operating in China, makes it very difficult by design, it steals U.S. intellectual property left and right. We know that. What the president is demanding here is China in effect fundamentally change its economic model here. The president believes he has an upper hand. Xi is pushing back here. I mean, is there an awareness in the White House that the president's tactics here might not work and then what happens next? If China doesn't yield, is the White House, is the president, prepared for just a trade war that threatens the economy?
[Alex Burns, Cnn Political Analyst:] Oh, I think there's very little doubt at this point that the president is prepared for a trade war, that he believes in the concept of trade wars, in some ways he's enthusiastic about the idea of pushing things about as far as he can. You know, talking to a lot of Republicans over the last few months and sort of business sector donors to both parties, there has been this confidence that to be candid I'm not sure where it came from, that at the end of the day there's going to be a deal. The president won't take things over the edge and I think today we're seeing that a lot of that confidence may have been misplaced. So, you know, there is a sort of politically speaking there's a short term, long term tension here, where in the long term a lot of people like the president really taking it to China for all the reasons you just described. That there is a big constituency in this country for a president or for a politician who would say to the Chinese, you do have to fundamentally change the way you do business globally but short term, that comes with a lot of pain and we're going to see how long voters will put up with that.
[Harlow:] You know what's really interesting, too, Alex, just talking about the politics of this, is that it was just a week ago or so that Joe Biden said China is really not that big of a threat, essentially, I'm paraphrasing here. You've got Joe Biden leading by a lot in the new Monmouth poll this morning. It sets up quite an interesting contrast between how former Vice President Joe Biden now 2020 contender sees China and how the president sees China, and how hard the president is going to go against China and what Joe Biden would do and what he's going to say in response.
[Burns:] And a big I think that's dead on and I think it's a big contrast between essentially how they see the nature of competition with China.
[Harlow:] Sure.
[Burns:] Right? That Biden I think remarks were inarticulate. What he was clearly trying to convey was the sense that China has a whole bunch of problems with their economic fundamentals that over the medium to long term will work to our benefit so let's not freak out. Right?
[Harlow:] Right.
[Burns:] He has had to sort of defend those comments and explain that he wasn't, you know, trying to play down different kinds of threats that the Chinese pose right now. But, you know, the president's argument is very much the opposite of that, right, that the Chinese are coming for us, you know, guns blazing and we've got to fight hard and we've got fight hard right now.
[Harlow:] Yes.
[Burns:] What we haven't heard from Joe Biden and frankly a lot of the Democrats is what they would do differently to challenge China.
[Harlow:] Sure. They're going to have to
[Burns:] On same underlying complaints.
[Harlow:] They're going to have to articulate that especially when you have, you know, Senate minority leader Chuck Schumer telling the president to go hard on China. Right? So
[Burns:] Well, Schumer has been Schumer has been essentially a zero cost China hawk for a long time, right.
[Harlow:] Yes.
[Burns:] Talking about currency manipulation, unfair trade practices.
[Harlow:] Yes.
[Burns:] But this is what it might look like to actually take those subjects on.
[Harlow:] Thank you both very much.
[Sciutto:] Alex and Mark, thanks very much. Still ahead, the president's personal lawyer Rudy Giuliani is now taken on a new role. He's planning a trip to Ukraine to dig for information that could help President Trump in 2020. Are you comfortable with that? We'll explain.
[Harlow:] Yes. It's really fascinating. Also former FBI director James Comey has clearly strong feelings about the current attorney general when it comes to the handling of the Mueller report. Ahead, why Comey thinks William Barr is behaving less than honorably.