relish it. down 482 now on the dow. we'll be below 24,000 in the open we'll see if we'll hold in the 23.5 s&p indicated at 37. nasdaq indicated down of 102 make sure you join us tomorrow got to get to "squawk on the street" now, it is coming right now. ♪ good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber cramer is off today. got a sell-off on our hands. tariffs on 106 u.s. products as investors ask once again whether they believe a trade war is inevitable bonds relative stability here. obviously the markets going to

be the big story of the day as china announces those counter measures talks a lot about in this case soybeans and autos and airplanes and it is not just about wine or fruits or nuts or frozen pork anymore. >> coming out of the real area of significant import. >> by the way, sarah, that's a camera >> thank you >> you are coanchor >> it has been a while i remember when the trump trade was risk on. people were buying stocks because of president trump's policies and finally got it passed the market is down about 3%. going into today since the tax plan clearly a lot of uncertainty. i would not miss a trade war which president trump says it is not a trade war for anything especially now we are talking about soybeans which is really the most powerful weapons that a

chi china can use. >> wilbur ross said this morning, wall street is surprised by all of this anybody who thought they're not going to respond was not paying attention. the chinese is a good arithme c arithmetic he may have been hinting of the top 10 soy producing state in this country, iowa, missouri and so on and so forth this is what wilbur ross said. >> the response should not surprise anyone. the response to the 232 tariff was quite proportionate. the response is quite proportionate to the 50 billion that we announced last night i am surprised that wall street was so surprised by it which was been telegraphed for days and

weeks. >> for more on china's trade announcement let's get straight to eunice yoon we reaction therithe >> china was going to take equal action to the united states. that's the reason why aircraft was put on this list chinese aircraft was put on the u.s. list so american aircraft is end up on american's outside pressure only emboldens china to act on a cultural level and also on a historic context that china does not like to publicly pressured into anything and more specifically i asked him whether

or not china was going to change its practices and intellectual property and force technology transfers, of certain industries like high-tech which is some of the allegations that the trump administration have been slapping onto the chinese. he says the chinese are always trying to improve their intellectual property, right protection, they're not make changes based on what the u.s. says on force technology transfers, he says maybe they'll have conversations over specific cases but broadly they out right reject those accusations he says mutual respect between the u.s. and china is critical he said that this is going to be very important for constructive talks down the line. right now they feel the trump administration actions have been unilateral that's why they are pushing back with this large package of

tariffs of their own, $50 billion, of goods are going to be affected this is a 25% tariff and that's a 25% tariff on top of any of the products that already have existing tariff. information data is going to come sometime later after the u.s. act the other main point when you look at the list of what's on there, soy is on the list and i ask him specifically about this because chinese have relied heavily on american soil and he said that's right but we are willing to take the pain and buy some where else if that's what we need to do, guys. >> eunice, good discussion, eunice yoon in beijing today >> good morning guys, thank you for coming >> the last point that eunice

made waycross gos a good one there is public feedback and there is after that if the government decides to do this, so do markets get caught in cross fire of all this brinksmanship? >> whether it is on nafta or sol solar where we get the big headlines and tweets i am hoping the sense of being the same and i don't think many people in the u.s. business community want a trade wars so commentary period will be important. it could be successful watering it down. the challenge is we have this up, down and depressive environment, it is changing so rapidly. if this continues overtime eventually it feeds through business and consumer confidence that can have an economic impact that's what i worry the most now. >> ben, the commerce sector is

right. it is not that we did not know the trump administration was focused on like theft and of rebecca's point it had already target dishwasher or steel or whatever, when do you know you are in a trade war as opposed to these squirmishes, do you have an idea? >> remember the context so u.s. economy is strong off to withstand some uncertainty associated with trade and tech if we were to rewind about a month prior to right now and go back and peel away of those uncertainties of trades and squirmishes, we find a positive fundamental story. you have a labor market that's solid and consumer spending took a pause but it is well supported. businesses are confident and cap ex plants are robust and

inflation is rising. policymakers are responding in a too aggressive manner? is this a meaningful trade war is it to the point that it is affecting business confidence in a meaningful way i don't think it is sufficient to do so >> you don't think we are there yet. will we know when we are >> it is a beginning of a negotiating process that could take some time i think if we think about what is the scale of aggressiveness of international economic diplomacy. i think we are not that different in principle from the previous presidential administration which is pushing the rules of enforcement under current w-2 rules. the administration is at pain to justify this we are still in the institutional framework here >> whether it is a trade war or a warning shot clearly there are winners and losers being picked right now. you are seeing sharp decline,

soybeans and a lot of the agricultural makers and john deer is down sharply here in the market what's the strategy going forward not knowing whether these tariffs are implemented or whether it is going to escalate? >> picking up soft what ben says, the economy and the u.s. globally is strong we saw good job numbers. you got economic reality that tells you to be invested our strategy has been to be neutral equities verses the benchmark. invested but not over skis we added some defensive strategies within those equitie that help us manage through volatility we are staying invested but we gotten defensive over the last year because we don't know what the day will be and the catalyst but we saw volatility. >> can you describe the measu s

measures >> yes, this is about getting a baske basket of equities together. when you put them together, it brings down your volatility. we get about 60% of global equity volatility of that. that helps our portfolio over periods like now and february. >> the dollar is a save -- not looking so safe in the middle of all of this trade back and forth. japanese yen >> ten minutes in, she's back. >> let the record show >> 10.5% since the birthday of my son >> sarah and i are both currency nuts so we are going there >> we missed it. >> this is a tool in china's tool kit they have $1.2 trillion worth of u.s. treasuries, they're not going to sell it all because they hurt themselves all they have to do is stop buying as much if they slow down purchases at a

time >> they have already been slowing down >> they have come down if we start seeing it up at the weekly treasury auction results, especially at a time when the u.s. is increasiining issuance fund all these stimulants. >> the return on that especially with state owned intenterprisesn china, what's their leverage right now relative to what it used to be >> the economic cloud of china is clearly very high on this point of how do you hedge in this environment and in principle, a big economy implementing trade treasures and retaliatory war should be a

gross shock. that's not providing the typical protection on that gross shock >> inflation running a little high >> or is it about issuance doubling from a year ago >> either way, duration is less effective within your portfolio for big acquisitions we are okay on the direction of travel and we are taking slightly smaller bets given that we don't have many hedges as we used to. >> bitcoin was not a big hedge in the time that i was off >> we have covered it all. >> on sarah's return >> i hope soon >> i got a trip coming up. >> we do want to hear from her >> rebecca and ben, thank you, guys >> we'll have a lot more what's

shaping up to be a rough morning on wall street sarah mentions her baby, samuel, absolutely adorable. >> very smiley these days. no screen time except for watching me on "squawk on the street." >> futures are down, "squawk on the street," back in a moment. [whistling] hello. give me an hour in tanning room 3. cheers! that's confident. but it's not kayak confident. kayak searches hundreds of travel sites to help me plan the best trip. so i'm more than confident.

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u.s. stock futures indicating a steep sell-off here in about 15 minutes. china retaliating against the white house by announcing $50 billion of tariffs of u.s. goods. let's get more from phil lebeau on some of the big reactions here >> good morning sarah and welcome back 27% of its new airplane deliveries last year were to china. we should point out that when you look at the list from china, it is select aircraft. it is not across the board it is based on weight. the most likely airplanes would be 737 and the 777, china is dealing in a position of strengths in terms of say look if you want to deal with us, you are going to have to come to our

terms in terms of aircraft deliveries or in terms of air ka craft tariffs because look at where we are trying to sit when it comes to demand it is the number one market, single market in the world for new orders about 22,040 new planes needed by 2035. that's $1 trillion in potential orders we reached out to boeing this morning, they said they are assessing china tariff list. that's scheduled to open next year meanwhile, take a look at shares of air bus of 24% of its deliveries are to china. now, it does not mean that china airline will be moved and ship from an order of bow to air bus. that's worth watching when you look at the competition. that right now between boeing and air bus.

>> guys, back to you >> phil, quickly on the au auto fronts, the 25% is in addition to tariffs that already exist, right >> correct >> that's a 50% tariff is what they are proposing currently if the vehicle is built in the u.s. and shipped to china, there is 267,000 last year all of those vehicles were hit with a 25% tariff. anything built in the u.s. and ship to china would have a 50% tariff >> wow, that's something that the chinese consumer likely to notice as well phil, thank you. >> phil lebeau >> you bet as we watch our market action in names like gm. >> it is funny hearing phil talk about autoimport that we have there. you end up thinking about apple.

they make many of the iphones in china. i don't know how that figures in then clearly that's not apart of anything going on here but you see apple shares are down 2%, although that's roughly in line with the overall market. >> you wonder what the next f n front is if this continues to escalate some of the consumer companies they're banking heavily on china right now and made nike's quarter. >> that's why you tend to think of apple as well >> the whole retail industry really, sneakers are not manufactured in this country >> no. >> much of the clothes are not manufactured in this country as well >> yeah. when we come back, we'll weigh into all of this, tariffs and the futures. one more look at the premarket as we get the opening bell in 10.5 minutes 10.5 minutes don't go away.l assets. like agriculture to feed the world.

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about eight minutes here before the opening bell. let's bring in art, good to see you again. >> welcome back. >> we got hard threats on both sides in terms of tariffs but as long as these are just warning shots, is this digestible by the markets or not >> well, potentially is. these are weeks or not months away from implementation we'll wait and see if you are optimistic, your hope is we'll have a big pull back on the opening but we'll hold the levels below that we shall before and that people will say

okay, that low level was retested and we are in good shape. the key here is the previous lows down around. >> 25.33 >> there is also 25.55 or there about. that would be the first spot that's where you got two and the worst of yesterday's sell-off, so we'll see >> the president is tweeting once again, a short one this time when you are $500 billion, you cannot lose. we think he's referring to the bilateral trade deficit which we believe is 340 billions if you include goods and services >> which is a big enough number. it is maddening how its gotto be bigger. it is not. nobody ever come up with a $5 billion number but then we don't know the methodology that he used to come up with that number but it is certainly is a big number

>> it certainly is and it could put a dent in a lot of businesses you want to be careful here. again, the market tends to think that this is all an openin opening -- very dramatic and okay, we'll meet you half way and we'll see how things go. for now, i think there is going to be less worries of the conversation of the tariffs and the market internalized and see where it goes, does it make lower lows or does it hold >> i want to ask you about technology because it is such a strong group we are heading into earnings season can that continue to be a leadership group >> potentially it can. the one that's got a little bit of a problem here tesla.

things are beginning to build up on tesla here and missing production levels and the cash burn out is getting heavier so i would watch, some of the others may turn around but tesla could be very important key if that tends to weaken further. that may prompt a rethink on the whole tech area even though if it is not technically a tech stock. >> jpm today cutting their target to 185. opening bell is just about 4.5 minutes away as a control enthusiast,

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35 as liesman says in "squawk," a nice broad addition to the market construction is 31 manufacturing 29 and leisure, 26 it was left to say where we are going to get these workers at this pace. >> the government jobs report comes out on friday. we'll see if the unemployment rate can take lower. it is been about 4.1% the last few months the market is not embracing that numbers. you are seeing it hit other por pockets of the market. gold is running higher, highest level since march 27th some of the haven trades are doing well it is not that you see a huge reaction in treasury and credit market we have the period of risk of urgent the 10-yr yield is till above

270. >> you can argue with those job numbers that inflation should start to heat up and particularly wage is going to go up because of a shortage of labor. >> there is the bell and the s&p at the bottom of your screen at the big board today. it is american country investment celebrating launches of two etfs, security alliance we are expecting a tough picture to fill in here at the bottom of your screen as most of the sectors premarket were indicated down boeing is the worst component at the moment >> one stock that i am watching is amazon after all of this twitter fighting from the president. it is really one sided president trump really going after jeff bezos and amazon

which is taking a toll on the stock. investors ponder what the government could do to hurt amazon the stock is down again. down 2.4%. i find it interesting investors are paying attention to trump's tweets again now, it is moving not only amazon but the entire market amazon have been such a big winner in a growing market >> it is been of the relentlessness of the treat. there is something that could be done from the president's viewpoint in terms of changing post office and rates and what amazon's response would be the president appears to be in antitrust case that's not anywhere near to be made >> consumers love amazon >> although there is an argument on antitrust laws if you want to go back away, it is not just about consumers. it has been for quite some time.

you can make a larger argument about market power and not allowing competition >> what percent of the retail market they have >> 48% online though 4% his repeated assertions about main streets no longer having retailers. it is funny for me because having done two documentaries on walmart, that's all you heard as about walmart for over a decade. >> that walmart is chasing amazon >> since the recession,the number of u.s. ecommerce jobs added, 335,000, far exceeding the net decrease of physical retail jobs down 55. that's not just amazon that's all ecommerce >> right >> the argument is is as tough one. amazon this morning saying they're going to open their fourth nevada city creating 4,000 jobs >> it is a company that employs

half a million people. it is a tough target for the president to go after. clearly. that's not holding back investors from selling amazon is still a big winner over the last year >> it is >> it lost a huge chunk. >> the number of stocks have dwindled dramatically. amazon is still up almost 17%. twitter, another technology stock that's up. apple is down for the year facebook, of course, down 13%. down again today more or less in line with the markets overall ovement. all al >> i think they may be doing

other additional media on thursday we'll see what stage two of their media presence is following cambridge analytica and the outbreak i guess people are calling it a scandal now. >> that's the way it has been termed the focus on amazon and now, investors' focus on macro economic issues such as potential trade >> gold is the other big story at 13.47 highest since late march the gold utilities stray is going to out pace the copper >> that's the ultimate question their if these tariffs go into effect, first of all, i think it is an important point to make that it is not immediate and nothing's happening over night there is going to be a common period for u.s. companies to complain that goes well into may

and there is going to be a public hearing on may 22nd on this issue there question will be whether there is going to be abon impact on a global economy. growth in the united states and we are heading into earnings season in the coming weeks we are set to have and we have seen upward revisions here because of the tax laws and tax cuts that came at the end of last year and it will be interesting to see whether the trade tensions start to factor in on guidance and ton growgrowh outlook. >> yeah, we are still waiting for clarity with the benefit of tax reform and not just re-patrioted earnings and also largely speaking of a little more clarity overall as the months have moved along here and things have become a little bit in terms o f the law itself. there could be some positives that we hear and some increases and free cash flow estimates and

things of that nature. >> it feels like it was not long ago that we are talking about boeing being up dramatically here it is now only up 7%. 8% for the year. well below the $200 billion market value that it had for a while there when it was smooth sailing. >> went above 300 and right around, going into the january highs. right around january 8th, it went parabolic there. >> down 12 bucks today >> cramer said back then while this is beginning to brew, boeing is the one to watch would they give up their seat in line in this long delivery schedules. that's still unanswered. all this rhetoric is one thing, are we going to give up that spot in line to get a new 777?

>> it will be interesting to watch. it was the biggest contributor to the dow jones' rise over the last six months and the stock market as we have seen >> boeing is the worst component, all 30 in the red but obviously off the initial lows let's get to bob pisani this morning. >> boeing and caterpillar, s&p is not down nearly as much i want to point that out, china is down. germany was weak as well spain is down as well. if the commodity sector, gold is near a 52-week highs oil is at a 3-week low copper is near the lows for the year in terms of sector of what's happening. a lot of weakness in tech and semiconductor and for very good reasons.

banks and industrials. 9-1 declining advancing stocks as you can see the dow jones industrial average, we are well off the lows right now tech is weak for a very good reasons. you look at micron and apple and microsoft and nvidia, look at micron, 51% and intel 24% and nvidia 20% and apple at 12%. you look at some of the big names like boeing. boeing gets 13% of its revenues and 20% of deliveries went to china. deere, and not as much as the tech area. understandably, all those stocks are down as well other dow components also get mid single digits exposure to

china. mcdonald's is about 14% of its revenues coming from china, nike and chevron and visa and fairly significant. pfizer at 8% >> spotify a big move yesterday and 139 open here today. the important thing is there is a lot of debate of the model this is a very unusual ipo they did not need to float new shares and not concern of the fact that 90% of the shares were available to trade was it successful or not initial reference price of 132 people who sold, they're certainly happy. people who bought at the open though i think the important thing here is jurors are still out on whether it is a long-term successful model i think there is unusual

circumstance here for r spotify. spotify is 139 and stable now and down to 420 points david, back tow. >> bob pisani on the floor for us >> cbs and viacom. both directors are negotiating a deal which cbs would purchase a viacom putting the two companies together an offer that was communicated orally on friday from cbs was made formal. we cannot tell you what that offer is from cbs to viacom. it was immediately rejected. cbs committee indicated they want to pay .55 cbs shares for each viacom share. viacom's committee says are you

kidding? no thanks. they did not know it was a real offer because it was not written down it was communicated orally during a meeting viacom by the way in looking at what it believes of the unadjusted stock prices of both companies based on all the news that was out available and where the ratio between the two traded, they think that's .62. they believe a market ratio if you want to call it that's .62 and they want more than that they have been asked by cbs to counter and i am told by people familiar with the situation at viacom will offer a counter offer to the .55 they received from cbs viacom also believes that there is as much as a billion dollars in cost synergies. so .55

they believe .62 is the market ratio. they want more than that they're going to counter we'll see where they end up. as i reported yesterday even if they were to agree somehow to a price, given they are fairly apart right now. there is another issue which comes to the floor and more significant impediment to a potential deal at least of this point. that's the desire of red stone, the controlling shareholder and having bakish, installing the number 2 she wants moonves to run the company. in addition to mr. moonves want mr. ianneillo. both men have a decent amount of respect on wall street

ian ianneillo has an important business of cbs reported to him. and redstone believes strongly that moonves will run the combine business the two sides are saying different things they are not in agreement on this the ceo of or the special commit t commit -- >> we'll see where they end up right now they are far apart on price and who's actually going to run this combination. i want to mess with the control usually. we'll see how it ends up now, let's get to rick santelli in chicago

>> rick. >> thanks dave if we look at what's going on regarding to interest rates. it is like bookendbookends we see 30-yr is down one if you take a two-day approach even though we are lower, we are still higher than we ended the week last week that's significant especially considering what's going on in equities one of the fixed income markets is it is some what resistance of the volatility and the equity markets. it response in a shy sort of way. bund is responding in a shy way as well with some of the trade issues running around global equity markets they are bouncing along some of the closest yields going back to the second week of january it is an important day if you are watching some of the

europe european's negative interest rates. nothing to brag about it in my opinion. the swiss at 10-yr hovering minus one and minus two bases point. the dollar index is down a little bit but still on the side way. everybody is watching equities and trying to decide is this volatility a short term economic benefit in the long-term they are quite worried and sometimes things can get out of hand carpal, back to you. make sure you tune in at 10:40, i have gym grajim grant, talkint everything in the bond world >> we cannot wait. rick santelli in chicago >> we'll stand on top of the sell-off still about 50 points above the february later on, jeff gundlach is going

to join with his outlook on yield of the market and trade. back in a minute many small businesses, from kitchens to factories to contractors, rely on their equipment to serve customers every day. when equipment is broken, it means lost revenue. trusted choice independent insurance agents offer special protection that could help replace or repair damaged equipment and provide lost business income. they represent multiple insurance companies and customize coverage to help businesses get back to work. announcer: to find an agent, visit trustedchoice.com.

china is announcing new tin tariffs this morning industrials also is getting hurt on the news. ge, united technologies and of course, we talked about boeing this morning all down boeing in particular has an outside effect on the price weighted dow jones industrial impact we are joined by steve maccarth who covers ge. it is $13 now, rob why are you at that number >> yeah, we are at that number because we see fundamental risks over the longer term, the cash generation of these businesses in particular of the power businesses which have been going through quite some challenges over the past 18 to 24 months and a recognition that in this environment of trade war, a slow

economic cycle, this is a company that's going to have a lot of challenges going forward in a weaken organic growth environment. >> that's one of the keys here.o what 12 times your '19 estimate of a buck five and also pre-cash flow of 86 cents but that i would assume doesn't include what a trade war with china, does it >> certainly no. as we said in our note that 86 cents was a very charitable view of a company that can generate trend line cash flow from operations of about $12 billion has $3 billion in capex. they're selling several businesses, so you get to that kind of 85, ex-number. but that's clearly a bull case from here. there is significant downsides to that number in a china trade war environment or any other material down cycle environments >> i did notice in your note,

this idea of what you are calling a modest proposal, johnson swift had an interesting little book of that same name. but you want them to potentially consider capping the cash pension benefits for long tenured executives first of all, i had no idea if they'd ever consider doing that. but is that a big number >> you know, i wouldn't say in the aggregate it's a big number. the outflow on the disclosures we've seen are around $250 million a year but i think it's an important point in this era of virtue signaling by ge management, in terms of bringing on board members that have certain skills and allocation and transparency, financial transparency,king transparency the fact that they are highlighting a shift to more equity componentation is, they should go after a sacred cow like this. you can see that they have about 100 million of benefit coming to them over the longer term here

and the current and existing management has about $50 million coming to them so from that standpoint, i think charity begins at home virtue begins at home and tapping that underlying cash payment would send a strong market signal about management's understanding that they get it and that they're focused on long-term shareholder creation >> we'll see if they listen to you on that one. just broadly, i'm looking at this, industrials are the biggers loe losers boeing, dr caterpillar, at the bottom of the list who has the most to lose here in your industrial universe from the escalation in the chinese trade war? >> absolutely. you know what i would say here is, i would go back to the comments around the questions i asked greg hayes at the united technologies analyst day back in mid-march and really the prospect there was everybody loses in a coin trade war. listen, conglomerates were not built on popularism.

they were built on globalization. if we go into an environment where we are re-visiting the underlying basis upon which these companies are making investments, it's going to be a very difficult environment and greg hayes was answering me. he cited specifically boeing, just given the fact that it was a large export of aircraft and from that standpoint, that's understandably why that is a posterchild today. i would say names in my coverage would be most at risk would be ge, honeywell, and united technologies >> yeah. all of which, of course, sell to boeing, don't they >> absolutely. >> yeah. rob, thank you, we appreciate your insights this morning >> it's good to be with you. thank you. with all that in mind, boeing is the worst performing dow component still. although coke has gone into the green. the do you is down 416 back in a moment

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the dow down 380 energy and industrials getting slammed on those retaliatory ris omoin to the u.s more from the sell-offs on "squawk on the street" after the break. >

. >> good wednesday morning. sell-off this morning drawing in some buyers. the dow well off the initial lows a tornadoes s&p as well back to almost 2560, 2590, excuse me. we are getting breaking data, ism and factory orders >> fact order orders were eggs pictured to rise 1.7 they were up 1.2 last month they get a positive revision transportation up 110. durable goods. now this is a final read for february 3%. so this displaces the 30i7b 3.1 mid-month read

that's 1.2 on our last non-final whoop. if we look at capital goods, non-defense ex-aircraft, capital spending up 1.24. not too bad. non-manufacturing ism service sector biggest swap of the economy 58.8 >> that isn't a bad number keep in mind that at the beginning of the year, we had 59.9 that was the best since 2005 that was followed by 59.5. now we're at 58.9. we've given up some ground in the grand scheme of thing, fairly lofty levels. we lift the hood to non-manufacturing, new orders number 59.5 down from 64.8 it's very similar to what happened in the manufacturing side and if we look at prices paid, not like this manufacturing side 61.5 now, it's definitely higher than

61 on our last look. but it really puts into perspective the difference between the manufacturing and the service side with respect to increase if price activity sarah. welcome back and back to you >> thank you, rick happy to be here and let's get rate is to our road map for the hour. china striking back announcing $50 billion in retaliatory tariffs against american product. >> our markets responding. stocks plunged at the open we will bring you a full rundown of the movers. >> plus we will look at the companies most at risk from a trade war. moving markets, china announcing $50 billion worth of retaliatory tariffs against the united states. >> that includes key products, soy beans, cars, chemicals good morning. >> reporter: good morning. it's great to see you back on the air with us. if you distill the position from the white house of what we seen if response to the steep

sell-off in stocks as well as the actions from china overnight. they see as a proposal, the president's tweets, administration comments as well as white house officials on background, the general sense is this action was overdue and any action you see if response to it could be short lived the president tweeting this morning, when you are already $500 billion down, you can't lose, referring to the goods deficit that the u.s. has with china. a white house official telling cnbc the solution is not more unfair trade practices from china, but instead china taking real action to trade the trading relationship what the administration is going to try to do now is extract that action from china through talk, which are still ongoing behind the scenes later today, the acting secretary of state will meet with the chinese ambassador to the u.s. you can bet this is going to be on the agenda. but the real deadlines they could place pressure on each side won't happen until may. you have a 30-day comment period

that ends roughly around may 4th. you have a public hearing the office of the u.s. trade hearing will hold. on may 21st, there is a treasury deadline for investment restrictions into the u.s. and on may 22nd, fine allal comments are due. it's after that point you could see potential action from the u.s. and china has said its retaliation would only come if the u.s. decided to move forward with those tariffs at that time. we'll see whether the next six weeks bear fruit in terms of these talks. administration officials said they've failed in the past so we'll see whether history repeats itself or this time it's different. back to you. >> yeah, whether they get watered down like this steel tariffs and what happens to nafta in between kayla, thank you for more in the market impact on growing trade concerns, we are joins by oppenheimer ceo and global investment strategist. good to see both of you. >> good to see you back. >> thank you it's good to be back

boeing is still the biggest drag on the dow when does this become a real concern for global economic growth >> the global economy is strong enough so i think any tariff measure, it can, the impact of that on the economy, itself, actually is going to be very modest. having said that, it's really about sentiment. and i this i the place where you are going to see the impact of that sentiment is really the dollar and on that front, if you see these trade wars escalate, the dollar is going to weaken, the u.s. economy will have inflationary pressures and as a result, the cycle may end sooner than what we have anticipated. not the base case, that's really the rick case. the thing to be mindful of is given the deficit that we have created the fiscal deficit that we have created the likelihood that trade deficit goes down meaningfully isvery, very small. so u.s. is starting out at a really weak negotiating position relative to china.

they can stimulate their economy by credit growth we don't have that flexibility >> even after all the credit they've added? >> again, it will have long-term negative impact. in the short-to-med july term, they have more flexibility and control to manage. that we don't have that. we import a lot of capital if the dollar deappreciatiates the inflationary pressures on the u.s. >> i know, ironically, it also increases our export competitiveness. if we continue to see the dollar weaken jeff, let me ask you if you agree with this. if we see these measures enacted we've got frein china and the u.s., who is the biggest loser >> well, we all know no one wins a trade war, right if you take a look at the big kansas that make up out u all the global index, they get more than 50% of the profits in trade. everyone has skin in the trade not from the existing tariffs, the idea of escalation today from china it was a response, not an escalation.

we'll see how the talks go the request eis down the road. i think the most important thing for investors is, don't put tariffs on your portfolio here think about international exposure look, international markets are holding up better today, they may be less exposed to this u.s.-china potential for trade war escalation i think that's important especially if the dollar goes down that's actual lay benefit to your international stocks in your portfolio >> what were you going to say about that point >> i think jeff is absolutely right. we believe in interable allocation or -- international allocation or people should believe in international allocation and emerging market they are earlier in the cycle than the u.s so if hopefully nothing bad happens. but if bad things happen, the u.s. markets will suffer more as a result >> but what about i mean on the flipside, some would say you should look for companies that don't have interable exposure, that are purely domestic, the

retailers the consumer staples and companies and retailers, because when you have a trade war between the two biggest economic superpowers in the world, surely there is other collateral damage from other countries? >> of course as jeff said, there is no winner in any of this, if the trade wars escalate. it's a question of relative performance. while the u.s. domestic companies may do better in the near term. from a longer term perspective, being late in the cycle and inflationary pressures picking up because of the weakness of the dollar the u.s. economy becomes more vulnerable. therefore we think international companies end up being in a better situation from a medium-term perspective. >> some of the commentary out of ism, jeff, says that distributors are holding on to costs. they're committing to shorter time periods, because prices are changing more drastically. there's questions about whether exporters start trying to put some deliveries on the tape in advance of this public commentary on tariffs.

i wonder how much of all of this, despite the fact that it's brinksmanship might impact or change the way we are seeing data come in >> that's a great point, carl. we have to watch this closely. already this seems to be affecting some of the data out of europe. we know supplier driverries are stretched there. it seems there could be channel stuffing so to speak ahead of potential tariffs. it's going to be distorting data that is often some of our best forward looking data, the isms, because they're sentiment driven we know these issues can be priced in or responded to these surveys can price in their fears over trade >> are you as confident in this year's earnings now than you were three weeks ago is it going to change? >> not meaningfully, i think the u.s. economy and global economy for that matter has enough momentum we have the tax cuts are not going away so overall the earnings left is going to be meaningful the question is, will the

markets react as positively as they did before? i think the numbers are going to be what they are the markets will not go up as they would otherwise. >> on the flipside we also have a fed tightening cycle that we haven't brought up, jeff and that chairman powell now is on track to continue raising interest rates at a time where the policy uncertainty out of washington is becoming more unpredictable and volatile so, how does that end? >> yeah, it's a tough job for the fed right now. balancing the potential for inflation tied to some of these potential rise in import prices. at the same time it's the potential for slower growth. it's definitely a question that the feds will be facing. i think they will be more data driven than they have been in the past >> that means if inflation continues to rise in the u.s. along with wage, we'll likely see the feds maintain that path. we expect at least two more rate hikes this year. >> do they go on track with that if we continue to see three 500

point swings lower in the dow on some of the trade fears? >> i think there is enough growth momentum in the economy for them to keep on the pre hype path i think the likelihood they go forward goes down every day with these types of situations. but at the end of the day, i think again, it's not forget, these are, this is about politics far more than economy and i think at some point as we get closer to the mid-term election the temperatures are going to go down you know, it benefits trump in that regard. so the temperatures will go down so from my perspective, it is a buying opportunity rather than panicking in the market. >> we will leave it there. echoing the words of commerce secretary wilbur ross. good to see you both >> thank you we continue to get some new details on yesterday's shooting at youtube's headquarters.

good morning aditi. >> reporter: good morning, carl. i spoke with the police chief not too long ago he recounted the terrifying shooting and the suspect is a 38-year-old nasim aghdam her family reported her missing on the 31st and she re-appeared yesterday morning early in the morning in mountain view in her car. the police say stars any motive is concerned it appears she was a disgruntled youtube user and aghdam also expressed on her personal website anger towards the company. she believed youtube filters her videos to reduce her views, police believe that's what prompted her to come to youtube's headquarters and fire off a 9mm in a lunch campus. police arrived two minutes after that first 911 call. hundreds of officers swarmed,

many rushing into the billing as employees were fleeing the police chief says it may prime many companies to rethink or beef up their security. >> there is no magic pill. there is no magic wand that you can wave that's going to completely prevent these times of instass we all in today's world, we face these challenges and every time we implement a new security measure, there is someone on the other end trying to defeat that. >> reporter: he says they're still trying to figure out how exactly she got into the building back to you. >> thanks for that we will come back to you later on. when we come back, our dow components starting to see some buying cat's about $4 off the low boeing may be 6 or $7 off the low following china's new tariff announcement why industrials are feeling the pain a sell-off in the way gold is responding among other asset classes. soy bones is off the lows.

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you know what's not awesome? gig-speed internet. when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. today's sell-off bringing major corrections to the territory the looming trade war with china adding to the pain today, the dow down 34u678 plus the chief investment officer the largest educator only pension fund $224 billion under management it's good to see you thanks for the time today. >> you bet good to see you as well.

>> we've had these worries with us for a while trades lumped on top of that today. we got volatility running 123 x, are you rethinking your overall position next whichties? >> we are evaluating where we want to be in our range. so we have been at the target for the last year, taking profits as this market continued to run up. now we're under weight we're debating globally whether we want to be with usa versus the rest of the world. >> how does today's news help inform that decision >> i've got my antacids with me all the time now you know, today, this was a goldilocks market. obviously all last year. now with all these tweets and the trade war, we're going to back right back up and start losing already what we had gained last year this market is already back to where we were in october. if he keeps it up, he'll probably give us back to july of last year. >> are you popping any of those

antacids on the president's tweets about amazon? i notice it's one of the top five holdings in your portfolio? >> our portfolio represents the u.s. equity markets. so if it's a number 5 stock, in the index, it will be the number five stock in our portfolio. there is no question this is the exact example of a bully pulpit these tweets attacking individual companies, complaining about issues, instead of working through a governmental process it's ludicrous it drives me nuts and obviously as you said this morning, the market was ignoring this, but now we know all the president's handlers have left and now he's on his own and obviously it looks like he's running for the mid-terms already. so who cares abc what he saout s in his view. he loves rattling the markets. we have to deal with it. >> markets went through the process of gettingulesed to his social media now they will go through his tal rance for being lit ticket juins

-- being littioigious >> the only way to send that down is by starting a trade war. we know that all the way back to the 1930s. it's textbook. and as you said, it's a looming trade war. i'm sorry, but yesterday's announcement with china to me this feels like a trade war. i think you are starting to see the u.s. market react and global markets start to react to that >> chris, it's david you know, how is this all going to shape then the allocation of that $224 billion you have right now you are what, 13%? not quite. 12.2% in fixed income. do you get larger there and take down your global equity allocation add private equity how are you thinking about

thimgs right now >> it sounds like you were listening in last week in our conversation with the asset allocation group the number one way we do it and an individual should do it is by diversifying, deep put all your eggs in one basket somebody i really respect has a big position in boeing today he's hurting so he will have to reevaluate what other things are you in besides u.s. stocks. in our case, we will be broadly diversified. we have some exposure to fixed income it's also in other parts of our portfolio, just not labelled as fixed income so we do have some 30-year bonds in our risks mitigating portfolio, to offset days like today and months like february what we're going to look at is diversifying a across the globe this is a giant portfolio. i can't spin it on a dime and i shouldn't. i got a 30-year investment horizon. so i got to weather difficult

markets. 2016 was a choppy year it wasn't great. so far 2018 is going to turn out that way we will diversify into other assets i'm in real staetd, private equity in addition to the fixed income portfolio >> tech is, if i'm not mistaken, met try much makes up your top five right? there is some banks in there and berkshire. but on apple, microsoft, amazon, do you see those falling out of the top five by any stretch? >> well, your point about what our top holdings are, like i said, it's the u.s. index. it represents the russell 2340u6789 3,000 so fang is at the top of that i think the bank stocks certainly got overheated and ahead of themselves, so question, particularly in january. so we're not surprised to see them come off somewhat as they should be. this hole spat with amazon i think that's nuts. but the question's about amazon,

its size in the online market. obviously it's a percent of retail it's much lower. then facebook. you know, i thought the valuation of facebook got way out of whack it doesn't make sense. i'll let the market decide where they have to trade they have to deal better with privacy issues we have been unhappy about the governance, the shareholders have almost no say, zuckerberg controls that thing. i think this is an example of where while silicon valley loves to have one person in charge at times, because they think it's a star we think there is drawbacks, huge drawbacks of having a single person in charge of a company and have control of it >> you maid your points known on governance in the past you have been a leader in terms of some of those things, what can you do in facebook other than to speak publicly about it? you don't really have the votes. right? >> that's correct. but you hit it on the head, we can speak publicly about it. we can talk to the company constantly, which is to tell

them, we don't think this is right. importantly, we can talk to the regulators and to the new york stock exchange ability how they list shares. how they uphold governance rights the idea of using our capital to help grow a company, we're all in favor of. that that's capitalism but we want to say and have influence on that xaendz how it grows through the o-- how that company gross through the capital. >> what's your bogey, 7% somewhere around there >> you hit it on the head, exactly. over a long time period. remember, i don't have to hit that year after year it's a pace over a 30-year mile. >> right what, last year you had a good year, right? i would assume you were above it >> yes, almost 17% 16.8% in 2017 >> right this year not looking as good maybe? what do you think as we sort of head into the second quarter >> no, like i said, we already started. i work on a fiscal year.

june 30 is my year end we had a great start a nice lead in the first half of the year. we've already started to get that back some where we sit today at the beginning of april looks just like where we were back in october. so thanks, to all these tweets and this trade talk, you've given back almost a quarter of our fiscal year back in rewind i hope it doesn't give it all up before we get to june 30 these are the kinds of volatility we're in a roller coaster market i was going to put a roller coaster slide behind me. we just have to get used to this volatility i think a probably a good half of the trading volume, different academics debated. about half of this trading volume is high frequency trading. which means this kind of volatility will be with us for a while. stood a good example down 500 at the opening. down what, 300, 200. but let's watch in that last hour >> that all of a sudden is going to set the trend for the day the order and balance, that itself the kind of stuff you guys

talked to art cashenabout. a little fundamental also. a lot of dynamics. >> we appreciate your candor, good to see you soon when we come back, much more on china's retaliatory tariffs boeing still getting slammed it's shavingant 80 points off the dow all by itself. we will take a look at other stockshacod tt ulget hit most in a professional trade war. "squawk on the street" will be right back stay with us ♪ there's nothing more important than your health. so if you're on medicare or will be soon, you may want more than parts a and b here's why. medicare only covers about 80% of your part b medical expenses.

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>> it is time for our etf spotlight. phil lebeau taking a look at boeing and the aircraft industry, firmly in the crosshairs here, phil. >> oh, absolutely. that's why shares of boeing are under pressure we see that reflected with boeing in them will you take a look at the proposed tariffs from china. here's what was outlined yesterday in china 25% on select airlines not just across the board.

the most likely models to be impacted by this would bep 37s the narrow body models will have the best impact. >> that is the most popular plane in the world right now china is the second largest aviation in the world. it will surpass me and become number one in terms of people getting on planes and flying right now. airplane demand, one trillion dollars in new planes will be order between now and 2036 it is the number one market. take a look at boeing. the reason it's under pressure, not only is it airplanes that are built in the united states and then sent to china remember they also have a finishing center they are in the process of building in china will that potentially be impacted because of any kind of a trade dispute that will erupt between china.

obviously, there is a fair amount of them the bottom line is this list for boeing. nothing is finalized here. there is nothing saying that chinese airlines will cancel their orders immediately when you start targeting specific aircraft. then you will get the attention especially given the fact that china is the number one mark in the world when it comes to new airplanes. >> that's good stuff we'll talk about a news update >> at this hour the leaders of russia, iran and turkey for talks on promoting a talk on syria. they say the territorial a reference to u.s. support for syrian kurds

international trade service in france, one of the road's most traveled networks. some 86% of trains were cancelled nationwide they say facebook ceo mark zuckerberg will testify on the use and protection of user data and 50 years ago today, dr. martin luther king jr. was killed in memphis. speakers are scheduled all day they will hear his last speech tonight and we will send it over for the eia inventory report >> take a look at prices, they are trading at 6277. the eia told us we had a draw down in gasoline of 1.1 billion barrels. that's why these prices are rebounding a little bit.

but the broader theme is the price and the pressure we are seeing in the equity markets think about it this way, if we have a full blown trade war, also, that implies that demand will be weaker final point to make here, u.s. production close to 10.5 millions of barrels a day. back over to you post-9. >> thank you so much when we come back. fighting back what china's tariffs. some things are working, namely housing and some retail today but largely domestic names, a lot more on sell-offs when "squawk in the street" continues.

>> welcome brack to "squawk on the street". good to be back. we're about an hour into trading here and still seeing some pretty sharp declines. off the lows, still looking at 1 1% boeing is responsible right now for 87 points of the dow's negative 123e7b9 china striking back announcing new tariffs on planes, cars and in reaction to all this, good morning. >> good morning good to see you, telling me that beijing will continue to respond with the same size and scale of tariffs

and is ready to enter a full on trade dispute, if necessary. if not that's what cone wants, the economic consequences will be negative for china and the united states. >> we have a negative impact it will also have a negative impact on the u.s. economy such protection will not protect anybody. it will not protect american farmers or business or american consumers. actually the workers, everybody, including the u.s. economy, itself we don't want to have any trade war with anybody but people have to understand who started all this >> now, what could be really disruptive to financial markets if chosen were to scale back purchases of interests if it was

a in the cards he said we have didn't our utmost to avoid this kind of situation. if the other side has a choice, we have no alternative but to fight back the trade may have stopped beijing on international property theft washington may have to continue this strategy the ambassador calls them groundless, thousand he says beijing remains ready to address in a quote destructive way, he says china will as well. he typically uses a measured approach in our conversation last night he was strong, bold, kurt. it was an example or a testimony on the topic of trade. >> yeah, rhetoric heating up on both sides, thank you. president trump did take to

twitter to comment on the story saying we are not in a trade war with china, that was lost many years ago by the foolish or incompetent people it's unclear where those exact figures are from joining us cnbc contributor, senior fellow at the center on budget and brian the president says we're not in a trade war. not yet. >> i think kayla made an important point a half an hour ago on our station she told us the public hearings take to us may 22nd and then i think this has been under reported. then there is actually a six month period be every the u.s. must apply these tariffs

that's a lot of time for negotiation. i have been talking to a lot of people this morning and kind of calculating my own internal probabilities. i think there is a 40 to 60% chance at the end of this day the tariffs will ultimately come to fruition. i'm at 50% that's a lot of time to negotiate and get off a train that i very much agree with the ambassador is not going to any good places. >> so brian do you agree with that, 40% chance that these tariffs actually see the light of day on both sides >> i'll not sure i agree with the numbers, i agree with jared's point. there is a conversation last overnight. yes, there is time to take place and maybe the two countries will walk back from where they are today. for the markets. i don't think they are quite interested in the nuances, i

think they are rushing forward in what the cumulative effect could be if we go down this road it's calling into question the value of the mark and their portfolios at this point >> hey, jared, what would a good deal look like regardless of the president's numbers? we have a huge trade deficit they have been stealing our intellectual property for a long time what do you think would be a good deal for the u.s. >> it's a great question and one that's gotten lost in the ether. i think a good deal would attack a part of the problem that i think is truly legitimate f. you go through the tweet that jump just presented from trump. there is actually one thing in there that resonates for me and other next much more free traders than i call myself that's the business of intellect cull property, theft, forced transfers. that's the part that really

violates a kind of economic condition and benefits from trade that china has long undermined how you get there, that's the charge most people agree is a problem. which i think is fundamentally wrong. >> we want to go outside the white house. we are getting breaking news, breaking comments from president trump's adviser, larry kudlow. >> reporter: he dropped in the driveway, they are asking about the tariffs and retaliation and nafta and the stockmarket and amazon, specifically on the tariffs. you guys were talking about the probability that these tariff itself never come to pass. this is the administration getting him to the table

i asked what is the probability this never happens he said not euro if the president ultimately at heart is a free trader >> that is only a development, escalating tit for tat with their proportionate back and forths and the fact that talks are going on behind the scenes kudlow results in some sort of deal broker and these tariffs potentially could never actually come to pass on nafta, another deal that is currently in the works he said it is quite possible we won't want to get a deal by the end of the month he says the stockmarket will love this wane hen it happens he called it mild. he said that a correction was overdue. part of this conversation is

that me believes there is a possibility these tariffs never get implemented. i was reading what larry said to us about navarro we'll see if there is any evolution in larry's thinking now he is in the job bryant, i'm wondering. with dade comment, he said tariffs are likely to create new tariffs for manufacturers and american consumers when do we start hearing from the chamber of commerce or the farm bureau? how long do you think they can move these comments? >> i think there are a lot of discussions between chamber, farm bureau and interesting parties and want to be too public to criticize the

administration they're in delicate position i suspect, kind of going back to jared's point, they're sympathetic to the arguments of cracking down on chinese staff there is broad consensus on that how you attack that problem is another matter so far what we have been seeing is not addressing intellectual property test. it's manufacturing issues, steel, alluminum and with the new round. so i think the chamber will be support ev of what the administration is doing if it gets to the issue. themgetting out if public and criticizing. not being if step with the administration could cause them political problems they will be very cautious on this >> it sort of gets to the political upshot this is an election year mid-term elections, president

trump campaigned on helping the american worker, protecting them from these countries he says were taking advantage of us on trade. whether these tariffs take place or not can he say, i kept my promises or is he going to fight the narrative that a lot of these agricultural prices will go down it will hurt farmers, a lot of the states and communities that voted for him, is this going to help or hurt him >> i think it's going to hurt him with a narrow base and a broader swath of people. he really can go forward and say i fought for you, when he talks about manufacturing woes i agree with what brian was saying, this is an intellectual if i recall. however, where i think trump loses support here is from the elite folks.

he's out there with protectionism. look at the pashlths this is not a busy friendly president in action. he hurts himself probably more broadly. >> we'll leave it there. thank you for joining us on the news of the day. >> when we come back a lot more on the sell-off, dow down 295. we will talk to jim grant of grant's interest rate observer later jeffrey gundlach will join us with markets, yields and a t lomore "squawk in the street" back after a break. ve lives. mr. stevens? this is your new name. this is your new house. and a perfectly inconspicuous suv. you must become invisible. [hero] i'll take my chances.

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let's get to the cme group in chicago and rick santelli. >> reporter: hi, carl, thank you. i'd like to welcome jim grant the bond guru. jim, thanks, for joining us this morning. >> you are welcome, rick nice to be welcome, rick. nice to be here. >> let's start at the beginning. not everybody is a bond aficionado would you agree we're in a generational bare market when it comes to sovereign debt globally but specifically in the united states >> well, i think that we are in more or less an eternal bear market government is not the best for honoring commitments of a frenchman of note way back when said he would rather hold a mortgage on a garden than a kingdom, reflects the world's wisdom on reliability of governmental governances >> having said that, i keep a

close eye on spreads for high yield and etf. hyg toying with levels we haven't seen since thanksgiving of 2016. junk spreads are wider but well behaved, all things considered what's your feeling on junk and how does it fair with the recent equity volatility? >> i think speculative grade credit, corporate credit, investment grade corporate credit and emerging market credit are for a world in which we do not live things stay exactly as they are, you will put the coupons if there's a move to something resembling old fashioned inflation or soft patch or even recession, i think those securities will avail you less than nothing i think it is a very risky time for anyone investing in risk based fixed income securities.

>> i see one of the big dynamics i see all the time is be careful, investors in the stock market because we're starting to see yields on short end of the treasury market compared with s & p dividend yields. i remember times of significant dirchl difference do you see that with respect to the bearishness of the equity market >> no, i'm not sure rules of thumb ought to be so important as to actually cause people to move money around. take one example coca-cola, for example, offers higher equity dividend yield than it does yield on short dated unsecured fixed income securities i'm not sure what that signifies, not sure if it means the note to bonds are too rich or stock is -- stock is 20 times

earnings, does that make it cheap? no in other words, rick, i don't see arguments about stock and bond yield necessarily being something you should take to the bank >> i don't disagree with your answer to the biggest question of all quickly, do you think that the ten year note yields behaved very well with respect to the fact we haven't been able to challenge 3% given debt, deficit and spongy equities as of late your final thought >> these yields have tended to move in the past, a long way in the past tend to move in generation length cycles. these can take the pace of geological time. so just because we have failed to pop through 3% the past few months does not mean we have not begun, for example, a bear market, may i believe it will. last for 25, 30 years. >> on a hard break, i hate to

interrupt you. i could go on for awhile thank you. we will always come back on big moves for your thoughts. back to you. >> thank you. "squawk on the street" will be right back. you know what's awesome? gig-speed internet.

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welcome back to "squawk on the street." i am jackie deangeles. one sek tor bucking the trend, managing this morning, staples one of the worst performers for the year take a look. names like cvs and walgreen up more than 2% in early trading. when we come back, stocks roll off lows. dow down, we'll look at the big movers when "squawk alley" begins in a couple of minutes.

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