good morning it is 8:00 a.m. out west it's 11:00 a.m. on wall street and "squawk alley" is live ♪

♪ good thursday morning. welcome to "squawk alley." i'm carl quintanilla with morgan brennan and jon fortt at the post nine stock exchange worst decline since laip late april as the president cancels his historic summit with north korean leader kim jong-un. eamon javers is here to start things off, along with melissa cabrera-caruso eamon, let's start with you. >> we'll see him on camera in an unrelated event. when i spoke to sarah sanders, they've not decided whether or not the president will address this live to the nation or not, or stick to the script and stay with the unrelated signing

event. we'll see what the president has to say about half an hour's t e time meanwhile i wanted to flag for you this section of the president's letter to kim jon jong-un in which he seems to leave the door open for further negotiations saying i felt a wonderful dialogue was building up between you and me, to kim jong-un, he says and ultimately, it is only that dialogue that matters. some day i look very much forward to meeting you, if you change your mind, having to do with this most important summit. please do not hesitate to call me or write. so, a very solicitous president trump in that section of the letter, amid all this acrimony and intense verbiage from one side to the other. the president signaling he would like to keep the dialogue open and suggesting that he may have been in direct contact with kim jong-un over the phone for now the president taking a page from "the art of the deal." he has written several times you need to know when to walkway

from the negotiatinging table and the president, this morning, is walking away from the negotiating table. >> michelle, speakingof walkin away, secretary of state pompeo is in front of senate foreign relations, michelle, and says as they were trying to work out logistics with the north koreans, in some cases, were not hearing back at all. >> he was set to testify on another matter but this has come up repeatedly during his testimony exactly what was perhaps happening or, as you highlight, not happening behind the scenes when it comes to trying to set up the logistics for the singapore meeting on june 12th. i would add what is particularly interesting in the last 24 hours is that the reason the president called this deal off is because of these insulting comments coming out of north korea where the north korean diplomat called the vice president -- describing what he said as political idiocy, threatening the possibility of once again some kind of nuclear war. what's interesting about that is

how solicitous the president was on tuesday, when he spoke at length for 35 minutes. he foreshadowed that canceling this meeting was the possibility but at the same time he made clear that he would make some big concessions to kim jong-un in exchange for denuclearization. >> he will be safe he will be happy his country will be rich his country will be hardworking and very prosperous. i think that he will be extremely happy, if something works out. and if it doesn't work out, honestly, he can't be happy. >> despite all that, those comments coming overnight out of the north korean diplomat and clearly that's how we've ended up where we are right now, guys. >> michelle, thank you john harwood is in washington, d.c. with more as well let's get some reaction. john, this coming as we get reports out of north korea that at least one of those nuclear

sites was destroyed. >> right you know, i think the thing to keep in mind here is that the premises of this summit never made any sense that is to say, the idea that kim was going to agree to denuclearization, no one who is an expert on the korean peninsula believed that they were going to do that. and so the idea that president moon and his diplomats convinced president trump that he was willing to do that and then president trump hastily agreed to the summit. and then the closer we got to the summit then the north koreans clarified that they weren't going to agree with that and then you have this escalating rhetoric. this was on a very shaky foundation from the start. in fact, when i talked to experts on korea, what they say is that the president didn't

push them to the table they pushed him to the table they are in the crosshairs and they persuaded president trump to go along with this summit but since kim was never going to do what the president indicated he was going to do, ultimately we were going to get to this point. and it's probably better that we get to this point now rather than in singapore where the results would be more -- consequently would be more unpredictable. >> all right john, thanks michelle, eamon, all of you stick around mike santoli here with us at post nine. the stock market reaction, is it a reaction to this do investors really care that much whether this settlement happens or not or are we witnessing moves based on other stuff >> jon, i don't think the market cares this much. if you're going to be drawing lines between the fact that this summit is not going to happen

and what might happen on trade policy, i think at the margin, the perception is that it creates the makings for the president to be more hostile toward china on trade. there's one fewer reason to be conciliatory in that region. energy markets leading to the downside all that stuff is in the mix i don't think it's a matter of oh, no, now we have the potential for hostilities to break out on the korean peninsula. >> michelle, mike just mentioned china. how does china fit into all of this >> inextricably linked that impromptu news conference he did on tuesday was when i think about china and trade, i think about the border i think about the border of north korea.

china is north korea's biggest trading partner and to the degree that the u.s. is going to apply maximum pressure, they need china to do that as well. so, when president trump talks about trade with china, he does not see it in isolation. he always sees it in the context of the broader deal that he's trying to get in terms of denuclearizing north korea they are very related. mike was spot on when he says, okay, if they're going to play tough with north korea here, does that then mean they're going to play even tougher with china as a result? does he backtrack on zte does he do other things because he doesn't think he's getting the cooperation, perhaps, he thinks he needs from china he also said on tuesday that north korea's attitude had changed in a bad way after the second surprise meeting to him between kim jong-un and xi when it happens. >> right jon, on that meeting, kim did travel to beijing. a lot of the -- even the

comments were made by vice chairman or lieutenants, not kim himself. and he did get those detainees released so he said if you want to talk, call or write to me. how strong of a line is there to the prospect of a meeting down the road john >> oh, for me? >> yeah. >> i think it is possible, but people in south korea were concerned about this summit getting canceled because they thought that with john bolton installed as national security adviser, he is not somebody who has been very optimistic about peace talks with north korea they're concerned that boldton will fully have the reins and will not pull back i recognize the service -- surface connection between china

and north korea but i don't think this is going to change the president's attitude, vis-a-vis china all that much. to some extent, that is going to flow on the terms of the economic relationship. of course, we've got the split within the administration between the people who want to tamp down trade conflict and the people like peter navarro and bob litheizer who want to amp it up. >> there has been a lot of talk about this historic summit and the implications for diplomacy abroad and now, at least for the time being, it's not happening. how does congress react? >> you won't get a lot of denunciations of this, at least initially on capitol hill. that's what we're seeing on some of the statements so far back to john's point on china

and trade, what i'm told by white house officials, just from talking privately, is that one of the possibilities here is that the president has been sublimating his own instincts to get to that june 12th summit that he was so eagerly anticipating that is not taking as hard a line on china, not citing overtly and instead letting steven mnuchin, the treasury secretary, lead the dialogue, that say little more amenable to the chinese. there had been some discussion after june 12th we would get the president coming out and clarifying exactly where he stands and where he sees the future of china trade going. the question is now absent that summit does the president take a harder line which some people inside the white house that he had been suspending in order to get this summit to occur in singapore on june 12th we'll have to watch that relationship between all the

players on the trade side. we're seeing a wire flash here saying south korean president moon is meeting with his top aides after the president canceled that north korean summit that coming from a spokesman for president moon you see the daylight visible between south korea and the president. you saw south korea officials saying there was a 99.9% chance that there would be a summit the president on that same day expressing real skepticism that the summit would happen. the south koreans much more eager for the summit and now they are scrambling to react to the president's decisive move here. >> hey, guys >> yeah, john? >> to follow up on eamon's point, by and large, i think people on the hill will be pleased at this decision by the president today. and that is because i think there was significant amount of concern that we were going into a summit with unrealistic expectations and not a clear strategy and so you see critics of the

president, ben sasse, for example, praising him for having made a correct decision. i don't expect the president is going to get a lot of pushback from republicans or democrats. >> that's certainly been the read on our air. former ambassador saying this was probably not the best idea from the get-go. we'll see what happens from here eamon, john, michelle, mike, thank you. appreciate it. we're just getting started here this morning in about 20 minutes, we are expecting to hear from the president. as eamon said, no guarantees we will hear from him on north korea specifically plus, morgan has something special coming up later in the hour. >> i do. illegal short-term rentals and the law. we spent months investigating. you will not want to miss the atbc exclusive th is coming up after the break. "squawk alley" will be right back [phone ringing]

need a change of scenery? the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price. giddyup! kayak. search one and done. the sun goes down. you did a million things for your family today. but speaking to pnc to help handle all your investments was a very important million and one. pnc. make today the day.

sure. mom,what's up son?alk? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom?

you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. [ chuckles ] download the xfinity my account app and set a password you can easily remember. one more way comcast is working to fit into your life, not the other way around. welcome back to "squawk alley. airbnb has been capitalizing on the wild landscape of a shared economy. disrupter coming in at number three on this year's list, worth more thani its publicly traded rivals an investigation into that clash between illegal short-term rentals and restrictive regulations. airbnb says it's worked with

cities to craft regulations but not in miami beach, where that fight seems to have no end in sigh sight. >> it's 9:00 on a saturday night and we're riding along with miami beach co-compliance, on the lookout for illegal short-term rentals. >> what are you looking for? >> hopefully we can establish contact if it's occupied and whether it's a violation or not. >> compliance officer has seen it all, large, late-night parties, commercial shoots with scantily clad women in a home investigated for illegal rentals. saying they knowingly booked airbnbs in prohibited areas all captured on body camera videos recorded over the past two years. some are so blatant, as these

house rules show, what to do if someone asks they're told to lie, saying they're a friend and certainly don't mention that they rent this place. >> you're not allowed to rent this place for less than six months and one day. >> everybody has to leave. >> this party needs to clear out. >> at a loud party in milbray, california, in a san francisco bay area, shots rang out guests seen on surveillance cameras running down the street. airbnb says it has zero tolerance for this type of behavior and permanently banned the guests airbnb says these incidents don't represent the overwhelming number of satisfied hosts and guests in an 81,000 cities and 191 countries and has successfully worked with lawmakers around the world back on the streets of miami bea beach, it's not long before we roll up on a group of vacationers. the building has telltale signs of an illegal rental, two of the

units advertised on airbnb have lock boxes and key pads. >> do you live there >> we do. >> how long have you been living there? >> we just rent ed the airbnb. >> were you surprised to learn it's not legal here? >> when you hear that story -- >> to miami beach mayor, the issue is clear cut. >> they may work in some places but they don't really work here because at the end of the day it's not the mom and pops we're seeing here. we're seeing commercialized, predatory companies that are trying to commercialize our residential communities. >> predatory seems like a really strong word. what do you mean by that >> it is predatory because it's not about a mom and pop or grandmother wanting to bring in a college kid to make him chicken soup at night. it's people taking very nice properties, buying them and turning them into essentially a flop house. >> in an interview at airbnb san francisco headquarters, the head of global policy strongly

defended the company's track record. >> i've yet to see a program being run by any mayor, any elected official in this time of economic inequality that's generating $6100 for a typical middle class family all without the cost of a single taxpayer dollar that's what it's about at its core. >> should airbnb should be responsible for what is in that market illegal activity on that platform >> a common sense solution for miami beach, happy to do this if they want to sit down and have a constructive conversation. you could take that 35% of the city that's a residential area make that an exclusionary zone allow the activity to take place in 65% of the city that's explicitly zoned for this type of activity. >> meantime, you have illegal listings on your site. >> well, first of all, if you actually look at the underlying law in the city, in miami beach, right, the miami beach allows

for this activity to take place. $20,000 fines on someone making their home available a few times a year to actually help make ends meet, does the city really want to make this work as well as possible for as many people as possible? >> it is an increasingly complex issue. for more of our exclusive investigation go to cnbc.com where we talk to cities around the country about illegal short-term rentals and this issue at large. >> airbnb is not the whole industry if it's a problem there, is it a problem at competitors, too? >> it is, whether it's airbnb, booking.com or expedia's home away they've all been having clashes in varying markets we spoke to officials in many cities around the country and whether it's los angeles or here in new york city or boston, to name a few, there are issues that have been emerging. that said what we found in all of our reporting is that

speaking to different officials around the country, by and large, time and time again, the company that was brought up most frequently was airbnb. in miami beach specifically, officials there are pretty emphatic saying that that platform more than any other causes the biggest issues. >> i watched the longer version of that package. i encourage everybody to do that that's great one of the allegations airbnb makes is that the hotel industry is beyond this sort of response from communities like miami beach and their reticence to talk to airbnb and the like. what did you find in your investigation? >> that's been a discussion and a debate that's been playing out in the last couple of years. there have been reports on both sides. chris lehane did tell me he thinks miami beach hasn't, qu e quote, had a serious desire to want to engage with airbnb on

resolving the issue. based on what has come out that the city is effectively working with the hotel industry. we got a response from the hotel industry american hotel and lodging association did not mince words either airbnb has opted to deploy a massive destruction campaign of dirty tactics, deceptive messaging and personal attacks against anyone who raises a concern. the bottom line is that however the law came into being there is a law on the books in the city of miami beach and what our reporting showed is that it's getting worse. >> any sense on whether it's the worst in miami beach, whether other cities give miami a run for their money? >> miami beach is the worst in terms of regulations it has in place and enforcing them they start with $20,000 fines when they find an illegal listing. that goes all the way up to $100,000 with a fifth violation.

that being said, as i mentioned before, boston, l.a., which has new rules that were just approved on a preliminary basis earlier this month, you have issues in new york city here, which has been making headlines recently there are different issues playing out across the country we get into all of this in much more detail on cnbc.com in our future article and the documentary. >> great stuff, morgan important for investors to pay attention to airbnb, one of the most important coming ipos in the next, who knows, 12, 24 months. >> and i'll say it one more time airbnb does say, and there are examples out there as well of places and cities where it is working with regulators to pass regulations, too it is complicated. coming up, president trump speaks we will take you live to the white house as he signs a bill to roll out dodd/frank, just minutes after calling that historic summit with north korea

off. and taking a look at stocks, having their biggest drop in a month. the dow is down almost 200 points the nasdaq and s&p o mffore than half a percent

we are watching apple, morgan stanley raises its target within 2% of all-time highs. joining us now is apple analyst at morgan stanley, katie huberty. good morning. >> thank you for having me. >> great to have you you tackle what is the most important issue for apple investors to figure out right now, which is a service business and to what extent it can be a growth driver apart from the iphone itself. longer replacement cycles for the iphone, different average selling price profile. what convinces you that the services business is more than kind of like a lagging indicator

of how the iphone business is doing? that 18, 24 months out of iphones flattening, the services business won't slow down too >> sure. so the opportunity with this stock right now is that it's tra trading at a hardware multiple that was fair when they were driving most of the growth by our forecast services will drive the majority of the growth going forward. that provides a higher, more durable, more profitable growth profile and deserves a higher multiple fewer than half of apple's users pay for services today as the company reduces friction around payments, around subscription, around expanding the data center footprint we think those penetration levels will come up regardless of the growth in the installed base of devices. >> katie, you say that the app store is the best proxy for the services business overall. i wonder what you need to see

apple do in order to feel like your bear case to what do you think apple music and icloud need to be? >> the app store, icloud accelerated as the company opened data centers in china apple music subscriptions are accelerating we've got data on that in april. apple music is growing over 100% the diversity of the growth drivers is really expanding. but the reality is the majority of the growth does come from the app store. and so that will be a big determiner of growth going forward. we do think that expanding payment options, reducing subscription churn is contributing to the accelerating growth and that's just going to

continue in future quarters. >> katy, i know you just laid out this case, that it could be trading at higher multiples based on the growth in software and services and that is the biggest driver of growth for revenue. but overall, looking at the revenue pie, it's still iphone and iphone sales at what point looking out into the future do you see services overtaking and becoming the biggest business >> so, as we look out a couple of years, we do see services growing to about 25% of revenue. but because of the higher margins, it becomes 40% of profit dollars so, three years out, you're approaching 50% of mix, of profit dollars coming from services. >> katy, one thing that people have looked at as we focused more on service is margin structure and people argue we know a lot less about that structure than we do about hardware

what metrics do you wish you had that you don't have yet? and do you think you'll get them >> the company has provided some data that allows you to come to a conclusion that gross margins is close to 60%, compared to overall gross margins of 57% margins in icloud, margins around the app store because of spotify's ipo. margins around streaming music businesses and so we wrap all of that up and that's where we get to the conclusion that operating margins in this business are in the low 40% range and that those will expand to high 40% operating margins over the next five years and that compares to operating expenses right now. >> thank you, katy

we want to take our viewers to mark zuckerberg in paris, speaking at the vivatech conference take a listen. >> we appreciate you being with us when we wrote to you, you almost accepted immediately and i really appreciate it it's great so a lot has been said recently about facebook data. honestly, i didn't want to cover that but you said no, no, no -- >> we have to. >> we have to. do it upfront. so what i would like to hear from you is -- okay. how have you reacted to this and what has been the most bold issues for you maybe you could share with us your feelings. >> sure. we face a number of important issues right now the way that i thought about

this is that for most of facebook's existence we've focused primarily on all the good that connecting people and that technology can bring, right? so as we've grown we've seen all these people around the world have gotten access to new tools to stay connected with people and communities they care about. in paris here, after the terrible terrorist attacks a number of years back, people used the tools to be able to tell their friends and family that they were safe and to show support for people here. around the world there are more than 70 million small businesses that use our tools in order to reach their customers and to grow and more than half of the small businesses that use our tools have told us that they're able to grow and hire more people because of using our tools but what's clear now is that in addition to that, we didn't take a broad enough view of how people might be able to use

these tools for harm as well that goes for all the issues you mentioned, fake news, for interference in elections, for hate speech, for developers potentially using the tools in ways that don't respect people's privacy. so, we need to take a broader view of our responsibility to make sure that we're not just reacting to issues as they come up but we're out there, trying to prevent any issues from happening going forward. if you look at -- for most of the company's history, the way that we've dealt with bad, inappropriate content or bad actors is reactively people can go on facebook, say what they want if there's an issue, then someone in our community will flag it to us and we'll try to look at t i don't think that's enough now with the current issues we see around hate speech and fake news, we need to be building systems using ai and other technologies that can go out and detect this stuff proactively. we're hiring thousands of people by the end of this year we'll have more than 20,000 people at the company working on security

and content review to make sure that we're proactively helping to get rid of bad content. to give you one example of an area where i'm really proud of our work, in terrorism, for example, 99% of the isis and al qaeda-related content we take down is flagged by our ai systems before any person in our community reports it so that, i think, is a big deal and is an example of the kind of work that we can do using ai systems, hiring thousands of people to be more proactive. when you look across the other issues that we face, whether that's protecting election integrity, making sure that countries like russia can't interfere in other elections like they tried to do in the 2016 u.s. elections. we just have a lot of work to do here we're confident we can get in front of this. this is a top priority for the company right now, to make sure we do a good job on this. >> mark zuckerberg's world tour continues, having testified now in washington, brussels and in

paris with the q & a today we'll keep an eye on that. we are awaiting the president, who is about to sign some of those rollbacks of dodd/frank in a few minutes. we'll be listening to see if he makes any comments at all on north korea. to raise the curtain on that, we turn to eamon javers on a busy thursday eamon? >> reporter: i think the president will want to say why he made this decision. we'll see whether he does or not. this will be his first opportunity in front of the accuracy to explain to the public why he canceled this summit a couple of questions we want answers to, whione of which, secretary of state mike pompeo refused to answer, did they give any heads up to south korea and our allies in the region before announcing this? mike pompeo suggesting that the president said directly on camera that the likelihood of this summit happening was in doubt. the white house was certainly

transparent throughout the week even though the south koreans were here at the white house earlier in the week, the president transparent about his doubts that this summit could ever take place. you remember the north koreans had gotten somewhat bulky over the past week or so. and the president almost but not quite laid the blame for that directly at the feet of the chinese leader xi jinping. exactly how much coordination was done with the allies, how much daylight there was between the united states and south korea. >> michelle, what do you expect to hear from the president if he does make some comments specifically about north korea that might either address concerns that allies might have about where this leaves these talks or even address these trade issues with the chinese. >> as eamon said, i hope to at least hear some explanation on

his part about why he canceled this meeting, at least for now, what his thinking is there and then what is the strategy going forward if, indeed, he addresses north korea at all because this event isn't necessarily about that i will add mike pompeo on capitol hill saying he expects additional sanctions on north korea. so with the backing out of this meeting -- this all happened that, by the way, treasury sanctioned nine more individuals related to iranian sanctions and at the very same moment that the atomic energy came out saying broadly speaking iran had complied with the nuclear deal even though they rebuked them from being a little slow in letting in the inspectors. still it's clear that this administration plans to be very aggressive, continued sanctions. the campaign of maximum pressure versus what we saw previously

the campaign of maximum patience under previous administrations. >> in that live shot there on the left side of your screen, you see senator heidkamp and commerce secretary wilbur ross, who joined squawk earlier this morning and did talk about trade. john harwood it's a reminder of all the fires or pots, should i say, that are boiling right now, regarding trade, in this case regulatory reform, geopolitical diplomacy. it is an extremely busy time. >> you could say he's juggling boiling pots because they're between iran, china and north korea, he has so many. on some of the points you were discussing with our colleagues earlier, one concern -- the greatest allied concern is probably going to be south korea. they're the ones most invested in the idea of tamping down potential conflict i would expect president trump to be conciliatory

that was a very conciliatory letter for president trump, especially that he said in calling off the summit, saying if you want to talk, call me, let me know. question is going to be whether north korea will be interested in doing that. sure surely, they want to be bribed and paid off to slow down their nuclear program. but they're not going to give up their program. and they've already gotten something of what they wanted. that is, with the scheduling of the summit in the first place. calling him the supreme leader he has gotten some treatment as a peer with the leader of the united states on the world stage and i suspect they may be content to lay back for a while. >> eamon javers, we're waiting on president trump to sign this rollback of some of the banking regulations tied to dodd/frank stlchlt a scenario, given the

news this morning, a scenario in which he would not address or speak about north korea? >> it's certainly possible he would address that i want to highlight for you two sentences from this public letter that indicate the real diochd dichotomy. in the same letter, the president invokes a nuclear threat, saying to kim jong-un, you talk about your nuclear capability bus ours are so massive and powerful that i pray to god they will never have to be used. overt nuclear saber rattling in that sense in another sentence, i felt a wonderful dialogue was building up between you and me and ultimately it is only that dialogue that matters. i look very much forward some day to meeting you in the same letter the president

menacing kim jong-un, reminding him of the u.s.'s nuclear capability and then saying i would like to meet you some day. so keeping the door open with some kind of dialogue and summit with the north koreans one of the questions on the u.s. side is whether kim jong-un has ever felt he could safely leave his own country. u.s. intelligence not clear whether or not he would base a coup or attempted power shift if he were to leave the country in the hands of his political advisers not clear what his relationship is with those other leaders. >> those two sentences that eamon talked about isclassic carrot and stick every step of the way, right you hear the president say your country is going to be rich. but at the same time, pompeo says there's going to be more sanctions if we don't have this

meeting. you know, make the choice yourself. >> michelle, it's also what the president was saying the other day when he said well, no, the libyan model is not what we're talking about. that decimated libya we're going to protect kim but if he doesn't agree to what we want, then we'll have the libya model. and that's exactly what michelle was alluding to, and eamon as well. >> i want to bring in ceo of business insider as we await the president here who knows, we might get some guidance on diplomacy we might discuss community bank lending and deal making. >> you never know. >> what's the sense of all you're having to absorb today? >> continuing his apology tour silicon valley has clearly hit a new phase. it's what microsoft hit in the 1990s. suddenly so rich and powerful that governments have to intervene. mike zuckerberg is saying the right things the usage data shows it hasn't affected them. as long as they stay ahead of

this and start to make some changes they should be fine. with regard to north korea, it's -- the president is great at generating ratings. i can totally understand why he canceled the summit here but i'm going to have to say, boy, he spent the last month or two doing this >> it's remarkable, isn't it, that from facebook to airbnb, we're seeing this theme of regulations and tech being in conflict, either because there are existing regulations that tech is flouting or because regulators haven't been able to keep up with. >> look at the ntsb report on uber, deep dive in how this car managed to not avoid this person and morgan's wonderful example today of what's happening in the lodging sharing business. >> again, this is something that other companies have gone through. you are successful early on because you're totally scrappy

you find ways to do things that other companies can't. you move fast, worry about problems afterwards, do things and then apologize that's where they are. eventually, you get so powerful that you have to change. that's where facebook and google rr are certainly and uber. >> guys, hang tight. i want to bring in chris hill, former ambassador to south korea. ambassador, how do you see the cancellation of this summit. >> i'm not going to say it's inevitable that we cancel but i certainly have questions about what the trump administration thought they had in the first place. it seems the south koreans, north koreans were prepared to talk chinese said the same thing. potentially in return for no sanctions relief

the president talked about in the last few weeks there was a problem of diplomat diplomatic trade craft knowing what theintere interestiinteres interested in doing. mike pompeo's comments suggested to me we didn't have the basis for a summit the question is why did they allow this to go on so long? and were other white house staff, in particular john bolton, in favor of this thing in terms of negotiations and whatnot with libya to give up their nuclear weapons but, in fact, what the real issue was was for the rest of the -- the rest of mankind was whether this meant we were going to kill kim

jong-un. >> ambassador, people are reflecting on the way that this summit was originally announced, came as a surprise, threw the south koreans for a loop the libyan example came as a surprise we don't have an ambassador to south korea. how much of all of this is constructive to an element of surprise in diplomacy and how much is destructive? >> certainly when the south koreans came and visited the white house and said kim jong-un was interested in meeting president trump, the correct response was to say let's think about this and see where we go instantly president trump said he would do t i guess right there we should have realized there were some problems with diplomatic tradecraft. so i guess my concern is any

time you have a high-stakes summit, you have communicae that says this is what we would like to see as the outcome of the summit what would you like to see i'm not sure that was done if the north koreans want to engage in that or say we don't agree to anything on this piece of paper, that should have been warning sign enough. it's gone two months and created a lot of problems, especially for our relationships in asia. you have japan very upset about this thing in the last two months you have the south koreans that are wondering where they are and, of course, the chinese were not happy. a lot of problems. and i think they could have been avoided if the president prides himself on thinking outside the box but frankly the box is there, sometimes, for a reason. >> i wonder what to make of south korean president moon's comments it might have been yesterday it might have been the day before, that he had full

confidence in president trump's ability to have this summit and bring piece and it was a full-throated voicing of expectation that everything was going to be great with this when even president trump seemed to be saying it didn't look like this was going to happen what political position, what diplomatic position is the south korean president playing, do you think? >> i think the south korean president has political parties that really wanted to happen sort of willing this to happen would bring it about in fact, the south koreans were rather circumspect on would north korea give up their weapons or do something real and do it quickly? so the south koreans never indicated they had that thought. that is why the u.s. shouldn't have been dealing with south

korea. they have their own way of looking at some of these issues and i thought that's why it was wise to send mike pompeo not once, but twice to north korea when he asks these questions, what was the answer? because it doesn't sound like the north koreans ever agreed to the terms that we have in mind, which was essentially give up all your nuclear weapons and in the fullness of time we'll give you things that will, quote, make you rich. >> ambassador, at least according to reports we've gotten out of north korea, at least they did supposedly destroy one nuclear site does that not count toward that process? >> well, look, the test site has been used for six nuclear explosions, including most recently hydrogen explosion. there's a lot of indications that if they tried a seventh nuclear explosion, it would have leaked out and we would have had a huge environmental issue i think it was a good thing that

they closed it and you can understand when you take a measure like that, you try to put it in the context of momentum toward a summit we need to understand that the first issue was a technical issue that this nuclear facility did need to be shut down after all, it's a series of tunnels. i do believe, though, that north korea is sincere when it said it completed its nuclear program. i don't think that they have anything coming up in terms of testing. and i guess my point is that that's a good thing, but i don't think it's a petition thing to have -- >> i have to ask you how this all affects trade if, in fact, china and south korea are no longer necessary to help build a consensus on nuclear weapons, how likely is it that the u.s.

takes a more strident stance on trade, at least regarding those two countries? >> well, i would have to ask donald trump, but certainly there are a lot of voices in his administration, including his own, to the effect that china isn't playing straight across the board, whether it's with north korea or with trade. i don't look for any warming trend with china in fact, i look for problems coming up. those problems essentially will be in the trade area i do wish there could be some better appreciation for the fact that the chinese have a real dog in this fight, that is on nuclear weapons. after all, north korea is on the border if that site were used again and sent into the air, it would be in the air of china. china has a real interest in it. and i don't think notwithstanding the difficulty

of dealing with china, i don't think we have to work with china on this issue. and as they start to pick up the pieces, i hope they'll look at what we could have acres chi, a dimension to a more comprehensive industry as we work with china, perhaps trade issues will start finding solutions as well. right now, this is not going in the right direction. >> we might get more on that next week. commerce secretary telling us this morning he will be going back to china after a trip to paris, i think john harwood, i know you've been watching this as we await the president. you might have some news, too? >> i wanted to follow up, carl, on the question that jon fortt asked ambassador hill. what you're hearing from scholars of south korea and north korea is that essentially president moon of south korea played the president by trying

to call on -- take advantage of his impulsivity. here, we'll listen to the president. >> john, thank you let's listen to the president. >> i would like to begin by saying that based on the recent statement of north korea, i have decided to terminate the planned summit in singapore on june 12th while many things can happen and a great opportunity lies ahead, potentially, i believe this is a tremendous setback for north korea and, indeed, a setback for the world. i've spoken to general mattis, joint chiefs of staff. the greatest military in the world that has been greatly enhanced, as you all know, is

ready if necessary likewise i've spoken to south korea and japan and they are not only ready, should foolish or reckless acts be taken by north korea, but they are willing to shoulder much of the cost of any financial burden, any of the costs associate d by the united states in operations if such an unfortunate situation is forced upon us. hopefully, positive things will be taking place with respect to the future of north korea. but if they don't, we are more ready than we have ever been before north korea has the opportunity to end decades of poverty and

opreo oppression by following the path of denuclearization and joining the community of nations and i hope that kim jong-un will ultimately do what is right, not only for himself, but perhaps most importantly what's right for his people, who are suffering greatly and needlessly all of the korean people, north and south, deserve to be able to live together in harmony, prosperity and peace that bright and beautiful future can only happen when the threat of nuclear weapons is removed. no way it can happen otherwise if and when kim jong-un chooses to engage in constructive dialogue and actions, i am waiting. in the meantime, our very strong

sanctions, by far the strongest sanctions ever imposed and maximum pressure campaign will continue as it has been continuing but no matter what happens and what we do, we will never, ever compromise the safety and security of the united states of america. i want to make that statement. i feel very, very strongly about it our military, as you know, has been greatly advanced, will soon be at a level it has never been before our approval of billions of dollars this year and next year,

largely due to the help of the people with me and standing here today, we appreciate but we had to do that for our military and we've done it. and hopefully everything will work out well with north korea and a lot of things can happen including the fact that perhaps it's possible that the existing summit could take place or summit at some later date. nobody should be anxious we have to get it right. with that being said we have something else we have tell all you chairman, mike and everybody, that was a big deal until this came up. i don't know where is mike? you did a great job. it doesn't seem so important now. but it is important. it's incredible. and it's incredible you've done

it, and in a very bipartisan way. thank you. thank you very much. a very bipartisan way, mike i want to congratulate you and congratulate you very much i want to read a few names these people worked hard this is all about the dodd/frank disaster and they fixed it, or at least have gone a long way toward fixing it. incredible job heidi heitkamp thank you very much. appreciate it. david purdue where is david what a great guy he is jim rish, what a great lawyer. i learned all about you. i think i have to use him. tim scott.