should be down it's not down that much, i think that bodes well for it. >> alphabet looks like it's picking up momentum to the upsid upside. >> thanks for watching, "power lunch" begins right now. good afternoon, scott thank you very much. i'm tyler mathisen welcome to a busy edition of "power lunch." president trump slapping major tariffs on mexico, canada, and europe he says it's good for america, good for business, our allies are set to fight back. we'll talk about the impact on businesses and the markets and your bottom line that is straight ahead plus, the race for driverless cars, general motors up on softbank's big investments in autonomous vehicles, and waymo teaming up with fiat chrysler. and shares of this biotech

company surging 135% 13 135% we'll reveal the name as "power lunch" starts right now. >> no such thing as a free lunch. i'm sara eisen, we are seeing fallout from trump's aid the tariffs, as long as sliding on this final trading day of the month. still, the old saying sell in may didn't pan out stock market on track to post its biggest monthly gain since january. there are some movers, the etf attracts the steel sector, slx moving higher on pace for a second straight positive day shares of u.s. steel leading the way but the etf that tracks mexico, the eww, down on pace for its worth month since september, 2011. the canadian etf down as well on pace for its sixth negative day in the last seven.

melissa? deutsche bank shares plunging on reports that the federal reserve reported that it's in troubled condition the designation that took place is one of the loyest used by the fed. cnbc reached out to the fwed we got a no comment. deutsche bank not commenting but in a statement it says the ultimate parent of the deutsche bank, deutsche bank ag is very well capitalized and has significant liquidity reserves. uber's ceo says the company is on track for an ipo in 2019 and that it's in talks to add waymo's self-driving cars to its network. and the world's leading air transport industry group says airline industry profits probably won't hit record levels forecast in december due to a jump in fuel costs we'll get the pulse from delta's ceo minutes from now tyler? we begin with on again off again and now on again trade

tiff eamon javers has the story from washington. >> tie ler, that's right the announcement came from the commerce department and then wilbur ross was on cnbc explaining the president's decision here. one of the questions he got was about the eu's reaction here the eu threatening to take retaliatory action of its own. here's what wilbur said to that one. >> you'd obviously v to talk to the eu, but think about how small in number $3 billion a product is relative to our $18 trillion economy it's a tiny, tiny fraction of 1%. >> he also dismissed concerns about the stock market, saying markets will adjust and also

saying foreign governments will adjust to this, dismiss the idea that this could be an impediment to the relationship between the united states and its key allies who objected vociferously to the idea the u.s. would impose these tariffs on national security grounds when they argue they are the united states's closest allies we're waiting to hear from the president. we will see him on camera later today. it's possible he may talk about it when we see him this afternoon. he's in texas for the rest of the day today. >> i thought it was interesting he blamed the market decline on pending home sales mess we got at the top >> he suggested there are other reasons why the market wouk off tod today. pick your poison, if there's a bad news headline you can chalk that up to something but it strikes me what the president is doing is guambling that this will be better for domestic industry than the

negative impact and that's the choices the president made. >> they're not dismissing in it europe eamon javers, thank you so much. let's get to steve with news on the fed. >> in a speech released moments ago, it was said fed policy is set to move modestly beyond neutral. she's one of the first ones to make a comment like that she goes on to say the economic outlook and labor outlook are positi positive fiscal stimulus would provide growth she says that could help bring inflation back to target she sees more evidence of wages accelerating but that's on the guide side on the other side she sees trade clouding the horizon and foreign developments suggest risks to the down side. she's one of the first fed people to talk about in italy

it's reduced some risk there and financial conditions in the euro area have worsened and emerging markets are at risk. so put it all together, those foreign risks she talked about along with the solid domestic economy and upside risk from the fiscal stimulus, she supports a gradual rate hike. i'll talk to one of the other board members with randall quarles in an hour from now. >> when is that meeting? >> june 12 i think >> june 13. >> steve liesman, thank you. did president trump just declare a trade war? joining us, the former ceo of auto zone and office depot and the chief investment officer and architect of president reagan's economic plan. steve, i'm suppose the question

to you first, i don't care what the administration tells me the markets are going to jump to the conclusion that we might be in a trade war. what's your take on what's going on >> i don't think the markets tell you that because the nasdaq is up, the s&p is down less than a half but the administration has said over and over again we don't expect a trade war, we're not going to start a trade war, there will be no trade war steve mnuchin has said this, larry kudlow said this secretary ross said that so why are they putting tariffs on because every time they do they get action and that action can be released a couple weeks later but it's the only thing that moves it forward you can't sit at a table with no chips except to walk away so by putting the tariffs on they say look you want to deal with this

and move your thing. >> it's all part of the art of the deal. >> trade policy isn't done by announcements from presidents and cabinet members. sending wilber on a plane won't accomplish anything and the response we get from eu and our neighbors won't be positive. we need to work with these guys to figure this stuff out in particular, the single greatest risk to the financial markets is italy italy is one of the largest exporters of steel so if you put steel and aluminum tariffs on the eu the financial markets are much more likely to knock out the euro and european asset

prices. >> but in the process that will hurt the eu much more which to steve's point could force the eu to come to the table and offer something up themselves if they know italy could be a weak point there. italy is a bigger weak point to the eu than the united states. >> italy is a weak point for the global financial market because there are tons of italian loans out there in the bond market and when markets fail they don't just nail one place this idea of negotiating is really stupid. >> that's how the europeans put it we went to do this with a gun to our head steve, i'm surprised to hear you defending the administration's policies. >> i'm not defending them. i'm trying to explain what they're trying to do it's not the way we've conducted trade policy for the past 30 years but i think they're

unhappy and have been trying to conduct trade for 30 years in the same fashion and here we are. the definition of insanity is doing the same thing over and over again. >> the definition of insanity is shooting yourself over n the head. >> they're not shooting themselves in the head they did the same thing with china and within a week china relented on three points again, i'm not endorsing this as the way i would do it, i'm just saying it's effect ive. it has worked for this administration we can talk about the right way or wrong way but the objective is to move this along and have fair trade. >> that's totally nuts that's ridiculous. >> it's not ridiculous. >> this administration has no trade policy. >> hold on guys, you're talking at the same time. >> on tuesday there's no trade war on wednesday there's tariffs. we have separate factions in the white house fighting over what to do with trade one day one group wins, one day

the other. this is not the way to establish financial market policy. we need stable policies not crazy risky policies. >> what do the facts say about the level of tariff the eu places on some american goods versus the level of tariffs the united states places on goods and what about wilbbur ross's point that what we're talking about is a tiny, tiny dollar amount of trade in the context of massive multitrillion dollar economies? >> trade policy and tariffs are administered one product at a time it's a micro business. the reason it's that way is because when you establish a tariff on, say, cheese, like europe has said they would do back, that's aimed at wisconsin. if you establish a tariff on pipe and rebar, that's aimed at

nucor. so it's not an overall trade deficit. you can't move the overall trade deficit by making an overall policy announcement. >> steve, what american business in this country besides the steel company do youthink is supportive of the president's strategy >> i don't know. i think the point is what we've been doing hasn't worked there are no agreed-upon rules on how you negotiate these things and hence you see a variety of things. they're trying something differe different. is it going to work -- >> there are rules, it's called a wto and we've been a member of it for a long time. >> finish your point. >> and our trading partners have been violating the wto for a long time as well as the other trading pact so we have to do something different to get them back online. when we did this -- >> if you're arguing there's no rules then you're wrong. if you're arguing you can

negotiate better, of course we can. this is nuts for policy. >> there is no rule on how you negotiate these things once they're negotiated it's called wto policy so therefore this is in the sausage making again, this suspect the way i would do it. i'm trying to explain it it's not crazy. >> the problem is in order to explain it you have to say there is an organized policy that's agreed upon in the administration there is not there's a huge disagreement inside the white house between the radical protectionists and the free traders our friend larry is on the side of opening up trade. opening up markets is always good but there's math here you have to understand the math of international finance and trade in order to understand what you're moving when you change policy. >> none of us are in the white house. >> fallen thought, steve >> final thought, steve, please.

>> none of us are in the white house. we don't know about these supposed risks i think the point is we all want the wto to work. we want our trading partners to be fair and this is an attempt to do it it's unconventional for sure. >> gentlemen, spirited argument, we appreciate it. >> it's nut. >> steve, john, thank you. now to two big deals in the auto sector as everyone tries to hop in with the autonomous driving move let's go to phil lebeau for details. >> shares moving higher after the announcement of investment into gm cruise automation by softbank so softbank will invest $2.2 billion into gm subsidiary that will give them a 19.6 stake in gm cruise whose valuation is $11.5 billion as it moves towards commercialization next

year here is the president of gm, dan ammann. >> we see a path to commercialization in 2019. importantly, our ultimate decision to launch the technology fully driverless is going to be gated by safety. we need to hit the right levels of safety performance and when we do that, we'll be ready to go. >> as you look at shares of general motors, keep in mind today it got positive comments on wall street, upgraded to outperform by ever corps isi also when it comes to automakers, waymo, formerly known as the google self-driving car project, announced an expansion of its partnership with fiat chrysler they will be providing up to 62,000 more chrysler pacifica minivans and--

discussing of licensing with other shares of fiat chrysler. tomorrow in italy that's when sergio marchionne, the ceo of fiat chrysler, will give his five year profit forecast for the company. expect focus on the growth of cheep. >> ford shares are down 1.2% is it seen as being left in the dust with the investment by softbank into gm cruise? >> i don't think so. i think it's perceived by many to be a laggard relative to the other automakers when it comes to mobility services they would argue we're investing heavily and we'll be there with everybody else but the perception is that it's not as far along as general motors and waymo hooking up with fiat chrysler is an advantage for fiat chrysler.

>> fascinating, phil, thank you. phil lebeau. we have news out of italy. >> phil just talked about investor perception aky according ing ting to reuters e a coalition government between the league and the five star movement, the fringe parties that won an election in italy in the spring the reason why we're saying it's close is because nothing formal has been announced but sources on both sides so say they have agreed upon this government. jis acces giuseppe conte will stay in but a euro skeptic they put up for the economy ministry job that had people wonder iing, also th president of italy, sergio mat rell la, he will be in the government in a smaller role with regard to european union

affairs, another, another professor will take over so that move town seen as a way of shoring up uncertainty around italy. >> dom, thank you. it's been a short but eventful week for the markets. 200 plus point moves for the dow as the markets grapple with trade, ily atand more. what should you do with your money? we have that next on "power lunch. sergio mattarella.

stocks are falling as president trump sparks a possible trade war with our biggest trading partners and allies the dow taking a bigger hit with boeing and caterpillar having the biggest negative impact. let's bring in the chief investment strategist with people's united advisers good to have you both. steve is securities managing director steve, you say one potential negative is president trump's trade policies are you surprised the market isn't down further the nasdaq has managed to stay positive. >> there's a silver lining in the cloud which i'll talk about in a second but if these trade policies get out of hand and we get into a very protracted deep trade war it's not going to be good news. this argument that it's just a small percentage of a multitrillion dollar economy, well, when you're talking about growth going from 3% to 2%, that's a very big move so if

these trade policies inhibit gdp growth that isn't going to be good >> how could they not? >> well, to the extend that they're using a bludgeon opening up outside market. we've got china reducing their import tariffs from 25% to 15% things like that can help u.s. gdp growth to the extent that our exports are shut down, it's that balance that matters and to the extent that we're winning some of these wars then i think that would help gdp growth. >> john, you make any portfolio moves on things like this? this is major for the global economy, whether you buy steel and aluminum stocks or sell multinationals, europe is threatening to retaliate within hours for tariffs. what kind of changes should you make >> in our portfolios we're

trying to focus on what the economy is telling us. things are moving along, inflation, while it's creeping up slowly, is not getting out of hand so the economy is saying to keep investing but as steve said these trade questions are causing company managements -- imagine if you were a corporate manager deciding to expand oversea overse overseas you're paralyzed. so we're spending time listening to corporate management trying to get a sense how this is impacting what they're doing and by and large it's negative. >> steve, let me zero in on something sara uner arthed there may be losers in american businesses if there's retaliation. motorcycle makers, bourbon makers, should i get rid of brown foreman? what would you say are the

fuller inable nafull er -- vulnerable names that might be hit >> well, businesses where their greatest revenues are overseas exports. they'll be susceptible to problems if a big tariff is slapped on motorcycles then that's bad news at harley-davidson. if it's slapped on tractors and earth-moving equipment that would be bad news for caterpillar. so to the extent you're concerned, you have to look at overseas markets this is why we've seen small cap outperform over the last few days and small cap companies tend to not have significant international revenues. >> that the right move, john >> that's an interesting point it's too difficult to make a call on any particular company or region so what we would do and i think what again the concern would be, investors would say i'm just decreasing the amount of money i have in

equities and you're seeing that in the small cap stocks. large caps are underperforming small caps because people are saying i'd rather stick with this domestic economy so you're seeing moves based on this global uncertainty. >> it's reflected in the record high for the russell 2000. >> and one final quick point anything that detours banks from raising rates and don't start reducing monetary policy, that's good news for markets. >> yes and we have seen a bit of changed expectations guys, thank you. coming up we will talk to the ceo of delta airlines about his company's nearly $2 billion investment but first, contessa brewer in kentucky for a look at how small milk farmers are struggling. contessa >> tyler, a looming deadline for more than 100 farmers.

i'm in a farm in kentucky where the buyer has canceled the contract effective today can they find new buyers in this new eranamic landscape for dairy? that's coming up on "power lunch. it lets you know where your data lives, down to the very server. it keeps your insights from prying eyes, so they're used by no one else but you. it is... the cloud. the ibm cloud. the cloud that's built for all your apps. ai ready. secure to the core. the ibm cloud is the cloud for smarter business.

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tripadvisor. visit tripadvisor.com american milk farmers getting squeezed in part because retailers such as walmart and kro kroger are streamlining their production contessa brewer is live in smithfield, kentucky hi, contessa. >> these are tough times for jericho acres dairy.

in march therm miy were milking cows, but their buyer dean foods canceled their contract effective today. >> i regret to notify you we must cease purchasing milk from your dairy farm. >> reporter: caroline and curtis combs got the same letter as more than 100 farmers in eight states, giving them 90 days to overhaul what was a long-term vision to leave a profitable for for their children. >> him and i talked about retirement that's how sure we were that we were going to have a market. >> reporter: dean foods blames in part competition. walmart is entering the processing business with a new plant in ft. wayne, indiana. it will bottle milk for its own great value store brand. kroger and other grossers are in the processing game. prices are lower than ten years ago and americans are drinking less cow's milk than ever.

all of that puts the squeeze on american dairies, especially the small ones. >> we'll always have a farm and always get to drive the tractors and work cows but it just won't be the same. >> as the coombes try to strategize, they did get a last-minute temporary reprieve dean foods says it will extend their contract for 30 days with those big companies like walmart or kroger getting into the milk business and the dairy farming business or are they just buying from fewer and larger farms >> that's an insightful quest n question walmart will get their milk from three co-ops and a few independent farmers.

they've given some contracts to former deans foods farmers who will supply milk to walmart. so they won't buy the farms, they're not sourcing the milk themselves they're buying it from co-ops but the increasing pressure and let's face it, these farms are getting more efficient all the time they can produce a lot of milk from fewer cars and americans are drinking less milk now the consumption is going down so finding buyers has become increasingly difficult as it stands now in kentucky, 20 farms and six of them have decided to go out of business after this contract cancellation. >> tragic for the farm economy thank you very much, contessa. >> i do not realize milk prices are at a 13-year low. >> do you drink milk >> i do. >> most people -- many people have switched to nut milks. >> i drink regular milk and i eat serial. >> i have a 12-year-old boy, we go through at least two gallons of milk a week at least that's a lot of milk. >> doing your part there.

when we come back, the name and story behind this mystery chart. the stock is soaring, now up more than 1600% in the past year there's the chart. can you guess? and an exclusive interview with the ceo of delta airlines about the company's big investment in l.a.x. and a lot more "power lunch" will be right back let's begin.

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hello, i'm sue herera, here's your cnbc news update for this hour. president trump speaking aboard air force one says he is considering pardoning martha stewart and commuting the sentence of ex-illinois governor rod blagojevich. the democrat began serving a 14-year sentence on corruption convictions in 2012 but both participated in "apprentice" tv shows. secretary of state mike pompeo and top north korean official kim yong-chol have concluded their meeting in new york, wrapping up their summit negotiations nearly t lly two hs earlier than expected. president trump said the talks were going well. crews are searching for three people believed to be swept away in floodwaters in

virgin virginia a man and woman were last seen outside their car in albermarle county clinging to trees before they were swept away and sotheby's will sell the map of winnie-the-pooh's hundred acre wood sketched in 1926 that's the news update back to you. >> delta airlines plans to spend $2 billion to renovate the terminals at l.a.x phil lebeau standing by at los angeles international with delta's ceo. phil. >> ed bastian, you just announced along with the mayor of los angeles a huge investment $1.9 billion over the next five years. how critical is this for delta

and its growth >> los angeles is an important market it's the number one destination in the country we're the fastest growing airline in l.a over the last five years we've grown 60%. we're out of capacity. >> you're not the only one investing heavily in this airport. is this the pricety that everyone has to pay because let's be honest, if we run into hassles going through the airport, it's as bad as the hassles on the plane. >> no question we need to make sure our airports, whether it be security or check in or the boarding process is the same experience as what we're trying to create in the air. >> and the lucrative customer, the international and high net worth customer coming into southern california is the target. >> l.a. is unique. you have a strong destination local market and an

international market so all of our partners from air france, klm, china eastern, air mexico have big operations. we bring over a thousand people a day to delta and transport another thousand going out internationally. there's not another hub in the country that has that demand. >> how do you feel about what you're seeing in terms of demand in the summer and fall >> we finished our biggest memorial day weekend over 3 million customers over the long weekend revenues are up 8% on a year over year basis so we're seeing strength, fuel prices are impacting results but the outlook is healthy. >> there's a lot of hand wringing amongst investors that fuel prices mean airline stocks will be dead in the water. >> i think in the long term it's not terrible because higher oil prices creates a more durable business model for people.

they have to be more disciplined in terms of how they think about the supply we've made money at oil prices higher than that this year will be the fifth year in a row delta has made over $5 billion in profits no airline has done anything close to that so we've done in the low oil environments, higher oil environments i feel optimistic. >> one last question, the open skies agreements, particularly with the countries in the middle east that is changing things you've added direct flights from new york to india. first time in ten years. is this the beginning of what we'll see more of in terms of additional flights whether to india or the middle east >> the open skies agreements were being violated by the uae and qatar and we give credit to the trump administration for standing up and defending our right to fly into those markets on a fair and level playing field so wen't ha haven't annoud new york so atlanta you have an opportunity to compete but we're going to india and other parts

of the world that we used to be and they ran us out. >> for you as a ceo, i know you pay attention to whatever the president says he's out with very strong trade comments, particularly in the last day or two. what's your reaction when you see the stuff he's either tweeting or saying and how it would impact the outlook for your company >> we felt like we had one of the biggest trade violations with respect to these middle eastern carriers and the subsidies the governments were using against us i support him. as compared to other industries, i'm not in the middle of that discussion but i've been a big supporter of his concentration of defending u.s. workers and putting u.s. employees in a position to win. >> ed bastian, ceo of delta airlines joining us on "power lunch" on a big day, guys, where they're pumping $1.9 billion into their terminals at l.a.x. back to you. >> phil, thank you phil lebeau with ed bastian, ceo

of delta check out shares of madrigal pharmaceuticals. that stock is soaring, up $159, or 146%. with a gain like that, you know there has to be good news. meg joins us to explain. >> the company is developing a drug to treat a disease called nash, non-alcoholic steatohepatitis. it's a liver disease associated with obesity and diabetes and it affects as many as 3% to 12% of adults in the u.s. and there are no approved drugs to treat it. so madrigal released results of a clinical trial showing 27% of patients saw resolution of the disease compared with 6% of patients taking placebo. the company is making plans for a larger confirmatory trial before it applies for regulatory approval the results led madrigal shares to double giving the company a market valuation of $3 billion other companies from gilead to

allergan and smaller companies like intercept and genfit are also developing drugs for disease and you can see they were hit on this news. coming up, a new series on the threats to real estate from the weather, diana olick has that story. >> hurricane season starts tomorrow so we're looking at how real estate developers are dealing with rising risks from severe storms. we'll take you to the boston seaport where massive construction lies in the path of increasingly wicked weather.

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tomorrow is the first day of hurricane season as we've seen in years past, the storms are getting more dangerous and destructive. we're looking at the rising risks to real estate, what's being done to safeguard billions and billions of investment dollars. >> from floods to fires to the wildest hurricane season in memory, last year, 16 separate events caused more than $300 billion in economic damage, the bulk of that to commercial and residential real estate. but even with the frequency and intensity of recent superstorms, building along the waterfront continu continues, putting property and investment capital at risk winter slammed hard into boston this year, back-to-back nor'easters send water flooding into its historic streets and seaport. it was what city planners predicted -- just not yet.

>> in boston we've sent a lot of time thinking these impacts are 2030, years down the road. these storms are here now and happening more frequently, many more severe. >> reporter: deanna moran studies the impact of climate on real estate and new development. >> the planning has been great but we aren't there yet. >> reporter: the planning started in the mayor's office and its climate-ready boston initiative headed by austin blackman. >> if you want to build a large building in the city of boston, you have to take into account what the climate projections are and flood plains are right now but also in the future. >> reporter: so far it's just conversations and recommendations, not rules and regulations. and data show the water is rising and the storms are intensifying just as development is booming in the city's most vulnerable district, according to experts, the seaport. when we picture rising tides and stronger storms we think of

places like miami and the gulf coast. but with the exception of alaska, new england is expected to see greater warming than any other place in the u.s. because of its higher latitude and its proximity to the gulf of maine, the fastest warming body of water on earth according to the national oceanic and atmospheric administration in the past decade, nearly $8 billion worth of residential and commercial real estate has been built or approved for construction in the seaport, its enve inventory of properties doubling they have seen more new buildings going up than in all the rest of boston's much larger downtown and financial district. and the seaport is ground zero for water. this is what the city predicts will happen in ten years 20 years, 30 years the booming district underwater. >> i think what scares me the most is the disconnect we're relying on the historical past when we build buildings for the future. >> reporter: why are we not

changing the code? >> the process for changing the code is long and tedious. >> reporter: changing the code could drive away the precious influx of big business to boston names like amazon and ge, investing millions in boston real estate development and attracting thousands of new workers, especially to the seaport. >> this is 121 seaport, a building that i'm incredibly proud of. >> skanska has recently sold two of their new buildings for record prices. its latest is the centerpiece of seaport square. >> it's shaped like an ellipse and that is sustainable in that the wind on this building is less than it would have been had it been a square rectangle. >> so i'm looking at over water, water, water, water everywhere no concerns? >> no concerns at all. this building is very well prepared to withstand any ma major storm event. >> reporter: the building's electrical infrastructure is 40 feet above the 100-year flood plain. the ground floor is elevated

all of this at increased cost. while some developers are pro-act i have, others are less so because they know the end game is to sell the building. >> what we are starting to see is that developers won't necessarily qualify for financing because insurance companies are saying hey, we won't ensure this unless you take into account those climate challenges. >> why build why develop the seaport? >> right now we've got a number of buildings and assets in harm's way as we look at continuing to develop it there's an opportunity for them to be part of the protection processes. >> like ge, building its proposed $200 million headquarters in the seaport district and elevating the ground underneath to protect against rising tides but the plan has to go beyond individual buildings or so-called islands of resilience. what barriers frustrate you most >> not having control over the building code as the city.

>> there are guidelines that everything is voluntarily. >> reporter: this is value what you're looking at, the hold in with the new. >> absolutely. one thing is tried and true, they want to be by the water but they want to be in a building that is very well prepared to withstand storm events i >> it is all about the high value of water front real estate developers are laser-focused on it despite intense weather because the returns are so high and the irony, the tax returns to cities from this development is what's funding a lot of the research and redevelopment to guard against these storms >> absolutely fascinating. >> some of those graphics that show how much water is going -- >> is coming >> it's going to creep up into the land why don't they just change the building codes >> because the building codes are at a state level, not a city level and if you apply them to the rest of the coast, there are a lot of other parts of massachusetts that don't want those codes. >> very interesting. >> bureaucracy >> thank you canadian prime minister justin trudeau weighing in on president trump's new trade tariff move. let's listen

[ speaking foreign language >> translator: is here to outline our retaliatory measures this morning, i called leaders of the opposition to let them know what our response would be. in closing, i want to be very clear on one point americans remain our partners, our allies, and our friends. the american people is not the target of today's announcement we hope that eventually common sense will triumph unfortunately, the actions taken today by the american government do not seem to be headed in that direction. i want to be very clear about one thing. >> americans remain our partners, our allies, and our friends.

this is not about the american people we have to believe that at some point, common sense will prevail. but we see no sign of that in this action today by the u.s. administration >> thank you, prime minister as the prime minister has said, these tariffs are totally unacceptable >> translator: in response to these measures, canada plans to impose surtax or other similar measures in order to limit trade on steel imports, aluminum imports, and other products from the u.s. in the amount up to $6.6 billion that amount represents the total

canadian exports in 2017 of steel and aluminum to the u.s. those exports that are now being targeted by the american tariffs. today, we are publishing two lists of products that are subject to these measures. on the first list, products will be subjected to a 25% surtax whereas a similar measure to limit trade, the products on the second list will be subject to a 10% surtax a similar measure -- a similar trade limiting measure these countermeasures will only apply to u.s. products these countermeasures will take effect on july 1, 2018, and will remain in force until the united states eliminate their own

tariffs on canadian steel and aluminum products. our steel and aluminum workers have our support which is why we have included american steel and aluminum products on our lists. as for the other products enumerated today, we ensure that they can easily be obtained by american companies and our nonamerican trade partners to avoid costs being -- affecting canadian families and consumers. today, we will begin a consultation period that will last 15 days we will be consulting canadians so that they can express their support or their concerns about the proproposed countermeasures as well as the list of products. the list of products will be

made public immediately. and will be posted online for all canadians to see these unilateral measures by the u.s. are also in breach of the nafta rules as well as wto rules. canada will be launching a conflict resolution -- according to w tto rules the -- canada is going to collaborate with the wto and our other partners, including the european union, to challenge these illegal and counterproductive american measures before the wto it is completely inappropriate to consider any trade with canada as a threat to the united states' national security.

i want canadians to know that their government will always defend canadian workers and canadian businesses. thank you. >> i'm going to say it in english now. we are a bilingual country in response to these measures, canada intends to impose tariffs against imports of steel, aluminum, and other products from the united states representing the total value of 2017 canadian exports affected by the u.s. measures that is $16.6 billion. we are imposing dollar for dollar tariffs for every dollar levied against canadians by the u.s. 25% and 10% are the tariff rates today imposed by the united states on canada we are today publishing two lists of goods, one list which will be subject to a 25% tariff, the second list will be subject to a 10% tariff. these countermeasures will only apply to goods originating from the united states.

these countermeasures will take effect on july 1, 2018 they will remain in place until the united states eliminates its trade restrictive measures against canada our steel and aluminum workers have our government's full support. >> we are witnessing an extraordinary moment you're hearing from the foreign minister of canada the prime minister of canada our second biggest trading partner and one of our closest allies announcing retaliatory tariffs against the united states on steel and aluminum in response to what we got from president trump and his administration this morning imposing tariffs on canada, mexico, and the eu for steel and aluminum imports by the way, canada is our biggest source of steel imports, provides about 17% of all of the steel coming into the u.s. our eamon javers covering from the white house. eamon, this really is quite a moment, especially to hear prime minister trudeau saying that this is an affront to the

security relationship between the united states and canada >> reporter: yeah, that's right, sara i'm struggling to think back to a previous rift like this between the united states and canada it's been a while since we've seen an incident like this you heard justin trudeau, the prime minister there, saying these tariffs are totally unacceptable and he also went on to say that canada could be considered a national security risk to the u.s. is inconceivable and i think what the trump administration would say to that in response is not that canada itself is a national security risk to the united states, but that the lack of a domestic aluminum and steel industry is a national security threat that's what we heard wilbur ross say from the commerce department earlier today. they feel very strongly that it's important to have those industries strong here at home in the united states and that importing as much steel and aluminum as we do is not good for u.s. national security going forward. that was the argument that they used to impose these tariffs this morning obviously, provoking, though, a strong reaction here from the canadians, also from the eu and

from mexico already today. wilbur ross said earlier today that we'll wait and see what the reaction is from our allies, but i was told by sources familiar with this decision this morning that they expected eu retaliation, they expected retaliation during the course of the day today. >> we're going to go back to prime minister trudeau taking questions. >> how we would defend canada and canadians and canadian workers' interests if the need arose. so, although we continue to work and negotiate and try to convince the americans to withdraw those unacceptable restrictions, we must also respond firmly to these threats. but with respect to the trade war, has a trade war begun do you still have faith in mr. trump? do you still believe he's a man of his word as you've previously

said well, obviously, we have long engaged with the americans in many different ways, whether it be me directly with mr. trump or other ministers who are engaged with our counterparts, whether we're talking about provincial premiers who have engaged or opposition leaders, canada's business leaders, we are continually engaging in order to put pressure on the americans and as well as explain to them that it would be a bad idea to create trade restrictions or any other obstacles to trade with canada today's decision belongs entirely to the american administration that was their choice. it was their choice to begin by imposing these unacceptable measures so, we are responding. as i've always clearly expressed to president trump, we will always be defending canadians' interests and the interest of canadian workers >> so, since nafta negotiations

began, you launched a diplomatic blitz in the united states you've been there, what, 15, 16 times, minister freeland, i don't know, maybe 100. and your surrogates were there and you make nice with the white house and you went all over the united states. is it time to change the canadian strategy? >> it's very clear that we've said and i've been saying directly to canadians for a number of months now that we have to be prepared for anything, and we have been we have always chosen to try and be positive and constructive, but at the same time, in my conversations with the president and canadians' conversations with their american friends, colleagues, and counterparts, the message has been very clear. the canadians stand united the canadians are firm about standing up for canada's interests. the american administration has made a decision today that we depld

deplore and obviously is going to lead to retaliatory measures as it must but we regret that. we would much rather move together in partnership, understanding that no two countries have economies as interwoven and mutually beneficial as canada and the united states. >> you're hosting the g7 in a week mr. trump will be there. the american -- the european allies, the eu will be there are you -- how is this going to work out >> obviously, we have done a lot of work to pull people together around common and shared themes at the g7, whether it's protecting our oceans or empowering women to be more successful in the workforce or addressing the economic challenges that happen at home and around the world every single g7 country is facing a similar challenge of demonstrating that growth can work for everyone. in canada, we talk about growth for the middle class and those working hard to join it, but

that is a similar challenge and responsibility for each and every one of our elected g7 colleagues that approach is one that we're going to continue to emphasize the choices made by the united states administration today, you know, have a goal of benefitting american workers unfortunately, we all know that this is going to lead to harm for american workers and american industries. our economies are too interlinked to not have significant disruption in american families and american communities south of the border. we are going to continue to highlight that working together as friends and allies is extremely important for the prosperity of each of our citizens indeed, when you look at what the united states has chosen to do to its closest friends and allies, g7 nations, european allied, canada, mexico, it shows

that we need to have an opportunity to come together to discuss this directly and firmly and look for opportunities to benefit our citizens, not to harm them. >> as we listen to prime minister justin trudeau of canada announce the retaliatory measures against the u.s., we are looking at session lows. there's a market reaction here the dow is down now more than 300 points the nasdaq, which had been positive pretty much all day, did go into the red. melissa, i know you're looking sector by sector some of the strilz getting slammed, which would make sense. they're most exposed to foreign trade and they do a lot of business overseas. >> that's why we're seeing the biggest impact on the dow. caterpillar and boeing had been the poster children of this. take a look more broadly a lot of the things that we send over to canada, electrical machinery and autos, so you take

a look at a lot of these old school industrial names are also sitting closer or at session lows right now on this news. >> and these are companies that presumably, in any kind of blossoming trade conflict, have a target on their back >> absolutely. >> also, the canadian dollar, the mexican peso getting slammed on the impact of all of this we'll continue to monitor any comments from canada but we want to also check in on the eu position and all of this we are expecting the eu to follow canada's lead and pose retaliatory tariffs against the united states as well, and for that, we are joined by david o'sullivan, european ambassador to the united states. ambassador, nice to see you again. >> hello good to be here. >> when can we expect those retaliatory tariffs that the eu has threatened >> we have already announced that similar to canada, we will both take a case to the wto to challenge the legitimacy of these tariffs and also exercise our rights under the wto to

apply rebalancing the tariffs to an equivalent volume of u.s. exports and we've already made the necessary procedural steps at the wto and i would expect that this will be taken forward within the next few weeks so probably by the end of june, we should see tariffs taking effect >> commerce secretary wilbur ross told me this morning that this is not a trade war. does europe agree? >> well, i don't think it's yet a trade war. it's maybe more of a trade skirmish when you look at the volume of trade involved compared to the overall volume of trade between the european union and the united states, but it is a step in the wrong direction we deeply regret the decision of the united states. we don't think these tariffs are justified. we don't believe that european exports of steel and aluminum pose any threat to u.s. national security or even to united states economic interests, because they are frequently high quality products which are inputs to the industrial process in the united states, enabling american companies to be more productive and more competitive. so, we are very disappointed and

consider this, as cecilia said, a bad day for world trade. >> what do the numbers say, mr. ambassador, about the level of tariffs between the united states and the european union? who's taxing whom more >> we are both pretty much low tariff economies and open economies. i think the average tariff in europe is about 3% the average tariff in the u.s. is about 2.4%. but these conceal, of course, peaks. the administration is particularly concerned about a 10% tariff on autos in the eu compared to a 2.5% tariff in the united states, but i could point equally to a u.s. tariff of 25% on light trucks, which is a very important part of the automotive market, which we only have a tariff of 14% in the european union. so, i think the general point is that we are both low tariff, open economies who trade fairly and freely there are, of course, issues between us and we have offered to discuss these and even to

have a limited trade deal which would reduce industrial tariffs or eliminate them on most products and the area of government procurement, but we can only do that in an atmosphere of trust and confidence, and the imposition of these tariffs by the united states damages that mood >> tariffs can be with stood, mr. ambassador, if the economys that have to bear the brunt of the tariffs are in a strong position right now, most recently, some of the most recent data have indicated a slowdown in the improvement of the euro zone on an economic basis. you've got the turmoil in italy. how concerned are you that the tariffs right now would be received at a point in time when perhaps the eu can't afford to bear those tariffs >> well, these tariffs would have a depressing effect on economic activity whenever they're introduced it's true that the indicators for the european economy and the euro zone in particular are a bit less optimistic than they were a few months ago but i'm not sure that there is a permanent downturn but the point is that both the

united states and the eu are each other's most important trading partners, and we both do well economically out of that trade, and anything which seeks to reduce or diminish the importance of that trade will ultimately damage our respective economies, and that's why we think it's a big mistake to make -- to impose these tariffs. >> can you talk about the list of the retaliatory tariffs that you're now imposing, kentucky bourbon, harley davidson motorcycles. how did you guys come up with this list and are you specifically targeting political hot spots in the united states, i.e. trump country >> it's actually quite a long list if grow through it. rather boring to read and i understand that journalists have kind of picked out what they think are the most interesting items, such as those you mentioned. we have not yet taken a final decision on the choice of products, which will be selected from that list but the main point is to send a clear message that actions have consequences and in imposing unfairly these illegal tariffs, the united states has to understand that this will then have consequences

for their exporters also that's the logic of this decision >> so you bring a case or a complaint or a dispute resolution action in front of the wto. what does that entail? how long does it take? and what happens if, after the imposition of mutual tariffs, the wto chooses one way or another? who pays back whom >> well, the procedures in the wto are quite slow, so we will initiate this case in the coming weeks, but it will probably take, typically, a year, maybe even two years before you get a final decision, and even that can then be appealed so this is a long process, but the purpose of it is to clarify the legitimacy or not of these tariffs. in the meantime, tariffs which have been imposed by both sides, when the case is finally adjudicated the question then remains to see who wins and who loses and what are the consequences in terms of compensation for any tariffs which were deemed to have been levied illegally

>> mr. ambassador, i want to switch gears now and ask you about deutsche bank. deutsche bank shares hit a record low today the u.s. regulators have added the u.s. business to a group of troubled lenders, which essentially means that the fdic, the federal insurance agency here, views deutsche bank's federally insured u.s. businesses as having financial, operational weaknesses that threaten the financial viability of that business here. the shares seem to be acting terribly, and i'm just wondering if you view this or if the eu views deutsche bank as any sort of risk to that system >> to be frank with you, i've been so are preoccupied with tariffs in steel and aluminum and i haven't followed the story so i would be reluctant to give any comment without more information. you caught me off guard with that question. >> i'll wrap up on trade we talked to wilbur ross earlier. i asked him about the status of the friendship with europe after the u.s. withdrew from the paris climate accord, after the u.s. withdrew from the iran nuclear

deal, and now that the u.s. has levied new tariffs on steel and aluminum from europe he said that these are just tiffs and they're small blips. how would you characterize the friendship right now >> well, i think that the depth and strength of the transatlantic relationship is enormous, both in terms of economic and commercial relations, in terms of our security relationship, and in terms of our joint values and our commitment to democracy, human rights, and the rule of law. so, in that sense, i think any one of these issues should not pose an insurmountable obstacle to continued good relations between us and it's normal that friends sometimes disagree on the other hand, as you rightly point out, the cumulation of these different things does add additional strain to this relationship, however solid it may fundamentally be, and i'm afraid those strains are going to continue for some time to come >> strains he called them blips on the radar screen ambassador sullivan, thank you for voing joining us today

stay tuned to closing bell because we are going to hear from geroimo gutierrez, the ambassador to the united states. he'll be discussing the tariffs, mexico's response, their currency is getting slammed, 4:00 p.m. eastern, that interview will be here on cnbc we should note we are just off session lows right now with the s&p 500 down by 20 or about 0.75%. dow by 1.1%. what does the fed think about the trade tariffs? let's go to steve leishman in d.c. with randall quarrel. >> i'm here with the vice chairman for bank supervision at the federal reserve. when there's news, we shift gears a little bit i want to ask you about this trade fights that seem to be going on how do they affect your view of the economic outlook >> well, i think, you know, over the long-term, over decades, the u.s. has benefitted from an open -- globally open trading

regime that's something that has to be managed and to ensure that broad support remains for that regime over the long-term the specific measures that have been proposed up to now haven't really had a dramatic macroeconomic effect, the direct macroeconomic effect of the measures, and so, you know, i think we want to -- we're hopeful that this, you know, again, over the long-term, helps ensure support for an open economy. that's at least what i would hope would continue to happen. but the near-term effect on the macroeconomic outlook is -- it doesn't change my view >> at this level, if it were to escalate, if, for example, it became one where we pu put $50 billion of tariffs on china and they slapped $50 billion back on us, would that change your mind if it escalated. >> at some level, you could have

measures taken that would have an effect on the outlook but we're not there yet. >> let me move on and talk briefly about some of the issues that you've been very involved in when it comes to banks and bank supervision we were just talking about the issue of deutsche bank and i understand -- i want to say this at the outset -- you're not allowed to divulge any supervisory, regulatory information about a bank, including whether it's been rated as troublesome or not. i want to ask you this question. the market cared a lot when this news report moved and you can see that deutsche bank stock is down quite a bit this is relevant information does it make sense that this information that you can't talk about remains hidden from the public, hidden from investors? wouldn't it serve a public good if this were out there in the public eye >> so, that's an interesting question when we have quantifiable supervisory information, take the results of the stress test, for example, we have tried to make those public. i think that there's benefit

when there is concrete quantifiable information in making that information available to the public and to markets. the supervisory ratings are a result of a more subjective assessment of a very broad array of factors that i think there's reasonable concern could be subject to misinterpretation if those were more open and of course there are legal limitations on our ability to do that >> so, legal limitations you can't tell me if they're still troubled or currently not troubled anymore you couldn't divulge that and the company couldn't divulge that >> i really couldn't >> you put out a reform of the voca rule. i want to move on. is this the leading edge of more bank regulatory reform to come >> so, the general regulatory project, at least as i see it now, is that we have had many

years of experience with this body of post-crisis regulation and it's unsurprisingly on the basis of that experience, there are a variety of ways in which we can make that regulation achieve its objectives in a more efficient way and wherever we can see that that can be done, i think that we'll do that the volcker rule is an example, again, where this was not the result of assumptions that a few of us came in with but the result of experience that all the implementing agencies had had over the four or five rules that the rule has been in place, and the changes that we proposed, we think, will significantly reduce the burden without undermining the objective. i think that there are, you know, a variety of places where we can do that in legislation and we're looking closely at where we can do that >> let me turn to monetary policy we've had some developments in italy where there's concern in the markets and we had yields

fall there is trade issues that are out there. and the general feeling in the market had been that you might do another three rate hikes this year what's your sense of where rates need to go right now, given all of the information that's out there right now and the concerns and the risks. >> so, you know, the concerns -- just to take italy as an example, again, i think that the -- so far, markets have been absorbing the news out of italy reasonably well, some volatility around it, but not kind of a dramatic and durable reaction. obviously, there's frequently, over the generations, there's been news from italy, and the markets have generally survived that so, i think it's something that we need to look at and be cautious about, but i don't see anything that's on the horizon right now as really changing my view either of theeconomic outlook or of the appropriate

path for policy. >> do we go to neutral or beyond neutral, and what's neutral? >> so, i don't want to propose a kind of a specious precision in where i think the neutral rate of interest is, but i think there are reasons to think that the neutral rate is rising, a significant portion of that depends on what you think is happening to the productive capacity of the economy and not just whether there's purely demand stimulus currently, and i think that, you know, a variety of things are happening that can improve that productive capacity of the economy, so i see the neutral rate rising. >> randy quarles, because of the fast-moving news, we have to move on. but thank you for joining us randy quarles. back to you. >> secretary of state mike pompeo taking questions now on north korea after his meeting with kim yong and chol

>> look, make no mistake about it, president trump -- this administration completely understands how hard this problem is there's a long history where north korea has viewed its nuclear program as providing the security that it needed for the regime the effort now is to come to a set of understandings which can convince the north koreans of what president trump has said. if we're able to achieve it, if the north koreans are prepared, in fact, to denuclearize, this includes all elements of their nuclear program, if we convince them of that, that in fact their security is greater, that, in fact, the real threat to their security is the continued holding on to of that nuclear weapons program and not the converse we've had lots of conversations around that. the true test, of course, comes when we actually achieve this. but many conversations have been had about how we might perceive what the path might be forward so that we can achieve the

denuclearization that the world demands of north korea and the security assurances that would be required for them to allow us to achieve that. >> next one to martha radditz from abc news. >> secretary pompeo, you call it a proposed summit. will we find out whether it's a go tomorrow? and also, you looked the vice chairman in the eyes, you have been with him in the room, what accounted for the progress this has been such a roller coaster ride the summit was off, we've gone from "fire and fury" to this so talk about what accounted for the change and do you worry that you could still change back? >> so, mar ctha, i have had the chance to meet chairman kim jong-un twice and now kim yong chol three times, have spent a great deal of time with each of them i believe they are contemplating

a path forward where they can make a strategic shift, one that their country has not been prepared to make before. this will obviously be their decision they'll have to make that. they'll have to choose, as i just spoke about, they'll have to choose a path that is fundamentally different than the one that their company has proceeded on for decades it should not be to anyone's surprise that there will be moments along the way that this won't be straightforward, that there will be things that look hard and times it appears there's a roadblock and perhaps even perceived as insurmountable our mission is incredibly clear. it is to continue to push forward. the president's directed me to push forward to test the proposition that we can achieve that outcome so i know everyone's following this minute by minute and hour-by-hour this is going to be a process that will take days and weeks to work our way through there will be tough moments. there will be difficult times. i've had some difficult conversations with them as well. they've given it right back to me too

we are decades into this challenge and so one not ought to be either surprised or frightened or deterred by moments where it looks like there are challenges and difficulties, things that can't be bridged our mission is to bridge them so we can achieve this historic outcome. >> and on the proposed summit, will we know tomorrow whether there will actually be a summit. >> i don't know. don't know the answer to that. >> our final question goes to adam shapiro >> while we may not know tomorrow, i will tell you, we've made real progress in the last 72 hours towards setting the conditions so your question really goes to what are the conditions. the conditions are putting president trump and chairman kim jong-un a place where we think there could be real progress made by the two of them meeting. it does no good if we don't think there's real opportunity to place them together we've made real progress toward that in the last 72 hours. >> adam from fox >> secretary pompeo, you talk about complete denuclearization

of the peninsula, so my question is about the attack on our allies what concerns does the united states have about exposing south korea and our asian allies like japan to greater perhaps chinese influence if there is, as part of the deal in the future, a drawdown of u.s. military presence in south korea. >> i'm not going to talk about today nor at any time during the negotiations about the elements of what the shape of the agreement looks like that's -- those are things that ought to be held so that the leaders have all the freedom they need to make the right decisions. so with respect to the threat and it's obviously a d.o.d. issue, i'm not going to speak to that today what i can say is this and the secretary of state now before 30-odd days, i think, there is no daylight between the south koreans, the japanese, and the united states with respect to our approach, to how we resolve this issue with respect to north korea

i've spoken to my counterparts there. i've spoken to president moon. we understand their concerns we understand the risks that can be posed to them and an agreement that we reach will provide an outcome that each of those countries can sign on to as well. >> but is there the potential for the creation, for lack of a better term, of a vacuum that the chinese could then come in, whether it's economic, political, or militarily >> chinese are moving all around the world today. let's be clear the risk of that is real everywhere, not just in this particular space we are keenly aware of it and i am confident that the things we're talking about with respect to north korea will not enhance the risk of that to any significant degree we wouldn't do that to the south koreans or the japanese, two of our most important allies in the region >> everyone, thank you thank you so much. great to see you >> will you be going to singapore? >> all right secretary of state mike pompeo

speaking after his discussions with vice chairman kim yong chol of north korea he said we do not know yet whether there will be a summit, but perhaps more hearteningly, he said that it appears from his conversations, too, with kim jong-un and three now with kim yong chol that the country is contemplating what he described as a strategic shift, which obviously can move in fits and starts and maybe not ever be achieved, but he seemed heartened by that very hard work that seems to be going on or at least to his perception is at the highest levels of the north korean government. so, then there's canada announcing a retaliatory trade measures against the united states just moments ago. we heard from the eu's ambassador to the united states saying they are going to do the same so there are a lot of moving pieces to talk about here with fred kemp, who is the president and ceo of the atlantic council. he is a cnbc contributor and tony fratto, the founding

partner of hamilton place strategies he's also former white house deputy press secretary welcome to both of you fred, let me begin secretary pompeo said very -- right after he said that north korea seems to be contemplating some sort of strategic shift in its defense posture, its adherence to or willingness to develop nuclear capabilities, that we should not be surprised that these negotiations are not developing in a straight line. there are going to be fits and starts there are going to be difficult times. there are going to be heartening times. talk us through that >> i was in south korea just a few days ago, and the south korean leadership, the major players around president moon, think that kim jong-un has undertaken a strategic shift in his mind, that he has -- that he does see the nuclear weapons not just as a net benefit to him but more increasingly as a net

problem for him. in terms of developing his economy and in terms of assuring his political survival so, what he really wants is a guarantee of his political survival against unification, against regime change, and he'll certainly want that from the americans, and he also will want the situation to free him up so that he can develop his economy more without losing his job. so the south koreans think he's been there for some time, but it is going to take some very difficult negotiations, because it's incredibly high risk for kim jong-un to go in this direction. we always talk about the risk to us, but the risks to him are actually a lot higher if he's going to open up his very closed society. >> tony, this is a man, kim jong-un, who like all of us i suppose, goes to bed not knowing whether or not he's going to wake up because somebody might seek to do him in. the president seemed, in recent weeks, to effectively guarantee his not only regime security but

his personal security, which is the -- to fred's point there, do you see it that way? >> yeah, i do, actually. i think fred, you know, hit the nail on the head the only tradeoff for the supreme leader and his family, really, to make a tradeoff this big of their nuclear program is for their personal security and the security of the family to continue to stay in power and run the government that's really the only tradeoff that they can conceivably make now, the problem for him is, as fred noted, is the trust in the united states and the other negotiating partners won't be just the united states, south korea and japan need to be a part of that also in ensuring -- making those assurances. that, you know, can he trust them now, he has seen what the united states just did with an important agreement with iran and seeing what we're seeing with some of our trade

agreements, the bar is going to be very high for trust from the north koreans. >> that's just where i wanted to go, fred how does what president trump did to our allies today -- i mean, china was already a target of these steel and aluminum tariffs. so was japan how does that complicate the picture of foreign policy and these negotiations with north korea. >> first of all, you have to give president trump some credit without his pursuit of maximum pressure through sanctions and without a real credible military option for north korea, and i don't think kim jong-un would have come this far this fast on the other hand, disruptive president isn't always disrupting in a positive way and i think with the europeans today, you've got a situation where you really need your european allies, you've opened up the way for a tougher trade approach to china, but the tougher you get with china, the more problems they're going to cause for you with north korea, and the tougher you want to be with china, the more you need the europeans on your side at a time when you're going after them with whether it's a trade

skirmish as the u.s. eu ambassador said or a trade war, and so all these things are linked together and sometimes i'm not sure if the president sees them that way his strategy is more tactics than strategy, and it strikes me that we need an overall strategy on trade to put all these pieces together and to really use his disruptive nature in a positive sense. >> tony, i give the same question to you, but with the addition of saying that, you know, when we -- when he exerted maximum pressure on north korea, a lot of people thought the president was crazy for doing that and look where we are right now. i mean, fred kemp just said we should give him a little bit of credit for that. >> i don't want to take credit away from -- yeah, i don't want to take credit away from that. look, it takes both to get to the table. remember that you could equally make the case that the north koreans brought the americans to the table by shooting ballistic missiles over our allies in japan, also. though, they did their own saber rattling also that elevated their importance to this administration and to the

greater security questions in the region so, look, we hope that there are negotiations, that they're successful, that the korean peninsula is denuclearized, however that happens i think secretary pompeo is exactly right, though. no one should expect it to proceed in a straight line >> gentlemen, thank you. fred kemp, tony fratto coming up, stocks lower this hour on fears about trade wars canada announcing retaliatory measures against the u.s. just moments ago. how can you protect your portfolio against what could be a very volatile summer that's next on "power lunch.

hello, everyone. i'm sue herera here's your cnbc news update at this hour. in an interview with russian tv, syrian president bashar al assad says the u.s. must leave syria he vowed that forces loyal to him will seize areas currently under control of the u.s >> this is our land. it's our right and it's our duty to liberate it and the americans should leave somehow they are going to leave. they came to iraq with no legal basis and look what happened to them they had to learn their lesson

samantha bee is under fire for referring to ivanka trump with a vulgar slur auto trader dropping its sponsorship calling bee's comments offensive and unacceptable bee apologizing today saying the remark was inappropriate and inexcusable. an olympic sprint champ usain bolt training with a norwegian soccer team. and that is the news update this hour. sara, i will send it back to you. >> sue, thank you. oil market closing for the day. let's go to jackie at the cnbc commodity desk >> well, crude prices falling today alongside the equity market today's drop can be attributed to the news on tariffs on steel and aluminum now, traders who yesterday were saying now's a good time to buy the crude dip, they still feel that way, despite today's move this morning's crude inventory report, a drawdown of a little

more than 3.5 million barrels, not as great as you'd typically see at this time of the year, therefore not supportive of prices either, guys. back to you. >> jackie, thank you trade tariffs off the lows mike santoli is at the nyse. it seemed like we took a leg lower, as soon as the retaliatory measures from canada were announced >> definitely did, and then kind of the market found its footing a little bit again so it's definitely a bit of a delicate reaction process, i think, the market's going through with each new wave of news on all this i do think, though, the market is trying to kind of localize the damage and be more selective about exactly which sectors get hit and which don't, so obviously, you've been mentioning the machinery stocks, theaerospace stocks that might be seen as really the losers in any retaliatory trade measures on the other hand, i think the other thing muddying up the picture a bit is the weakness in bank stocks. jpmorgan down, has nothing to do

with steel and aluminum tariffs, has more to do with deutsche bank so i think there's an effect but we're higher in terms of the index levels than we were in early april and february when we had previous flare-ups of these trade tensions >> mike, thank you, mike santoli. so how do you protect your portfolio in this market let's bring in dave and chief investment officer at private wealth management and chief investment officer over multiasset investment strategies dave, do you do anything to these gyrations in the market based on these headlines >> i really don't think that would be a good idea i mean, you have to -- on the trade issue, you really have to look at what has happened and what has happened is a couple of trade spats or skirmishes, not a trade war. and it's most likely that these skirmishes, it may take some weeks and months of angst, it's most likely these skirmishes will be worked out before the end of the year and we can't forget in all of this that what

we have is a strong economy, we think probably the strongest year of growth this year since 2005, very strong corporate earnings, and back to the trade issue for a minute, the reality that it is in nobody's economic and political self-interest to have a full-blown global recession inducing trade war >> i get you want to stay the course, dave, but at the same time, is it a little bit safer you're talking about the strength of the u.s. economy, to perhaps be more exposed to domestically oriented companies as opposed to multinational or ones that send their products to canada and europe and china for that matter. >> we do think -- we do think, for instance, that there's a lot of value in the small and mid cap area that stands on its own as a valuation statement, but also as you know, many of those companies do have less export exposure and more domestic content and that certainly is probably more -- has more of a tail wind behind it right now. >> rich, i'm reading the noelte

here you say, don't naively buy on the dips more worried about stocks here >> we're a little less sanguine about stocks than my counterpart here economic growth, although it is in the 2.5% range for this year, maybe less next year, it's decelerating and although we do have solid corporate profits, the tax reform has not had a halo effect on the retail or consumer sector yet so we're seeing clouds on the horizon, slowing economic growth, rising interest rates, the specter of inflation, and so we would not be naively buying on the dips here and in fact, we took some off the table in equities for some of our more defensive portfolios and our target date funds, our retirement funds. we're underweighted in equities. rather shorter term fixed interest types of funds, market neutral funds, other elements which are not so affected by the beta of the stock market

>> where are you seeing slower growth how much >> overall for the u.s., i think the blue chip consensus is now somewhere around 2.6 or 2.8 for this year and then slowing down to 2.3 or 2.4% next year so it' decelerating economic growth and most of the increase for this year had come, again, from the corporate sector, a result of tax reform but in order for this recovery to continue and not to continue to wane, we need the consumer sector in there and there's been very few signs of that so far this year. it doesn't seem to have legs >> don't tell that to atlanta fed. they predict gdp growth in the second quarter is 4.7% so there's some more optimistic forecasts out there, rich. >> there are some government-related entities that may have some more optimistic forecasts. >> it's the atlanta fed. >> i'm sorry but the majority of economists out there are looking at best at 2.5% for next year

so, very few with a three handle for this year and next year overall. there may be a quarter blip but we're not looking at 3% or 4% next year. >> you know what's so interesting about you guys is that you have such divergent opinions of where the u.s. economy is, where your weight to stock should be and yet two of your overweight sectors are actually the same, tech and health care. why is that, dave? i mean, how do you come away with such different takes on the economy and see the place to be, the same exact places? >> well, i think we all look at the macro picture, overall direction of the market and then whether you're bullish or bearish, look for the best places to be within the market and in the case of technology, you have, you know, very strong underlying growth. it's obviously a significant part of our market and a significant part of the reason for growth in the economy, and in many cases, valuations that are still reasonable in the financials

you have a situation where valuations look quite inexpensive and of course they cheapened up a little bit more this week. you have a regulatory environment that has turned more positive again, we believe a strong underlying economy and good fundamentals for these companies. >> just to be clear, both of you are overweight tech and health care financials doesn't show up on rich's list. thanks for your time dave and rich. coming up, self-driving gains for alphabet today our next guest says the deal with waymo is alphabet's billion dollar opportunity he will tell us why next is my . this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities - trade confirmed - and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see

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fiat chrysler announces it will expand its partnership with the company's self-driving car division, waymo. the deal may include licensing servic services and technologies to be incorporated into fiat vehicles. victor, thanks for phoning in. on top of this waymo news, we also had the investment by soft bank into gm cruise. does all this -- does any of this change how you view waymo's valuation and in turn value google's valuation >> no, it doesn't. i think the gm news today, the news from uber, from yesterday,

from dara that he was looking to possibly partner with waymo, i think this is just supportive of the entire autonomous vehicle industry i think the runway for -- this is just still the early beginnings for -- as everyone knows -- for driverless cars and i think the opportunity ahead to disrupt vehicle ownership, disrupt taxis, disrupt car rentals, disrupt public transportation, is enormous, and most estimates place that at around a $7 trillion opportunity. so i think with soft bank and gm, it's a small to investors to pay attention to every company involved in this emerging industry, whether it be waymo, nvidia, intel, lyft, some of the players out of china, so i think that's what the signal is. >> we're also seeing facebook in today's session up by about 2.5% they're hosting a shareholder meeting. didn't look like too much news was coming out of that meeting but i'm wondering what your take

is on this move higher by the two tech stocks. whether it's the markets looking for idiosyncratic growth in the tech sector or is there news surrounding these two companies that make them specific stories. >> i think it's more company specific even though i think it's some sort of rotation out of more interest rate sensitive stocks and technology names so i think that's part of it. but you know, i think facebook in particular, they recouped almost all their losses since the cambridge analytica crisis and i think that's a testament to the fact that zuckerberg handled himself quite well during the congressional testimonies. i think it's a testament to the fact that cambridge analytica issues are starting to wane. i think the issues around gdpr in investors' minds has become essentially not much of a major disruptive issue for these issues it looks like they're trying to sell through the gdpr concerns quite well so you look at facebook, solid

user growth, strong free cash flow, there's multiple opportunities to -- modernization opportunities, whether it be messenger, what's app, continued robust growth at instagram, strong growth in the core platform and there's optionality around oculus, possibly trying to entry so i think that's what you see reflected in the stock price of facebook and some of similar sort of trends with alphabet and google as well >> if you had to pick one, facebook or google, which would it be? >> well, facebook, i just think there's a lot more untapped opportunities across facebook's family of apps >> victor anthony, thank you lululemon, one of the big stock winners this year. it's outperformed. is the stock just warming up "tradi "trading nation" will tackle that next.

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today, we look at lululemon, dipping into negative territory, but the retailer surged in 2018,

100% in 12 months. chris and gina are here, chris, you called the rally several months ago there's been a lot of bulls, jim cramer loved the stock for a long time. how does the chart look to you now? >> this thing is not over yet. frankly, it's still one of our favorite names in the space. long term chart, there's ten years of lululemon it tried for a decade to get through the 85 level so we had 40 points that we're playing with here. ultimately, this takes it up here to 120, so there's still room to go i recognize it reports today there's very good support near 99, 100. any pullback, a buyer, we don't think the longer term rally is done yet >> always a huge move with earnings gina, there's a weird obsession here in the news room from the

men on the pants this is a company that still does not have a permanent ceo and already had a strong run what do you do >> well, it's interesting. you're spoipti inpointing to im issues it continuines to run. the roes above average for the industry it deserves the run it's had i point out from a valuation perspective is at risk we're not necessarily saying that that's the only reason that you should not be enthusiastic about lululemon. they are best in class and continue to hold that. however, with the markets showing the volatility they are showing and retail sector generally bracing itself for retail apocalypse, you know, you have to consider how long that valuation is going to hold out we'll see what the company reports after the bell, guys, thank you. for more market insights, go to tradingnation.cnbc doe.com, follow us on twitter

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mexico's economy minister said the country will impose equivalent measures on diverse products in reaction to u.s. steel and aluminum tariffs announce today on that country as well as canada and the eu announcing the measures affect steel products, pork, and other agricultural products and will affect $4 billion worth of trade between the u.s. and mexico. time for check please. >> check please. >> i have data lost in all that trade back and forth >> yeah, yeah. >> that we talked about all day, a huge story, but the u.s. economy has been showing strong signals. consumer spending, which is a bulk of what the the economy is made up of, this morning, posted the biggest gain in five months in april we got the numbers from the commerce department, 0.6% rise in spending. that was actually a good sign. i mentioned some of the gdp

forecasts in the second quarter shaping up to be good. so i can't help but think during all the trade tariff back and forth, what the impact is going to be that the president has a good economy here, is he going to hurt it >> which he can tout, yeah >> by putting tariffs -- >> deserves some credit for that in the personal spending numbers, i know it's included in retail sales and spending is gas in there gasoline >> yeah. they do it without gas as well >> they can adjust it, but if the overall number includes gasoline, some of that personal spending is the rise in prices in gas >> yeah. i mean - >> good point. >> look at the breakdown, but nondurable goods purchases serged 0.9%, and there's other goods and services, so this is a broad based takeoff. it's pretty strong >> yeah. >> with the market turmoil on the back of the trade stuff we talked about, square and twitter are oasis in the big cap sector.

look at this, the jack dorsey company is fairing well throughout the market volatility for the year and for this week >> a hunk of the next program i devoted to the question of the day, tariffs, and retaliations coming >> thank you for watching "power lunch. >> the "closing bell" starts now. here's what's coming up. a tariff tantrum, markets selling off as the u.s. imposes steel and aluminum tariffs on its allies who wins who loses? we assess talking to real business owners affected by today's action i'm kelly evans. investors looking outside the box. shares of the storage firm sinking today despite the earnings beat, and the ceo joins us to make his case. >> reporter: in los angeles, i'm phil lebeau, a big opportunity in autonomous drive technologies, what companies cash in, and are the investments worth it i'm diana, floods, winds, and rising tides i'm taking a deep dive into