"squawk box. good morning welcome to "squawk box" here on cnbc we're live from the nasdaq marketsite marketsite our guest hosts for the hour, cnbc's fast money trader guy adami. >> fired up to be here the four of us -- >> this is awesome. >> equities futures at this hour are in negligence negative territory. they have improved almost 200 points. the dow would open lower about 82 points. the nasdaq lower by 32 we had more selling in asia. china was already in a bear market more than 1% selloff in both the shanghai and the hang second

japan off more than a third of a percent. big move in chinese currency overnight. we can ask the question, whether china is letting i currency to devalue. european equities as trade fears there continue to weigh on some of those stocks. italy is flat. spain, lower this is an improvement in the last few minutes the ftse must be higher because barry gibb has finally be knighted treasury yields at this hour the ten-year yield is at where it was pretty much yesterday, 2.8% two-year at 2.5%. okay, joe crowley, this is an upset top political story, primary upset for the fourth ranking democrat in the house.

we have had this congressman on our show many, many times. senator crowley was defeated after serving for two decades as the representative for queens.c 28-year-old activist and former bartender, now you have a better accent than us. >> alexandria ocasio-cortez. >> there was no feeling, there was no emotion usually you have zs that run on for ev >> all right, she was endorsed by the democratic socialist of america and is considered left ofwley she ran without corporate donors and her campaign was outspent 16 to 1 to crowley's.

president trump tweeting the following, wow big trump hater, congressman joe crowley who many expected was going to take nancy pelosi's place, just lost his primary election, in other words, he's out. that's a big one that nobody saw happening. perhaps he should have been nicer, more respectful, to his president. i'm not sure that's the lesson in this situation given who just beat him >> you think she's pro-trump compared to crowley? >> i don't think so. i don't think so >> probably not in this case. >> to me, i wonder if everyone else feels this way, it really suggests when you get to the midterms and potentially further out, where is the democratic party, people talk about centrist people like howard schulz, i think the party is

going to move so far left. >> remember way back when, sarah palin called barack obama a socialist. at that time, the democratic party was insulted i'm not sure that the democratic party today would be insulted. >> no, no, i think large parts of the democratic party would be insulted the question is, do you get a truly divided democratic party like the republican party splintered reports yesterday, the local channel 2 cbs channel in new york reporting that mayor bloomberg is now apparently now back in the hunt $80 million spend tong midterms also about befriending some people along the way the question is, do people like that have a place in the democratic party. >> a split party, here you have a very blue district but you have the pennsylvania

special election where you had a kind of quasi-republican running as a democrat who won the special election out there who refused to criticize president trump. depending on where you are in the country it's going to be a very different complexion to the party. >> for president trump to tweet that out, there's a referendum on his presidency, he's either the smartest person in the world or the other side of that. >> every single story revolves around him remember, he's tv talent what do you know about tv talent we're all narcissists. >> speak for yourself. >> congressman from queens for 20 years he's been side by side for the president a pretty long ti if he gets knocked off the pe h

perch, that's kind of a victory for the president. former presidential candidate mitt romney won utah's republican nominee for senator by a landslide president trump also tweeting in this case, big and conclusive win by mitt romney, congratulations. i look forward to working together, there's so much good to do. a great and loving family will be coming to d.c. >> in the meantime, down to washington, d.c., where president trump is this morning. trade will be at the forefront >> the administration is now fighting multiple trade battles in china, europe and here in the united states. hitting back at europe its retail area ya toir tariffs. faced with these unjustified

tariffs the u.s. will take all necessary actions under both u.s. law and international rules to protect its interests on china, a deadline looms for new nt restrictions. yesterday, president trump seemed to suggest that the u.s. could protect intellectual property additionally in an effort to strengthen the company in the united states. >> we're going to protect it and that can be done we have a lot of things that we can do it through. but the bottom line is, we have charged a very substantial tax on some people they're coming back to negotiate. >> a move that's broad support on capitol hill the house yesterday passed a bill expanding it by 40 votes to 2. so it's widely supported as this trade disputes heat up,

larry kudlow is looking to fill the growing vacancies on his team includinp trade officials. now some names considering for key roles. dan clifton who's the head of policy research at strategas and steve moore from heritage undation clifton i'm told is among clienthose being considered for an outside roll there's a lot of turnover at the nec and very important for those roles to be filled considering how crucial that body is to trade policy >> first of all, do with we now how larry is feeling and what it's been like for him this week >> he was back to work on monday that's when he started with some

of these interviews according to people i have spoken with. some suggestions from my sources that he might be working shortened weeks. he's easing back into things as he's back at work but some people say, you know, if he had not had this heart attack the last few weeks that maybe the trade situation would not have escalated to this point. and one close friend of his, art leffler said that steve moore could serve as a miniature larry in that role if he were to join as a senior adviser, he would essentially stand in for larry when he was unable to be there perhaps one reason maybe he's considering him. certainly, large shoes to fill over the last few weeks and he wants to restock those deputy ranks which are vacanting quickly. >> foreign investments into the u.s., you mentioned that the

vote in the house to expand the definition and the strength of it was a 400-2 raised the question that kind of came up yesterday, which is, talking about investment restrictions coming out of treasury department on foreign companies in the u.s., it feels like congress is running ahead of them. we're getting to that point. >> right, congress has been working on this for well over a year at this point i mean, it has not only bipartisan support but also bicameral support, the question is, which vehicle it gets pass through. the senate day tachd its language to the bill, they put knit the defense spending package which still needs to be reconciled with the house. the house voted as a stand-alone. regardless of the vehicle it gets passed through, treasury

department has been wog with capitol hill to shape the language we have this big bill that does a lot and really expands the scope, how much could we do and should we do outside of that >> i'm glad someone is watching this because it's complicated thank you. stocks to watch, sonic reported better than experted third quarter earnings but revenue fell short of forecast sonic posted a surprise decline in same-store sales particularly at its franchise restaurants sonic chairman cliff hudson will join us on set first on cnbc. astra zeneca said a third stage drug helped people with

cancer. wwe signing a new tv deal for its top two shows. monday night raw will stay on usa network. while smackdown will move to fox. you can see the stock is higher by 13% told you earlier this week, the conagra brands is closer to buying pinnacle. healthy choice frozen meals, pam's cooking sprays pinnacle includes es mrs. butterworth's. is this just an ola for a sector that's struggling you know, let's get bigger

because we can't come up with inventivproducts that people would buy so we'll just -- >> pretty much you have to ask yourself, you know, does target have to make a moveoing on with kroger? you watch with the stocks performed over the last couple weeks. i do think that the amazon/whole foods thing set this entire wheel in motion. >> also the changings consumer habits, right. >> i'm 54. nothing's change as you can tell. people are changing their taste, they're eating healthier i get it >> buy more brands so you can focus on the ones that might be able to revive and work. conagra among all of the food companies have held it better. the protein-based -- >> because atkins is back.

they don't call it atkins, it's antisugar. no carbs let's get you caught up on the broader markets. here with us is ryan payne and jason daro and our guest host is guy adami. good to haveyou here ryan, china is in a bear market, the united states is not does that tell us we can actually withstand a lot more pain when it comes to this trade situation? >> i think it does the bottom line is, we import so many goods from china than they do from us lot of room to move from a concession standpoint. they're not dependent on being overseas for, you know, whatever they need in their supply chain. >> do you chase that trade >> no, definitely not. small caps i mean, i think you have to have

them in your port foal ya. the value on small-cap stocks, they're extremely high valued. >> you do what instead. >> global. commodity exposure in your port foal ya. you need to know foreign markets. tariffs are keeping that stuff down in price. >> jason, what do you think. >> i degree. what we're seeing in china the dwer jones of the impact of trade. small caps have done well here kind of low rated. >> should it be? >> given what we know in terms of trade implications right now, it shouldn't be. the risk is escalation i think that's what you're seeing china is selling off more so because the impact will be greater there. in addition, once he consolidated his power, they're

trying to slow growth. slow momentum. on top of these uncertainties, it's more liquid that's why we're seeing a bear market. >> we're talking about the markets, are we focused on the wrong thing? i would submit the market has been skittish since that fed meeting couple wednesdays ago when they talked about a hawkish tone, my concern all along is, i'm not saying it's a fed misstep, is the fed in the conversation again, is that the real threat for the market. >> the fed is almost out of the equation going forward, it's price for the fed raising the rates two more times around 3%.s the fed will stop if that's the case it comes down to what growth does. >> you're going to say something? >> no, that's the biggest

misconception. rates are still low. they hike s year, have modest inflation it's a gift from god >> if banking can't do well when the economy is hot, when you've supposedly the fed is raising rates, what's the problewith xfl. >> this is where financials should be doing well you have lending growth increasing you have the results -- >> breaking news. the deal that we just talked about. just crossing the wire, conagra buying pinnacle, the figure includes assumed debt, for $10.

billion. the deal is done just wanted -- we interrupted you. >> the environment is one where financials should do well. they haven't that's a bit of puzzle it comes down to the markets cl you want to own financials or tech tech has been doing well right now, growth is winning out. we think financials should do better >> by the way, wall street journal this morning the big lose between the u.s. and china is europe. >> seems to be >> is that a head fake or are we writing europe off completely. >> head fake if you look at consumer confidence, business confidence is growing overseas, the fundamentals are there the growth is slower than everyone expected.

again, great valuations. and the world's growing. synchronized global growth >> is it synchronized? >> all of this stuff happened when the rest of the world indicators have grown. pmi indexes rolled over. fed tightening plus it wasn't all that synchronize zbld europe could be a loser in this case because it's leveraged to global growth than u.s. companies, if there's a gross slowdown, europe's going to be impacted that's a headwind for them. >> last word, yes, there are headwinds there. the biggest thing, this tariff thing is probably going to blow over good for emerging markets good for europe and good for the global economy be bullish. >> thank you. okay, coming up, i'm so

excited about this story i want this to happen. if you want to fly from l.a. to tokyo in three hours, boeing wants to make it possible. we're going to show you the aircraft of the future we'll show you images of all of it right after the break once there was an organism so small no one thought much of it at all. people said it just made a mess until exxonmobil scientists put it to the test. thht someday it could become fuel and power our cars wouldn't that be cool? and that's why exxonmobil scientists think it's not small at all. energy lives here.

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♪ ♪ we're in the chairs and we have what i think is going to be the story of the morning, at least for me boeing has released its vision of the act of the future and it cut flight time from new york to london to two hours. l.a. to tokyo, three hours this is boeing's rendering of a ultra fast, hypersonic jet, altogether the concept is generating a lot of buzz aircraft will take decades of research and development. >> it's like, airplane porn or

something. this is like for road warriors for road warriors this is what we all need. but decades is the sad part there. >> they describe it as hypersonic, faster than supersonic >> does that plane look comfortable? i guess it doesn't matter if you're only in it for only two hours. >> i just wonder if there's incremental progress you can make on the way to hypersonic. >> it's kind of remarkable that planes can't go faster one of the reasons why people like private planes, by the way, is because they fly higher the is thinner, you go faster. >> the higher you go the more

dangerous things get my question would be, this sort of back to the future thing, if you go this fast that you actually get to where you're going before the time you left, does that make sense you actually pick up time. think about that one>> that's v. >> from asia to the west, you got start in asia -- >> at some point it's got to get very confusing like a sci-fi movie. how much would you pay for a sandwich made from the finest japanese beef? a restaurant in new york would foundation on a seasonandwich f $180 what makes the beef so special, it's sourced from ainge isle japanese farm that sends just

five cows to america each month. >> you don't think that's a scam >> you're a restauranteur. >> yit's fantastic i'd rather get my roast beef at the deli for 7 buck and this is millennials, they love all of that stuff. >> no, no. >> yeah, yeah. you see their instagram feeds, all they do is post food they get the money from their parents. >> oh, stop, this is for you at your thursday night opera and your gown. >> bingo >> don't out me. barry gibb knighted in this segment. come on. >> she's going to somehow slip that into every segment this morning. coming up, trade war rhetoric heating up. as we head to break, a look at yesterday's s&p 500 winners and losers

♪ ♪

♪ ♪ welcome back you're watching "squawk box. live from the nasdaq marketsite in times square. good morning welcome back to "squawk box" right here on cnbc take a look at u.s. futures

equities nasdaq looking to open off as well 36 points right now. the s&p 500 down close to 7 points. let's recap a deal, conagra is buying pinnacle foods $10.9 billion. when you exclude debt the deal comes to1 billion. conagra will take on $7.3 million in debt to get the deal down conagra is the company behind hunts and healthy choice pinnacle, behind birds' eye sh, wi wi wishbone and others. the trade tensions between u.s. and china some new data on china's economy. let's talk about your new data the data reflects -- well, you

tell me, what does your data reflect? i won't speak for you. >> right now, people are really worried. a trade war on t rise and a chinese stock market crash, all things suggesting that the chinese economy is particularly vulnerable to a trade war or turned the corner. none of this has actually happened in our data we have seen a much stronger economy than most people were expecting. retail sales were better than expectations credit is more available than expectations i think part of this is because data is lagging. the government data right now reflects a current period that's actually several months behind us. >> therefore, if you're president xi you feel like you have a strong hand to say what >> you have a stronger hand than people think you have a more robust economy going on, you're more robust

domestically, you're not falling off the cliff. people really thought things were falling apart they're not falling apart. you got continued momentum of the economy. >> why is the chinese mark is off 20%. >> fear of trade war that's not happened fear over leveraging that has hit the shadow sector but has not affected corporate borrowing. corporate borrowing actually went up this quarter they're still borrowing. >> you're not a stock analyst, does that mean china is a buy -- i mean -- >> compared to the markets are thinking right now, i think china is a buy much less chance you have this full-on trade war. one of the tricks that the government does they don't announce weakness until they've already gone in there and fixed part of the problem.

they'll have a ready-made solution in weeks or months. >> the vote coming, the committee on foreign investments into the united states 400-2 was the vote wide partisan support that we haven't seen to restrict investments into the united states or expand the definition of what it does and that's all about china. the only country we're about. my question is, i feel like we already got there. it's already stopped a bunch of deals. and the numbers show that chinese investment is down dramatically >> look, chinese investment restrictions are the focus othen one reason congress voted so overwhelmingly to take the prerogative back from the president talking about using emergency authority on

restrictions they wanted authority back the first one was underresourced it only hit deals at certain part of the cycles could china-state ownership be small smaller. there was a lot of ways to fix it what they're doing right now is going a long way towards making this effective. >> how do china view this whole discussion about appropriating technology do they say we have the po prese what we have right now. >> the most hard-core chinese nationalists understand they have stealing u.s. technology for years. you would hear, well, this is being dealt with, not part of our plan going forward we're already moving in the right direction. no reason to have a big debate over this right now.

that was old china this is new china, we're innovative now that's not true. >> what kind of retribution could or could not happen to the biggest american companies that do business in china. >> there very vulnerable if they go the 50 billion and the counter 50 billion and the trump administration decides to levy the tariffs. there's a negotiation window, if that doesn't work and the chinese don't come to the table or white house makes impossible demands then you have $250 billion tariffs on the chinese economy, that's where they have no choice to really go after u.s. corporates in china and they'll be hit heart >> one of my co-anchors yesterday asked the question like this, how much do the chinese cheat and steal? even for me i thought it was --

based on what you said that take it as a given what they have been doing by the chinese. >> right they are impressive. they're competing well against the u.s. and other western firms. they're impressive that said the chinese system was built on theft and stealing trade secrets and this is something that continues. >> august 2015, china devalued their currency by february our markets were collapsesing here. they have strengthened it since. should we be concerned as the currency weakens maybe we're on the verge of something like that happening again. >> i really don't think so one of the reasons the chinese weakened their currency going into the trumped a money strags is so they strengthen make him happy and have room to blow off

this around 6.4, 6.5, get past 6.7 markets will start to get worried. this is an emergency break the glass move >> rhodium group put outaybook investment numbers showing that chinese investment in the united states has dropped more than 90% compared to year over year numbers. why is is that is that because of what the u.s. government is doing or the chinese government >> it's a perfect confluence of two factors. chinese government has been much tighter on outflows. they want to control these ridiculous transacti the same time, there's not the same appetite by the current holder in the white house on having chinese investment in the united states. it's seen as risky

other firms don't want to get in chinese companiebecause they're afraid it won't pass muster >> final question, how do you get the chinese to change behavior >> pain. got to give them pain. the chinese understand strength, they understand pain there are smart waf doing feign and stupid ways of pain. >> what's the smart way doing pain. >> target companies -- >> hold on f not let zte off the hook, what would have happened >> it would have failed. >> so president thought that he needed to do that to get an opening to continue the conversation. >> you could have weaken sanctions so they could still survive. china can't allow a major firm like zte to go understand. that would have had more

leverage for china on the united states you have to make sure if companies are breaking u.s. laws they are severely punished if sectors look ripe for chinese threat or chinese investment you make sure they're protected. you have to be targeting companies that misbehave and violate u.s. laws. >> what about politically connected person going after them very definitively, no visas for you, no shopping in london. >> you have to be careful about that but sure, if you have people violating north korea sanctions, violating iran sanctions, go after them hard. they have to understand there are consequences for their bad behavior >> you cannot embarrass the chinese in public, you can't do all this this is the worst way to do it, that sounds like you

don't agree with that. >> the chinese understand strength, they understand pain, if you want to change the system that's what you have to do >> thank you leland. coming up, news from facebook on its drones and crypto currency ads. stay tuned, you're watching "squawk box" on cnbc ♪ ♪ my mom's pain from

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welcome back to "squawk box" time now for the executive ench. facebook announcing it's aban dog itans for drones that plan began back to 2014 facebook is working with partners like airbus to develop programs i still believe it has its balloon, i think google still operates the balloon version of that you know what i'm talking about. >> yes i thought thigh were doing that in developing parts of the world. >> kind of cool, though.

what kind of face is is that >> listen, the dinosaur that i am i'm not embracing the technology of the titan program and facebook beaming down internet makes no sense to me with that said i understand the need for it as this world continues to progress. i'm not their target audience. >> none of us are. >> internet and cable from 3:30 in the afternoon past bedtime. >> i didn't know that. >> they can't forget drones. they can't get it here in new york city. i couldn't watch the final episode of the americans, i was very upset. facebook allowing certain ads from preapproved advertisers on crypto currencies facebook said it would monitor the policy and revise as needed. coming up, do you need a home manager that's the idea

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♪ hello is it me you're looking for ♪ welcome back to "squawk box. here's a fun story home service platform hello alford brings humans back into hospitality. the company recently raised money and are looking to bring their home managers to residences nationwide. welcome. >> thank you >> we were all uninitiated before we heard about it here. what is hello alford >> if you live in an alford building, you're going to get your personal shopper, fill your fridge, dry cleaning in your

closet, bring your packages up to the countertop. it is a person who is going to anticipate your needs. >> we don't call them a butl more like a personal assistant >> we call them home managers. they manage all the ins and outs of living life >> do you have to be in an alfred building? >> yes that's key. >> why is that key >> it's important for us to make it accessible to make it work for people >> in terms of your business model, one person paying for your service would be expensive for you. you want 60 people paying the monthly fee. >> we want to make it as accessible to as many people as possible it's easiest to build it into your home. you can move into a space that takes care of you. >> when you first started the service, if i recall, it wasn't building by building you could buy it as a retail

customer, yes? >> yeah. we won that competition. a lot of people signed up for alfred and we were launching city by city with a direct to consumer model we wanted to grow faster you really need that density and scale. but the most important part of what we're doing here is the majority of people are going to live in cities 80% of americans are going to live in cities by 2050 and how people buying and what people are buying is different. and you're seeing the store really come into the home. >> but speak to the pivot. at some point you must have decided the economics don't make sense to do it necessarily -- >> that's in the true. the consumer model works really well we needed to get buildings on board with this idea that service needs to be built into your home. >> so your revenue stream doesn't come from individuals, it comes from buildings. >> we have three revenue streams. that subscription a building a paying for the service to be included in their building >> and those are typically rental buildings

>> these are multifamily rental buildings. i think millennials are thinking about how and where they live differently. so people are staying in the city people are renting, and people are paying for experiences and services like ours >> so if i am a real estate owner, let's say i own a building here in new york city let's say i have -- i don't know -- we'll call it 80 apartments in my building. what are you going to charge me? >> we focus on buildings above 100 units or more. >> let's go with 200 apartments. >> yeah. i mean, those numbers really depend on the size of your portfolio. we're working with he largest -- >> i'll make it easier for you i have 500 apartments. how much are you charging per apartment? >> it depends. >> we're probably less expensive than the standard concierge companies on the market today. >> so give me a price.

thegood news is you have an audience right now of real estate developers. how much is it going to cost them if they're going to call you, they need a general price. >> when we were direct to consumer business, it was $250 to get alfred once a week. you're adding to rent and you're going to see up to a 10% lift in your rental prices you're going to see cost benefits and lower churn so we're getting top line and bottom line results for our developers but i want to stress the most important part of this is in-home commerce is going to be the next big category. e-commerce has major pain points that aren't being solved with returns, being able to touch and feel product that we can bring in and decide if you want to keep that speaker. and whether or not you look at the numbers. there are 30 million packages stolen each year plus the package waste we're taking local services and

bringing them inside the home as well as the largest brands >> and you're integrating your service with things like alexa. >> there is no alexa eavesdropping required with alfred but if you want to use a speaker, we can integrate it a lot ofe use our app. it's easy to turn things on and off. >> we've got to go, but what's the craziest thing people have asked alfred to do >> we've done everything from hosting parents to engagement parties. >> is there an extra fee for hosting my parents >> it's very expensive >> thank you, ladies good luck. >> thank you is much >> thanks for having us. >> appreciate it the story we've been teasing all morning. british music legend barry gibb was knighted yesterday he was honored for his services to music and charity >> is that him >> yes, it is. >> he looks like 97 years old. what happened to him >> and he expressed how much he

hopes prince charles becomes king we'll ask wilfred how he feels about that >> fever was 41 years ago. 41 years ago by the way, i'm actually going to -- >> i was born 41 years ago there you go >> our thanks to guy adami sitting in this hour >> always a joy. >> always. >> i'm calling alfred to sitn for you next >> you see me on the alfred patrol i'm going to be -- i'm an alfred at home. i should get paid for it says auto tariffs could cost consumers $45 billion a year we'll talk to the ceo of autonation mike jabs going to join us in a few minutes. and lennar posting a better than expected second quarter. the executive chairman is going to join us in the 8:00 hour. the. extreme risk of burst pipes and water damage... soon, insurance companies won't pay for damages.

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a trade war and the markets. investors searching for answers from the administration. the latest from washington what you should be doing with your money, straight ahead $45 billion. that's what one trade group says it could cost american consumers if tariffs are placed on imported cars. autonation ceo mike jackson joins us with reaction on what he thinks needs to be done to keep the auto market in drive. a look at the deal plus the ceo of sonic on the fast food chain's quarterly results. the second hour of "squawk box" begins right now ♪ live from the beating heart

of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times scare. i'm andrew ross sorkin with michelle caruso-cabrera and mike santoli. take a look at futures at this hour red across the board about 97 points off right now on the dow. nasdaq off 37 points s&p 500 off about eight points a merger this morning. conagra buying pinnacle foods. the figure excludes assumed debt and comes to a per share figure of $68 a share cnbc reported yesterday that a deal was close conagra will take on debt to make that transaction. we're going to get the goods

numbers. that's following the april drop of 1.6%. general electric is getting praise from one of its major shareholders after announcing moves yesterday. telling "the new york times" it includes a spinoff of ge health care will create substantial value for shareholders trian's garden joined the ge board last fall. and beyond the world of corporate headlines, trade turmoil front and center for the markets. you're looking at a live shot of ite house. president imposing tariffs against china and the eu putting investors own edge we'll get to kayla tausche who's got the latest >> now the white house's top trade official is leaving. everett eisenstat is set to leave early next month he told colleagues he'd leave after a year he was the so-called sherpa. meaning he led negotiations at

multilateral summits like the g7 and g20 in addition to domestic trade issues eisenstat is another leaving in july larry kudlow is working to restock the ranks. and he is looking at strategas for another place. the turnover comes as the white house has multiple trade battles. yesty more than 270 business groups wrote to the senate in support of a measure requiring congress to sign off on tariffs saying that current circumstances highlight the need to ensure the tariffs is in the national interest. meantime, the feud with europe is escalating. called retaliation by europe unjustified. even as europe plans more retaliation for potential auto tariffs that could come from the

u.s. this week we expect more details on chinese investment restrictions which the president yesterday suggested could be weaker than expected, but we will see as always wihat the final decision is. >> thank you for that. we'll talk more to you throughout the day meantime, markets on edge about trade. mike santoli hasore morning. >> yeah. some other things too maybe related to trade i thought we'd look at a few themes over the past month which seem to be restraining the market on a one-month basis, e s&p 500 is almost exy flat have given it up and then yesterday tried to hold our ground near the early month lows but look at the u.s. market, the s&p 500 against the rest of the developed world markets. the efa is basically the rest of the world markets. see how it diverged with that white line, the s&p 500 has been holding up better than the rest of the world

it seems it's one of the things that's suppressing risk appetites in the u.s. markets. you do have the rest of the world growing more slowly and maybe more susceptible to trade issues banks underperformance also seems a global story european banks have struggled a lot. deutsche bank also hitting new lows recently. that's something that at least sentimentwise is causing people to wonder about the risk taking environment. i think the takeaway is that it's kind of a sideways market until we get another quarter or so of earnings to come some think the fed has to back away before we get an upside catalyst if we're going to get one of those obviously that remains to be seen, guys okay. mike, thank you. joining us right now to comment on that and much more is mike lippert phil orlando as well

you are to the left of mr. santoli this morning i don't know if that is really where you are. what's an investor supposed to do right now in the middle of what may or may not be a trade war? >> so the s&p 500 has had a terrific move into mid-june. s&p was up about 9%. as we looked at the environment with the tariff and trade war and concerns about central bank activity and various other elements, our view is this is a perfect recipe given the fact we'rnot going to see quarter earnings until the third week in july we could easily see a 5% or 6% error pocket here. i think we're starting to see that view to investors was be a little careful here, maybe raise a little cash. emphasis on defensives and small caps and let's sort of hide out until we see how this thing materializes and let's redeploy later in the summer. >> so you're hiding out? the strategy is to hide out?

>> and preserve some capital the small cap trade is working and the defensives the last couple of weeks have started to work as well but we moved technology, for example, to neutral back in march because the valuations had gotten, you know, a luittle rich tech had done really well. and we did see returns over the summer so i guess we've got more of a risk off kind of approach at the moment we think that will reverse itself in the fourth quarter we're looking for a good end of the year, but we think the summer months could have greater volatility and chop. >> you hiding out over there >> we're not hiding out. you know, we're always invested. that's what we do. we're long-term investors. what could happen over the short-term who knows. up until yesterday we had three days of a down market. but the markets have been very strong, growth has been very strong this year our portfolios have done very well so we are careful and look for opportunities. you look for the stocks you want to own for the long-term.

>> like? >> i certainly believe the long-term themes are very apparent and very clear how world is changing. software, how we use software differently. in health care, genetics, minimally invasive surgeries, in technology how we build technology with the cloud. i mean, the cloud is less than 20% of i.t. spending it's growing about 30% the last several years. and going forward, it's probably going to be all of the growth. the areas to investors are clear. investors should be patient and pick their opportunities that's what tryo do. >> can we talk about rob barron's favorite stock? est -- elon musk, tesla. the math starts to work the wrong direction. he thinks he needs to have 5,000 of these vehicles in production i believe by next week per week starting next week are they going to hit that >> the truth is we don't know. we visited their facility less

than 30 days ago we toured fremont for about six hours. we see exactly whae doing. whether they exactly hit 5,000 this week, i don't know. and the math doesn't depend on a week it depends on having it done certai year. the math is clear. more important than the 5,000 cars per week is the gross margin >> tell us what it was like to be inside the factory. what did you see were they shut down at that time >> no, they were not they were operating. >> was this before or after the sort of refresh? >> this was before the second refresh. >> of the production line. >> of the production line. we saw the main production line which is a u-shaped model 3 production line. we could see all the differences for what they were doing from what a typical auto manufacturer does >> like? >> for example, they -- if you're putting a rivet or a screw into the car, that is measured it goess up to a system and it

nose exactly what you're doing so if a machine is doing it wrong, it says you're not doing it right, don't move it on if a human being is doing it they got a little bit ahead of themselves -- part of the automation that was ahead of themselves was basically bringingthe line the line itself is very automated. >> could sees you're standing there in the factory -- and i apologize to go to this tesla but this is fascinating to me could you actually see where the bottle neck was? could you see everything is going fast, fast, fast and slows down at a particular station >> no. you couldn't see it, but the company told us what it was. it was the marriage of the bottom parts of the car was the issue at that point in time. the chassis which was the drive train, the wheels, everything. has to be married to the cars we know with the chassises, the seats, everything. >> automation is supposed to make everything bigger, better,

faster and in fact, automation is actually what hurt them so dramatically >> you have to tune it it has to be done perfectly. the precision has to be exactly right. until they tune it and get the machines going exactly right it's going to take longer. they're trying to do something different. they're trying to push the informal they're trying to get to a place no one has done before no one else has mass manufactured an electric car before >> all right i want to go to phil and talk more but i have one tesla question since you went into the factory, did you decide to buy more, less >> we've decided to buy a little bit more >> okay. so show of fast. phil, what about europe? >> well, it's slowing down a little bit relative to the united states. we understand that valuations are still attractive there. particularly some of the financial stocks so we still like that area but the slowdown in europe in part helps make the case why

domestic small cap works there's a lot of concern about trade. and the fact the u.s. economy is doing better and you've had the tax cuts and the surge based on the repatriation, et cetera. small caps we think are particularly well positioned to benefit from that. and the last nine months or so, the stocks have worked we think they'll continue to work >> thank you, guys fascinating. coming up, the alliance of automobile manufacturers warning that new tariffs on imported cars could cost the consumer $45 billion a year autonation ceo mike jackson joins in after the break later, sonic presenting better than expected earnings. stock is off by 8% we'll hear from cliff hudson in just a bit stay tuned

♪ welcome back to "squawk box. the futures right now are suggesting a negative open the dow would open lower by 92

points the nasdaq lower by 37 all of china off more than 1% last night auto industry bracing for ck waves from the hich could assembly line all the way to the car lot. the alliance of automobile manufacturers warning against new tariffs on imported cars the group which represents gm, toyota, volkswagen and others plans to file with the commerce department later this week joining us now autonation ceo and chairman mike jackson. hi, mike >> michelle, how are you this morning? good to see you. >> good to see you i assume you do not like the tariffs on imported vehicles to the united states. >> first let me state, michelle, i'm in your camp for free trade and i'm for fair trade i congratulate the administration for taking on china. i prefer to see the administration forming alliances with our friends around the world in that challenge, but it seems to me like we're going to

take on the whole world at the same time on trade so if i look at the president's performance in south carolina, it struck me as one of those fact-free riffs that just makes your head hurt so let's review the score card on the threat of tariffs on bmw while he's in south carolina so bmw produces more vehicles in the united states than it sells. let me repeat that bmw produces 400,000 vehicles in south carolina than it sells i the united states. it exports the -- to the rest of the world and is one of the major exporters in the united states to china of all places bmw has been investing in this plant for decades. it's now bmw's largest plant in the world. located in south carolina. and bmw's bold step to prove

that you could manufacture very complex vehicles in the southeast led to mercedes-benz and volkswagen also ilding plants in alabama and tennessee. and so the germans, it seems to me, should bcongratulated for their big commitment to the united states. if you put them together, they sell about what they sell in the united states. it's a head scratcher to threaten -- >> so we're showing everybody bwm daimler. the european automakers are getting hammered really punished. a guest yesterday said when you combine the implications of tariffs on cars and then what happens with brexit that are no longer part of a trade

pact, these guys really have some issues ultimately with sales down the road if all of this comes to pass does that make sense to you? >> oh, absolutely, michelle. it's interesting germans a week ago offered to go tariff free saying they support tariff free between the united states and europe and i thought the administration would have embraced this but the facts are once again a little bit sticky in that 10% duty in europe and the administration always talks about cars in the u.s. being 2.5%, the dirty little secret they never mention is that they have a very protective tariff on pickup trucks and commercial vehicles of 25%. so it'll be interesting to see if the administration really does support tariff free between europe and the united states now, as far as the consequences, automotive tariffs will make steel tariffs look like a

company picnic where everybody's kissing and hugging. this will unleash, if it comes about, a real trade war. because the numbers are just so much bigger. it'll raise prices dramatically for conss in the united states it will be un-inflationary >> yeah, you know, i was very surprised when harley-davidson said the eu tariffs were going to add >> i was going to say, mike, given that backdrop, you know, when harley had its announcement yesterday that it was going to move production to t it said 18 to 24 months, i believe, is when they have to allocate to get this happening if the tariffs are imposed, it's a long lead time before even if it, quote, works before production gets over here. and maybe these companies just wait it out. how do you think it's going to play out are you expressing all these concerns to anyone you can in the administration >> well, the point is the

europeans are already doing what i'm saying they're investing in plants in the united states like crazy they already are doing exactly what you want. ou want to punish them for doing what you want? that's where it gets to be a bit of a head scratcher. and now you're going have trade wars going on with europeans on big ticket items like vehicles and by the way, they're also threatening on parts that you're going to disrupt a global supply chain on a complex large industry they talk about they have to do this for national defense reasons. well, the automobile industry is healthy. we're producing almost 12 million vehicles a year in the united states already. and the -- >> so you're saying we have enough capacity, got it. >> what is the threat? >> andrew's got a question >> i want to get your latest thoughts on our other favorite

topic we were talking about in our last segment i don't know if you got a chance to hear any of it. we we lking about elon musk and tesla and this deadline that is self-imposed. at least the economic math says they need to hit 5,000 car production per week starting next week. you've been always a skeptic of tesla, if i remember, right? >> well, i think that's fair to say. listen they make an excellent product and i congratulate them for demonstrating that there is a marketplace for electric vehicles and i would observe other manufacture ners the world are now investing billions i calculated $150 billion over the next several years and have fantastic electric vehicles coming so we've passed on inflection point. now, my issue with tesla is their business model so he said he was going to produce 200,000 model 3s last

year i said on your show it would never happen i think the final number was 10,000 or 11,000 a fraction of what he said now he has this target of 5,000 a week i'd be interested to see what he does the week before and the week after on the 5,000. >> thank you, mike great to see you coming up when we return, the latest corporate headlines plus an update from washington straight ahead take a look at the dow off 113 points and the s&p 500 off about ten points got a lot more this hour "squawk" returns in just a moment time now for today's aflac trivia question. what airlines were the first to fly the concorde the answer when cnbc "squawk box" continues thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?! not that kind of hurt.

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airbus on high altitude connectivity would shut down the titan internet program back in 2017. coming up when we return, a feeding frenzy for those in e sector and then we'll talk with the ceo of sonic the company's stock underperforming after results. take a look at u.s. equity futures this morning ar are in the red across the nasdaq off 42 points s&p 500 off about ten points "squawk" back in a moment.

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♪ >>good morning and welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center, mortgage applications fell 4.9% last week according to new figures from the mortgage bankers association. new purchase applications and refinance activity declined during the week. it was unchanged from the prior

week from %. other housing news out this morning when national association of realtors issues its pending home sales for last month. economists think pending home sales rose 1% in may general mills just out with its quarterly earnings the food producer earned 79 cents per share for fiscal fourth quarter that was 7 cents above timates. revenue was in line with street forecasts and that stock is higher by about a half a percent in pre-market trading. a freeding frenzy for m&a. conagra acquiring pinnacle foods today. there's also talk of kraft heinz taking a closer look at campbell's this all takes place with consumer ceos on the chopping block. and nearly 16 major public food companies left over the last two years. joining us to discuss is jonathan feeney from consumer

edge research. good morning to you. >> good morning. thank you. >> before we get into it, jonathan, just help us understand what your take is on this conagra/pinnacle deal >> there's no question it makes sense. any business like frozen food that's got a strong number one in nestle more or less needs number two and three to get together it makes sense it's just a question of the price paid and how much it raises the stakes as far as generating synergies >> and to that very point, what is your view of this price >> relative to the market price, i think it's a pretty good execution for conagra. broadly speaking, they're buying a wonderful company in pinnacle foods. by that i mean wonderfully run a great, great management that's got low overheads and has take an lot of efficiencies out of everything now i think in the big picture, the price is a little bit full that's why it raises the risk profile just a bit >> what were you going to say? >> i was -- >> no. i was going to go to a larger

question just about all of these sort of traditional old brands and long-term in this w age of, don't know, i hate to say new age. but new age of new brands and direct to consumer and everything else that's happened. whether these guysre going be stuck in the past >> well, i look at it as a time of transition. all this change, you mentioned some of the digital trends going on allowing retailers to get a lot smarter. i don't think it's a secular change i think it's a question of changing the assortment, one-time adjustment. it's going to take some years to work out but i think the best companies with the highest margins are going to wind up with a business that grows something like gdp in the near future. >> another way to ask andrew's question is does merging solve what ails these companies?

i'm not sure it does based on what you just said, doesn't convince me. >> i mean, it doesn't solve anything what it does is buy you time independently of -- can't control what's going on with technology a retailers all they c do is adjust. taking out costs makes sense getting synergies makes sense. you just have to trust the management to make the right decisions. >> you said this will be a strong number two in frozen food brands what is the overall prospect for frozen i think it's a little counterintuitive it's not something in decline >> well, we like frozen food it's actually been growing if you think about these meal kit businesses that have grown and attracted tons of investment and are growing in double digits, frozen foods t is the original meal kit. it is one of the few center store food items that overskews to millennials so it's got a bright future. it's got some pricing power.

it's got a strong leader i actually like that category. and it's one of the reasons we recommend conagra. >> you was going to campbell'sw to campbell soup >> we detailed all of this listen, i think it's easier -- i think they need to make some changes. i think mae -- thinking about str options is the right thing i think their fresh business probably is better off some place else and maybe, you know, the whole company, you know, perhaps, could benefit from some outside thinking particularly around costs and cost discipline. >> but does it make sense? part of the larger question, if you're a kraft heinz, for example, do you want to buy something like that or let it wither on the vine and buy it for next to nothing later if you think that's the direction this is all going >> look, if you compare -- one of the reasons you don't, these brands aren't going to wither.

this still has 85% household penetration, believe it or not with the shared leverage how much they have, they're very, very important to retailer particularly in season power that's therepricing it's got to be matched with cost discipline if you're going to take prices up, you're going to lose some volume but there's a lot of power in this brand and it's far from done >> i was surprised to hear you say that frozen food i over-indexed with millennials. why is that? when we think of them as being obsessed with frh annew and all that >>. >> believe it or not, frozen is a very healthy technology. it offers comparable benefits as far as ingredients to fresh. a little bit more sodium because to get through that process, but there are ways of dealing with that too you can get tasty food and it's convenient what hasn't changed over the past 20 years is consumers' need for convenience. millennials want that more than anybody.

and frozen is one reasonably priced way to reach for that i would look at the meal kit business and say frozen food is the original meal kit. >> we'll leave it there. good to see you. >> good to see you, thanks when we return, service at the speed ofnd that's what it ir sonic. the ceo is here to talk to us. he's here after the break and yes he brought food. here are the futures at this 'rba id wns the boardo wee ckn a moment greatness of an suv? gaue is it to carry cargo... or to carry on a legacy? its show of strength... or its sign of intelligence? in crossing harsh terrain... or breaking new ground? this is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedes-benz summer event, going on now. receive up to a $1,250 summer event bonus on select suvs. mercedes-benz. the best or nothing.

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welcome back to "squawk box" this morning take a look at futures we are in the red this morning the dow off triple digits. off about 102 points nasdaq off about 42 points the nasdaq off about ten points. shares of sonic are under pressure this morning following the third quarter results. company posted a surprise decline in same store sales. i've had trouble with that all morning. particularly at the franchise restaurants. the stock is off by a little more than 8% cliff hudson is ceo and chairman of sonic and he's brought burgers >> by the way, this is a pickle juice slushie. is that right?

>> it's sweet and sour go ahead and try it. i think you'll be sprieurprised >> you know what it's so thick. that's interesting it actually is good. it's like drinking an ice pickle >> but sweetened >> not really sweetened. >> keep your eye on him, and you'll see here. >> same store sales. see what's happening to the stock this morning the economy is going gang busters. i'm surprised to see a decline in same store sales. what happened? >> so at -- for the system, 20 basis point decline for company stores a 20 basis point increase. in the month of may, we had 2.5% ve the primary thing causing bumpiness was weather. and as we got beyond the weather, then sales were consistently positive. as we told the market yesterday during our release, may was 2.5%

positive into june we see no deterioration from that. now that we've got beyond some of that cold weather, late cold weather in the spring, we've really seen much more consistent positive i think we're on a good path this is part of when you talk about the stock being down after close yesterday, the stock had had about a 40% run up in the last month so there was probably an opportunity for a little profit taking and maybe a little error. >> should i read anything broader into the economy or what's happening with your consumers when you see a slight same store sales decline in some of the stores? >> well, the fact is ours have been -- so the winter was tough particularly from a weather standpoint as we've got beyond that, we've moved more positively. i would not read anything into the consumer or the economy based on this kind of flat for the quarter. it was generally up and as i said, may was up 2.5%. >> after being flat more than a year, it skyrocketed

>> i was going to say, what are the themes that matter in terms of the industry? you hear it going through -- it's always promotional. it's about getting more for less but is it particularly intense right now? >> it is intense that's a large part because some of our largest competitors are to us candidate on discounting for quite a while now. and they've been stealing share from the regional concepts so our approach been to focus on that value and there's some discounting associated with it but differentiate the product. in other words, as our business got better this spring, one of the things we came out with is a signature slinger burger what's the appeal there? one, it's a buck 99. but it's also engineered to be a buck 99. the beef patty is blended with mushrooms, 50% fewer calories than the lowest of its competitor burgers so 350 calories, has a good earthy taste about it. it's a very nice product and it really helped our sales quite a

bit through the spring differentiation but we don't ignore values. >> did you bring one, she asked disinterestedly? wl find out if we got one. >> what was the burger someone was selling today for $180 >> the with ragu. >> ours is $1.80 the decimal point in a different place the difficulty is behind us, in about all of t technologulty is put in place the network we've built over the last several years requires a new point of sale system of the store. requires a customer interface in the stall. requires the customer to have a smartphone but that's in place. so now what we're doing is updating the app market by market it's now -- it's in stores representing about 29% of our sales. it makes it easier your guest you had on a moment

ago was talking about convenience being a major factor this is going to blow away convenience. the reason it is, the customer can choose where to order. they can choose where they want to pick it up, set the time they want to pick it up and then connect with the stall heir app and literally be first in line have their food in two minutes that they customized it's going to change convenience for our industry we have 25 parking stalls. we're the only ones that can do this in the qsr business >> did you outsource this to somebody else? >> we tried that and we built it ourselves. it took quite a while. if you ask has it been difficult, yeah, all on the front end. but now for the operator it's simple >> what about your dna as a company, build an app for that sorry, we got to hold on one second

we got breaking news. >> we do have some breaking news commerce department coming out with news about how it's going to handle trade with china i don't know if we can go directly to -- can we go to washington >> we just had the ticker that the administration is going to choose cfius as the way to dea with chinese investment or foreign investment in the united states opposed to a rollout of something new. >> of a much larger trade embargo. which by the way, i would think, this is a much more palatable way to do this in terms of how the market should respond to this >> you would think so, yeah. congress is going to be involved it seems it's through the current mechanisms to some degree opposed to some newly imposed special powers >> okay. hold on. given what peter navarro said earlier this week about where all of this was headed, we thought we were getting hard and fast tariffs potentially on certain types of goods that were going to be approached i certain type of way. no >> i thought the original story

that broke over the weekend was there were going to be investment controls and restrictions on chinese investments in the united states, right? mnuchin says that's not true peter navarro says it's not true >> but if there's going to be hard and fast rules, this is different. >> navarro said it's not specifically about china it's going to be a more general approach >> i don't know if ultimately it's not the same thing. your -- what it comes to are you going to lose the takeover in the premium market because the chinese can't buy, that's going away if you lose investment stream regardless of via cfius or what they do independent, it's still out of there >> kayla, do we have kayla in washington right now we don't just yet. the one point, though, that's worth mentioning is the cfius thing makes it either better or worse because it does bring a whole different level of uncertainty. because you don't really know what's going to be allowed or

not. >> i think we already know look at all the chinese deals that have will be been stopped under the old definition of what the committee of foreign investment in the united states used to be right? which is a strict national security definition. and we've had numerous people on over the last year who have come on from previous administrations that said we have to widen that definition we have to say does this represent an economic threat of some sort. right? this was coming. you heard kayla say the vote went 400-2 in favor of doing this i want to know who those two were >> the u.s. treasury recommending cfius best to protect from motivated acquisitions the cfius panel as enhanced by pending legislation is strong and agile tool they say can respond to the u.s. technology issues going forwaarther, they said its

well understood by the business community. it's not fully understood because i don't think we know exactly how it's -- >> it's going to be bigger and broader now. >> in contrast to what was as michelle reported over the weekend that the president was going to invoke these emergency powers to hit china directly, this is very different from that >> and we've seen an improvement in the dow implied open. the dow would have been opening lower by 200 points. we've seen a dramatic change >> and go straight to the issue of the bark and the bite meaning this is the same negotiating playbook we've now seen it over and over again. a lot of bark. we don't know whether this is as much bite. but clearly less bite than the market was worried about >> ultimately a more traditional. it's been great to have you on set. i like this pickle slushie >> the pickle juice is all domestic so you don't have to worry about

tariffs or trade issues. >> how much is this going for, the pickle juice >> there's a range of prices this is probably on the order of $1.89. but you can get smaller or larger. >> who decided to do pickle juice? >> well, we have a chef that comes up with these various products and he was working on this las year ad to share it with america. >> is this a best seller now >> it's one of the top sellers it's one of several we have right now special flavors. we've got a flavor bahama mama, tiger's blood. >> what's tiger's blood? >> you might say it's a super cherry it's very, rich, deep red color and very popular actually selling more than the pickle juice. >> innovation everywhere you look >> that's the key. >> thanks so much for coming on set. >> thanks for the opportunity. >> can't wait for the big burger over there coming up, the president

taking on harley-davidson after they announce plans to shift production out of the united states, at least some of it. the impact it could have on the motorcycle maker coming up check out the european markets at this hour we've seen a definite turn in the united states and stocks in europe because of the news coming out of the easury, we'll talk more on that coming up here on cnbc. up here on cnbc. "squawk box" will be right back. and the alzheimer's association is going to make it happen. but we won't get there without you. visit alz.org to join the fight. [ horn honking ] [ engine revving ] what's that, girl? [ engine revving ] flo needs help?! [ engine revving ] take me to her! ♪ coming, flo! why aren't we taking roads?! flo. [ horn honking ] -oh. you made it. do you have change for a dollar? -this was the emergency? [ engine revving ] yes, i was busy! -24-hour roadside assistance. from america's number-one motorcycle insurer.

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we have seen a dramatic turnaround in the implied open for the futures particularly for the dow jones industrial average. earlier this morning it was down negative 200 we're now up almost 22 in part because of news just coming out of the white house which is that when it's come to the final decision as to how they were going to implement stricter investment policies into the united states due to concerns about national security, the president has zdecided they're going to use the current construct called cfius but based on legislation moving through congress that would expand the definition and the purview and the methodology to a wider range of topics and issues and we have a statement from the president that says, after reviewing the current versions of firma which is the acronym for the legislation moving through congress i have concluded that such legislation will provide the tools to combat the predatory

acts that affect our future economic prosperity. >> he goes on to say should congress fail to pass firma legislation, he says that he's going to direct -- i'm going to direct my administration to deploy new tools developed under existing authorities that will do so globally so the threat is out there if congress does not act, he is saying that he will move forward. but this is a lot less in terms of how far we thought he might go by the way, also much more in tune if you go back and look at the statements that secretary mnuchin said earlier this week, talked about it being a broad effort not mething that was going to be directed just at china. something we were going to hear directly about china and all of the reporting earlier

this week. it raises lots of questions. the good news is we're going to be able to ask questions about this to the secretary treasury steven mnuchin, he'll join us to walk through this new policy he will join us at the top of the 8:00 hour. you're not going to want to miss this conversation literally minutes after this news just broke. check out the futures. as we said, they have turned around in a big way. dow up 20 points "squawk" returns in just a moment with the treasury secretary. whoooo.

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with new digital systems and technologies. get ready, because we're helping leading companies see it- and see it through-with digital. breaking news literally just minutes ago. the trump administration stepping up its defense of theft of u.s. technology the market reacting right now. plus a big interview with steven mnuchin. he's going to join us in a couple of minutes to talk about it the final hour of "squawk box" begins right now live from me most powerful city in the world, new york, this is skb.

-- this is "squawk box. >> good morning and welcome back to "squawk box" here on bc we are live from the nasdaq market site in times square. i'm michelle caruso-cabrera along with andrew ross sorkin and mike antoli. joe and becky are off today. the futures are now in positive te they have been in negative territory all morning at least the for the dow. now all in positive territory rebounding based on the news that kayla tausche is going to tell us now on the "squawk" news line >> i just got out of a meeting with the treasury secretary who will join you momentarily. but he said the administration's decision is to pursue stronger control of chinese investments through the cfius legislation versus a broader set of investment restriction he cited the strength of the legislation be quickness with which he expects congress to pass that legislation as well as the broad bipartisan support for that legislation as a way to step up the review of foreign investment that is coming into

the united states. he said commerce will also be looking at exports and whether those need to be reviewed further. and he said he ets no negative impact from the legislation on the overall economy. so that is going to be important to watch he declined to say that the market reaction this week or other weeks played a role in the administration's decision. though he did say that yesterday afternoon all of the adviser that were taing to the president and weighing in on this issue were unanimous when it came to pursuing this route versus the route of broader restrictions he also said this was an olive branch to china. that by pursuing this avenue versus something that was more targeted to china and would take effect and have broader ramifications immediately, he didn't say that was the case he just said that china has no free and fair trade and if china wants to talk to the u.s. about pursuing free trade, that the administration will listen

he was asked about other trade issues separated china into a separate bucket from nafta and europe he says he hopes negotiations restart after the election july 1st. and he said if the president at the g7 would propose where there were no trade barriers with europe he secretary said he views the proposal to lower or eliminate their tariffs on autos from the u.s. coming into europe was a positive first step. on zte said the treasury department is 100% comfortable with the controls put in place with the new deal and they have ever level possible to enforce future action ifs they need to a lot of headlines a enthe treasury secretary in support of the administration that has been divided on various trade issues in the past. but saying yesterday afternoon when this decision was made that

they were unanimous within the white house in recommending this to the president >> kayla, thank you for that we now have the treasury secretary this morning from the white house. treasury secretary steven mnuch mnuchin, thank you for joining us literally minutes after this news broke good to see you. the markets responding positively this morning. in large part, i imagine, because the expectation had been that the restrictions would be more severe. can you walk us through how you got to this place? >> first of all, it's good to be here with you. you got a long update on my pre-briefing you heard a lot of the issues already. but we've been very careful in reviewing this issue reviewing the issues that ambassador lighthizer raised in the 301 report technology is an itant issue. i do chair the committee on foreign investment in the united states known as cfius. we've been working with the

house and senate on updated legislation to strengthen those controls we are very pleased that it has been passed on a bipartisan basis. yesterday 400-2 at the house i mean, that's just an overwhelming bipartisan response we've looked at the issue of protecting thnology is very important. and we will use these new tools very carefully and we determined and we recommended to the president and we were unanimous in him accepting our recommendation that as soon as firma passes which we expect to be quickly, the president will sign it, maybe part of the ndaa and we will have the necessary tools to protect investments. whether it's china or any else we are not signaling out china but we will protect transfer to china as we will to othe important areas. >> mr. secretary, the president also saying in his statement that if the legislation is not

passed, i will direct my administration to develop new tools under existing authorities that will do so globally what is he referring to? >> what he's saying is we expect this to pass quickly, but if for whatever reason it doesn't, we'll think this goes to be part of the ndaa. but if this doesn't get passed quickly, the president request use and direct us to use executive authorities to effectively use the same tools we would under firma broadly as we've defined. >> right mr. secretary, as you know, the market has been on quite a roller coaster of a ride this week in large part due to speculation over exactly what you may announce today i want you to just listen to this and respond, mr. secretaryn monday about trade, trade adviser peter navarro came on cnbc and seemed to contradict your comments. i wanted to play for you what he said so we can all understand how we got to today.

>> there's no plans to impose investment restrictions on any countries interfering in any way with our country this is not the plan all we're doing here with the president's trade policy is trying to defend our technology when it may beeatened. so this whole idea there's going to be investment restrictions to the world, please discount that. >> but nonetheless, he seemed to then revert -- i don't think we have the full clip he seemed to then revert to talk about china. what's going on inside the administration over the past several days because it feels like we've got mixed messages >> well, if there are mixed messages, again, that's something that's unfortunate but let me just start with, you know, unfortunately what happened over the weekend, there were leaks saying that the president had made a decision. it was completely not true and when the president and i discussed this, he suggested i

tweet out on behalf of him as i did to clarify that that decision had not been made those leaks were not helpful to the markets, not helpful to the process. we then said andd in the release we would be coming out shortly with a further statement. we reviewed this again yesterday with the president we were all unimous in this recommendation i think whateter was referring to was there wouldn't be something specifically desned, but again, he didn't want to pre-announce exactly what the final decision is. again, i think there's been a lot of talk about dissension let me be very clear this economic team has worked together for a long period of time larry and i worked on the campaign peter was on the campaign. secreta secretary ross and i have known the president for a long period of time. he was on the campaign i speak almost every day,

secretary ross and i were integral in recruiting him here. the president wants to hear different vis. that's an ant thing. but we will come together with recommendations. this is a perfect example. this is a question about ecting techn we have e right tools under this legislation to protect technology but the trade issues and we're excited this is the six-month anniversary of tax cuts. we're expecting a big second quarter gdp number let me just say i have no advance notice of what it looks like but the atlanta fed is projecting 4.7%. i have no idea whether it will be that high but a year ago, people were laughing when we talked about 3% gdp. we have an economy that's here because of the president's tax plan and the president's regulatory relief. and we've always said trade is part of this >> mr. secretary, i want to ask you more about trade and this

decision this morning. the committee on foreign investment into the united states has heretofore had an ability to pro the united states by protecting our technology and making sure we don't lose it. what is going to change about the mandate of cfius when this legislation passes >> well, we've had very broad ability to interpret what i would say is over the last year and a half, we've been aggressive in using cfius. although there are only a few cases that have been blocked we tell them when they're going to be blocked and i'm sending it to the president and they decide to withdraw. we've decided to be aggressive there are cases in the previous administration that most likely were passed that if we had reviewed, we probably would have taken a much more aggressive view on. e purpose of this legislation is that there are areas that we can't protect.

to the event we turn down a trction. companies were able to do joint ventures critical technologies. we have a broader ability to do that, defining non-passive investments. real estate thse to military facilities. this gives us many more tools than we have today. >> are there any transactions out there that you wish you could have done something about? everybody's aware of, for examplt happened with lattice semiconductor. the situation with qualcomm. even sky bridge and hnh. ant financial. there have been prominent deals that have been stopped by your committee spp there anything out there you wish could have done but couldn't >> i'm not going to comment on any of the specific deals because that would be inappropriate. this is a confidential process but i would say there haven't ny deals we wanted to block that we couldn't in terms of whole deals

there are situations whether there could be joint ventures or other things we now have expanded authority that we will use. i think we're going to use this carefully. as i said earlier, i don't expect this to have any significant economic impact on the overall econom we have a large, open investment policy again, passive investments are welcome. we're talking about a small part of the economy tham we intend to protect. >> this legislation will pass. so this is one side of this whole trade discussion where does that leave the process in terms of any negotiation with china i think the markets are contending with ideas this is an ongoing process. we're trading volleys and threats and there's nothing planned in terms of coming to any terms. >> well, the president has been very clear since the campaign. he wants fair trade deals. he is a free trader withen but he wants free and fair trade

hopefully after the mexican election, we'll make progress on nafta. the president proposed a free trade agreement. no tariffs, no tariff barriers let them respond to that one and open their markets and as it relates to china, you know, this is an ongoing issue of we want fair and reciprocal trade. and i'm not going to comment where discussions are, but i will say any timthe inese want to make a proposal, i'm available to listen. >> mr. secretary, though, do you put this new proposal today on the table as part of that trade agreement? or to talk how we are now in the bilateral negotiations and by not singling out china at least today not to say we live to fight another day but there is another fight to have in the future >> well, we are going to signal

out china in the fact we have a large trade deficit in china so that we can have fair trade with them and oumpanies can do fairly. so that is still our objective and we should be very clear on that as it relates to investments, the president was very clear we're going to treat china the way we're going to treat other people and to the extent that we were worried about transactions, we will block them. but we are not going to on a wholesale basis discriminate against china as part of a negotiation. >> staffing levels, mr. secretary. when i've spoken to those involved in the cfius, one of the things that was problematic was the process took so long because every document needed to be translated, interviews needed to be translated figuring out who actually owned the chinese company was incredibly difficult they said it took so long.

what about staffi ining levels d trying to speed up the process or recognizing that this is a much bigger issue and therefe requires a lot more resources. >> well, i've said to companies they should expect that the government will be responsive. and you're 100% correct. we've told congress we need a lot more staffing for this and they are on board with that. that is part of the legislation says it doesn't kick in entirely until we have the appropriate staffing but we are most likely to launch a pilot program which we have the right to do. to make sure we protect critical technologies right away as soon as this is passed. >> mr. secretary, speak to this issue which is there are some people that are going to look at this and think this is better than the quote, unquote, bright lines you could have created but there are others that are going to say this creates more uncertainty. that people will propose transactions and not know whether they have crossed that

bright line because there isn't one. >> i don't think that's the case at all this doesn't create more uncertainty. again, we will publish regulations. we will provide clarity. we will -- you know, i spoke at the commerce department this week on select usa we're clear that the united es is open for business. and we'lbe clear on what type of business we're going to look at carefully and what type we're not. i think everybody understands what these critical technologies are. and this does provide clarity. >> for example, the administration has talked about car companies and national security, for example. things we didn't normally put in a national security bucket and how we should think about those buckets. >> well, that's a different issue. so i was referring to the cfius process. i think the president has directed the secretary of commerce to look at the issue of cars and national security and i'm not going to pre-judge that we'll wait for the secretary of commerce to come back with that

report which i know 's busy working on >> you don't think is silly to talk about cars and national security >> i'm not going to go into all the details of that. we'll wait until we get the secretary's report i will say on autos more broadly, again, we want our car companies to have the same fair opportunities. i'm pleased china dropped thei tariffs from 25%, but they should have dropped them to 2.5% which is what we have. so let's have fair trade and reciprocal trade >> the reason i raise the auto issue is how broad cfius is going to think of its mandate under these new rules. >> again, the auto issue is independent of cfius that's independent of that >> one of the issues of great concern to industry, to the administration is forced technology transferred to china

when a u.s. company does a joint venture in china anything within the cfius situation that could potentially regulate a u.s. company investing overseas >> well, i'm glad you brought that up. that is a very important issue so one of the problems with cfius before was we could block a acquisition. but then the company could form a joint venture. so commerce will oversee the joint venture prospects. if someone sets up a joint venture on critical technologies that would have been a company that is blocked they will also be prohibited for that technology and the secretary of commerce is reviewing potentially expanded export controls it is very critical that we protect our koun jewel technology and we'll do that in all forms. again, that's a small part of the economy. i just want to put this in perspective. >> i want to underline that. a u.s. company considering a

joint venture in china could potentially see that deal blocked by the expanded rules under the cfius legislation? >> if it is critical technology and they are transferring kr irg critical technology. >> that is new, correct? >> that is new and part of the legislation. that's protecting critical technology wuch again overwhelmingly bipartisan support by congress. >> every year the report comes out and it's mostly numbers. how many transactions are done in what categories, et cetera. the most recent one, every year it also has to answer the following question is the u.s. government concerned about a foreign country trying to take control of a u.s. industry and all of them had up until the last one said the answer was no. the last one, the committee

declined to answer the question. and it is widely believed that the u.s. administration believes that the chip sector is of great concern and that you are worried about the chinese taking over the ship sector hence why there was a decision not to answer that question in the most recent report can you clarify that >> no, i'm not going to clarify that, but what i will tell you is in confidential classified briefings with the house and senate based on intel information, we've given them more information again, i'm not going to tell you. but again, the intelligence community is a major part of the cfius process. and again, just as i've said, we're perfectly comfortable with the zte settlement, on the other hand, where we see critical technology and we have intel we will use our powers accordingly. >> before we let you go, just wanted to get your reaction. yesterday the cbo reported that the debt to gdp ratio is going

to be at its highest level 78% by 2028. that's the highest since 1950. what do you think of that? >> the major contributor to the national dead ov-- debt over the last eight years is other things the united states has spent an awful lot of money protecting the world. that's presidents very focused on whether it's nato or other areas burden sharing so we can't afford to pay for everybody's military all over the world. i'm not uncomfortable with where the debt to gdp is now, but that's something we'll keep an eye on again, it's something -- you know, we will review and carefully look at. again, i think we shouldn't just take the 2028 projections as that's where we'll end up. there are issues we need to deal with over time

>> how's larry doing >> larry's doing terrific. he's healthy we're thrilled to have him back. i think he's going to be on tv very soon if not today >> we cant wait. >> we've got to go by the way, our next segment is about harley-davidson. i'll ask before we go, what did u make of the announcement by harley-davidson this week? >> i wasn't happy about the announcement i would just say in every single one of these meetings i've been part of, i listened to the president talk about tariffs on motorcycles. he's been a big advocate so i don't know why harley-davidson would come out and say they're moving production we've been fighting to lower their tariffs all over the world. >> mr. secretary, we'll leave the conversation there we appreciate you joining us right now right after this news was announced. thank you. we'll talk to you soon we were just talking about harley-davidson. in the cross hairs morgan brennan is live she joins us now

>> that's right. so it's been a rough week fo harley-davidson stocks down 6% so far this week that's after the announcement that they would shift production due the tariffs there europe is the company's second biggest market then of course president trump taking to twitter afterwards to slam that decision now, among the tweets this one that came out, earlier this year harley-davidson said they would move their operations from kansas city to thailand. that was long before tariffs came out shows how unbalanced and unfair trade is but we will fix it now enter the factory that is behind me here in kansas city which harley said back in january it would close next year this facility employs 800 people it's only going to hire 400 new

positions there. harley will telt you that this story, this closure has nothing to do with eu tariffs. and that this really has to do with the fact that sales are slumping parlarly here in the u.s. it would also tell you it's not connected to thailand. but all that being said, it is basically a 1-2-3 punch. the eu tariffs announced this week higher aluminum and steel costs tied to those. the reason they're building that thailand plant is because the u.s. pulled out of tpp harley-davidson has become a lightning rod for this global trade debate >> completely emblematic of all the issues we're talking about thank you, morgan. coming up, home builder lennar topping expectations for the last quarter but they have slumped behind rivals we're going to talk to stuart miller coming up next. check out the futures at this

hour they're in the positive territory. stay tuned you're watching "squawk box" on cnbc

home builder lennar had a beat on both the top and bottom line on second quarter earnings. despite concerns about rising interest rates, the company's

executive chairman says faculties in the housing are solid. joining us now is the chairman of lennar. good to have you here. >> good morning. >> how is it going in the housing industry especially when we're looking at rising rates when we look at the mortgage results last week, they were down sharply >> the housing market in general remains fairly strong. i know there's a lot of questions around the head winds on interest rates. it seems every time interest rates move upward, the housing market takes a hit in the stock market but the fundamentals of the industry are to defined much more by employment, by labor participation, by people feeling confident with the economy and the way their lives are being affected the new tax law has been a stimulus to people's wallets and generally demand remains very strong against a very supply constrained market.

>> that supply constrained market has been a story for awhile so what is the outlook forhina to try to ramp up supply to meet that we're also hearing about costs on the builder front going up. therefore even profit per home going down even though you have this great supply demand dynamic. >> yeah. at the end of the day, it's very difficult to right this ship land prices have been going up it's very hard tt approved land in strategic markets where people want to live. construction prices have been moving up. so supply is constrained and is likely to remain constrained it's very hard to get affordable housing under construction but with that said, you do have growing demand millennials are starting to form families getting married and having children and that's of course the first step to entering the for sale purchase market. and at the end of the day, with demand growing and supply

constraint and likely to remain constrained, production continuing to be under historical norms we're probably looking at a stable, strong housing market. even as interest rates tend to tickover time. >> you talked about rising input costs. what's more problematic? the cost of lumber which has shot up so much or is it the employment when we look at employment levels as low as they are, are you struggling to hire we're hearing that from many, many companies >> yeah. so the cost of lumber has certainly spiked we kind of feel that it's reached its kind of peak and we've seen the end of that cycle. but the cost of labor and the availability of labor is clearly a constraint for the housing market and again, a limitation on the amount of supply that can be brought to market. >> got it. stuart, thanks for joining us from beautiful miami which has seen their construction boom there. we're going to get some

important economic data in about 20 seblgconds. meantime, we can see we have a projected positive open. durable goods data for may is going to hit the tape any second rick santelli is standing by give us the numbers, please. >> there's a litany of numbers we will start out with the durable goods orders expecting down 1%. better news, but not great news. we're down 0.6%. so not down as much. and last month originally reported down 1.6% now becomes down 1%. ex-transportation, it just brightens a bit. down 0.6%. following a seriously upgraded ex transportation that moved from 0.9% to up 1.9% and if we look at capital good orders non-defense ex-aircraft,

that's down 0.2% not good however, and these are preliminary, last month also upgraded huge from 1% to 2.3%. that is significant. wholesale inventories for may up 0.5%, double the expectations following an up 0.1% and finally the may trade balance which is a trade deficit became a bit smaller moving from a slightly revised 67.3 billion that's a minus sign to minus 64.8 billion sequentially smaller the big news today, long before that data came out and some of the revisions were bullish, we're already slipping on the long end this looks to be if we closed at

2. 2.85 so you're going back a couple of sessions before the end of last h. is it u.s. strength? maybe just a smidge. i think it's global issues andrew, back to you. >> okay. thank you for that, rick kpmg hosting its annual women's leadership summit today aimed at closing the leadership gap and advancing more women we are joined now to discuss diversity in corporate leadership and more. what are you guys doing today? >> hey it's so good to be with you. we're having a great day out here at kemper lakes >> when it comes to the diversity debate, i don't want to say it's a debate, but there is one in terms of how you do it and a very practical sense what are you working on and how are you doing it >> well, listen. i think, andrew, the -- it's really -- when you think about

it's so surprising in this day and age that when you look at s&p 500 ceos and we only have 5% are women, that we have some work to do and this summit is really all about, you know, getting more women into the c-suite so we askeceos, this is the fourth year in a row, to invite two of their up-and-coming women to be part of this program they get to hear from amazing speakers they get to interact with people in business and have a year-long programming. and we have amazing speakers like condoleezza rice. eneral admiral from the four navy michelle howard and they just get inspired about kind of going for it within their careers. and we get to do that here as part of the championship, the women's pga championship and also get to elevate the game of golf for women on the lgpa tour.

>> if you're going through the recruitment process of a ceo and diversity is part of -- "a," should diversity be part of the mandate? let's even start the question there. >> well, i think diversity absolutely needs to be part of the mandate. when you think about what organizations are facing in the marketplace of change, it requires different perspectives in the boardroom as well as in the c-suite. i think the opportunity to collaborate in new ways, we're moving at break speed. if you have a management team that all has a very similar background, that all look the same, i think you're mising the boat >> lynn, what's the one biggest challenge that you hear from ceos and board members on this issue? >> you know, i think what we hear is they're saying the pipeline is not there. and i think that that is just wrong. i think we have women who have

the experience, who have really been in positions that prepare them well. and we talk to women, too, when we did a recent study where they desire for these roles and i think that if you're not seeing women on the slates, you need to push back and ask again. because they're there. we see them. we have 200 of those women right here at our summit today and i think that there's a huge opportunity to really push the envelope and insist on having more women on the slate >> okay, lynn. thank you for joining us today good luck with it today. appreciate it. comi up, we just heard from steven mnuchin. house republican conference chair kathy mcmorse rogerss standing by. we're going to talk to her about the new china investment we'll be right back. it can take more than 10 years to develop a single medication.

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welcome back to "squawk box. steve leisman is here. we were going to talk e con policy and numbers, but i want to hear your take on the announcement from the administration this morning on using cfius instead of, perhaps, some more aggressive measures that we had been reporting

>> definite walkback they're going a congressional process although than executive order. although there is an executive order hammer over this saying if you don't do this, we will do it for you. i think there is a movement towards a more aggressive stance when it comes to protecting u.s. technology i think that makes a lot of sense, by the wa and i coratulate michelle who's been on the issue of the numbers that china is able to extract from the u.s. when it comes to technology. andrew, yo know the way frontier technology spreads, the speed of it, the ability to control it is almost nothing in this world today. >> is this just a more palatable way, though, to go after the chinese without saying we're going after the chinese? >> it is, but it still requires a congressional process and there is still rather than executive order -- you're grimacing, michelle. >> finish your thought >> rather than executive order there's a congressional process

that's needed. so it still works from a negotiation standpoint in that this idea of tighter restrictions will hang over the negotiations with china and the u.s. i think you kind of tried to get at that issue with mnuchin is this a real thing is this where you really mean this or you're holding the negotiation. he didn't understand that. >> when the markets think about this, they think what's the loss of the takeover preemmiupremium. i would argue we are already there. when you look at measures constantly the amount a of foreign investment into the united states from china and it had been rising, rising. it peaks in 2016 and this year year to date it is down more than 90% to $1.8 billion. so the chinese government had started to control our flows and control their companies and we had already sent the message what is the dollar impact of this i'm not convinced.

>> so many things are getting conflated here all of this started with the president saying the goods based deficit with china is this get it down by a lot this doesn't even play into that unless it's a negotiating tool >> it's a separate issue i completely disagree with the president on focusing on the trade defici most economists think this is wrong. it started as this issue, but the issue of technology theft and unfair transfer of technology, that is a separate and to my mind -- >> let me ask one other question there's the reason i raise the automobile issue, the national security idea. cfius can despite congress have a very broad view of what they're doing on any given transaction. and so if you -- if the group decides that they don't want something to happen, they can raise their yellow card and say, okay, we're not doing this >> that's right. they can >> but that actually then gives

it a remarkable amount of flexibleabili flexibleability. this goes back to the uncertainty that creates relative to the lines that get created. >> all of this trade stuff is essentially anti-free market it is -- the president said that europe is stealing $150 billion. no here's what's happening. if you have that european date, i know we got to go but real quick. the president misstated the european trade deficit again it's not $150 billion. it's $92 billion we send them 500, they send us 592. this is the result of a series,s of individual transactions michelle, i can't believe that you are not as a deep thinker libertarian you are up in arms about what is essentially the intervention into individual decisions, into the free market that these tariffs represent if you look at the charts, the u.s. and european tariff regimes are essentially the same

about 4% across the board. their tariffs are no worse than ours >> we have to get to a member of congress but let me just -- >> there's the tariffs right there. >> let me say this the number one rule of the federal government is to protect the nation, protect the borders, defend our national interests, right? so that is where they presume to stand on a lot of these issues you can argue they're using it too much, i think that's your point. and point taken. but certainly i am a free trader >> my point, quickly, it is not the tariffs that is the reason for any imbalance that exists in trade. and even so it's not a big deal. >> agreed. thank you. all right. congressman -- excuse mecongresr rodgers joins us good to have you ere. >> thank you good to be with you. >> we had treasury secretary on to talk about the expanded definition of cfius moving through congress right now tell us why you support this

legislation. >> well, i think as the discussion you're having, the house just took action it's important for congress to act to update this law to make sure we are protecting american interest what we're seeing is a growing although maybe in recent years you've seen a downward trend but you're seeing more foreign investment in america. i think it's important the law is reflecting an updated version so we're protecting the interest america has always had the look at protecting the national interests. that's reflected in laws like sieve yus. >> 400-2 in the house. that's bipartisan support if ever t it was two republicans that voted no democrats equally on board along with republicans on this issue >> well, this is an issue they

had been working on for several months, even years broad bipartisan support as you look at protecting american interest i think that's where we can come together there's a big debate going on right now over trade obviously. i am concerned about the tariffs. i'm concerned about trade wars in all of this, though, i also believe fully that we must protect american interests and i -- >> are you concerned about what many would argue is the overuse of national security as a justification for lots of different things that would just be trade barriers in any other circumstance >> sure. we definitely have to be looking at that. and congress has a role of oversight. and i am working with my colleagues right now to really readdress our role when it comes to tariffs and some of the decisions related to trade but clearly we need to make sure that we're putting american interest first that's why you saw the overwhelming support of the

sie cfius law earlier in the house >> thank you for joining us. good to have you on. >> thank you coming up when we return, a car e-commerce platform set to make its debut at the nasdaq today. first the ceo is going to join us here on "squawk box." before we do that, look at u.s. equity futures we are now in the green following the president's announcement he's going to use cfius more aggressively than perhaps another effort in erm th -- terms of trade and china

welcome back to "squawk box" this morning a used car e-commerce platform based in china is ipo'ing today on the nasdaq. joining us is the chairman and ceo. we were just talking about -- good morning thank you for being here >> thank you >> it's going to open up higher today in large part because of this news from the white house today about the relationship -- i don't know about the relationship but in terms of the battle between u.s. and china over intellectual property and things like that. before we get into your company, i actually am curious. how do u yo see the relationship between the u.s. and china right now? >> i think they are both very important partner with each other. so i think the government should have the intelligence to resolve all the problem. i think the trading partner relationship is benefit for two

countries. >> and you have a mostly domestic business, obviously >> yeah. >> are you -- inside china right now, how much of the conversation is about this potential trade war between the u.s. and china we talk about it here all the time. >> i think we talk there all the time it's the same. [ laughter ] you know, because, you know, that's a big issue for both countries. >> and do the chinese fear a trade war is coming? what do they think of what the trump administration has been talking about? >> i don't think we should use the word fear but i think china wants to solve the problem it wants to make the relationship go back to i think the balanced way for both countries. >> yeah. >> i believe, yeah. >> you're selling used cars in china. >> yes. >> you're raising money in the u.s. >> yes. >> even though you don't sell used cars in the united states tell us about the decision.

>> i learned to sell used cars in the united states when i was young, you know, i'm familiar with the car max, the car auction that's all very successful company in the united states selling used cars i think because chinour used car business start from the year 2005 that's the first time we have a used car in the market so i think for that time, the u.s. has gotten 20 years, or 30 years with the used car industry. >> how many used cars are you selling a year in china. you have 1.4 billion people. how many >> last year we sell more than 600,000 in china yeah. >> so lots of people run into concerns about accounting standards. there's a lot of talk among investing groups in the united states they they worry about chinese standards of accounting. >> right

i'm a little bit confused by this accounting i think we're accounting the numbers the financials is under united states rules. our accounting house is pwc. they're familiar with the united states rules. >> i guess my question is, on your road show, did you encounter a lot of questions about that because you're a chinese company? >> oh, no. because our business is selling cars it's an easy model. >> who is your biggest competitor right now in china? >> we have several competitors there. some they connect customer to customer but i think you shin model we're focussed on how to sell the used car from big city to small city we have 88 million population live in the small city even a small city there's a half

a million population they only have almost 100 local used cars. how to make customers that can buy a sayed used car when they're leaving the city that's the key point. >> will you facilitate that market, is there also as much as there is here ade in type market if you're buying a new car, would you trade the old car in >> yes. >> and financing are you in the financing business, as well. >> we do the finance business, as well. you buy the carton or eight years ago it's the right time to place the car. if they get a used car, the used car should be sold because the people who are living there do not have the sufficient income they need a car. >> so here in the united states when there's financing at the dealership, they call it asseted backed securities and they sell it into the markets. do you do that financing, where does the loan end up

>> the customer to the bank. >> i see. >> we're helping customer because, you know, used car is a very nonstandard. >> yeah. okay we got to run. we got to go what is the average cost of a used car >> around 90,000 rupee. >> okay. >> back in a moment. thank you so much. you always pay your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™

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check out u.s. equity futures. dow up about 40 points after the trump administration announces new policy we're back in a moment

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>> thanks, guys. big show big day. lots of news i'm going to hand it off to our friends "squawk on the street. join us tomorrow "squawk on the street" begins now. ♪ good wednesday morning welcome to "squawk on the street." dow futures nearly 200 points off the overnight lows as the white house backs off the harshest approach to restricting chinese investments in the u.s relying on a pending bill in congress, instead. germany is up a percent. most of europe is green. our road map will start with easing trade fears futures point to a positive open reversing early losses a