the question whether it has any legs behind it a lot of people are hiding in the familiar places. >> we'll watch nato and putin and england and croatia, too. >> a lot on tap. >> all right you're here tomorrow. >> i am here tomorrow. >> you're not. >> i'm not. >> make sure you join us tomorrow jauk "squawk on the street" is next good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber futures are lower as the u.s. trade rep ups the ante preparing an additional $200 billion on chinese good the president with a feisty exchange this morning at the nato summit in brussels. europe down about a percent. also, prices up 3.4 year on

year that's the hottest in seven years. we'll get cpi tomorrow the trade war fears spooking the street stock futures set to tumble at the open as the trump administration unveils billions of new tariffs on chinese goods. trump slamming germany in today's nato summit saying it's totally controlled by russia and 21st century fox increasing the bid for skyy. what is next battle with the parent comcast stocks are falling around the globe are trade war concerns on the front burner. the u.s. is preparing to slap 10% tariffs on another $2,900 billion of chinese goods the president tweets i'm in brussels but always thinking about our farmers. soybeans fell 50%. farmers have done poorly for 15 years. other countries trade barriers and tariffs have been destroying their businesses i will open things up better than ever before it can't go too quickly.

i'm fighting for a level playing field for our farmers and will win. the president is clearly watching prices today. soybeans back to a 10-year low this morning. >> wow i'll tell you, there's tremendous demand for soy. it's not reflected in these prices, but the market in general, look, it's very clear there's a concerted -- peter navarro behind a lot of this we better get used to the idea if there's $500 billion in goods that are exported here from china, there's going to be tariffs on all $500 billion. that's what this is about. it's not about ratchet up. no they're doing it step by step. of course, it marks the almost destruction of the chinese market three years ago was exactly that. >> your point being the $200 billion won't go into effect there's a review period.

it'll be until september there's another $16 billion coming on top of the $34 billion that went into effect. >> i'm saying, remember, these didn't go into place tonight there's a review process the review process is meant to be let's see who blinks. not that there is a lot of blinking so far by the chinese i want to keep an eye on the shanghai market. it was only three years ago we thought they could bring down the world. then we forgot how powerful they were i think they could be in the bringing down the world phase. i'm being a little facetious they're not bringing down the world. we didn't fear china back then when did we start fearing them >> there's the added wrinkle that china is running out of runway to respond with reciprocal tariffs the journal has a headline china said to consider delaying an approval of mergers. >> nxpi is down a lot.

>> they put tariffs on everything. >> you know the leverage the question is whether they would go to a boycott. >> apple/starbucks >> that would be defeating in certain instances, because, where are iphones made how many jobs? that said, it's not a democracy. i don't know if you've heard that they have a leader for life there. we may have one, too they definitely do. >> they should never have a stock market. >> so they can have things happen in a way that we can't. >>well, you know, i'm used to that i'm hearing that over and over again. then again, our market is big. so they may have a winner for life but they have people who may not want that for life there are other things besides elections that can happen. >> oh, really? a revolution will happen because people aren't going to drink starbucks? what >> massive layoffs i don't think the government. >> social unrest is the key thing.

>> i mean, why do you think -- >> do you think they're going to back down? >> oh, yeah. >> you do? >> oh, yeah. the shanghai market cracks 2500. let's see what they say. >> interesting the vice minister of commerce said we never yield to threats or blackmail they said they go low, referring to us, we go high. we haven't seen cracks i'll give you this, he did say they need to show some motion of comprise >>well, i think that could happen but i think remember what this is about intellectual properties it's about the joint ventures. what shanghai has to do is say you know what the chinese have to do is say american express, we've insisted you had a joint venture. no more. you can come in. visa, you can come in. >> that would be a big deal. you have to deal with the espionage aspect of it and things that are still done if you're operating in that

country. that would be a big deal. >> that could happen. >> there's a great trade pack we're part of called tpp how many experts have we had on our air from both sides of the aisle consistently saying the best way to have attacked china would be continue to be a part of tpp haven't you heard it over and over again >> you know my stance. my stance was before i had the show kudlow and cramer my situation is unchanged, which is that i'm not saying they're paper tired. i do believe they have a lot more stake than we do because we're the 155th largest exporter in the world last i looked, there's a couple of countries beyond 150. there's like 18 0 or something.

>> this is the second largest food exporter in the world. >> we're going to talk more this morning about trade. on the other burner, there's nato the president had tough talk today for u.s. allies at the summit our amonohas been live in brussels and joins us. >> reporter: good morning. dramatic moments here at the nato summit this morning we saw the president at the atlantic council meeting in the secure what they call room one at nato headquarters the president meeting with the other heads of state early this morning. but this day, so far, has been dominated by the exchange that the president had at breakfast this morning with the general secretary of nato. the president came out of the gate very critical, sharply critical of the u.s. allies in germany. here is that exchange. >> getting the energy from the person you want protection

against -- >> because you understand we stand together and dealing with russia we are stronger, i think. it's getting so much of the energy from russia >> reporter: so, guys, those comments have roiled this summit here life goes on, as usual a marching band has entered the plaza behind us. a lot of music a lot of tourists. a lot of business, as usual, here in downtown brussels. over at nato headquarters, though, things are getting pretty tense. >> thank you for that. right near the belgian chocolate shop this gas pipeline is an interesting story. because germany gets it and goes

past a bunch of other european countries. does he want that to liquefy from us? >> i remember when the great souke came up with we have so much natural gas and they were telling me the way to get out of this situation in russia, for germany, is to take all of our natural gas we're putting train after train after train in the louisiana area and they're all sold out. many of them to european countries. there's ones to europe that don't want to be hostage so i think that in the end, the president is salesperson in chief for the liquefied natural gas. salesperson in chief for the defense business there's a business angle to what he does in every single case and i know that louisiana is going to be the capital of export and the germans should take it the germans, also, i know

there's a big pipeline coming from israel to greece that will go by the biggest natural gas field. that could happen, too but that will take a long time we're in shape in the next two years. everything is sold out now the next 18 months the president doesn't seem to realize everything is sold out he's talked about this issue. >> yeah. everything is sold out and freeport. >> yeah. >> and cove. >> right also. >> one of the things i try to explain is this is the single greatest manufacturing renaissance this country has ever had it's all about export. i think the president is not saber rattling as much as saying listen order natural gas now that's a cynical view but not really in the sense that's what other european countries have said to do to get free from

russia they don't want to be captive to russia by the way, every energy guy will tell you is german. no energy guy would say germany isn't worried about russia they want to have that relationship even though the two countries, historically, ever since the great war, world war ii have not been great friends. >> yes. >> they weren't friends in world war i either. >> yeah. >> right. >> we don't have much time left in this bloke but we'll try. >> you have news >> no. chip is telling me we have to talk about sky and comcast. our parent company. >> am i stopping you >> but it is so complex and, frankly, there's so many moving pieces here. let's get to some of the things we know. julie reported this morning that a source she was citing said comcast likely to come back with

a higher bid for sigh. i can add to that, as well that is the case comcast is expected to bid for sky, remember, the bid is just raised and accepted by sky. $14. fox's bid where they started $10.75 they're almost up 40%. comcast was at $12.50. now at $14 and we're expected to go higher than that. but, of course, the question is, what, if anything, does it have to do with the fox assets where comcast also, of course, has been an aggressive bidder but disney that is a deal to acquire them at $38 a share, half cash half stock you get into time livens i think there was a hope that coming back with a higher bid. by the way, when you speak to people close to both sides they'll indicate, comcast and disney/fox, that the sky assets are getting up there in terms of evaluation are you going see something with a $16? no could you get higher than $14?

yes. and comcast will come higher, but the question in comcast's mind will it come high enough that disney would say we're done that's unclear the timeline in the uk, comcast has to actually come with a live bid by friday given 28 days will pass since it got approval disney would have to do nothing. and it could not respond and this thing eventually will move to an auction process. but that could be a ways away. 46 days after both bids are live and so we're talking about sometime down. why am i saying this because still the belief, i think, in the comcast camp there's a possibility to resolve sky in a rapid manner in an inability, therefore, to also decide whether or not to make that bid counter bid for the fox assets what is the latest you can bid for the fox assets when you hav

a july 27th shareholder meeting? probably the 20th of july. will it get done prior to that who knows. is there a scenario comcast will come with a number and disney and fox will say we're done and they will declare peace even thr though there's no collusion between them yeah and is it possible down the road that the 39% of sky that fox owns which would be owned by disney would be sold to comcast? sure and comcast might turn around and say, hey, we'll save the 38% of hulu we own >> i thought they hated each other. >> i'm going through scenarios here is the thing, jim, nobody really knows if you speak to disney, we don't know what shoe is going to drop next we know what we did today.

went higher for sky. but they don't know what comcast is going to do alternatively, comcast, i think, will come back with ahere bid for sky. does that mean they'll back off on fox >> sky was not up at $3.30 >> yeah. it has but, you know, you're getting into territory where many people say the evaluation is getting quite high consider they had a done deal at $10.75 now they're 40% above that there's something called the chain principle. the uk take over panel will be ruling on. you center to raise your bid by the sky assets by the same amount you raise your bid for fox itself they own 39% it gets complicated. there's a lot of game playing going on here. but my question regards the timeline and whether the belief of the comcast camp they can actually figure out sky in time

for them to make a decision whether they want to move on and make a counter bid for the fox assets. >> yeah. >> we'll have more as we go on this morning. >> i heard there was more and there was less the fluidity is surprising. >> yeah. it's minute by minute. it is now. >> that's astounding. >> so we'll see today perhaps we get that counter bid from comcast, if not. >> does it matter they're all there? >> yeah. i think it does. >> we see them in the same room we should draw a conclusion? >> here is the thing, you can't have collusion there's no between comcast and disney you have rupert murdoch there the beneficiary of the bidding war. he'll make sure that neither one get to talk to each other. >> we have cameras there and julia has talked to tim armstrong about the environment now. we'll get you to idaho later today. pfizer gives in to the white house. the drug maker delaying price hikes in response to the

pressure from the president. another look at the premarket as the dow, s&p, nasdaq all have four-day win streaks and up eight out of nine. "squawk on the street" back in a minute still nervous about finding a new apartment? yeah... but popping these things really helps me...relax. please don't, i'm saving those for later. at least you don't have to worry about renters insurance. just go to geico.com. geico helps with renters insurance? good to know. been doing it for years. that's really good to know. i'll check 'em out. get to know geico. and see how easy homeowners and renters insurance can be.

big week as we await bank earnings on friday got close to 2800 yesterday. some argue the number is key futures are down 200 on the dow. we'll get cramer's mad dash and count down to the opening bell in about ten minutes

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the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price. giddyup! kayak. search one and done. all right. welcome back time for a mad dash this morning. we have seven and a half minutes before trading pfizer had big news that is worth discussing we're not talking about the fight with the president over the rise in drug prices. we're talking about reorganization. >> yeah. happy hump day, david.

>> thank you. >> talking about the company is going to organize, not split, but organize into three different divisions. david, we're seeing something like this before, but this also is going to have been, remember, lyrica is going to go up i take it. incredible drug. expensive. it's a moneymaker for pfizer they mentioned this. while this is going to be occurring, david, i think it's a prelude. >> to? >> splitting. >> they tried to sell consumer health care and the last report i had was p & g surprisingly at least in conversations but the differential in price and expectatio expectations of what they would receive were wide and never got there. and the other potential bidders went aside in part, they're keeping consumer health care now as a

separate business, so to speak, or being run separately? >> i don't know. it will help business. because of the humanization. i can say there's intrinsic value within pfizer. i like this boring in a market where i wake up. this is all you get on a rollback from 40 drugs, price increases, stability. >> as you point out, from tweeting yesterday, calling them out, and retreated on the increases. >> why do you think it's pfizer and not any other company? what did pfizer do to him? >> that's a great question i don't have the answer. as we know, ian read is one of the strongest supporters of tax reform remember, they're trying to do an inversion they were prevented from doing so in part, to avoid change

their tax regime so you can argue they've benefitted they've been a benefit. >> maybe some of that. >> of the pharmaceutical ceos, ian read is the one i associate with trump's agenda. it's amazing he picked on pfizer. >> yeah. >> interesting we have an opening bell coming up a lot more to talk about on squawk "squawk on the street. stay with us

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the rotation we had before when we were worried about paris, which is the real estate investment trust and health care i want to know where the high money will go. does it go back to the stuff it was buying when we were worried? does it come out of the casino i don't think it does. it's one of the reasons i don't want to buy this sell-off. but you could maybe wait 48 hours. >> i was going to say, they point out this morning trade worry days have been met with buying late in the session. >> yes we've been up for all those days i figured it lasts for a little longer than that look, i think that's a little too bullish. we need to have -- i need to see some leadership. i don't see anyone buying anything now we have a note about amazon. the new $2600 target i've been waiting for that target i felt like this is one of the greatest ones i've seen.

>> you can see morgan stanley coming out david, you're close to michael pacter [ opening bell ] >> no doubt about that as they reiterate itself on netflix. there's the opening bell s&p you can see quite a bit of red there as we look at the big board this morning medical technology company celebrating an anniversary you mentioned netflix. they initiate outperform i think they use the word "unchallenged leadership" and

"disproportionate scale. earnings next week, by the way. >> yeah. i think you're getting a bunch of notes because people are trying to position themselves as being high person on the netflix bandwagon. if netflix turns around by midday, i think you're going to have what they talked about. there aren't too many stocks there's a little bit of negative there was a piece today mcdonalds down in numbers. i thought that was significant. >> what was the reason behind that >> some of this is just going to be dcurrency and stuff. >> the pepsico conference call yesterday it was like the yankees. >> they're having a good year. >> yeah. the new dunkin' donuts ceo, david hoffmann, is a 22-year mcdonalds vet. they have a division called high growth markets south korea and other countries

and that was the role he settled into going to take over immediately. >> wow. >> i knew i saw that. >> he looks good. >> who >> not to my knowledigel. >> dunkin' donuts has done better than starbucks -- never behind tim horton will open 1500 stores in china. starbucks might have company in shanghai. >> starbucks, howard schultz has said he's never felt better about the situation. david mentioned the term boycott. we were waiting for the jack ma to tie up starbucks. that could help the situation. the fact the stock isn't down more is a sign that schultz's comments are reverberating positively tim horton's is big. why is the boycott thing so front and center we remember when they turned on

kfc. they turned on young china's division. >> and they have used it in previous trade disputes with south korea there was a boycott. with japan the chinese have done that it has occurred. and, to your point, they're going to run out of things to actually raise tariffs on because the numbers don't equal each other. >> yeah. what is it going to come down to sunflower oil? >> i don't know. >> you know china, remember, china imports -- remember we're a nation that we have such an inferiority complex. we're almost a self-sufficient nation when it comes to natural gas. we're pumping 11 million barrels. think about the chinese. they import everything they import everything co coal, iron, copper. >> i guess they do. >> they import. >> they export pollution like 70% of it goes to california.

>> and lo the of plastics that end up in the landfill. >> yeah. it's the chinese when you go -- >> what is your point here >> my point is we're stronger than a lot of people think. >> aren't we relying on global trade overall for the increase in our overall wealth? >> a lot of s&p was not. >> that's nonsense. >> what do you mean? you look at the russell. >> how many of those parts are coming from china or part of the supply chain >> i know. so sthey import some from china but they switched to india remember martin franklin they moved everything to mexico. mexico could be difficult, too is there anyone who is safe? >> no. that's the point there's nobody who is safe even the long time allies. >> bmw today the largest u.s.

auto exporter is going to start making minis in china for the first time they signed a deal today. >> i think you have to make things there, but i think that, look, things are convoluted. i'm saying that china is an import nation as well as an export nation. if you're deciding to boycott them with some of their products, well, they would be susceptible is what i'm saying i'm not just talking about the sunglasses i buy five for $5. >> listen to you. >> go ahead. >> i still feel like i'm not sure where it ends and all the different parts. how they line up to being a coherent trade policy that ends up with us in a better place. >> i'm espousing -- okay is it peter navarro rap? i've known him for ages. it's a 2025 plan china derailed that. trying to get intellectual property not stolen. okay i remember there was documentary

a network did about intellectual property know who did it? >> i do. >> you do. >> i learned from him it was about the theft. now i'm supposed to say forget the documentary and the nonsense. >> that was a different -- >> that was "house of cards. okay, whatever. >> to your point, jim, caterpillar, boeing, utx -- >> they get tired selling the same stocks over and over again. let's throw those cards down and buy kimberly clark they're having the one-baby policy. >> i know. >> we sell the companies that because boeing -- china needs boeing more than boeing needs china. they can't make the planes fast enough people think they have supply problems there's a piece that came out that i like. it was reasonable.

and this is a bear piece $40 reflecting robust cash flow. don't need china boeing gets sold down every single time. doesn't it in the end, david, get tiresome >> it does perhaps. >> thank you. >> but you seem -- again, your belief is there will be a deal. >> yes. >> and those are look at a year and a half into the trump presidency and see no signs of any deals. there's not been any deals none. >> right. >> there's been no deal on immigration. there's been no deal on democrats or anything. >> it's early. >> we pull out of iran we pulled out of climate change, i'm sorry, the paris accord. we pulled out of tpp there's no deal. there's no deal with china or mexico if it didn't require you to negotiate with the other side. what gives you the confidence there's going to be a deal here. there's no deal with north korea. no deal with mexico.

no deal with canada. >> why do i have confidence? because i think we have more leverage than people think i think that's all that's my point. okay it comes down to leverage. >> you look at the business confidence surveys which have held up. you look at german ztw yesterday. six year low they're all citing fears over an escalation of international trade war. >> those are export nations. what 12% of our gdp is exported. you may think that number is not a correct number our economy is not based on exports. two-thirds of our economy is consumption. 10% of our economy is housing. >> absolutely. and the pressure on our consumer will not be as great if we continue to go down this road, and particularly, i think you made the point if it gets to 20% tariff on

automobiles coming out of the eu, and we've got a president right now at nato saying, you know, he certainly doesn't seem to be particularly pleased with germany. >> no. a lot of times he's saying somebody it their great friend he didn't do that. >> here is the other element we're dealing with this week and that's earnings. we'll talk to david of goldman sachs next hour. his point is that unlike q1 where you had earnings roll in and did not impress the market whatsoever right. in terms of price action that's not may not repeat itself because we're not as buoyant as january. >> that was the pepsico situation. pepsico did a slightly better than expected number they beat the number people were frantically trying to get on the right side of that if you look at pepsico, by the way, is not done going higher. because we're getting a lot of

$120 price targets they delivered a number that people did not expect. the stock can go up from 120 down to 96 from 96 up to 109. between 106 or 109 a lot of analysts told you be careful. it's not going to make it. north american beverage is in trouble. no none of that happened. as a matter of fact, they had gains throughout the quarter the set sup is very good for all except for some of the tech stocks, which are, i mean, is the set up good for netflix? i don't know netflix has to make that every person is born with a subscription right out of the womb. >> yeah. you want to revisit the news this morning that is impacting a number of stocks involved in a bidding war between disney and comcast for both the fox assets and sky. comcast, our parent company, is down a bit but fox is down about 2% why?

well, the likelihood of potential competing offer from comcast. it's probably gone down. how much is very much unclear. while we're reporting, of course, comcast will come back is expected to come back with a higher offer for sky to exceed the 14 they have accepted now from fox and disney for the 61% that fox doesn't own, it remains unclear how quickly that will play out and whether or not there will be a conclusion there that then allows connemcast to k the final decision as to whether to try to compete for fox assets one thing for certain on sky and fox, the prices are far higher than many had believed initially. remember this is a sky board that agreed to $10.75, i think, originally. >> wow. >> and now it's 40% above that and a fox board it agreed to 28 and now at 38. so, if you are the murdochs,

you're just happy with it all. all of them are in sun valley. that is brian roberts, bob iger on his way rup earth murdoch there. i think mike cavanagh will be there. who knows. maybe they'll run into each other in the hall. they can't collude with each other and say, okay, i'll back off on this if you do that that can't happen. we're getting to a high price levels on all of them. you can see sky is trading above the price. >> all right. >> that's not showing you -- there it is. >> there's a bid underneath at comcast for 33 level every time. >> yeah. >> no matter what. ever since they made their up bid. stock is going down 31 it was acting badly before they raised there's someone buying comcast it was a neutral piece that was neutral on monday. it was like wow. just saying there's no real -- >> there is is a belief if you get full clarity they will not be making a counter for the fox assets the stock will go up

i don't know if it goes to 40. but perhaps some people think mid to high 30s. because they will not be taking on the enormous leverage they otherwise would be. >> they have at lot of borrowing capacity. >> yeah. cable never had a down year. so it's very cash flow intensive business where it generates a lot of cash flow it's consistent and they would argue their debt capacity, therefore, is higher than disney which is subject, perhaps, to the whim to the marketplace a bit more in terms of movies or cable. people will make different arguments. >> why is comcast up >> i guess because what i said must be responding to what i said. >> exactly my point. >> people didn't get it clearly the first time. >> we wanted to bring it back because it was your story that turned comcast around. you're saying things are a little more rational i think a lot of people said there's no way it almost seems they could do a deal with hulu.

>> yes they have to do it publicly because the process itself can play out for frankly a month and a half before we got resolution on sky, if they chose to disney backs off and said we're done therefore, comcast backs off on fox. eventually when disney owns fox it'll sell the 39% of sky it'll control to comcast peace will break out comcast will say we got the 30% of hulu. would you like to bid on that? everybody will be happy. >> you decided that the president is a complete failure but you're going to put together the comcast bid. >> thank you for that. >> that's cold. >> how many more people do have i to block on twitter?

>> on that note, let's get to bob with the dow down 140. >> i'm never going to block you, carl we're off the lows and the usual suspects are getting hit but not that much. first, a look at the china stocks the ones that trade in the united states. your j.d., badu, they're all down about 2%. that's to be expected. badu might do better the other ones sectors in the united states. semis are proxies for the business of tariff wars. materials and industrials also proxies. they're down and energy has been bouncing around oil is down a little bit here, as well. that's impacting them. take a look at the material names and steel names. they're down you get the usual free port to the downside along with some of the steel names, as well my producer and i had an musing morning reading the list of tariffs that are subject to the 10% tariffs. it's 200 pages

200 pages listing with all the numbers associated with them what is interesting here, furniture apparently virtually all furniture imported from china is going to be included in this so you see restoration hardware getting hit there. you see at home group. restoration hardware imports a lot of chinese furniture 77% of the volume imported from asia china furniture tariffs. it's one of the spaces you might want to look at. how does it work china supplies 65% of the furniture for the united states. $28 billion in value a year. that do you do do you pass through the cost, absorb them, shift it to another supply chain that's the issues the companies have to face apparel and footwear were excluded handbags are included. tapestry which owns coach is done kors is down a little bit. tapestry has stuff in china and

production facilities in vietnam. elsewhere, the ppi numbers this is separate but big story. very hot much hotter than expected. highest in seven years and i think we're seeing impact. it's going to get the inflation hawks going here wd 40 which is a lot of petroleum products, obviously, is out with the earnings they generally were good guidance was lower look what they said about inflation. in other words within if they decided to pass on the costs, we'll see if it works or not wd 40 is trading down. they did beat but their guidance was a bit lower. i'm sure that's concerned about eroding gross margin is impacting them, as well. it could be a story going forward here separate story down 157, carl back to you. >> thank you very much, bob.

checking on the bond pits, as well rick santelli on a busy day for data hey, rick. >> reporter: absolutely. and dat it was a on the hot side but it's ppi we need some sort of confirmation to those ever expanding pricing trends, should it be carried through to tomorrow's cpi it's about yield curves. look at year to date of two year notes. hovering at 2.58 and change. that's the high yield close going back to 2018 from mid may. we want to pay attention we continually keep updating the rear view mirror and subtle changes but they keep moving higher two day of tens, you know, it looks like we moved up and we did. overnight we traded as low as 282. here we hovered down one basis point to 284 tens minus twos should they close at 26 be a fresh, flat, back to 2008 they all come to 2008. 30 minus five at 18.

these are all flattening and all for the same reasons think ppi and cpi. think the fed and the long end think global issues, and think about low interest rates on a comparative basis in other countries. two day of the euro versus the dollar a bit of a pop but it took it to where it was yesterday the news a blend of what the ecb officials think about what weather they're going to rai-- e they're going it raise rates it's july of 2019. here is a chart of the dollar versus the canadian. since june 1st the dollar had quite a bit of strength. canada seems to be coming back a little bit let's watch that at 10:00 a.m. eastern. back to you. >> thank you dow down 165 just slightly off the initial lows of the session. take a look at the dow this

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it's one of those days where trade concerns lead the list of headlines. ckw's down 164, s&p down 15. ba to 2779 we'll get stop trading with jim in a minute. a little bit of water, it really- it rocked our world. i had no idea the amount of damage that water could do. we called usaa. and they greeted me as they always do. sergeant baker, how are you? they were on it. it was unbelievable. having insurance is something everyone needs, but having usaa- now that's a privilege. we're the baker's and we're usaa members for life. usaa. get your insurance quote today.

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a new kind of network designed to save you money. visit your local xfinity store today. it's time for jim and stop trading. >> i think people should recognize that all the news is good the corporate insurance, they get some fair numbers from american air, and that does matter, because that's been a terrible group and it's verified again today by the fact that not only do they have fuel cost problems, but they're getting -- half a percent, but people are reacting to that i think it's overdone. i like southwest air, but it can't seem to catch a bid at all. >> what about tonight? >> i have vm ware, giving me a special dividend

blue star lane and these are the companies that we know are doing quite well rk, because people l the marijuana story, they made an acquisition, i think this is the most real. >> you work during the breaks. >> i think the marijuana story is way, way under done, not the penny stock kind, but the kind that is going to be in your coffee, actually it's going to be in your beer. >> "mad money," 6:00 p.m., as we said earlier, goldman-sachs chief equity strategist. alerts -- wouldn't you like one from the market

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about potential investment opportunities in real time. fidelity. open an account today. ♪ good wednesday morning, welcome back to "squawk on the street." let's get some wholesale trade numbers with rick santelli >> most trade numbers don't get me excited this one does. this is our may read on wholesale trade sales, up 2.5%, up 2.5%.

you have to go back to march of 2011 to find a higher numbers and that number was 2.6% and last month's 8% stands now at 1.4 we had a mid-may read and that mid-may read was .5, now we replace that with a .6 sequentially, it follows april that was .1, then.6. it's better than the expectations, we also saw bank of canada, and i do believe they raised rates, so we want to check the impact on the dollar, the canadian dollar, and it is moving a bit so we want to pay close attention. i'll talk about that throughout the day. wholesale trade numbers. and our trade turmoil is back. tough talk, the president kicking off the nato summit with

a jab at germany merkel striking back, the two met just minutes ago and fox raises its bid for british broadcaster sky. we begin this hour with a story of the morning president trump kicking off the nato summit in brussels with some harsh words for our allies. german chancellor angela merkel responding and just minutes ago, the united states announcing tariffs on $200 billion in chinese goods. let's start with the headlines out of brussels coming this morning. >> reporter: that's right, sarah, this nato summit started off with a bang this morning, the president sharply critical of germany, in a breakfast session this morning

we heard a response from angela merkel on that criticism and then we just saw a face-to-face meeting between president trump and angela merkel over the past couple of minutes ago. the reporters that were there say both sides stuck to the diplomatic platitudes here the united states and germany having a good relationship merkel saying that she's pleased with the opportunity, they talked about trade and says she's looking forward to other exchanges in the future. apparently from the reporters in the room, a different session from what the reporter -- we should be able to play it for you in the next couple of minutes or so. take a look at the comment from the president that sort of roiled the nato summit this morning, again, the president, sharply critical of germany.

here's what he said. >> if you look at it, germany is a captive of russia, they got rid of their nuclear, they're getting so much of the oil and gas from russia. i think it's something that nato has to look at i think it's very inappropriate. >> reporter: so the president there saying that a gas pipeline from russia to germany is inappropriate because germany is paying russia a significant amount of money for that energy and also because the united states has criticized it in the past as going around some of the other nato allies, and therefore putting russia in the drivers seat in the event of any conflict angela merkel responded to that saying that germany makes its own decisions and has independent policies here and is not controlled by russia, we'll see if she pushes back in this face-to-face session, and again, we have got this tape that comes through later on this morning. we'll see if we can get any

reporting on what was said there. >> we'll come back to you in the next few minutes let's get over to the other story, of course, which is china and trade, eunice is in beijing with a look at how china's reacting to the tariff announcement on these additional chinese goods. >> well, china says it's shock and that the u.s. move is totally unacceptable the foreign ministry today called the latest decision by the u.s. american trade bullying and the commerce ministry also weighed in saying that china would immediately file a complaint with the wto and would respond with counter measures, though we don't know what those may be as you guys were talking about earlier in the show, china only imports $130 billion worth of american goods so even if they wanted to match the chinese -- the u.s.'s $200

billion, they wouldn't be able to so china also this week announced a new policy, a 4-point defense plan to try to help safeguard some of its chinese companies. first of all, they're going to assess the impact of tariffs for chinese companies and that money is going to go back and plow back into chinese firms, they say that's a more direct way of helping chinese companies. and longer terms, the country said they're going to try to divert the country's imports away from american products and they would also step up the use of foreign investment, so use foreign money in order to support chinese companies. state media has been saying that this plan really shows that china is expecting a protracted action by the united states. and earlier today i was speaking to a couple of american businessmen, and one of them

said to me specifically that most companies here are now starting to feel that this trade war will be protracted because it looks as though neither side is going to be backing down any time soon. and he told me that the only silver lining that he sees, with this $200 billion tariff, and it's 10% instead of 20% we're going to look at all of this, as well as q-2, we'll talk with david kostin good to have you back. >> nice to see you >> let's do earnings first, because this is usually what you come on to talk about. q-1 earnings came in and didn't give us the jolt that you would expect on a year on year profit growth >> second quarter earnings season kicks off on friday, and the next few weeks financials,

82% of the market will release results. the expectation is 12% year over year growth, that's led by 11% growth on the top line, so revenue growth very strong, and 13% pretax earnings growth this is the second quarter we have had under the new tax law, which is why you go from 15% pretax growth to 20% eps growth. that's a solid level of growth and if we look out to the latter part of this year, third and fourth quarters, analysts have not increased their earnings estimates. in those first two quarters you referred to--you'll probably get very good results and positive eps growth >> large players like hedge

funds are more conservatively positioned than they were in january? >> that is a report that we published out earlier this week, which is that the position coming into first quarter results is much more aggressive. now it's very great. our s very, very light and that's a positive situation moving into a series where we'll get strong earnings. >> just want to go over some headlines with you, the bank of canada are talking about trade, so central bankers are keeping an eye on this, bank of canada says that -- trade uncertainty has grown and trade uncertainty on tariffs has grown by .6% by the end of 2020. what are those trade concerns going to do with earnings and earnings outlooks. the impact of tariffs likely to take place over an extended

period of time it's clearly a risk. earnings are probably more important than near term tactical -- it's definitely a concern, but if we look at how it is, what are the opportunities in the market in an environment where there clearly increased trade tensions, this is a risk that has been overhanging the market for a while. we have loan growth increasing, we have -- the banks can increase the capital they return to shareholders for dividends and buy backs. that's less dependent on trade issues, so that's the way that you can deal with the elephant there and how you can bat around that looking at companies with stronger balance sheets in an environment where there's rising rates as you suggested. >> why does the market seem to

care very much though it's down 166 we have had bigger selloffs in februaries. >> the impact over extended period of time, it's unlikely to be impacted this quarter, for example and a lot of commentary from management is going to be in second quarter conference calls is what is the foreign impact and how is that going to affect the supply chain. >> the president and mrs. merkel talking about the bilateral. >> we're talking about trade, we have a very, very good relationship with the chancellor, we have a tremendous relationship with germany. they have made tremendous success and i congratulate you, tremendous success, and i believe that our trade will increase and lots of other things will increase, but we'll see what happens over the next period of a few months.

>> translator: let me say that i am very pleased to have this opportunity to exchange our views and indeed we had an opportunity to have an exchange about economic developments, migration and also the future of our trade relations, also we touched upon the president and let me say i'm very much looking forward to further extending our, change ou exchanges in the future. and it's important to have these exchanges together because we're

partners and we're good partners and we will continue to cooperate in the future. dew. -- thank you >> thank you very much, everybody. >> we can discuss that, thank you very much. thank you very much. >> thank you >> all right >> some brief and seemingly friendly remarks both from u.s. president donald trump and germany chancellor angela merkel, right after their bilateral meeting, they're discussing trade we have a very, very good relationship with the chancellor, said president trump the despite some of the -- >> you heard the president there, very much in person side by side with angela merkel,

stressing the partnership, angela merkel doing the same, using that word, partnership but at the end, reporters who were in the room said that they asked the president about this pipeline issue, that the president has been critical about. but it's clear from the president's remarks that he raised this hot button issue, that he used really to criticize very sharply the german government this morning. and then have these photo-opes in which all is well, so to speak from the two sides he raised that issue privately with angela merkel, but in public he went out of his way to say that he congratulates her and that they have a good relationship >> amon, thank you very much, reporting for us from the nato summit in brussels david kostin is still with us. the fact that president trump

has a completely different approach to multilateral countries, are there economic implications from all of this? >> the answer is yes, from a longer term perspective, 70% of the revenues are generated domestically, a lot of the supply chain input costs are devil affe definitely affected by tariffs the implications of tariffs has important idiosyncratic impact on companies, but the broader market has dissipated across the rest of their business. >> finally on margins, you have always be a proponent of watching margins, more than half the company is facing rising wage pressure, but only a third able to raise final prices is that going to be a squeeze? >> one of the benefits of lower tax rates has been the positive

impact on margins so margins are now 11%. so the likelihood of margins rising from this level is low. the corporatisting are likely r and the ability to pass that on to the consumer is limited our forecast from the economic team at goldman-sachs is that you have continued tightening on the part of the fed. >> that's a good reminder going into the season, which really kicks off with gusto on friday thanks, david, david kostin of goldman-sachs. some news to share this morning, involving a sky as many would expect prominently into the competing bids that are on the table for the fox assets and the back and forth that has gone on between our parent company, comcast and disney, for sky

itself this morning we woke up to the news that sky has accepted a far higher offer from fox and dizo y disney, you can see those sky shares are trading above even that level now, the expectation as we have been reporting, both myself and julia, that comcast will in fact come back with an offer that's below that 14 that should be soon, in fact, it is friday that comcast is obligated to go with their bid, given 28 days that have gone by since they actually got approval for said bid, but we can expect it sooner than that. the question of course is what disney's response is, and how this plays out major all in relation to the fox assets, where fox has not attempted to raise its bid for that cash and

stock deal to ahat disney the something called the chain system applied in the uk, still being debated and getting the final word you're going to need to pay more as well for the 61% proportionally and interestingly disney's -- 28 to 38 that actually already took place and their bid overall, disney's bid overall for the fox as sets. when you back up, these prices are getting high on all fronts, disney itself, if you back off the rsms, assume they get about 8% cash flow, they're paying as much as 22 times for the remaining assets that is a big price. if you're comcast, looking at that, wondering if in fact you

want to go higher, and how much higher in your all cash offer do you need to go in order to make it that the shareholders of fox would not look favorly on disney it's an open question, is there a chance here, that if you make that bid, that disney will publicly back off in doing so, and therefore allow you to own 61% of sky, with the possibility that disney will sell you the 59% that fox owns, and maybe you can even work a deal for your percentage of hulu down the road we await a potentially higher bid from comcast for those sky assets disney could choose even when that bid or sky comes, do nothing and let more time run out. comcast will have to bid by july 20 for the fox assets should it

want to get something in place and all of these ceos are in sun valley right now >> bob iger is either there or on his way, rupert murdock is there. both sides take very seriously the anti-collusion rules here so there really has been no communication, as you would imagine, because you don't want some sort of side deal to take place. >> it will just be small talk over dinner. watching that closely. thanks, david, when we come back, pfizer making some business announcements after a conversation with the president. not everything involves drug pricing per se, take a look at the possible surprise, dow is down 1 wh45 "squawk on the street" is back in a moment. full of work... full of work... a husband who snores with gusto... and marvin...

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it's not something you see very often after criticism from president trump, pfizer agreed to roll back price increases on its drugs. pfizer increased the prices of 41 drugs july 1, some as much as

9% president trump twe president -- certainly almost never see price increases reversed, but that's not what happened this time last night trump tweeted again, saying pfizer will roll back the hikes. pfizer specifies it's just deferring the hikes until lower drug prices take effect or later this year. many think it's likely we see the price increases reinstated when any governmental changes come to pass an estimated impact this year of $150 million to $300 million to pfizer meanwhile, pfizer also announced this morning, it will reorganize into three certainly units, one

focusing on internal medicines >> thank you very much from pfizer to defense spending to a trade war, the president's public negotiations, certainly the story of the morning. on tariffs, the white house unveiling $200 billion more chinese imports to tax in the next few months. bmw says it will build more cars overseas, rather than in the u.s. because of it and it will be raising prices. let's look at the political implications of these things good to have both of you here, ben, i made the mistake of printing the list of tariffs, 205 pages, what's different about this list is that we recognize a lot of products, a

ton of fruits and vegetables, furniture, handbags, how much of an escalation is this? >> it's enormous, remember over half of u.s. imports areimmedia. a lot of companies are already being hit from the president's tariffs against china. we rely on things like metal casings from china and that's not even looking yet at the retaliatory actions that will be directed at farms in key electoral districts that the president is going to need in november >> what's also different about this one, greg is that u.s. consumers is not immune. what could be the impact on consumer prices and inflation overall? >> well, you're right, some of this is going to find its way through to the final consumer. there's a couple of caveats, one

is there's still some margin for the manufacturers to absorb the tariff don't forget the dollar has been going up and the yuan has gone down the bigger consequence here is that we're seeing escalation of the trade conflict the chinese and the americans are not talking to each other, so it's increasingly looking like this is going to be a long lasting and possibly permanent state of affairs >> there's a lot of discussion about whether or not there are back channel negotiations that we're just not aware of. have you seen any indication that that exists in any form right now? >> they're still talking, carl, but you have a couple of issues, one is that -- nobody's really sure what the president's own bottom line is, what can he accept and so forth. whereas as there are delivera e

deliverables on nafta, with china we're basically asking them to change their entire system no more communistic control over things like trade and antitrusa. that's why i'm more pessimistic that there is a positive outcome waiting in the wings here. >> giving the differential on imports and exports. the chinese are going to run out of things to put tariffs on in terms of what comes in from our country. do you expect them to go to other methods? >> the chinese have an enormous number of tools they can play with, they can make life miserable for firms operating in the country. president xi doesn't face midterm elections in the autumn. he himself will never face another election, if this trade war goes on beyond labor day,

he's got a real problem. >> what are those tools? what else do they have >> they can slow licenses, they can slow walk inspections, they can call snap inspections on site they've already got communist party cells in a lot of foreign firms operating in china so there are an enormous number of tools here. >> we're reporting this morning from our china bureau that casf is opening in china without -- american competitors are still waiting for those approvals. that's a clear example on how the chinese can apply pressure in a couple of nontariff ways on the united states. >> given your expertise in economics overall, you had a piece earlier this week that experts will suffer in this kind of back and forth.

is it really going to have an impact on economic growth if we continue down this road? >> the initial impacts are going to be tiny, we're talking 0.1% or 0.2%, five to ten years ago, if all these tariffs go into effect, americans will be spending more for cars and won't have as much choice for cars >> as we watch soybean prices near a 10-year low, does that lead us to things like price supports, things that have been suggested in the past? >> well, it possibly does and there you end up in that world where the europeans used to be in return, we have to, like, spend bucket loads of taxpayer money supporting our farmers, is that really where we want this end up >> ben, on the subject of where

it ends up -- >> the biggest problem is we're fighting this trade war on multiple fronts, the u.s. is in a trade war with its nafta partners, it's nato allies and so many different issues from cars to the iran deal and sanctions to climate change, it's going to be very difficult to start unraveling all these. so it's not clear where the president's going to be focusing his energies house speaker paul ryan says he does not think that tariffs are the way to go, but china engages in unfair trade practices. can y can. >> they're going to try, but they have backed off on the possibility of using legislation. they have certainly got allies within the administration, your old colleague larry kudlow

wanted to put together a coalition of the willing to go up against china but the president's chosen to go in a very different direction. >> we'll see what they do if anything ben steele, good to have you here we're getting some inventory numbers crossing the tape. jackie has that for us >> the eia reporting that -- crude oil is still in the red, but it did regain some of its losses for the morning, we were trayi i trading 73.40, now it's 63.63 right now there's not a lot to take this price much higher from here last year we hit that 3 1/2 year high, prices are still supported over the 70 level as well. back to you.

32 past the hour, let's get a news update this morning with our sue herrera. here's what's happening at this hour, in brussels president trump pressing nato allies to bolster their defense spending as he opens talks with leaders of the military alliance he says disproportionate defense spending is an unfair burden on the u.s. >> over the last year, about $40 billion more has been given by other countries to help nato, but that's not nearly enough the united states is paying far too much and other countries are not paying enough, especially some so we're going to have a meeting on that. two suicide bombers attackiattack ing a building in afghanistan. the thai hospital where the

12 boys and their soccer coach are recuperating from that flooded cave in malaysia, here they are in their hospital beds. we wish them a speedy recovery as we head to break, take a look at where the major averages stand, coming off of four straight up days in the market s&p is up about .33% but things like industrials, health care, a lot of trading got caught in the crosshairs in this new tariff fight with china. medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan,

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you know your family, we know senior living. together we'll make the right choice. all right, time now for etf spotlight, and we'll send it over to mike santelli, he's looking at the market tariffs and trade concerns i wonder why, right? >> one way to gauge exactly how the market is trying to sort out these trade issues small, medium, large cap stocks.

and the dow jones industrials diamonds, dia etf, dow is flat year to date, the small caps are up about 10%, mid caps exactly half too, about 5% year to date too. you see some slight outperformance on the russell. the russell is more domestic therefore better growth is expected there, and obviously you had things like caterpillar and the dow. >> all right, mike, thank you. a few sectors to keep an eye on right there. when we come back, another automaker joining the outcry against the trade war, bmw announces it is shifting production overseas. dow down 119, the dow is

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. dow down triple digits, on pace to break that four-day win streak joining us to discuss what to do with stocks during all of this trade tensions sevita and brian when your clients call and say another $200 billion worth of chinese imports are going to be taxed. this is an escalation, what do we do? what do you say? >> i think there are some playbooks that might not work this time. the idea that you want to hide out in small caps is not necessarily the way to go. so if you think about it a lot of these smaller companies are

feeders into these multinationals that are more likely to be hurt. i think the knee jerk reaction is buy small caps but it might not be i think it's getting worse rather than bertter where i would go is look for pockets of the market that are cheap and not necessarily susceptible to trade friction. like financials, it's an undertraded financial that -- a lot of high quality companies have really beaten down multiples. this is a sector that has been painful for the last month or two. but i do think there are companies that might not be as negatively impacted by trade tensions higher quality areas that are not as necessarily negatively

affected by trade than what's priced in at this point. >> david kostin at goldman-sachs told us the same thing this morning, financials are insulated but financials are under performers and they have sold off pretty hard when you have trade wars and more mack c crow conce -- macroimpacts from the trade wars >> 100% correlation with the yield curve, when the truth is if the fed is hiking and these companies are cash risk and have healthy balance sheets, those are the -- having lived through the financial crisis, but the sector to date is very different from what it looked like in 2007, 2008, when it was overlevered, it was paying maxed

out cash yields, and reduced to the lowest levels i have seen in my career. i think it's an underappreciated quality sector >> where would you hide out? do you think small caps have less exposure to overseas earnings >> i think you want to continue to look for growth across market capitalization in the united states the administration to this point have really zmsignalled what th wanted to do and they have gotten there so the concern is do we get tariffs on another $300 billion. the good news for investors is that the 10-year rate has been generally stable here, the dollar has been reasonably stable the last couple of days, so i don't think the market is stunned by this. we can go to what if this escalates significantly, if it does, you want to be more

domestically focused and i this i the dollar will strengthen in this environment for us this is a cycle that's still doing reasonably well, the tariffs will slow down economic growth some, to me that's still growth in a slow growth environment where you can find it and i expect we'll continue to see small coaps and larger >> the dollar's barely moving, what then would you say if we see an escalation, and you want to stay domestic, what would mark that as this point, it feels like things have onlybee escalating over the past few weeks. we have been talking about the 200 billion f$200 billion for ae now, the 10% on the $200 billion

not as large to me i would still focus on the inflation numbers and i would still focus on how the federal reserve used those inflation numbers, if this number becomes more significant and it becomes more inflationary, then it will be how the fed responds, if the markets continue to do well, if the fed says this is getting out of hand and we have got to tighten, then i might be more defensive, i think president trump is playing up to the midterms, this energizes his base and ultimately i think we back off >> guys, thank you >> as we go to break, take a look at the shares of a few u.s. listed china tech stocks, you see some mixed eed performance there, the new administration is preparing additional tariffs on chinese goods, dow down 145,

we'll be back in just a couple of minutes

all eyes on the financials this week as they kick off earnings season, find out what to expect on trading nation.cnn.com more "squawk on the street" coming right up.

let's head to the cme group in chicago and talk to rick santelli good morning, rick >> good morning. i would like to welcome my guest, jim thank you for joining us this morning, jim >> you're entirely welcome, rick. >> we have the underinflation gauge, nig, from the new york fed. highest in the last few years. the expenditure hit the magic 2% first time this year for six years in may

jim, with all the expected inflation ramping up, why are yields still in the 280s for ten-year notes >> well, for one thing, the u.s. treasury is perhaps the cleanest shirt in the dirty laundry in the sovereign debt of the development world where it yields less. with that said, you look at the after inflation yield on offer u.s. treasuries, the ten-year, for example, what you find is nothing is there over 50 years the ten-year delivers a real yield of 2.3%. so you subtract the inflation rate tomorrow the cpis will be at 2.9% what is the ten-year yield 2.8% essentially nothing after inflation, so we may be better than most sovereign yields, but

we still are very eager for the numbers. >> doesn't this present jay paul with a real conundrum? he wants to keep tightening for real good reason with all the inflation indicators, but hence flattening what does he do? >> well, i think he motors ahead. jay powell is, perhaps, to his cost, is an english speaker when he says something and can understand what he says. and what he says is the models tell him that there is no real risk of an infection that may be correct -- >> i have to break in, sorry jim and rick we have to go to president trump and president macron in brussels >> he is doing a terrific job being president in france. and i think it's going to be

very successful. we have a tremendous relationship we are discussing trade. and we are discussing nato we are discussing a lot of different things and hopefully in the end it will all work out so it's great to be with you >> thank you [ speaking foreign language ] >> it sounded beautifully. i have no idea -- it sounded great. >> i thought the exact same.

i am just reminded that one year ago you were put into president and there was the importance of the fourth of july and we have worked together for 12 months now. and made some great decisions. >> we have made some great decisions. >> and we will continue to work together >> thank you very much >> translator: angela merkel -- in regard to the russians? >> thank you thank you very much. >> we won't forget that. >> thank you, press. thank you, press thank you.

>> looks like that is it, they avoided that question on germ y germany. president trump went through a series of bilateral diplomatic mornings seems like he and president macron have a chummy relationship as we have seen during the visits. >> reporter: yeah, that's right, sarah. so interesting to see how the leaders take a different tactic to come here with president trump, who came on a confrontational theme today. the president is critical of the germans off the bat. this morning at breakfast saying he was critical of a decision by the german government to have a gas pipeline come in from russia, saying that the russians, therefore, have leverage over the germans. what you saw there from macron is macron reminding president trump of a year ago when trump went to paris and had a fabulous trip with a military parade, a grand marching parade that the president used for inspiration for a military parade that he now wants to host in washington,

d.c. this fall he's got the pentagon working on setting up the parade. so interesting that macron sort of reminds the president of the great experience they had together and says that they have been working together really well for about 12 months now so macron reminding president trump here of the great personal relationship that the two have shared and the great visit he had to paris last year >> comparing this particular summit to g7 where he went in and put a lot of our allies on defense at the course of the summit are you seeing those kind of similarities or not? >> reporter: yeah, it does feel that way, carl the president deliberately close to come in here at the summit before breakfast and the summit was called to order and be sharply critical of one of the united states' biggest allies here he will say this is something the other administrations have been critical of before and other administrations asked the nato allies to pay more for their own defense. that said, these things are all

about diplomacy and tone and the president decided to set a tone right from the beginning of confrontation. that is what he did at the g7 as well of course, where the g7 really unraveled was at the end when the president left late and then accused trudeau of canada of essentially lying about what the president had said so we'll see whether this one ends with that sort of acrimony as well. >> ayman in brussels, thanks a lot. a check on market going to break. the dow is down 147. pretty solid decline here. d fairly tight range. "squawk alley" starts in a minute it came from the toaster. now you can quit cable. switch to directv and now get a $100 reward card. more for your quitting cable thing. that's our thing.

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