"squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. we have that special interview joe did yesterday with the president. very quickly look at the u.s. equity futures at this hour. you will see things are relatively flat. markets were down yesterday. dow was down by a half percentage point this morning the dow looks down, only by 2.5 points s&p is down fractionally and the nasdaq is indicated up by 30 points look at treasury yields. we've been watching that and the ten oversitting at ten-year sitting at 2.85%. rates came up in your interview yesterday, joe >> yes >> and those who control the rates. >> i remember -- there are certain things that are -- i don't know if they're predictable, but he's a real estate guy so -- and i remember prior to

him taking office he talked about the bubble it's a big bubble. rates are too low. >> and told us he didn't like higher rates >> he did. but you knew it would switch from it's a bubble and it's because of the fed to it deserves to be here because we have a great economy, then we'll switch -- as a real estate guy, we will switch back to lower rates. when we talk about the economy, i figured he doesn't like higher rates. has anyone asked him to -- obviously no one asked him outright whether you think they should be raising rates. >> not since he became president. >> if you listen to what he says, he says i know people say i shouldn't be saying this but i will tell you what as a private citizen, this is what i would have said. i'll tell you the same thing now, i don't care. let's get to the big interview with president trump talked about everything from russia and the trade war with china to the aforementioned

fed's interest rate policy >> mr. president, thank you for having us. >> thank you, joe. >> we're sitting in a pretty storied place. >> very storied. >> it's something to be right outside the oval office. last time we met was in davos. >> yes that's right >> we talked about a lot of different things one of the things that i asked you towards the end of the interview was as a businessman, a problem solver what will we do about education? i don't know if you remember that >> sure. >> we talked about a lot of other things the economy. you sort of gave me a foreshadowing of what i think you're talking about today >> right >> was vocational schools, but it's been honed now and it's much more the details are ready to come out now on what you're calling the pledge to america's workers. reskilling workers >> that's right. which we have to do. >> spearheaded by your daughter, ivanka >> ivanka is very much involved. she's been involved. we have tremendous numbers of

people who are really are phenomenal in every way but not trained or qualified to take some of the jobs you report on it all the time. all of the companies pouring back into our country. we have chrysler we have so many companies. we have companies expanding. look what's happening with apple. they'll spend 3$350 billion i can go on and on we need people with skill. we need people who are trained it's much different than it was 30 years ago, 40 years ago we need people to go out there and do it. that's exactly what we're doing. in front of you is a list that's going to create almost 4 million jobs these are a list of companies that will be creating a tremendous number of jobs. they'll be skilled jobs. these are people that will be trained, really trained. trained well >> the co-chair along with wilbur ross was ivanka when i spoke to her, she mentioned the pledge or the goal was for 500,000.

she said it was much greater than that, but she didn't tell me 3.7 million? >> yeah. >> that's individuals that will benefit from skills training >> training. if you look at the companies, those are the great companies -- >> this is all private sector funded this is an example of public/private partnership >> walmart, so many great companies. they'll be here at 3:00 today. they'll be having a big conference everybody is here. and we're talking about almost 4 million jobs >> currently things are -- the economy is pretty hot. running pretty hot hopefully not too hot. >> no but i think maybe it's as good as it's ever been ever. companies -- what i'm really happy about is cash is coming back in through the billions and trillions of dollars that was overseas where companies were locked and couldn't get it back. now it's coming back, hundreds of millions of dollars at a clip also companies are coming back to our country we have record numbers of companies coming back in

they're pouring in they're going to michigan, ohio so many states >> wage gains. do you worry -- is it time for the fed to be doing what it's doing? just to get a policy question in, should they be raising rates on the trajectory that is indicated? >> i put a very good man in the fed. >> i put a very good man in the fed. and i don't necessarily agree with it because he's raising interest rates i must tell you, i don't i'm not thrilled because, you know, we go up and every time you go up they want to raise rates again and i don't really -- i am not happy about it, but at the same time i'm letting them do what they feel is best. but i don't like all of this work that's going into what we're doing. you look at the euro, what's going on with the eu, an they're not doing what we're doing and we already have somewhat of a disadvantage, although i'm turning that into an advantage last year and for years we've

been losing $150 billion with the eu nations, with the european union and they're making money easy, and their currency is falling. in china, their currency is dropping like a rock and our currency is going up and i have to tell you, it puts us at a disadvantage now i'm just saying the same thing that i would have said as a private citizen. so somebody would say, maybe you shouldn't say that as a president, and i couldn't care less what they say because my views haven't changed. i don't like all of this work that we're putting into the economy and then i see rates going up i see china where -- look at what's happening with their currency it's dropping like a rock. >> partly because of some of the trade -- >> i think i'm helping, you want to note truth. i'm doing something to level out the playing field. >> in the context of the stock market after the election, well documented up at one point 40% or so. it's consolidated those gains,

held on to the lion's share of those gains. does that go into your thinking if we're ever going to address some of these -- >> this is the time. >> is there a time -- >> you know the expression, we're playing with the bank's money. >> is there a time where you say things are going so great with the economy, i'm worried about the headwind of trade given that we have a tailwind with tax reform, deregulation, all these great things happening do you look at it as, well, we have all these tailwinds, we might as well have a head wiwino do you say i need to pull back a little, not get everything i can but maybe everything i want. >> i would have a much easier life, sitting here i could let all of these countries continue onward with these massive deficits honestly, i don't want to use the word, because it's a highly respected show, but they're taking advantage of us i'll use a different set of words. they're taking advantage of us

>> it's cable, though. >> you know what the other word is we are being taken advantage of. >> okay. >> i don't like it i have not liked it for many years. china, with china, 5$507 billion a year in deficits with the eu, 15$1501$151 billion with mexico, 1$121 billion who would think mexico they have a tax. we don't have a tax. they have a tax on top of that the tax is almost 17%, a v.a.t. tax. i could go through every country. i could talk about japan i could talk about -- they're very good allies, but no wonder they're good the deficits, the moneythey're making off the united states now, i would have a higher stock market right now it's already up almost 40%, as you know, since the election it could be 80% if i didn't want to do this ultimately what i'm doing is making it so it's right.

we'll also start cutting expenses >> are you seeing some signs -- some glimmers of success, of hope from some of these trading partners >> tremendous hope >> are they starting to, what you think iscome around? let me mention one thing yesterday we had our delivering alpha conference steve bannon spoke, talking about china. said some positive things, by the way, about your presidency >> he should >> said for the first time in decades we're winning against china. they're so scared they don't know what to do. kudlow was on as well. he said the guy who may be holding things up is president xi >> i don't want them to be scared i want them to do well i like president xi a lot. but it's very unfair i raised 50. we're down 500 some people would say 375 billion. i'm not talking about million, i'm not talking about pennies, we're down 375 billion but other estimates could say 507. it doesn't matter.

it's in between there or there we're down a tremendous amount i raised 50. they matched us. i say you can't match us, otherwise we'll always be behind the eight ball >> are you ready to go to 500? >> i'm ready to go to 500. i'm not doing this for -- i'm doing this to do the right thing for our country. we've been ripped off by china for a long time. i told that to president xi. i said how did this ever happen? you know what their answer is? i deal with the highest echelons of china one of the great people of china said there was never anybody to talk to in the united states we would put on a trade barrier where you couldn't sell cars or you couldn't sell beef or your farm products, nobody would talk to us in the united states so we said that's great. then we would put on another one. we would put on a tariff on cars, 25%. you charge us virtually nothing, 2.5%, but they don't pay it.

so we would do this, nobody would talk we would start off at a lower number, raise it, raiseit, nobody would complain until you came along me they said now you're doing more than complaining we don't like what you're doing. they think i'm doing too much, but of course they'll think that for many years -- i'm not just saying obama i'm saying bush, i'm saying long before, they had nobody. it's interesting i actually asked them the question, so we're down 507 recently, down 5$507 billion in trade deficits how did it happen? they told me nobody ever complained nobody ever talked to us >> this morning you tweeted, interesting tweet. second meeting potentially with vladimir putin >> yeah. >> is that in the works? is it planned? >> yeah. i would say it's in the works. we had a tremendous discussion on many things, terrorism, syria, the middle east overall, iran we talked about as an example

nuclear proliferation. there's nothing to me, there's nothing more important than that we had a tremendous meeting. we had a very good press conference except for the fake news i thought i did very well at the press conference >> a second meeting was -- you broached the subject >> we got along very well. the fact is we got along very well i think we can do great things for his country but also for our country. i'm interested in our country. i'm also interested in the world. i like to see peace. i think we can do great things for the world. now, that includes china, that includes others. i'm doing very well getting along with countries getting along is a good thing, not a bad thing. i think i have a good relationship >> you have a personal relationship with people that i've seen for many, many years >> i do. >> i understand how that works looking at what -- >> even you, which is almost impossible >> as far as -- thank you. as far as the end game with russia, there are lots of things that you think we can do in terms of making the world safer

with russia. >> by the way, that's good for everybody. >> but the relationship you had with putin, the tone which was relatively conciliatory for what some people say is an enemy or adversary, can that tone totally be explained by you wanting to do the best things for the country or is there something underlying that? >> i have nothing to do with russia i never did. >> so it's totally just -- in your view -- >> it's call a democrat hoax it's a big, fat hoax i had nothing todo with russia i think you know that. you would know -- >> i know how you are with people i can see -- knowing what you want to accomplish in foreign policy and domestically, i could see that tone not necessarily having anything do with other than wanting the best thing for the country. >> i had a meeting that lasted for more than two hours it wasn't always conciliatory >> that hasn't come out. >> but we discussed many points i just said. basically that's what we discussed. lots of good things for both

countries, frankly but there are things we can do for both countries that are very good we then go to a news conference. i had some of these fools from the media saying why didn't you stand there, look him in the face, walk over to him, and start shouting at him. i said are these people crazy? i want to make a deal. i want to make a deal. you can't do that. we've been having a bad relationship with russia for many years that may be wrong. maybe you can't do anything. that's very possible i'm different than other presidents i'm a dealmaker. i made deals all my life i do really well i make great deals you know it because you covered them for a long time, joe. if we can get along with russia -- >> does it help with china to have russia almost -- >> it doesn't hurt it doesn't hurt. >> that was in your mind as well >> maybe, in the commuter. maybe.

it probably doesn't hurt i'm not looking at it that way if we can do certain things on terrorism. as an example, we found out that in st. petersburg, a little more than a year ago, there was going to be a major terrorist attack st. petersburg, russia we called them and let them know they were able to nab this very vicious gang of terrorists they got them. i assume they're someplace right now that you don't want to know about. i don't know what they did with them i don't care but wait a minute. they thanked us profusely. this was going to be a major attack we found out about it and gave them that information. that's a good thing. putin called me up, president putin called me up and he said i want to thank you very much. that would have been a major attack in st. petersburg we informed them i don't think anybody knows about that these are good things. they can inform us getting along is a good thing, not a bad thing. the fake news, they want to make

it like there's a big confrontati confrontation. i don't want to play that game >> any timeline on the next meeting? >> let me just say this, with that being said, i've been far tougher on russia than any president in many, many years. maybe ever even the big fight i have with germany over the fact that they're taking natural gas, they're taking energy from russia, paying them billions of dollars. i said wait a minute, we're supposed to be protecting you from russia and you're paying them billions of dollars what's that all about? now, do you think that's a positive for russia? i'm talking them out of things where they're giving billions of dollars. it's ridiculous, by the way, that's happening and on top of that germany pays a fraction of what they should be paying for defense. so they're paying russia and we're supposed to defend them from russia? so just look at that point but look at the sanctions i've put on look at the diplomats i threw

out. look at all of the things i've done nobody else did what i've done obama didn't do it obama was a patsy for russia he was a total patsy look at the statement he made when he thought the mics were turned off, okay the stupid statement he made nobody made a big deal about that getting along with president putin, getting along with russia is a positive, not a negative. with that being said, if that doesn't work out i'll be the worst enemy he's ever had. the worst he's ever had. >> i don't want to end it on that note. we do have to end it. >> i think he knows that i'll be his worst nightmare. i don't think it will be that way. i think we'll have a good relationship >> it's obviously, as the two last nuclear superpowers, or the two largest -- >> 90% think of it. the two countries. >> mr. president, thank you. appreciate it very much. thank you. >> thank you joining us now is the vice chairman at evercore isi, and

steve liesman. we had conversations earlier i know that the markets moved. we had -- the reaction about anything that the president says is pretty unconventional i always had known he liked lower interest rates george bush blamed his loss to bill clinton on greenspan saying he wished he had not raised rates. we know presidents -- this is one of the first ones who says what he feels like as an individual, not just as a president. you already heard him say i will let them do what they think is best there was kind of an overreaction you think that a president has to -- like the treasury secretary has to say i value a strong dollar, the president has

to say the fed is independent. >> you're right. let's not get completely carried away over what happened yesterday and -- >> too late. steve's here >> but i think it is something that is serious. it is a troubling development. you know, whether the president was being careless or whether the president was deliberately trying to put pressure on the fed, it creates the impression inmarkets that the white house is trying to put pressure on the fed to follow an easier interest rate policy. that's just not helphelpful. it's not helpful for the fed or in the end for the administration either. >> implied in this is another sacred cow, that is a strong dollar and that -- i referenced it, treasury secretaries are not supposed to comment on that either we heard basically from president trump saying if our currency gets too strong, it hurts in my efforts to cut down the trade deficit and export

more and to grow the economy as quickly as possible. we heard that, too, that maybe a weaker dollar is not necessarily something that they would be too unhappy about. >> that's for sure we've known for a long while this president is someone whose instincts go in the direction of a weaker dollar. but remember why is the dollar strong the dollar is strong right now because under the president's leadership we had a massive fiscal stimulus at a time when the economy was already at or around full employment that's going to push interest rates up it's going to push the dollar up you throw on top of that trade conflict if you have the reserve currency, if you are the one with the trade deficit, you launch trade protection, guess what the dollar goes up the president's economic advisers need to help him understand here that what's going on is a product of the policies they have chosen to implement. >> steve, if you're -- you know,

you want to -- as trump, he likes ratings. he likes ratings on "the apprentice," he likes ratings. >> so do you >> only for "squawk box. >> exactly >> so -- no, i don't here he is in his mind, he's tax reform, deregulation and the stock market is good then he will try to do trade stuff. he thinks that's one headwind, i don't need another with higher rates. it's obvious why he would say that he's the president, but he's -- it wasn't that long ago when he wasn't the president he was a real estate guy if you were -- >> whether the president should have said it is yesterday's story. i'm on to today's story. >> we're still seeing some effects. >> the question is twofold one, looking at what the president said, is the dollar now a weapon in the president's trade war?

>> right >> this is number one. >> having that in the minds of the chinese, which are able to manipulate their currency if they choose to you wonder how that falls out. >> they are manipulating in the sense they have not raised rates while the fed has raised rates both the federal reserve and fiscal policy is making the dollar worse, so that's one. put that to the side the second is is this the beginning of what was going to be an inevitable conflict between the fed and the white house based on the following -- the white house has a theory of the economic case which is that we can raise potential growth. we can grow faster without inflation if we do the following things to the economy. the fed, given all of their forecasts is much more skeptical of that. so i think they were -- this is paul's idea, who, by the way, said this was going to happen

months ago, that they were headed for this collision course which was powell is going to believe and most in the fed will believe that the underlying interest rate for the economy should be higher than the white house will believe it needs to be because of the inevitable effectiveness of the tax cuts. >> as we see this -- >> i don't know if christian thought about that i would like his two cents on that >> so for sure you make a really important point, which is that the fed like any mainstream economist takes a pretty sober view of what the sustainable growth rate of this economy is, largely because the population and labor force growth is slowing. also because productivity growth itself has been subdued over recent years the administration has an incredibly optimistic view of the kind of potential growth rate we could sustain in years ahead, and at some point those

two view also come into conflict what can the fed did the fed can be very empirical, very data dependent, fact dependent. you don't want to be making monetary policy based on a theology of what tax cuts or deregulation will do to the economy. you want to be very open to the possibility that tax cuts and regulation could actually increase to some degree over some time period the potential run rate of the economy. the fed has to base it on the data, and some market information as well. >> i want to make one more point, which is that i remember remarking after two days of powell testimony how there had been no conflict at all between republicans and democrats on fed policy that there was almost a bipartisanship the republicans were no longer complaining about the fed being too low. the democrats were not arguing -- >> which is why he ended his testimony so much earlier.

>> he ended early. my concern now is the president has kind of thrown the fed back into the political arena as an issue. >> on that, we don't know how they'll react. this is the story that made the top half of the "wall street journal" today in this story they say maybe the fed will raise rates further because they will try to look like they're asserting their independence >> i'll let christian answer i don't think powell will do that he'll let this glance off of his shoulder >> i think it would be a more critical issue if the path directly ahead for the fed were not as clear we have one or two in the bag if we have one of those yellen moments where there was a judgment call -- >> that's why presidents don't say anything because the next move by the fed can be seen as being influenced by the white house. >> the -- mark grant is taking this more seriously than a lot

of people. >> i was surprised >> they don't -- they have to be independent. trump knows they have to be independent. that doesn't mean jawboning doesn't psychologically -- >> do you think she have done it did your jaw drop down to your knees? >> no, there's a reason i asked it >> you thought it was coming >> i think he wants the economy to grow. he likes lower rates it's like asking someone getting a mortgage, would you rather have 6% or 4%. you would say the housing market is hot, for the good of the country, i want 6% no give me 4%. the market is down a lot, but eunice pointed out that the president said he's comfortable, if we go to 500 billion -- >> that's right. >> 500 billion he's ready to go to 500 billion. >> and he doesn't care what happens to the market. that was another comment >> he did say that >> the market was down slightly,

but the losses have more than doubled. >> right >> nice job, joe >> yeah. >> running too hot, steve. i can't believe you want to raise interest rates now the last guy standing. how long have you not wanted to raise interest rates rick and everybody else that you argue with. >> i wanted to raise a couple years ago. >> thank you, steve. >> tune in again at 7:00 if you didn't see that. >> coming up, we'll look closer at president trump's comments on the trade war with china first shares of microsoft are trading higher after the company posted a beat on earnings and revenue. also they issued better than expect the guidance. that stock is up 3.2%. more on wall street's reaction next

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it 19 cents a share in line with expectations, continuing expectations it was 8 cents a share, and the total year outlook is $1 to 1.07 consolidated revenues were actually 30$30.1 billion. >> better than expected. >> up from a year ago. >> expectations were 29$29.3 billion. so higher on the revenue number. i'm trying to figure out, they say 19 cents in line with expectations the estimate i'm looking at is 17 i don't know if there's something in the numbers that goes along with that they're also saying $1 to 1.07, and that would be versus the 95 cents the street was expecting for the full-year. don't know if that's a fair analysis or if this is a different set of numbers >> the good news is the stock is up almost a percentage point the bad news is that equates to 11 cents it's a $13 stock

john flannery says with our strategic review complete, ge's moving forward to implement the strategy and the structure we laid out in june our focus is on unrelenting ek kugs execution of this plan to strengthen our balance sheet and accelerate growth across our business to increase shareholder value. he added that second quarter, in his view, was in line with expectations and there was some strength across many segments including aviation and healthcare. power market remained challenging. we continue our focus on operato operational improvement. joining us now is the exhausted, longstanding holder of ge stock, jack at this point there's other things in life, i guess, that

are good family, friends. you still own it how do you like the quarter? chief investment officer at harvard advisory long suffering shareholder you buying more? >> first, congratulations on getting the interview with the president. >> thank you >> to answer your second question, we sold the shares after third quarter earnings last year, a little above 20 we're on the sidelines now in my note i think i said investors who have a 3 to 5-year time horizon f they buy the stock at 12 or 13, they'll be fine it's hard to analyze now now it's a sum of the parts story, not so much an earnings story. it will take a couple years to have the medical division, baker hughes ge distributed and then we'll see if the 50% of the

business, which is power, can be turned around and generate any kind of growth i think that's tough ask >> now it's up 2%, jack. you haven't moved -- you haven't decided -- you didn't buy at 12? that may have been a good idea, maybe. >> as i said, i think if you have a long-term time horizon, it probably is a good idea it's going to be a difficult slog you will be waiting for each of these share distributions and then waiting for a turn in the power business which can take multiple years >> so the actual makeup of the assets, which -- over the years, seeing so many switches. things that are supposed to be good, get rid of those things that are bad, add to that shuffling the deck it always seems like they got six or seven different operating areas. at any given time, three are

okay three are bad. do they have the right mix now with flannery? >> well, flannery was handed a very difficult hand. i think he's doing a good job. he knows he can create value by spinning medical, oil and gas. that will work his difficulty will be digging out of the hole thereafter with still a big pension underfunning and again, about 50% of the industrial revenues in power, which is a division that will struggle to generate organic growth >> jack, thanks. did you tell me you sold it? i usually remember most things, i have to admit didn't remember that where was i yesterday? yeah yeah washington >> joe, i think we both blocked out a lot that has to do with our history with ge. >> you're right. i still have 800 shares i can't

find >> really? >> yes, 800 shares by now, i might as well keep it. >> exactly from when we got it when we were owned by ge. i think i had the certificates, i don't know where they are. to get them costs money. with the custodian any way, jack, thank you i feel your pain we'll talk soon, talk to you, in three months maybe we'll be at where you sold it, you'll go why did i sell it. >> all right let's talk about microsoft the company posting fourth quarter earnings and revenue that came in above what the street was expecting revenue growth of 90% from the company's major cloud product was one of many bright spots in the report that stock up by 3%. joining us is jay fleeower

you were talking about incredible growth that continues to build on cloud. what would you say about the quarter? >> good finish to fiscal '18 they beat total expectation by 1.2 billion. half of that upside was cloud. 200 million was windows. which joe asked me about on occasion they will upside in the windows business driven by a bit of growth in the pc market. very strong finish each of the segments exceeded our expectation for revenues, income and the guidance for q1 shows a good start for fiscal '19. you take the mid point of the guidance range for september, that is above our previously published average. >> linkedin grew 19% dynamics 365 was up by 51%

and some street analysts are saying this could be a competitor to salesforce do you agree with that >> yes it's no longer a small business. we're talking about a nine-figure business for dynamics part of the now almost 25 billion annual business. linkedin had an upside quarter >> were a lot of skeptics when they made that purchase. >> there were. it's gone very well. two back-to-back upside quarters the operating loss at linkedin is half of a year ago. they're on the path toch bett m better profitabilities >> two years ago there was skepticism about linkedin, and people were saying this is gaming exposure. now people are giving them

credit it's a gaming play it's the netflix of games. i wonder how much of these high expectations are baked in. we have upside this quarter, the cloud sales momentum is there, where do you have to make that call and say now the street gets it. >> the stock is much more in favor. today is the sixth anniversary of when we started recommending the stock. >> really? >> yeah. the stock was 31 >> the stock is up over 131% since satya nadella took over. >> we still think there's upside our last price target was 119. we have not reassessed that yet based on good numbers. i'll stand by my expectation that the story will continue to be driven by upside and cash flow notwithstanding the 240% increase in the last six years, the story has only become more compelling in multiple ways. >> thank you very much good to see you. >> you, too. coming up, much more of

cnbc's interview with president trump. we'll take a closer look at his comments on trade and china straight ahead futures did turn sharply lower shortly after we aired those comments about trade as we head to break, here's yesterday's s&p 500 winners and losers

time for the executive enl several european drugmakers say they don't plan to raise u.s. prices for the rest of this year roche, sanofi and merck making those announcements today. they make well-known drugs ambien, which i have never taken. i have taken tamiflu

have you taken that? >> i have. amazing. >> amazing we have agreement on a lot of different things your flu goes away that's so weird. >> stops it in its tracks. >> impossible. not supposed to happen but it does. amazing. plavix and valium, needed a couple of those before the interview -- no. this follows similar moves by novartis, pfizer and the u.s. merck. tesla's batterymaker has suspended one of its cobalt suppliers over concerns that it mined in cuba. panasonic, the exclusive supplier of batteries to tesla said it was unable t determine how much of the cobalt used in the tesla batteries had come from cuba it suspended its canadian supplier after reuters asked about the cuban cobalt. coming up, atlantic council

ceo fred kempe will talk trade, russia and that interview with president trump. as we head to break, a quick check of what's happening in european markets right now president trump talks to cnbc's "squawk box" about the trade war with china >> we have been ripped off by china for a long time. >> that interview after the break. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...

president trump weighing in on trade during our one-on-one interview making the case for tougher terms for our biggest trading partners >> we are being taken advantage of >> okay. >> idon't like it. i haven't liked it for many years. with china, 5$507 billion a yea in deficits. with the eu, $151 billion. with mexico, $120 billion. who would think mexico mexico is making a fortune they have a tax. we don't have a tax. they have a tax on top of that the tax is almost 17%, a v.a.t. tax. you look -- i could go through every country. i could talk about japan i could talk about -- they're

very good allies, but no wonder they're good the deficits, the money they're making off the united states >> joining us now is the atlantic council president and ceo, fred kath yo remarking. he also made the comments that this is the time if you're going to do it, you should do it while the economy is strong. he made the comment we're playing with the bank's money. you've heard that expression what do you think about what he said >> a couple things first of all, congratulations to joe on the interview looked like a pleasant place they were sitting at two things first of all, you have to watch out for unanticipated consequences even while the president was in helsinki, the european union was in beijing with the chinese negotiating trade and promising the two of them together are going to save the global system. then from there the eu went off to japan and signed an agreement that'd been in the works for

years. but they axccelerated it during the latest trades spats. then with china and this is the second point, if you actually do the number of deficits and trade, you would think that we have the leverage in this relationship they have $571 billion of deficits that means as you escalate, it's going to be more and more pain for china and less for us. it doesn't quite work that way because of all the companies operating in china where china as an authoritarian government can make things difficult for the countries operating within china. sop let's see how this all unfolds. but one has to have a strategy one has to watch this very clearly. and make sure there aren't unanticipated consequences including higher consumer costs for the united states and in the end not winning the trade war

quite so easily as the president thinks it's possible >> we were watching the futures. when the interview first ran with the comments about the president saying he was ready to go to $500 billion in these tar roughs and ramp things up, we saw the dow futures drop by more than double what they'd been we were down by over 120 now we're back to down 79. but we haven't really seen huge panics in the market about this. never marn few hundred points. and that seems to kind of roll off snap because people believe this is a negotiation. >> i think the markets see trump as the negotiator. you try to create points of leverage to get the best deal possible one hasn't seen the pain of the tariffs or the pain of the-ned prices on the market yet so the market is still baking in there will be an agreement that

isn't that bad after all i will bet on that at this point because the president doesn't want to go there the first $50 billion wasn't really all that much about deficits if you talk to the white house officials that were involved in this they were aimed at ip issues, intellectual property theft. they were aimed at cyber issues, tech issues. so he hasn't really cut deeply into the -- and that wasn't the first intention of these first $50 billion to go after the massive trade deficit. >> fred, that actually gets to a point here if in fact this is a negotiation, if in fact there is a process behind the scenes we can't really see, will china give on perhaps those longer term structural issues and requiring joint ventures which is not going to show up in the trade deficit numbers in anybody's window of the next year or two. >> you're already seeing the

chinese down tone their language about china 2025 they're changing the language on that which looked protectionist from their side trying to keep others out of their technology growth they certainly had a scare to have walked back from that a little bit so i think there's a lot going on behind the scenes with the u.s. and china there's a lot in public as well, but in this relationship, there is a lot of talking going beyond the scenes i think both sides see they have enormous stakes in this. in the end, the chinese know they have to give some ground. the truth is that these have been not the best trade deals we have been ripped off on occasion he takes an extreme position and my guess is he will give enough so the president and his negotiators will back off in the end. that's what the markets are baking in. >> you're pretty balanced.

even after sitting with you for several hours the other day, ooum not entirely sure how you're feeling on this are you optimistic or pessimistic on how this might all end? >> well, i'm an optimist who worries a lot. >> that's reasonable. >> look, i like the fact that president trump is bringing to a head -- by the way, i stole that quote from secretary albright. it was one of her favorites. but the president brings things to light that need to be talked about. our allies have not carried the right burden some of our trade deals haven't been fair. i think that's what resonates with his base. that's why sometimes by being disruptive, he can bring about deals that others can't. the question is is he going to be the deal maker or in the end disruptive that's where i get a little bit

pessimistic. here's a guy who's put his name on buildings all over the world. so you'd think he was a builder. so far what we've seen more is taking down the iran nuclear deal taking down the tpp deal, the transpacific partnership deal. but what is he building in its place? i really think in the next two years of his term, he has to start building some things he can put the trump name on that are lasting structures instead of tearing things down he likes the fact he's taking these things on but what i'd like to see him build some things. >> we're going to jump off on that the next time we see you. thank you. >> thank you coming up, president trump's comments to cnbc about the fed, the trade war, and russia. the full interview is next in case you missed it at 6:00 and we'll get reaction from democratic senator heidi heitkamp want to ask her about kavanaugh. "squawk box" will be right back. but which ones target your goals?

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good morning and welcome to a special edition of "squawk box. coming up, president trump's interview with joe kernen. he speaks up on the fed. >> i don't necessarily agree with it. >> the trade war with china. >> we are being taken advantage of and i don't like it >> and vladimir putin. >> i'll be the worst enemy he's ever had >> it's friday, july 20th, 2018. and "squawk box" begins right now. live from the beating heart of business, new york, this is "squawk box. >> good morning, everyone.

welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. we ha we have jim paulsen with us. how are you feeling? >> i'm feeling good. >> how are you feeling about the markets? >> i think there might be more of a struggle ahead for the rest of this year and either maybe we just keep doing a sideways movement, challenge the highs and not really break them. or we could hit another air pocket i still think a couple of challenges in the second half, we're going to print this huge second quarter gdp number. but i think we'll slow down in the second half. >> we're going to dig into this with jim meantime, take a look at where we've been trading this morning. u.s. equity futures were down this morning but not by much. once we played out that interview that joe did yesterday

with president trump, you saw a big drop, a big decline. maybe that's because he said he was ready to go with $500 billion in tariffs we saw the futures drop down by 120 points still down 80 points for the dow. s&p futures down by six and the nasdaq is still up it's up about 13 points. let's get right to our news-making interview of the morning. i never get tired of watching this i sat down with president trump at the white house yesterday and asked him about everything from jobs in america to russia and the trade war with china all the way to the fed's interest rate policy here it is mr. president, thank you for having us. we're sitting in a pretty storied place. it's really something to be right outside the oval office. last time we met wuss in davos >> yes, that's right >> we talked about a lot of different things

one of the things i asked you towards the end of the interview is as a businessman and a problem solver, what are we going to do about education? i don't know if you remember that we talked about a lot of other things, the economy. and you sort of gave me a foreshadowing of what i think you're talking about today i think it's been honed now and it's much more -- the details are ready to come out on what you're calling the pledge to america's workers, right and reskilling workers >> right which we have to do. >> spearheaded by your daughter ivanka >> she's very much involved. we have tremendous numbers of people who really are phenomenal in every way but they're not trained and they're not qualified to take some of the jobs you report on it all of the time all of the companies pouring back into our country. so we have chrysler. we have so many companies. and we have companies expanding. look at what's happening with apple, where they're going to be

spending $350 billion. and i can go on and on we need people with skill. we need people who are trained it's much different than it was 30 years ago and 40 years ago. we need people that can go out there and do it. and that's exactly what we're doing. and in front of you is a list that's going to create almost 4 million jobs these are a list of companies. they'll be creating a tremendous amount of jobs these are people that will be trained, really trained and trained well >> the cochairwoman. and when i spoke to her, she mentioned the pledge or the goal was for 500,000. she said it was much grandchildrgreater than that but she didn't tell me that's individuals that will benefit from skills, training. >> training. if you look at the companies, those are great companies. >> and this is all public/private partnership >> so many great companies

they're going to be here at 3:00 today. we'll be having a big conference everybody is here. we're talking about almost 4 million jobs >> currently things are -- the economy is pretty hot. running pretty hot hopefully not too hot. >> no, but i think it may be as good as it's ever been ever. h a lot of cash is coming back hundreds of millions of dollars at a clip. and also companies are coming back to our country. we have record numbers of companies coming back in they're pouring back in. and they're going to michigan and ohio and pennsylvania and so many different states. people can't believe what's happening. >> wage gains. do you worry that -- is it time for the fed to be doing what it's doing just to get a policy question in, should they be raising rates on the trajectory that is

indicated? >> i put a very good man in the fed. i don't necessarily agree with it because he's raising interest rates. i'm not saying i agree with it i must tell you. i don't. i'm not thrilled because, you know, we go up every time you go up, they want to raise rates again i don't really -- i am not happy about it but at the same time, i'm letting them do what they feel is better. but i don't like all of this work that goes into doing what we're doing. you look at the euro, you look at what's going on with the eu and they're not doing what we're doing. and we already have somewhat of a disadvantage although i'm turning that into an advantage last year and for years we've been losing $150 billion with the eu nations with the european union. and they're making money easy and currency is falling. in china their currency is dropping like a rock and our currency is going up and i have to tell you, it puts us at a disadvantage

i'm just saying the same thing i would have said as a private citizen. somebody would say, oh, maybe you shouldn't say that as a president. i couldn't care less what they say. we put all this work into the economy and i see rates going up look at what's happening with china's currency, it's dropping like a rock. >> because of the trade -- >> i think i'm helping, you want to know the truth. because i'm doing something we're going to level out the playing field. >> can we talk about in the context of the stock market after the election, well documented it was up 40% or so it's held onto the lion's share of those gains does that go into your thinking in terms of if we're ever going to address some of those >> this is the time. you know the expression we're playing with the bank's money, right? >> is there a time you say, god, things are going to great with the economy, i'm worried about the head wind of trade given

waef tail wind with tax reform and deregulation do you look at it as is, we've got all these tail winds, we should have one head wind. or do you say, look, i need to pull back a little >> so i could have a much easier life if i wanted to do it incorrectly. i could let all of these countries continue onward with these massive deficits honestly, i don't want to use the word because it's a highly respected show, but they are taking advantage of us i'll use a different set of shows. >> it's cable, though, if you want -- >> it's not as good as the other word you know what the other word is. we are being taken advantage of. and i don't like it. i haven't liked it for many years. china with $507 billion a year in deficits. with the eu, $151 billion. with mexico, $120 billion.

mexico who would think mexico mexico is maching a fortune. plus they have a tax we don't have a tax. they have a tax on top of that and the tax is almost 17% of that tax and i could go through every country. i could talk about japan they're very good allies but no wonder they're good the deficits, the money they're making off the united states now, i would have a higher stock market right now it's already up almost 40% since the election it could be 80% if i didn't want to do this but ultimately what i'm doing is making it so it's right. and we'll also start cutting expens expenses >> are you seeing some glimmers of success, of open from the trading partners >> tremendous. >> let me mention one thing. yesterday we had our delivering

alpha conference bann bannon said some positive things about your presidency. kudlow said the guy who may be holding things up is president xi at this point >> i don't want them to be scared i want them to do well i really like president xi a lot. but it was very unfair so i raised 50 we're down 500 now, some people would say $375 billion. i'm not talking about million. we're down $375 billion. but other estimates could say $507 it doesn't matter. we're down a tremendous amount i raised 50 and they matched us. i said you can't match us or otherwise we're always behind the eight ball i'm ready to go to 500 >> what if the stock market were to go down >> well, if it does, it does i'm not doing this for politics.

i'm doing this to do the right thing for our country. we've been ripped off by china for a long tomb. i told that to president xi. i said how did this ever happen. you know what their answer is? one of the great people of china said there was never anybody to talk to in the united states we would put on a barrier where you couldn't sell cars or beef and nobody would talk to us in the united states. we said that's great then we put in another one we put on a tariff on cars, 25% and you charge us nothing. 2.5% but they don't pay it so we would do this and nobody would talk we'd start off at a lower number, raise it, raise it nobody would talk until you came along. me they said now you're doing more than complaining we don't like what you're doing. they think i'm doing too much but of course they're going to think that and for many years -- i'm not

just saying bush but others. so we're down $507 billion in trade deficits how did it happen? and they tell me nobody ever complained >> this morning you tweeted. interesting tweet. second meeting potentially with vladimir putin >> yeah. >> is that in the works? is it planned? >> i would say it's in the works. we had a tremendous discuss on many things. terrorism, syria, the middle east overall, iran we talked about as an example nuclear proliferation. there's nothing more important than that to me. we had a tremendous meeting. it was a good press conference other than the fake news, i thought i did well. >> but talk about a second meeting. you've broached the subject with -- >> we got along very well. the fact is we got along very well we i think could do great things

for his country but for our country. i'm interested in our country. i'm also interested in the world. i'd like to see peace. i think we could do great things for the world. now, that includes china and others i'm doing very well getting along with countries that's a good thing, not a bad thing. i think i have a good relationship with putin. >> you have a personal relationship people that i've seen for many, many years. >> i do. >> and i understand how that works. looking at what -- >> even you which is almost impossible, right? >> thank you as far as the end game with russia, there are lots of things that you think we could do in terms of maching the world safer. so the person we're -- >> by the way, that's good for everybody. >> the relationship you had with putin. the tone which was conciliatory for what people say was anned adversa adversary. can that tone be explained by you wanting to do the best thing for the country or is there

something underlying that? >> i have nothing to do with russia i never did. it's a hoax. it's called the democrat hoax. it's a big, fat hoax i have nothing to do with russia and you think you know that. you've known me for a long time -- >> i know how you are with people knowing that you want to accomplish in foreign policy and domestically, i could see that tone not necessarily having anything to do with other than wanting the best thing for the country. >> i had a meeting that lasted more than two hours. it wasn't always conciliatory. we discussed many of the points we just said basically that's what we discussed. but there are things that we can do for both countries that are very good. we now go to a news conference i had some of these fools from the media saying why didn't you stand there, look him in the face, walk over to hum, and

start shouting at him. are these people crazy you want to make a deal. you can't do that. and we've been having a bad relationship with russia for many years that may be wrong. that's very possible but i'm different than other presidents i'm a deal maker i do really well i do great deals you know it because you covered them for a long time, joe. and i think if we can get along with russia and other countries. >> does it help with china to have russia as almost a -- >> it doesn't hurt okay that doesn't hurt. >> it was in your mund >> maub the compute-- as an exae found out that in st. petersburg a little more than a year ago, there was going to be a major terrorist attack st. petersburg, russia we called them and let them

know they were able to nab this very vicious gang of terrorists they got them. i assume they are some place now you don't even want to know about. i don't know what they did with them and i don't care. wait a minute. they thanked us profusely. we found out about it and gave them that information. that's a good thing. and putin called me up -- president putin called me up and said i want to thank you very much that would have been a your attack in st. petersburg we informed them these are good things. they can inform us getting along is a good thing, not a bad thing. the fake news, they want to make it like where this is a big confrontation. i don't want to go into that game. >> any timeline on the next meeting? >> let me say this with that being said, i have been far tougher on russia than any president in many, many years. maybe ever z even the big fight i have with

germany over the fact they're taking natural gas, taking energy from russia paying them billions of dollars. wait a minute. we're supposed to be protecting you from russia and you're paying them billions of dollars. what's that all about? now, do you think that's a positive for russia? i'm talking them out of things that where they're giving billions of dollars. it's ridiculous that's happening. then on top of that, germany pays a fraction of what they should be paying for defense we're supposed to defend them. so you just look at that point but look at the sanctions i've put on look at the diplomats i threw out. nobody else dw what obama didn't do it, look at the statement he made where he thought the mikes were turned off. the stupid statement he made nobody does a big deal about that

getting along with putin is not a negative with that being said, if that doesn't work out, i'll be the worst enemy he's ever had. the worst he's ever had. >> i don't want to end it on that note, but we do have to end it >> i think he knows that i'll be his worst nightmare. but i think we'll have a good relationship >> it's obviously the last two nuclear superpowers -- >> 90% the two countries. >> mr. president, thank you. i appreciate it very much. thank you. i have to laugh. senator heitkamp, if you didn't want to hear that, you're waiting and you've just -- that was just drilled into you. joining us now, north dakota democratic senator heidi heitkamp i wish we had the camera on you during that. we didn't know you're welcome anyway, it could be any day.

where do you want to start look at you. >> obviously i want to start with trade because that has the greatest and almost immediate impact on north dakota you guys are out there today they're worried. i had a farm wife at a meeting i had last weekend who was almost in tears saying if this doesn't get fixed, if the price is what it is today, she won't make her operating loan and her son won't be able to farm. and so this has real ramifications today for what's happening in north dakota. plus we're the ninth most dependent on imported steel. the prices have gone up. my equipment manufacturers tell me whatever advantage they have got from the tax code change has been eaten up in the very early months of the steel and aluminum

tariffs. so there are some economic pressures here that we need a broader look than just tariffs we could put pressure on china in ways that doesn't hurt my growers and basically potentially running regressive taxes which is what it will be for consumers in our country >> the trade is one thing. so many great things to talk to you about just in this environment. you're one of the last great hopes, i think, for your party, honestly i do i haven't heard you equate helsinki to pearl harbor or 9/11 i see things and then we've got a new rising star in new york. i know you've seen some of her comments that's the party right now

you're in a position, though, in a red state with an election in november so you're our last hope for any bipartisan -- or just reasonable rhetoric, i think. is that fair to say? do you look at some of the comments and say, i mean, where am i what happened? where did this party move? or not >> i don't think you educate and push back by being hyperbolic. i did express great concern. and yesterday watched as there was at least a moment where this administration was considering basically allowing the kgb to interview our diplomats. i think it'd be hard to fill the diplomatic corps so things get corrected and we move on. but, you know, we have to be concerned about what's happening with trade

you know, our national foreign policy doesn't stop at these kinds of summits it's about trade it's about relationships it's about cross border. then we could evaluate what the deal was >> joe manchin, another one sort of in a similar situation, he just came out and said chuck schumer -- i don't know. he said something. it was spicy whether he thinks he's going to influence me on kavanaugh, something about the sun not shining. i'm not sure what he said. >> no, it had to do with kissing. >> yeah, yeah, yeah. okay so have you heard from -- >> that's the nice way >> you must be getting -- are you getting whipped? and i know that's tmi, tmi, but is chuck schumer trying to convince you to -- no?

>> i think chuck probably wouldn't waste his breath. he nopes it's better just to let us -- >> he does a lot of that though. not for nothing. >> right i mean, for me this is a process. and, you know, joe, aren't you a little concerned that people before they even announced who this nominee was going to be said yeah, i'm for him or her, whoever it is. >> wait a minute i was thinking wow, she's so great. she's going to say aren't you surprised that they already had a blank space, fill in the blank, we're going to not support him. >> that too. absolutely i totally agree with you, joe. on both sides. >> where are you leaning right now? >> i'm not leaning any way we haven't had a chance to look at the record to review the documents. i haven't had a chance to visit with him i'm going to wait until after the hearings >> if he seems qualified -- >> yeah, that's my standard. is he qualified? have the right judicial

temperament. we'll continue to vet the record and i want to watch the hearings before i make up my mind >> you're not looking for interventions. it was the biden rule. >> there was no biden rule >> that was during a presidential election. no one said it was during a midterm election that you can't put up a -- and it was biden's idea during a presidential election not to have a -- now it's like that >> i didn't like any of it and i have said do wrongs don't make a right i was heavily critical of what happened with merrick garland. doesn't mean we shouldn't consider this one. i love becky how are you today, becky >> i'm wonderful it's great to see you. >> go on you love becky, go on. >> let's let her go. >> and you, too, joe on a good day. and if andrew's there, i love him too. >> gosh, the fishing

i can wait i've got time. but you finally said it. senator, thank you and, you know -- >> trade, trade, trade, joe. >> i know. but i called you the last great hope don't disappointment me. for bipartisan sort of something that doesn't have everyone just throwing up their hands saying where are we >> she's in the middle >> trade, trade, trade, joe. >> she'll listen to arguments and make her own decision which i'd like to see more of that in washington >> exactly right all right, senator thanks and we'll hopefully see you soon all right. when we comeback this morning, we will have more of today's top corporate stories and some stocks to watch, too, including results from general electric. you're watching "squawk box" here on cnbc who would have thought,

who would have guessed? an energy company helping cars emit less. making cars lighter, it's a good place to start, advanced oils for those hard-working parts. fuels that go further so drivers pump less. improving efficiency is what we do best. energy lives here.

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market site in times square. a federal court has approved the justice department's request for an expedited appeal in the at&t/time warner case. they are looking at the purchase of time warner the court said that legal briefs from both sides must be completed by october 18th. that's a much faster schedule than normal and an appeals court case of course because those companies have gone ahead and approved things. also, panasonic is suspending its relationship with the supplier of coe battbalt cobalt is a key component in the batteries. panasonic made the move after reuters reported that some of the cobalt is mined in cuba which could be a vieolation of sanctions. ipm is suing groupon for alleged patent violations. but groupon says that ibm is trying to use outdated patents

to squeeze money from other patents for threatens of litigation general electric beating the street on the top and bottom lines. and the shares up 2% at one point. they're up 5/8 of a percent. microsoft also reporting better than expected results. also raised guidance for the current quarter. wall street continues to pay close attention to the trade talks coming out of washington when joe sat down with the president yesterday at the white house, they talked china and trump's tariff strategy. >> did you ever get to 500 >> i'm red i do go to 500. >> we have the midterms. what if the stock market were to go down? >> if it does, it does i'm not doing this for politics. i'm doing this to do the right thing for our country. we've been ripped off for a long

time i asked president xi the question, so we're down 507. recently we're down $507 billion in trade deficits, how did it happen? they told me nobody ever complained >> joining us now to talk about the comments on china is gordon chang from the daily beast and john rutledge, chief investment officer at saffinad one of the things that people seem to be taking away from this is the president's pledge that he is ready to go to $500 billion in tariffs how does that read if you are looking at this from the perspective of the chinese >> i don't like the tariff strategy, as you know. you know, just doubling down the other guys got to do the same thing. pretty soon we're both shooting ourselves in the head.

best guess is the chinese tariffs we've got. we're at a trillion dollars roughly. we're about at a 1% ding on gdp. which is more or less a trillion dollars for the world economy. so far this escapade has cost us about $200 billion worth of output that we're going to not produce and the rest of the world about 600. that's not a strategy to me. it doesn't make sense at all i like rule of law i like protected intellectual property i like all those things. but trade tariffs is not the right way to get that done >> gordon, the president said in the interview with joe that he is doing this because you can't -- if they raise to 50, you can't have a tit for tat because we're already behind the eight ball on all of these situations having said that, you can be

worried about the unamended tax. but there are alternative measures what would some of those unintended consequences possibly be >> certainly as john points out, this is going to be a hit to everyone but, you know, at this point the question is what are you going to do? china steals somewhere between 225 to $260 billion worth of u.s. ip a year that's according to the ip report of that amount, probably you're talking $200 billion, $300 billion as china's share what are you going to do nobody likes tariffs, of course. but the alternative is what? we've got to remember we've got an innovation based economy. if we can't commercialize our own innovation, we don't have much of an economy yes, there will be unintended consequences but you cannot run three decades of miserable trade policy and not expect something bad to happen >> gordon, larry kudlow making

comments this morning saying the chinese have not offered any sort of potential for what they might see when it comes to intellectual property. you think by ratcheting things up that they can eventually be broken on that front >> well, yeah. i think that essentially we can. because the united states has most of the leverage we had the 375.2 -- 88.8% of the overall trade deficit in 2017 related to sales to the u.s. we're the bigger economy the things that china threatens to do aren't actually real threats. but a lot lot of chinese officials don't want to do that because they're worried that this will have a very bad effect on everyone investing into china. so china right now with a fragile economy, we've got a robust one we've got to have a continuing

fight with them. not just the theft of intellectual property. >> this is jim paulsen i was wondering, how much -- if the u.s. slowed down in the second half, how much would that affect this approach of president trump? could he continue it could he continue it in the face of the political pressure that would be brought here in this country if the economy slowed? whether it was due to the trade or not it would be blamed on it >> i think it was wrong for president trump in the interview with joe to blame his predecessors which he did by saying that they never raised the trade issue. but, you know, clearly presidents bush and obama and clinton were really not very good in terms of defending american interests and protecting american workers and businesses so, you know, i'm not a domestic political expert i don't know how that plays out. nonetheless, i think most americans understand that something's got to be done

and if you don't like tariffs, you've got to figure out what to do and the only what else that you can do is probably a ban on importation of goods to the u.s. which is even more drastic for people who don't like these tariffs you've got to say whatst the alternative. what are you going to do to protect american innovation. >> we just heard from senator heidi heitkamp that this is not necessarily a burden they can continue to carry over the long haul what do you say back what is the alternative? >> well, they are, of course -- soybeans are the heart of the ag exports. but this whole thing is pitched somehow our tribe against their tribe. it isn't a sensible way to approach the problem the best way to solve the problem in china of intellectual

is what's been happening of growing their own intellectual pros there's a stock called baba. that's chinese -- now there's a strong lobby group but the truth is, the trade situation should not be measured with merchandise trade merchandise trade is stuff on boats. stuff on boats is so 20th century in terms of trade. if you measure trade properly including services not just cars and steel, china's trade deficit this year is less than 1% of gdp. or trade surplus and if you -- and that's not even mentioning capital flows. the most valuable thing that president trump has done for the long-term situation is the tax

policy that encourages capital to flow into the u.s. which is changes in the way the taxes are collected from corporations and so forth that's the solution for workers is bringing capital back and yes, we do have to protect intellectual property. so this is a stuff that's all been developing very fast over the last 20, 30 years. and, you know, shutting down the world economy to me is not the right way to fix the problem >> i want to thank you both. >> thank you >> if you give 1% from twitter from not getting off twitter, is it worth it? >> 1 pr%? >> 1% of useful -- >> oh, yeah. why can't they be softly brushed on

andy rooney said that. the late great why are they slapped on? slapped on why can't -- no, but -- you know, so maybe i won't -- given all the other stuff maybe i'll stay on longer coming up, the morning's top corporate stories. plus if you want to see our interview with president trump, go to cnbc.com time now for today's aflac trivia question. one in five people are e sw wn bcsqwkn what country thanerhecn "ua box" continues thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?! not that kind of hurt. yeah, aflac paid us cash in just one day to help with our car payments and mortgage. aflac! perfect timing! see how aflac helps cover everyday expenses at aflac.com.

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open an account today. now the answer to today's aflac trivia question. one in five people are millionaires in what country the answer singapore. >> all right when we come back this morning, the main street meter. what jim paulsen says the american economy is signaling right now about future investment returns stay tedun you are watching "squawk box" right here on cnbc need a change of scenery? the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price. giddyup! kayak.

search one and done.

are you ready to take your then you need xfinity xfi.? a more powerful way to stay connected. it gives you super fast speeds for all your devices, provides the most wifi coverage for your home, and lets you control your network with the xfi app. it's the ultimate wifi experience. xfinity xfi, simple, easy, awesome. our guest host this morning is is -- i always think i don't have of you ooas the garrett of- >> that used to be a good thing. >> yeah, yeah. well, you keep me updated on the

list, please i couldn't tell you right now what he did. but remember how we used to sort of -- was it minnesota and -- that's you, right? the accent, everything else. so what are you feeling just in general about if you had to look forward of where we are as a country right now. you're optimistic? do we need a regime change do we need to do something in the mid terms or do you divorce yourself from all that >> you know, i think the economy looks really good. i really do. ic the financial markets look older than the recory does and there's this mismatch between where the economy is today. and i think what we're in the process of doing is trying to readjust values in the stock and bond market. which might sort of make the markets young again, if you

will, and realign with a recovery that could go on for a few more years >> that's an interesting way of putting it we've been treading water for most of this year. and earnings have continued to pick up though are you looking at stocks that are a better valuation and maybe more paltive prices. >> you know, we've got -- we've had market go nowhere hoar but earnings have come up. trading multiple was 23 1/2 times earnings in the s&p and now over 21. it's come off, but it's still really high if we're moving the rate environment on the 10-year from 2% to 3 357.5%. i think it's got to come down 16, 17 times if earnings come in 160 eventually and the market is

about where it is right now, we're going to get there by the start of next year if we get there and the 10-year is at 3.25% or above, there could be a case to be made that the recovery goes on because there are none of the traditional recession indicators out there. >> it's palatable. >> i'm not sure i understand anyways. >> it's like cream you put on but doesn't help anything. it treats the symptoms yeah >> i was going to say, the other way besides we grow into the evaluation is the markets say, look, the economy's still fine and parts of the markets are going to get bubbly. >> we're seeing that in

technology right now i wrote a piece where we've had sort of a half a dotcom move the year to date, these numbers aren't far off i think s&p technology stocks if you put the two in consumer discretionary are up there about 15%. and the rest of the s&p, it's flat this year and that performance has been going on and accelerating the i did -- divergence. when you think about what could win this year, it's a select group. everything else is outperform, underperform i would like to see values correct and i'd like to see some degree of gut check to sentiment. i think main street is doing so good finally that after eight years, people finally feel the risk is less. when i kind of think its risk is

elevating and people don't appreciate that in the financial markets. and we might get a good gut check. >> what's the markup now since the election >> the election? >> i mean, i looked at it. i almost cameup with 50% i think it's 50% that's a lot coming up, why investors are stomping on the shares of one sneaker maker this morning we will be right back. what about him?

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still to come this morning, we have today's stocks to watch. >> president trump talks to cnbc "squawk box" and he has some harsh words for vladimir putin >> i'll be the worst enemy he's ever had the worst he's ever had. >> that interview right after the break. are you ready to take your wifi to the next level?

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let's take a look at some stocks to watch this morning honeywell reported quarterly profits of $2.12 a share that was 11 cents ahead of expectations then the company raised its full year forecast as well citing growing shares intuitive beating expectations of $2.50 and that is helping the shares this morning up almost 4% company says sales of its flagship da vinci surgical system jumped by about 50% from a year ago and it also gave an upbeat current quarter forecast and skechers shares tumbling in premarket trading. the company says that earnings

fell 5 cents short of the street forecast with results of about 36 cents -- or of 36 cents a share hurt by legal costs as well as unfavorable situations >> it's down 25% on a 5 cent miss >> that stock swings around like mad. >> a lot >> every quarter yeah all right. when we come back, president trump inviting russia's vladimir putin to the white house this fall we'll hear more from joe's interview with the president about what he says about russia. then we'll get reaction from brookings' michael o'hanlon. ay tuned you are watching "squawk box" right here on cnbc ♪ it is such a good time to kiss ♪

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good morning and welcome to a special edition of "squawk box. coming up, president trump's one-on-one interview with joe kernen he speaks up about the fed >> i don't necessarily agree with it because he's raising interest rates >> the trade war with china. >> we are being taken advantage of and i don't like it >> and vladimir putin. >> i'll be the worst enemy he's ever had >> it's friday, july 20, 2018.

and "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box. >> good morning, everybody welcome back to"squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. our guest host this morning is jim paulsen. chief investment strategist at the leuthold group very quickly, let's get a check on the markets this morning. dow futures down by about 60 points after a down day yesterday where we were off about 0.5% for the dow nasdaq up by 20. now for our news-making interview with president trump he spoke out about china, trade, the fed, and russia.

mr. president, thank you for having us. >> thank you, joe. >> we're sitting in a pretty storied place. one of the things i asked you toward the end of the interview in davos, was as a problem solver what are we going to do about education? i don't know if you remember that we talked about a lot of other things you gave me a foreshadowing. i think it's been honed now. and it's much more the details are ready to come out now on what we're calling -- or you're calling the pledge to america's workers. right? and reskilling workers

>> right which we have to do. >> spearheaded by your daughter ivanka >> she's very much involved. we have tremendous numbers of people who really are phenomenal in every way but they're not trained and they're not qualified to take some of the jobs you report on it all of the time all of the companies pouring back into our country. so we have chrysler. we have so many companies. and we have companies expanding. look at what's happening with ts apple, where they're going to be spending $350 billion. and i can go on and on we need people with skill. we need people who are trained it's much different than it was 30 years ago and 40 years ago. we need people that can go out there and do it. and that's exactly what we're doing. and in front of you is a list that's going to create almost 4 million jobs these are a list of companies. they'll be creating a tremendous amount of jobs these are people that will be trained, really trained and trained well >> the cochairwoman. along with wilbur ross for the initiative we mentioned was ivanka and when i spoke to her, she mentioned the pledge or the goal was for 500,000. she said it was much greater than that but she didn't tell me

3.7 million. that's individuals that will benefit from skills, training. >> training. if you look at the companies, those are great companies. >> and this is all private sector funded. >> absolutely. walma walmart, so many great companies. they're going to be here at 3:00 today. we'll be having a big conference everybody is here. we're talking about almost 4 million jobs >> currently things are -- the economy is pretty hot. running pretty hot hopefully not too hot. >> no, but i think it may be as good as it's ever been ever. a lot of cash is coming back through the billions and trillions of dollars that you know were overseas where companies were locked and couldn't get it back now it's coming back hundreds of millions of dollars at a clip. and also companies are coming back to our country. we have record numbers of companies coming back in they're pouring back in. and they're going to michigan and ohio and pennsylvania and so

many different states. people can't believe what's happening. >> wage gains. do you worry that -- is it time for the fed to be doing what it's down? just to get a policy question in, should they be raising rates on the trajectory that is indicated? >> i put a very good man in the fed. i don't necessarily agree with it because he's raises interest rates. i must tell you. i don't. i'm not thrilled because, you know, we go up. every time you go up, they want to raise rates again i am not happy about it. but at the same time, i'm letting them do what they feel is best. but i don't like all of this work that goes into doing what we're doing. you look at the euro you look at what's going on, i'm turning that into an advantage

we lose $150 billion with the eu nations, with the european union. they're making money easy and their currency is falling in china. it's dropping like a rock. and our currency is going up i have to tell you, it puts us as a disadvantage. i'm just saying the same thing i would have said as a private citizen. somebody would say maybe you shouldn't say that as a president. i couldn't care less what they say. because my views haven't changed. i see rates going up, i see china where they're -- look at what's happening with their currency it's dropping like a rock. >> because of some of the trade -- >> i think i'm helping, you want to know the truth. because i'm doing something we're going to level out the playing field. >> in the context of the stock market after the stock market was up 40% or so it's held onto the lion's share

of those gains does that change if we address these -- >> this is the time. you know the expression, we're playing with the bank's money. right? we're up almost 40%. >> is there a time you say things are going so great with the economy, i'm worried about the head wind of trade given we have a tail wind with tax reform and deregulation and all these great things happening do you look at it as we might as well have one head wind or is there a time where you say, look i need to pull back a little and get what i can but maybe not everything i want. >> so i could have a much easier life sitting here i could let all of these countries continue onward with these massive deficits. i mean, honestly, i don't want to use the word because it's a highly respected show, but they are taking advantage of us okay i'll use a different set of words. they are taking advantage. >> it's cable, though, if you really want. >> it's not as good as the other

word you know what it is. we are being taken advantage of. and i don't like it. i haven't liked it for many years. with china, $507 billion a year in deficits. with the eu, $151 billion. with mexico, $120 billion. who would think mexico mexico is making a fortune plus they have a tax we don't have a tax. they have a tax on top of that and the tax is almost 17% of that tax and you look -- i could go through every country. i could talk about japan i could talk about -- they're very good allies, but no wonder they're good the deficits, the money they're making off the united states now, i would have a higher stock market right now it's already up almost 40% as you know since the election. it could be 80% if i didn't want to do this but ultimately what i'm doing is making it so it's right. and we'll also start cutting

expens expenses >> are you seeing some glimmers of success, of hope from some of these trading partners >> tremendous hope. >> are they starting to -- what you think is come around let me mention just one thing. yesterday we had our delivering alpha conference steve bannon spoke and he was talking about china. good things said about your presidency >> he should >> he said for the first time we're winning against china and they're so scared they don't know what to do. kudlow said the guy who may be holding things up is president xi at this point >> i don't want them to be scared i want them to do well i like president xi a lot, but it was unfair. so i raised 50 we're down 500 i'm not talking about pennies. i'm saying we're down $375 billion. but other estimates could say $507 billion it doesn't matter. it's in between there or there

we're down a tremendous amount i raised 50 and they matched us. i said you can't match us otherwise we're always behind the eight ball >> would we ever get to 500? >> i'm ready to go to 500. >> what if the stock market were to go down >> if it does, it does look i'm not doing this for politics. i'm doing this to do the right thing for our country. we've been ripped off by china far long time. how did this ever happen and you know what their deal is? i deal with the higher echelons of china one of the great people of china said there was never anybody to talk to in the united states we would put on a trade barrier where you couldn't sell cars or beef or farm products. and nobody would talk to us in the united states. so we said, hey, that's great. then we put in another one we put in a tariff on cars, 25% and you charge us virtually nothing. 2.5% but they don't pay it so we would do this and nobody

would talk we'd start at a lower number, raise it, raise it nobody would complain until you came along me they said now you're doing more than complaining they don't like what i'm doing but for many years and i'm not just saying obama. i'm saying long o before i actually asked them the question, we're down $507 billion in trade deficits. how did it happen? and they told me nobody ever complained >> this morning you tweeted interesting tweet. second meeting potentially with vladimir putin >> yeah. >> is that in the works? is it planned? >> i would say it's in the works. look we had a discussion on many things terrorism, syria, middle east overall, iran. we talked about as an example nuclear proliferation. to me there's nothing more

important than that. we had a tremendous meeting. i think it was a good press conference except for the fake news, i think i did well at the press conference >> talking about a second meeting -- you broached the subject. >> the fact is we got along very well i think we could do great things for his country but for our country. i'm interested in our country. i'm also interested in the world. i'd like to see peace. i think we can do great things for the world. now, that includes china that includes others i'm doing very well getting along with countries getting along is a good thing, not a bad thing. i think i have a good relationship with putin. >> do you hayou have a personal relationship with people that i've seen many years >> i do. >> and i understand how that works. >> even you which is almost impossible, right? >> thank you as far as the end game with russia, there are lots of things that you think we can do in terms of making the world safer with russia. so the personal relationship --

>> that's good for everybody >> but the relationship you had with putin, which was relative luchl conciliatorily -- could that be explained by you wanting to do the best thing for the country or is thering in underlying that. >> i never had anything to do with russia. >> so it's totally -- did. >> it's called the democrat hoax i had nothing to do with russia. you would know that. >> i know how you are with people knowing what you want to accomplish in foreign policy and domest domestically, i could see them that not running more than that. >> i had a meeting that lasted more than 12 -- two hours. we discussed lots of good things for both countries, frankly. there are things we could do for

both countries that are good we go to a news conference i had some of these fools from the media saying why didn't you stand there, look him in the face, walk over to him, and start shouting at him. i said are these people crazy? i want to make a deal. you can't do that. we've been having a bad relationship with russia for many years and, you know, that may be wrong. it may be you can't do anything. that's very possible but i'm different than other presidents i'm a deal maker i've made deals all my life. i make great deals you know it because you've covered them for a long time, joe. and i think if we can get along with russia and other countries -- >> does it help with china to have russia as almost a -- to set them -- >> it doesn't hurt okay >> that was in your mind as well >> maybe in the computer. maybe. it probably doesn't hurt you know but i'm not even looking at it

that way if we could do certain things on terrorism, as an example when we found out that in st. petersburg there was going to be a major terrorist attack st. petersburg, russia we called them and let them know they were able to nab this very vicious gang of terrorists they got them. wait a minute. they thanked us profusely. this was going to be a major attack we found out about it and gave them that information. that's a good thing. and putin called me up, president putin called me up and said i want to thank you very much that would have been a major attack we in fact them. i don't think anybody even knows about that these are good things. they inform us getting along is a good thing, not a bad thing. the fake news, thepts to make it where there's a big confrontation. i don't want to play that game i don't want to go into that

>> any timeline on the next meeting? >> with that being said, i have been far tougher on russia than any president in many, many years. maybe ever even the big fight i had with germany over the fact they're taking natural gas, energy from russia paying them billions of dollars. saying wait a minute we're supposed to be protecting you from russia and you're paying them billions of dollars. what's that all about? now, do you think that's a positive for russia? i'm talking them out of things that -- where they're giving billions of dollars. on top of that germany plays a fraction of what they should be for defense. they're paying russia and we're supposed to defend them from russia so you just look at that point, but look at the sanctions i've put on look at the diplomats i threw out. look at all of the things i've

do done obama didn't do what i'd done. he was a patsy for russia. look at the statement he made when he thought the mikes were turned off okay the stupid statement he made nobody does a big deal about that getting along with president putin, getting along with russia is a positive not a negative with that being said, if that doesn't work out, i'll be the worst enemy he's ever had. the worst he's ever had. >> i don't want to end it on that note but we do have to end it. >> but i think he knows that bill his worth nigst nightmare but i think we'll have a good relationship >> it's obviously the two last nuclear superpowers or at least the two largest -- >> 90% the two countries. >> mr. president, once again, thank you. i appreciate it very much. thank you. all right. joining us now michael o'hanlon, brookings institution codirector

of their 21st century security and intelligence michael, you're a young guy still. i was just looking trying to remember that khrushchev/nixon debate that was called the kitchen debate you read about that. you weren't there for it i actually kind of remember when it was going on. i was a little -- obviously, very young but you remember the cold war. i remember bay of pigs and cuban missile. i remember how i viewed russia for my entire life i remember how the world order has been so upset and established with nato. in recent days because of trump or just because the changing landscape of it, i never would have thought that my opinion could change but is the world order set in concre concrete or is it possible that elite alliances are shifting and things are changing? at least that's what trump seems to be saying that nato isn't -- it's not

going to be a slam dunk that we send our troops. if montenegro maybe we don't send them over is russia still the threat in the cold war >> first of all, congratulations on the interview fascinating to watch but it all adds up to a certain logic. in its own universe kind of makes sense. while i think he's still making a lot of mistakes in how he deals with russia and certainly at the press conference he did, i also see sort of a learning process. the policy elements of the administration often wind up being tougher. that the kind of issues we're concerned about today with russia, the security of eastern ukraine and syria, these are

important issues but not quite as existential for the outside world. the kinds of threats we have with the crises shouldn't be recurring. they aren't recurring, of course but you see a pathway between rifle rivalry. it doesn't compute we should be in that place. on that point, i'm willing to see a dialogue about how we can rethink europe rethink the eastern european countries where there have been so many clashes and problems with russia. because i don't think that those countries are strategically crucial enough to the united states that we should wind up almost on the verge of a

military confrontation so that's one thing. you have to figure out what to do about it. that's a whole different discussion i'm not sure donald trump has gotten far in that the relationship shouldn't be as bad as it's become >> i think when he used the word competitive, maybe he didn't think about it a long time, but i think he meant competitor. i think he kind of views the world that way now and i wonder whether -- i'm thinking about china as a competitor i would imagine in his mind he thinks china is the real threat in terms of economic competition. and probably if the united

states is at the top of the world as the superpower. it's going to be economically. i don't know if it's going to be with military force right now. i can almost see in the back of his mind that he's thinking china is front and center. you may need -- russia is less of a threat economically and therefore you sort of are less concerned. in the back of his mind, he looks at the meddling and everything else almost as business as usual. i don't know whether that's -- i'm not endorsing that viewpoint at all because it's horrific when they meddle in our election but over the years, i don't know what countries have done in terms of, you know, propping up certain leaders, trying to get rid of other leaders he probably thinks it's always been done, therefore i'm not going to pay attention to it do you agree with this >> maybe

i think putin looks at it that way. >> definitely. he looks at, you know, maybe sending some poison in it's all sort of business as usual with putin and it's scary in that way that's the old soviet era, kgb russia we're thinking about there. >> right but in putin's mind, he thinks we do it that way all the time that he's just in some sense getting even listen, i think president trump also is a proud man. and he dont like to admit when he's wrong he want want to see his election of 2016 tarnished in any way on the other hand, he has to find a way to do it. ukraine, georgia, syria, these may not be top tier american national security interests but the integrity of our own democracy is the idea that foreign powers are interfering in our elections cannot be tolerated. sop he's got to find some way to be firm on that point. although we have to recognize he's not going to be happy

talking about the meddling and will never be the top person to lead that charge >> okay, michael it's happening we're catching history remember somebody else was going to do a reset. press the reset button and we got more of the same. doesn't always work. all right. we appreciate it, michael. >> thank you very much when we come back, we will get you ought up on today's corporate stories including quarterly results in from general electric and honeywell we're going to dig deeper into the quarter after this so lionel, what does being able to trade 24/5 mean to you? well, it means i can trade after the market closes. it's true. so all... evening long. ooh, so close. yes, but also all... night through its entirety. come on, all... the time from sunset to sunrise. right. but you can trade... from, from... from darkness to light.

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welcome back, everybody. let's get back to our guest host jim paulsen. jim, we've been watching the economy pick up. you argue that, yeah, we are in great shape with the economy but you have concerns about what could slow that down what is it

>> right i think there's a lot of focus on fiscal policy and the excitement with that it's right through earnings where wall street lives. there's also been a lot of tightening underneath that big decline. a big flattening of the curve, contraction of the fed's balance sheet. i wonder, becky. we've been dealing over the last couple years of moving from where we had accommodation falling yields, no overheat pressures to where we're now dealing with the opposite of that but it's come at a good time we also had a huge surge in confidence amongst private players. we've had this now a massive earnings tax increase induced. if you look now going forward, i think we might slow down in the united states.

the rest of the world has slowed down to some extent. >> from an economic standpoint >> y and if we have to continue to tighten and continue to restrict monetary and raise interest rates, that's going to be a more difficult environment for the financial markets than if you can do it when everything on main street was wonderful. >> you pointed out there has been an unappreciated level of yields other people point out that real yields are negative or near zero >> i think a lot of things -- i get that and that may be right. we don't know. but i think in economics and business, whatever, and whether it comes from less negative, you run are on that differential look at three-year highs in commodity prices think about commodity costs and energy costs hitting corporate operations we just had a year where the

real wage rate went down >> he thinks this is the perfect opportunity to take advantage by going after our trade partners and getting better deals you say it should focus on getting a normalize getting back to normalization here. as mike saez, they raise rates seven times, if we're going into the next recession at some point, i'd like to go in with our monetary policy in a much more monetized state i would see much better through that recession if -- >> what is normalized at this point? >> well, i'd like to see a positive real interest rate across the curve so there's still a lot of abnormality. >> but that may explain the stock market too if you can't get your money to maintain its value by putting in

a bond and note, what do you do? you have to put it somewhere else those places look like stocks. >> i agree but i think i would find a way to have some cash to put commodities in your portfolio. >> not soybeans. >> maybe soybeans. but i'd put a diversified commodity tf in. i think assets will do better from here. i might introduce some hedge funds. but not suffer the downside. >> bitcoin, 1 pr% maybe? >> i don't know about bitcoin. i'm still trying to figure out what that is, joe. >> santoli, have you -- you're mr. market history >> i've stayed kind of -- i still think it's okay not to have a strong opinion as bitcoin as an asset. i think you can ignore it right now. i don't think it has the merits of really a currency

>> i like when people say you can stay away from regulators. i mean, isn't that the only inherit value of it that it's not -- >> it's the main reason is that. >> it would undermine the whole thing. >> i don't understand it how about tesla? how about elon musk? how about trump? we don't have enough time for any of hose. coming up, coming up, coming up, is it time for the fed to be doing what it's doing? should they be raising rates >> what? >> what he said that has everyone from wall street to washington talking that is next. i'm a small business, but i have... big dreams... and big plans. so how do i make the efforts of 8 employees... feel like 50?

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welcome back to "squawk box. i spoke with president trump in a wide ranging interview. leisman says i asked him the same question four times they're rerunning the interview. >> oh. it's replay. i'm sitting there, why don't you ask another -- >> i think this might be number five anyway, here's what he said

about the fed and rate hikes i figured i'd ask him one more time >> i put a very good man in the fed. i don't necessarily agree with it because he's raising interest rates. i'm not saying i agree with it i don't. i'm not thrilled because we go up and every time you go up, they want to raise rates again i am not happy about it. but at the same time, i'm letting them do what they feel is best. but i don't like all of this work that goes into doing what we're doing. you look at the euro you look at what's going on with the eu and they're not doing what we're doing. last year and for years we've been losing $150 billion with the eu nations with the european union. and they're making money easy and their currency is falling in china. their currency is dropping like

a rock and our currency is going up i have to tell you it puts us at a disadvantage i'm just saying the same thing i would have said as a private citizen. people say you shouldn't say that as a president. i don't care what they say i like all of this work we're putting into the economy then i see rates going up. >> joining us now is ken rogoff also allen blinder and steve leisman. allen, let's start with you. what do you think? >> if any other president said anything like that in this day and age, it would be a big deal. but i'm listening to the words

he's not thrilled with it. you know, with trump everything is always two extremes it's horrible, it's great, or something like that. the key thing to me and i think it should be the key thing to the markets is whether there's follow on. whether this turns out to be a one off off the cuff remark. said, you know, it's not such a great idea to brow beat the fed. he's not good at taking advice so i don't know what's going to be the next step but if it stops here, i think it's going to be, you know, a ripple in the bond if >> ken, you agree? >> so far it sounds like he's speaking to his therapist. i worry about this i know i shouldn't do anything about it but it is my big concern over

the next couple of years what if his polls are going down, the economy is not doing well, he's tiptoeing into this area so far the fed is one of the few institutions he's treated as sa making strong margins. the market has looked at everything else. as long as the fed's good, we're good but it's a concern >> steve, you said earlier that it was yesterday's story to look at this. but you agree in terms of looking forward, trying to figure out what it means >> i don't agree with blinder and rogoff i think it's a much bigger deal than they're making it out to be i think this is one of those dam break things that people ought so sort of build the ramparts on once you start down this path, it's a slippery slope. and i personally think people ought to be more outraged than they are >> could that be because you're

a journalist and not really one of those guys? >> it could be i'm an idiot i don't know anything. just covering the markets for 30 years. >> i'm glad you go up against rogoff and blinder though. >> i don't care who they are just because they got nobel prizes and ph.d. degrees i think it's a big deal. and i'm sort of surprised -- >> i'm glad you do >> i will say, joe mischkin yesterday said it was no big deal. yesterday i used the word benumbed and melissa came back to me with the word innord it was in the cross word puzzle yet by chance. i'm going to take a br et now. it's okay. i like alan and ken a lot. i think people ought to stand up and talk about it so it doesn't continue to happen

>> this is totally different >> this is okay as long as it's not a follow on. >> right >> this is totally different i guess you're allowed to influence policy you remember when tom wheeler came into the fcc as a complete net neutrality opponent. and he got a talking to. now, this is -- the fed should be totally independent i understand that. >> it's an executive branch function >> i understand that but i mean, all the qualifiers he threw in. he's a good man, i'm going to let him do what he wants to do if you're asking me, i would rather have -- >> ken made a good point to that he said if this is just easing into it carefully, then it's a cautionary tale. >> i'll say that again if i'm getting a mortgage, i know the housing market is hot and i should want rates to go

up but for me, i like low interest rates. >> honestly, as long as the economy's looking as strong as it is, i don't think it's a big concern. but if the economy starting weakening, that's when he could get really upset to where inflation isn't rising. that's the concern >> which one was h.w.? 41 i think if cable news and twitter was around back then, remember when greenspan ruined his re-election chances. he would said something. why are we raising rates now he blames greenspan for his loss >> nixon understood this really well >> yeah. >> he was bitter about losing in 1960 to kennedy because of the fed. and he was not going to let that happen in '72 and he brow beat

arthur burns and we don't want to let that happen again but it could >> the same similar thing happened under h.w all of his people were screaming at the fed this hands off the fed attitude only started with bill clinton i was there with bob ruben and others and he listened to the arguments and decided it was smarter not to do what the bush administration had done. steve is being hyperbolic. i don't disagree with him that much if, in fact, it's a slippery slope and we slip down it, this is bad >> i'm very conservative as you know too conservative would look back and say there's a reason why bill clinton, george bush, barack obama did not comment on the fed. and there was efficacy to it

and it led to better policy by the federal reserve. so i'm conservative in that regard relative to you, joe. >> well, president obama -- i think part of the reason this hasn't come up for awhile is because president obama never had this issue the whole time he was in office, there was supported policy for the economy the entire time. and i think that we've had, you know, there's been direct examples like h.w., johnson in the past but i think every president when they raise rates wasn't direct but there was veiled sort of if you could read between the lines criticism of what the fed was doing almost in every administration >> when the most -- you know, the one thing you always hear is it's the economy stupid. you always hear that it's not that hard to figure out that they'd like lower rates for their legacy >> i think the difference is most presidents have decided that reinforcing the idea of an independent fed is something of

a great value, why speak to it directly i think it would have been a bigger deal as we were saying earlier if it was a tweet, if he was lashing out, if it was by the way not a fed chair he appointed. >> funny you should mention a tweet. the president just -- >> uh-oh >> the president just tweeted. china, the european union, and others have been manipulating their currencies and interest rates lower while the u.s. is raising rates while the dollar gets stronger and stronger with each passing day taking away our big competitive edge as usual, not a level playing field. okay so he knows what he said yesterday. >> joe, can i comment on that? >> yeah, you can if you're not thinking about chess. >> everything's in dollars in the short run, it really doesn't have much effect virtually all our exports and imports are priced in dollars. yes, the chinese currency, the euro have dropped some but it actually -- the effect

for the next year or so is negligible >> isn't it more likely tariffs that cause the yuan to weaken? >> well, i mean, there's concern about the currency i mean, there's concern about what china's doing in general, i think. there's been capital outflows at times which had never really happened on that scale for a long time. >> you know, someone just -- we do have some smart viewers. >> a lot of smart viewers, joe >> when bill clinton was president, he was watching rates come down every couple of months and who's going to say, you know what i mean? maybe there's no -- he's not going to say -- >> clinton created the u-6 as a way to communicate with the federal reserve. what they were trying to do by creating the u-6, a broader measure of labor slack was to show greenspan there was more out there and he didn't need to.

that's fun economic triviafact for a hundred. >> let me correct one thing. bill clinton was watching the fed raise interest rates early in his administration. starting in february of '94. he didn't like it, but he was very -- he was completely quiet about it >> all right okay >> open season on the fed, i guess, right >> yeah. alan, you were so good today and so reasonable. i hadn't seen you in awhile. >> i don't know. it's an off day, joe >> yeah. someone yesterday said i bring out the worst in people. and i was unable today >> it was austan goolsbee. >> yeah. i said i bring out the worst in the right people thank you, ken he's thinking of some type of opening in chess >> congratulations on the interview. >> oh, thank you i appreciate it. as we head to break, check out the futures which are down about 100 points on the dow.

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morgan stanley when bewe return, caught in the middle we'll take you live to portland, north dakota for more on the story. stay tuned you're watching "squawkbox" on cnbc

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everyday when we go to work we want everyone to work safely and come home safely. i live right here in auburn, i absolutely love this community. once i moved here i didn't want to live anywhere else. i love that people in this community are willing to come together to make a difference for other people's lives. together, we're building a better california. all right. president trump tweeting a few minutes ago. china and the european union and others have been manipulating their currencies and interest rates lower while the united states is raising rates while the dollar gets stronger and

stronger with each passing day taking away our competitive edge, as usual not a level playing field. adding just now, the united states should not be penalized because we're doing so well. tightening now hurts all we have done the u.s. should be allowed to recapture what was lost due to illegal currency manipulation and bad trade deals. anybody who thought that was just a oneoff in the interview with joe yesterday, think again. here is the next leg. >> i know. i understand everything and i agree with steve but when i read that -- it just makes -- on the face how much are we worried about our debt surplus >> but it's a reason for -- >> i know. >> we should have been tackling our debt and paying attention to that and facing it rather than continually putting it off. >> i understand. if you look at -- this is going

to be philosophical. look to the beginning of time, huge strides are getting less and less time between huge strides. i think technology and innovation and cloud and artificial intelligence and, you know, the singularity based off. when machine learning is billion as times as much is inflation coming back or is technology is it a different world now? >> can we agree the president is not thinking about that? >> yes. >> we all know that. >> i would rates to stay low. >> he's a real estate guy. >> and he's a guy who pays attention to ratings. >> he can point back to this is why, too. >> that's true. >> interesting point. >> it's powell's fault after getting caught in the u.s./china trade war soybean farmers in north dakota are scrambling to find new markets

contessa brewer is live in portland, north dakota earlier today we heard from senator heitkamp saying she's hearing about it from her farmers. >> reporter: they've had some of the best weather in years, becky, for soybean crops they're expecting a bumper crop. will they have buyers for all of the soybeans china has cancelled all the firm orders for food-grade soybeans maybe a million and a half dollars work normally the contracts are locked in august north dakota sells as much as $35 million to food-grade soybeans to china every year that's more than 70% of north dakota's total global exports of these food-grade soybeans. suddenly trade groups from china are cancelling their visits or have gone silent the price per bushel already low. dropped on the tariff talk and hoovers around $8. 50 a bushel

the break even point is somewhere above $9. >> the agricultural economic of things are beginning to deteriorate. i think if we don't figure out something quick, it could start to hurt a lot of producers they might not survive this. >> at the grain processors responsible for shipping the soybeans, the pain is hitting in the pocketbooks. richland irc saw contracts cancel as soybeans were being shipped to china richland diverted the shipments to other buyers but added a significant discount other southeastern asian buyers are pressing for these same discounts while the soybeans are in transit that's the least of the farmers and processors worries they think the markets could go to brazil or canada or russia, they say, and that the buyers may never return to u.s. farmers. guys >> all right contessa, thank you very much. let's turn back to our guest

host today jim paulson. we'll go back to the president's tweet and how it plays into what contessa was telling us about the farmers and the trade. that's a lot for markets to try to assess and figure out how to handle them. >> i think one of the biggest things at the moment might be the dollar which president trump commented on i don't disagree with that i think the collapse in commodity prices we've seen, not just in soybeans but nonenergy prices have collapsed in the last 30 days ting dove tails in the rise of the dollar. >> he points out we're raising rates while others are lowering rates. we lowered rates first. >> i concur. i think we've got to -- the inflation rate on cpi is one of the highest. the core rate is going to break out to new highs for the recovery oil is three-year highs. i think there's a reason to do

it at a 4% unemployment rate it doesn't mean there won't be fall out one of the fall outs is economies slow. >> maybe so. one of the causes of a rising dollar is u.s. growing faster than the rest of the world >> exactly. >> president trump's entire construction is we want to grow in a sense of winning a zerosome game on trade. we want to grow faster than everybody else it's not a consistent kind of economic world view that is holding us together. >> not from his standpoint i get it he's just responding to what is fighting against what he wants to put up. and certainly a stronger dollar and higher yields will put a grip on that. >> jim, we want to thank you for coming. >> thank you very much. >> the next thing we should be watching closely >> to me, i think we're going to print this strong quarter and see what data starts doing here next month for the third quarter. and see if there's some slow

downgoing on the surprise index is the united states went negative for the first time this week. >> thank you. >> like next week? >> you'll be here? >> i don't know. >> will you be here? >> i'll be here a little bit. >> you'll move a little bit toward me and just to keep -- >> that's my role, right >> anyway. >> depending on who is here and who isn't. happy vacation and congratulations. >> make sure you join them on monday "squawk on the street" is next ♪ good friday. scott walker is here david and jim have the morning off. futures weaken