our trades for many years. they also know that i am the one who knows how to stop it there will be great retaliation for china. coming up, tomorrow you don't want to miss this. we got kevin brady joining us on the set to talk about taxes 2.0. "squawk on the street" begins right now. ♪ good tuesday morning, i am carl quintanilla with jim cramer and david faber. the white house announces new tariffs on chinese imports futures are higher despite warning from chinese u.s. manufactures and farmers voices concerns as the u.s. moves to slap 10% tariffs on

billions more in chinese goods >> worrisome to everyone fedex missed the quarterly expectations the review is in looking at app apple's most valuable products >> the market is shrugging off the president's announcing china says it has no choice but to retaliate wilbur ross down play such a threat earlier this morning. >> china does not have enough imports from us to make a reciprocal tax china will sell less than $150 billion a year. in that sense, they're out of bullets. they go onto say because the prices are spread over thousands of products, nobody will actually notice at the end of

the day. he's right >> i think he's right. i think -- are you looking at my haircut? >> just looking at you >> wilbur ross is a person that we listen to for many years who's right about cars and sodas. the businesses that we are putting tariffs on, if you raise the price of luggage, we'll buy the luggage elsewhere. the sourcing is rapidly moving away as you said yesterday 18 or 24 months to get it out there is a small price to pay right now. i think we would if it gets to 25, the discourse would be different. >> until the new year then it goes to 25 and 25% if there is no improvement >> yes >> now that's problematic. >> focus on the number because clearly we import a lot more

from them than they import from us are there other things that chinese can do we sat here and talk about this for the last six to nine months, a symmetric responses. >> do we not expect to go that route? >> we expect it. >> the president is not sensitive to the companies that make a lot of china in the country. they're the ones that sacrifice. we heard talks that maybe apple won't be on their accessory. i think the president is saying hey listen guys, you are not going to make as much money as china used to. that game is over. that's what the chinese did not think what happens we always sacrifice selling to china because their market is so big. eps and 25% earnings per share they do. that's like okay, listen guys, we are willing to take the pain

because our stock market is up >> consumer is going to suffer from additional $200 billion from the tariffs on additional there are things that are made that are very inexpensive there and we'll have to rapidly source away from it yes, there is a transition period it is impossible sulley talking about what happens to their steel prices. >> right that could be problematic for them and problematic last time there is absolutely no doubt if you take it to 25 that there is going sacrifice of our company i think what's different that people don't expect is the mark is up so much and employment is up so much there are a lot of people say you can't do it. has anyone looked at his moves they uniquely are not the way we

do things with our country it is not a consensus. he's against the consensus >> absolutely. >> goldman this morning, we believe there is a slightly greater than 50% chance that face three tariffs take place and take effect in early 19. >> yes, i think you have to be ready. >> so we get to all of it? >> i am saying he's not taking the pin in the earnings of the shares but our company will. look at union pacific today. union pacific should be the one you should sell. union pacific is west coast to east coast and retail. they're ready. their earnings are going to get hurt but they're ready that's the theme that i see. there are companies that are ready. when it comes to the broader financial mar

financial market, there is concerns of unintended consequences leading to some sort of blow up there as one on intended consequence that'll come back and hurt us. or this interesting article in the journal today where a lot of these and they talk about chinese manufactures that are moving up the value change and starting to out source stuff to vietnam there and now -- and now buying chips they would have bought from qualcomm from their own suppliers to bring their costs down >> we are making china more competitive is the lead of the story. >> well, yeah i could no not -- look the issues is that we don't sell that much there and what we sell is going to be sacrificed at their earnings in the way that we sacrifice american companies that's the theme that's what the chinese don't expect they don't expect that our

president is willing to sacrifice the earnings per shares of a lot of companies and doing business in china. that has never happened before >> we are getting reaction not just from wilbur ross but we'll also hear from jack ma tim cook, take a listen. >> trade is one of those things where it is on a zero some game. you can i can trade something and we can both win. i am optimistic that the two countries will sort this out and like will go on. >> life will go on >> i think -- they're 25 negotiations there is going to be negotiations did you ever think that mexico would cave >> yeah. with the changing? >> yeah, i kind of did where as with the chinese, i don't know, everybody keeps saying there will be negotiations >> i think the president has

more power he does this 10% look, 25% is coming. we sort of expected the response from china a leadership meeting in beijing today imposing tariffs on $60 billion of u.s. goods. >> now both sides are engaged and $60 billion is not a lot >> it is going to end. it keeps ongoing one way and it keeps on getting worse >> yes >> now the president and his team are really smart. we have a lot of chinese ipfs. >> i am not stopping what are you trying to do? get us kicked out of here? >> i don't care. >> nor should you? >> you guys want to do it? more companies here?

we own 49% you open companies that's involved with education. we'll shotgun you with checks. i am saying there are many more levers than we have. they need their capital. you look at the stock market you got to get activities. i know it is 14th amendment. >> how about the 13th? >> the 14th. 14 is a big one. yeah, we are not doing constitutional here. >> i am just saying the leverage does change. that's a better negotiating place. when peter navarro says i am happy then this ends notice peter navarro -- >> was it navarro's idea to

raise your hand and ask for talks again? >> i think navarro's idea is to go to 35 >> most people would understand why he said that >> by the way, tim cook says we'll fix this and life will go on jack ma sort of painted a different picture at that alibaba investor day take a listen at that. >> if you want to have a sharp solution, there is no short term solution china/u.s. trade lasts for 30 or 40 years there is no problem and it is impossible >> obviously carrying some water for chinese leadership there he said it would be a mess for all sides that you need new wto. you need a wto refresh because of these weak trade loss >> right >> i think that -- one of the things that happens is we are spending society

we spend than any other country. we spend it on a lot of stuff and a lot of the throw aways from china the point is our landfill are filled up with plastics from china. >> you are with me that's what i have been waiting for. i have been waiting for you to come right down the pipe where i am >> that's true well, it does not mean there are not going to be any unintended consequences of a trade war with china that'll have effects for a broad variety of u.s. business and markets. >> if they don't come on the table, i am just saying ten ace nice warning shot. you have to understand that they don't spend enough and we spend a lot. they have to stop this joint ventures and have to be able to say look we'll monitor steel they have to join. >> you think there could be an agreement on ip and joint

venture and shared technology without changes in the trade deficit. i think if you start getting some unemployment there. listen, we are not going to be hurt you don't say stuff like that unless you are going to be hurt. this is like j.p. morgan, if you have to explain why you don't need credit. you need credit. i think the chinese are playing dangerous game they need our market really badly and i can listen to jack ma we spend like crazy and getting our balance sheet for our consumers are the best again, i am just saying if you take it, you take it >> it is the time to do it >> now david coming around because of the land fall situation. >> we canda discuss landfill.

>> i cut myself with gillette. i live in two places one house i am completely unsus stainable, thank you, gillette >> when we come back, got a lot of corporate news to get to. fedex and oracle and the reviews are in for apple's new and higher price iphones we'll bring you details on that. futures have turned around this morning after the worse day for nasdaq since juliy. back in a moment at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated. & she can talk to him, & yes... atta, boy. some people assign genders to machines. and you can be sure you won't have any problems. except for the daily theft of your danish.

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fedex down to the premarket after a missed estimates the result were impacted by a move resulting pay raises following tax reform and then there is oracle shy of consensus jim. >> first, oracle, it is almost like they fear ellison

the company is aggressive and talking about how they're taking away shares and how they're ramping erp cloud. i thought the quarter were okay. the analysts all saying keep buying so stocks tend to come back i thought the call were remar y remarkably good. they decided to pay people more, they're sharing the wealth of employees which i like i think they're going to continue to take shares. i am surprised the stock that people are so willing to sell the stocks after i thought is a really strong call of how much ecommerce is it is the opposite of oracle in my opinion >> okay. >> taking shares from the likes of whom we had and obviously ups. friday taking share and let's

not forget they listen, tariffs are hurting business and europe and china are slowing. they are so on the case of winning commerce and amazon is a 2% climb they're bigger than amazon i wish they would tell us whether it is walmart. i like the call. >> walmart does get initiative and out performed. >> there was a downgrade last week i felt that the quarter was really great and the stock is going from 99 all the way down i think this is an opportunity to buy awalmart and it is behind most retailers it should be up like the others. there is a target about gross

margin problems even with their channels i guess i am bull issish than at of people. i just come out there and say a miss is a miss or a rose is a rose >> we are going to save it for the other block but amazon, some news from us about alexa products and studies about prime users being willing to use them as a banker. >> i think amazon, there is peace out today about how great amazon is doing. their web services can't be caught larry kudlow slams the heck out of amazon. amazon is down big this positive earnings per share

is meaningful. i like amazon and what they have to say i am not sure how you feel about it >> i have a lot of thoughts about amazon you did a documentary which talked about uniquely how little their people are facing. >> yeah. well, i mean in the areas where they pay the prevailing wage though and it may seem low in certain parts and others they are key providers of your jobs >> they added a lot more robotics in the warehouse. >> that's honeywell. >> we'll come back, we'll get cramer's mad dash and take another look of the premarket here on this tuesday morning busy day for trade "squawk on the street" back in a moment ♪

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nike after watching kaepernick's ad >> this is a survey done by people >> no, a machine you stun me. they reported of 9:25. that's the narrative that they'll talk about if you believe that when they do their concerference call, they' say we got a mix reaction. i think nike is an amazing company. >> no holdup no problem >> accessories are doing very well you know what's the hottest shoes in america >> i do not. >> vans. >> vans? >> you will see how big vans is. nike is going to have a very good quarter and people should stop fretting about colin kaepernick and pick him up in fantasy because he's going to

play >> no, he's not. >> maybe not josh gordon got picked up. >> what about devonte davis. >> you know his wife didn't know his wife was shocked >> all right, we got an opening bell coming up we got a lot more run and research to get to this morning and alibaba. i am never going to quit i am going to go right into the end until you put me in a landfill ♪ south l.a. is very medically underserved. when the old hospital closed people in the community lived with untreated health problems for years.

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has a worldwide product that has to make stuff in china i think the commitment by -- the commitment to build up a manufacturing fund that he created build up in the united states really fulfill what the president has asked which is to build things build things here that can help the company. they're playing ball they're the one that said okay, listen, we'll build in america and we'll get funds. any exemptions for them, you should buy the stock there is no doubt about it we'll look to see what goes up in price the american consumer is going to try to shift. >> i think it is going to hurt retails are on fire. walmart will absorb some of these costs. that's what you need to focus on that means retail will be a

little more elevated when you spoke about the transition of the last hour you are looking at a reset here on stocks >> if you own a lot of retail, they'll have to take some things i think the best will be concentrated and some of these companies are going to eat those costs. they'll lose too many sales. that's what i am worried about i think they can pass it on because they have very well decline. what a remarkable retailer and they source everywhere they are quickly switching so they don't have to raise the price six bucks. >> retailers have been vocal at the big board, it is fidelity

investment and prospanica, advocating for hispanics and business and professionals we are watching all of that and the other big name is autozone and general mills. both missed on revenue actually. >> yeah, i keep hoping that general mills raised a billion dollars to do blue buffalo after selling -- they bought stock high and they sold low and they did not get the margin expansion that we have seen from some of the good foodcompanies and the did not give you the organic growth it is interesting. kellogg did better than general mills. general mills should have been a break out quarter. it really was not. autozone brought back a huge amount of stock and suddenly we decided we want advance

autoparts. i have to tell you autozone is going to be -- they bought stock in the 600s. you think they're not going to be back there buying more? think about this 2.2% growth. they bought $665 million, average price of 23. that's well below from where it is now they have a million dollar stock left to buy. so you end up and you look at the flow you will end up selling your stock to the company which i never wanted the do. selling it right to the company. this is a strong company i think that stock is down on 48,000 shares. fer forget it. i like autozone very much, the average cars of 11.5 years >> we have not discussed

florence today the death toll is up to 31 some of the reasons why autos are so hard because of harvey. autos you get insurance and you get the money. you be i nuy new cars. it is hard to fix new cars autozone is going to get a lot of business and lowe's is the company that's most -- >> obviously >> we understand >> selling autozone here is a mistake given harvey i think that we have to start focusing on whether autos are going to do better because of harvey because they did before the trails are definitely going to do better >> unp is the leader that morning. why is that? >> they did what we call >> let's get the right name. they did psr which is position

by scale roading and do it by the train and not the car. i had lance fritsch recently lance fritsch is a very smart man. they doing this, they're going to do what csx did i really like this i don't think the stocks are up enough >> okay. i am trying to do some reporting here >> sorry >> i am sorry, i am just kind of meandering and following fantasy football >> i am going to interview adam. >> i am engaged. this person can't talk to me right now. >> north and southern, i think they're going to do the same thing. i think we'll wait a couple of days and realize how big the storm was for housing, and the economy. we just have not figured it out

yet. >> con stessa brewer says some these rivers are not expected to crest until saturday and not to mention the costs and the calculations on farms it will take months before they realize what they lost in crops. >> that means insurance check. that's the first big catastrophic they have been terrific for the company and checks go out and things are bought. rebuild has to happen instantly. the mold means you have to do dry walls and you have to go to home depot and lowe's. the molds will explode and your house is furry that's philadelphia talk for furry -- >> furry >> covered in molds. >> horrible. >> guys, take a look at shares of athena's health this morning.

down at 11%. it is not a near postal story indicating that the potential sale of the company and strategic options being reviewed you got center view and not going particularly well. i am kind of hearing a bit of a different story there. >> you are >> people are focused on sort of that and that would seem and that's why you see the stock suddenly coming back now as i just said that > >> wow >> i am hearing lace strategic was added and they did push back sort of the date to 27th that was not the result of a fail but more result frankly of lace strategic partnering with pe that came into the process, unclear where that goes, i am not getting a great sense at

this point but did think it was worth sharing and it does appear to be a broken process at this point. you still got eliot for us and at least have one other p and another strategic buyer that is partnering with pe that came in late and they wanted to give them more time >> you are saying it may not be accurate in. >> the stock just came back from 11% to 4%. >> interesting >> i think fedex is down too much i think autozone is down too much and now you put on -- wow >> i heard that story and i was going to come to you, wow, i just walked away >> it does not appear that this process is over. it is a company that got rid of their ceo not that long ago. >> i think it is an amazing company. i always felt that they have the data to be able to change the healthcare system. when you talk to jonathan you

shall b bush you never want to go there >> he's a really interesting man. >> i will reengage in that and see if i can buy more details. >> we have not mentioned cigna's expressed script and getting approval and what it means for aetna, cbs, right? >> yes, i felt it was a fabulous deal for cigna i was very alone i thought they needed to do this to compete with unh. i think mr. cardoni is really fabulous he came on "mad money" in a segment of why he needed to do this humana is terrific and united

health pretty nhca. >> that's hospital >> david, cordoni is really a smart man. he knew what he had to do. cbs knew they could not sit there and get the heck kicked out by amazon. i think it is a shrew move >> understood. >> reviews for the new iphones are out. usa today says they are the best iphones ever made. the journal says sit tight for the 10 r cnn says the phones are a notch above iphone 10. preorders for a lot of those on friday and will get to deliver it soon.

>> i love usa today. we are actually talking about the phones making money and not just the reserve new revenue or. when i hear all these ones are good, it makes me want to go to a store, verizon. >> as they are included in this exemption for watches. >> wow >> interesting mr. cook was able to -- doing air pods as well

>> mr. cook is sponsoring the most manufactured in this country by doing the manufacturing funds that never gets talked about where people building plants in order to supply i think he's going everything that the president could ever want and therefore he gets the exemption. it does matte. >> are you making fun of me behind my back >> no. are you doing this >> i am trying to listen to you and report more on this athena thing of the attacks and e-mails and phone calls that are not happening. >> he's busy at things >> i do, i need an apple watch i need an apple watch. >> call me on this >> i use it all the time just really quick to come back to it. the process was not extended until the 27th.

the process has extended for athena they have not made a bid as of yet. that's what's going on here. sort of what i am hearing with people familiar with the process who are combatting with the story from the new york post that indicated that otherwise. >> that's extraordinary. eliot and others are still doin work as well they have not walked away at eliot either it is also what i am hearing >> wonders of texts and e-mails is not the way i like to report however. i still prefer talking on my watch, hello, what's going on? >> david, pay attention to the show >> jim, it does not work >> this thing does not work. >> it do-- he does not have the new one, the fourth generation

let's get to bob pisani on the floor. >> good morning guys a nice open here, let's take a look at the sector and here is a surprise stuff that goes down on china tariffs news very well hey, we are up good heavens, it normally goes down on negative tariffs news. banks, don't get me started on the banks. they're awful. why are we moving up there is a couple of reasons number two, small parts of the economy, you hear about these exemptions and guys talking about it china's markets are up look at nchieana over night. we have the nikkei up and hong kong is up i would be careful assuming none of this matter, it does matter there is a lot of talk of new

stimulus program that china is going through. if you pick through what's been moving in chiena moving over night. china state construction company and railway was up 7%. all the steel company who are 5% or 6% or 7%, this is on stimulus some of it is to avoid a shut down in china to combat some of the negative effects of the trade issues overall we have to talk about what kind of trade war we are in right now. i hope you all watched jack ma at to top. we ransom sound from him a trade wall that could last two decades. and productions heelsewhere cou avoid tariffs. this is the fourth month in a row, of the biggest threat to global growth is the trade war china's slowing down, it is

almost up there. 18% and quantitative tighten the trade war is showing up in ceo commentary, our kourtney reagan talked to macy's ceo. he came out and said we do expect morte tariffs and it wil affect department stores because the apparel pieces will go apart of it. we have been looking at our own private brands and we are prepared for this. this is a variation of what jack ma was saying meaning their own private brands -- where are we right now and what does it mean for the u.s. market? we have done really well and the transports are doing well and industrials and machinery stocks are doing well and healthcare which is not directly affected by these power talks

it is outstanding and one of the main reasons at s&p is near a new high the semiconductors and clearly out of favor and our bank stocks, i have been emphasizing. this is just a mess this that's the major problem the mar markets have got we have seen these days after days in most of these stocks the railroad further limited group right now. up 96 points on the dow. carl, back to you. >> thanks, let's get to the bond pit as well. rick santelli. good morning, rick >> good morning carl mar markets are pretty smart i am not saying it is not important news the most part, the market's scenic was kind of yesterday's news there is a little bit of a benefit of the 25% tariffs going into effect on monday on the

24th a portion of that is only 10%. in a way, the market sees something a little different in a better way yesterday that was reflected in the asian markets. if you look at one week of twos or one week of tens, it is covering under 280 10-yr are continuing to build. technically we have not closed on the north side of 3%. yesterday and today we are flirting above 3%. of course i am just splitting hairs. the market is firm and we know next week, well, we have fed meetings coming up soon and most likely we'll result in a tightening if you think of the barometer of the income markets, you can look at the securities and relationships, look at barkl barkley's, these spreads are not widening there is not a nervousness in the fit income market. italian yields are coming down a

little bit closer to two or three quarters and 3%. here is the areas where we are supposed to pay attention to shanghai composite chinese market over lays with the dollar yuan that currency chart there is the in verse that's the dollar and finally there is the dollar index from early july and continues to hover near the lows from the last week of july. doug holtz-eakin at 10: 30, so much to talk about back to you. >> we mentioned unp among those getting a lift as the dow is up almost 92. back in a moment

plans to fly around the moon

currently scheduled for 2023 musk says the tycoon, quote, brave to do this and musk also talked to competitio competition. >> it would be great, really good at making airplanes maybe they can be really good at making rockets, too. >> we have actual people signing up. >> yeah, and boeing is going toe to toe with musk doesn't tweet that much but watch out. boeing is very competitive doesn't like -- a little bit of a rivalry there between those two. >> notice the boring company, cheap shot at boeing. >> i remember when dennis bloomberg sat in this chair and was saying don't worry about space. >> he is coming around, step by step, inch by inch, solely david

faber falls. >> we'll get stock trading with jim in a minute. dow is up 79 (danny dichter) in 1989, a new wireless technology was being tested for the first time ever. it allowed more users to connect at the same time while on the move. other wireless carriers considered the tech too expensive, but we saw it as the birth of reliability and the backbone of a company we all know as verizon. so we were the first to commit to the cdma system and the first to build our entire network around it. today, once again, we're transforming reliability as we know it, building america's first and only 5g ultra wideband network-- with unprecedented capacity, enabling faster speeds and the lowest latency anyone has ever experienced on a wireless network. which is crucial, because we'll be relying on it more than ever. (man) it's really quite impressive, uh, what y'all have put together here to, uh,

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let's get to jim and stock

trading. >> there was an incredibly negative piece this morning on facebook, talking about how they would have to spend more money, numbers they cut are really drastic and the stock is knock not down it was down when the day started. it's remarkable that this stock could go up. it's one of the weakest stocks in the market. i think it says that there are finally buyers coming out of the woodwork the stock is creating a bit of a value play, 20 times earnings, and i think it's worth focusing on, even if it's just because it's been so horrendous. >> what's on "mad" tonight, jim? >> i have square, sarah friar. >> one of your favorite. >> remarkable. >> david, i know you're on the phone but i have brendan kennedy

from tilray, david. >> if he were available, he would be impressed. >> let me give david a call. that's how you get ahold of david. david. just a sec call david faber he'll find out carl, we don't know what's happening. >> i know but tilray is up 14% in the meantime. >> bit of a short squeeze. >> yeah. >> jim, that's the show. can't wait for tonight "mad money" 6:00 p.m. eastern time much more onthe tariff battle between china and the u.s. ge vice chair beth comstock. dow is up 85 really want to be there, but you can't. at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems and technologies.

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than any other center in the nation. find out more and get out of line today. welcome back to "squawk on the street." i'm diane oelik. the street was expecting a one-point drop home builder sentiment is up from 64 a year ago the survey was conducted just as the threat of new tariffs on chinese products was rising. that concern is now a reality and has builders faced with even higher costs of the 5700

products listed in the latest tariffs from the trump administration, preliminary look found about 600 products connected to home construction or tools used to build apartments or homes, representing $10 billion in goods, which puts a $1 billion tariff on housing. this includes appliances and other kinds of home furnishing products of the indexes three components, home sales rose, component gauging increased to 74 and buyer traffic was unchanged at 49, the only component still in negative territory all these numbers right now on cnbc.com carl >> interesting numbers there, diana. thank you very much. good tuesday morning i'm carl quintanilla with sarah eisen and david faber. the dow was up 100 points but now up 52, tensions deepening between the u.s. and china. >> road map for the hour starts there.

the trade war escalates. china strikes back, announcing it is implementing $60 billion tariffs on u.s. products we've got the details. >> aftermath of florence death toll continues to rise in the wake of the hurricane. plus ge vice chair beth comstock is out with a new book, we'll get her take on globalization, the trade war and a lot more. first, though, escalating u.s./china trade tensions this morning, chinaa is expected to retaliate when the u.s. slaps billions of tariffs on products next week. apple ceo tim cook speaking out on tariffs today and commerce secretary wilbur ross. >> we're trying to do things that are the least intrusive on the consumer there was no particular need to do smart watches at this time, to do bluetooth or any things like that.

we really went item by item, trying to figure out what would accomplish the punitive purpose on china and yet with the least disruption in the u.s. >> i'm optimistic, because trade is one of those things where it's not a zero sum game you and i can trade something and we can both win. and so i'm optimistic that the two countries will sort this out and life will go on. >> you'll hear what jack ma had to say about the trade war in a moment joining us now, wells fargo strategy tracy mcmillan and former assistant treasury secretary and former white house deputy press secretary tony frado. do you share tim cook's optimism on trade >> i don't, actually it was interesting to hear him say that i agree with tim that trade is win/win. if you look at these relationships objectively, we should try to settle this easily so that we both can win.

i think the administration sees trade as a win/lose proposition, where we need to win and china needs to lose, or any of our other trading partners need to lose that's why i'm not optimistic. i think it will get a lot worse before it gets better. >> what does china do next, tony >> imposes tariffs we're on the next step where, you know, the administration said they would go to phase three if china retaliated. china retaliated i assume we're going to phase three now. >> so, tracy, explain the market moves today. you might have thought the day after the trump administration announces tariffs on $200 billion worth of chinese imports, you might see a negative reaction in the markets. i mean, to be fair, this was pretty well telegraphed and expected but how do you make sense of some of the action nasdaq is up now .7%. >> sure, so, yes, it was telegraphed pretty well. and i think the markets did expect this increase, the

escalation in tariffs with china. and what we are seeing this morning is actually a rise in the u.s. markets maybe that's because market participants expect this increased pressure to bring the two parties together more quickly, and that could lead to a faster resolution. we're not so sure that that's necessarily the case we do think this will be a long, drawn-out, complicated process of getting some kind of resolution here with china. >> so, you're saying that the market is viewing this as just a negotiating tactic to bring china to the table and get the demands that the u.s. wants? >> actually, wilbur ross said as much in your interview with him this morning he said tariffs are not the end game the end game here is actually getting some resolution to some longstanding issues, such as technology transfer, intellectual property rights and some of the subsidies that china

affords industries within its borders. >> tony, is that going to work i mean, the administration hasn't exactly laid out what they would like to see to remove the tariffs. so i wonder if the market has this right. >> yeah. well, i don't think the market does have it right, because those things that were just mentioned, those are the things -- they were on the table when i sat in bilateral meetings with the chinese 15 years ago. they were exactly the same issues and are very hard to quantify to get, you know, a real agreement on. that's why i do think those kinds of negotiations will take a long time. if china said tomorrow, look, we've got you. we'll take care of intellectual property and technology transfer, then how would they prove it in a way that the americans would take off the tariffs and, by the way, make some gives on their end also the chinese have some asks here as well on things like investing

in the united states in export control. these are very complex negotiations these are the two largest national economies in the world and a relationship is very complex. this is not going to be settled easily. >> tony, that's -- part of the puzzle here is understanding what would delineate success what if we got an agreement on forced and i.t. theft and yet agree that the trade deficit is what it is >> the trade deficit is what it is carl, you're right those things are not going to affect the trade deficit very much they may have the opposite effect of increasing the trade deficit because american firms will be more inclined to go and build things in china if they knew that they had certainty on the ip and their ability to run a business without having to do a jv so, you know, it's hard to know where the administration really wants this to go even in the case of saying that they know there will be leakage that firms could source these

things elsewhere if they're going to source them elsewhere, we still have a global trade deficit that's not being approved i don't think the trade deficit is a problem, but they seem to and this isn't going to solve it. >> so, tracy, what's the upshot what are you telling your clients in terms of making any portfolio moves, exposure to stocks versus bonds, get away from certain industries as we see this escalation continue >> yeah. so we actually favor stocks over bonds at this point. and we do see some upside in the large cap stocks in the u.s. through the end of the year. couple more percentage points probably probably see most of the gain for this year in u.s. stocks, but one area where we do see some value is in emerging markets. we feel like they've born the brunt of this trade negotiation so far and the valuations there look really attractive on price to cash flow basis, for example the u.s. at 14 times, emerging

markets at seven times that's an historically wide gap there. we also think, you know, should we see any progress in these trade talks with china that sentiment toward emerging markets could also change. that could be a near return catalyst. >> especially also if we see chinese stimulus, some of the chatter around there as well guys, thank you. tracy and tony on trade, with the dow up 25 points. >> we are continuing to follow the latest on the aftermath of hurricane florence, the death toll now at 31, as flooding becomes a major issue for parts of the carolina coast. contessa brewer once again is live for us this time in fayetteville, north carolina good morning, contessa. >> hi there, carl. yeah, i'm standing on the bridge, overlookingcape fear river. this is the persons bridge you can see that the csx rail line crossing the river is impassable at this point the trains are parked in town on

another rail line and all that debris -- we've been watching massive tree trunks go up and hit this log jam right up against the tressle. take a look over here. you can see the white post -- this would normally be the street sign or the street light over the walkway near the river. instead not only is there no walkway, but the light post itself is being subsumed by water. it's expected to crest tonight, wednesday night. it's expected to crest 62. flood stage, guys, 32 feet fayetteville, even though the power is back on in some places, we started seeing businesses open, people were sitting outside at a cafe in historic downtown fayetteville and yet this town is still in danger of flooding and we're seeing that across the southern part of north carolina, the northern part of south carolina and the threat doesn't really subside

until this weekend. >> contessa, you were talking earlier this morning about the rail lines csx in particular, where on those river crossings, they have been washed away and there have been serious derailments. >> that's right. in fact, we have some incredible pictures overhead of the derailment that were given to us by a guy that flies a drone for the fun of it. csx said their first concern was the safety of their staff and the surrounding community because that train was carrying you can see how dangerous it is for the rail lines to keep running. by the way, i should mention amtrak also seeing serious disruptions to service on all of its lines south of north carolina amtrak passengers experiencing real delays, to say nothing of norfolk southern and csx trying to move commerce and commodities around, carl. >> contessa brewer, who has done a remarkable job, showing us all different parts of the affected area we'll come back later today,

contessa brewer. >> okay. former vice chair of general electric, beth comstock, is out with a new book. we'll discuss the escalating trade war and what it could mean for consumers and corporations. a polaris plant in the u.s. nearly at capacity will steel, aluminum and other tariffs put its sales and jobs at risk? we'll take you there live with sully.

welcome back to "squawk on

the street." we're staying with the escalating trade war one company that could get hit hard with tariffs is polaris with more on that story from huntsville, brian sullivan good morning. >> reporter: do appreciate that. good morning this is based in minneapolis manufacturing in more than ten states, u.s. workers building products in the united states. 80% of their sales are in the united states and most of it is done here with american-made steel and aluminum but not all parts, of course, can be made in the united states there are certain things, parts that just aren't made here at all. i think this is the most important part of the story. even if you have a part like this, which is made in the united states, the costs have gone up. that's because as ceo scott wine explained to us on cnbc, once the tariffs hit, even domestic

manufacturers said guess what, they're going to raise their prices liste listen. >> domestic suppliers had the opportunity, producers, to pass on cost increases or price increases that they hadn't been able to get to some time we saw almost an immediate increase in our steel and aluminum costs even though we were buying it domestically. >> there you go. you're doing what the white house wants you to do to build these rangers, you're still facing an increased cost it means if your competition is in japan, buying parts from mexico, they don't have any tariffs or increased cost which means their product can go on the market cheaper if that happens, sales could decline. you have over 1,000 men and women working at this plant in huntsville who rely on this to make a living. i think that polaris just highlighting the fact that they

want to do the right thing, make it in america with american products even outside the tariff zone, there are still cost increases, guys, that they've got to deal with which means if you want to buy one of these, you have to deal with it as well. >> brian, does polaris get any benefit or have they seen any sales impact from the president railing against their competitor, harley davidson? >> reporter: not yet sales have been growing because they came off 0% market share because of a relatively new brand. no distinct increase yet because of that. polaris and scott wein are very aware of what happened to harley davidson they came out and made comments that the president didn't like and he kind of went after harley we know that saga. polaris is saying things are good, we're making things in

america with americans with american-made parts but that does not exempt us from higher prices indirectly. call it a second tier or second derivitive they understand there will be trade negotiations done, guys. they want those things to be done, as he said, very quickly just get it done so we can go back to business, making cool things that we all want to buy morgan, i know you know, because you get to ride all this fun stuff and they can't wait to see you in medina, minnesota, soon. >> it's sarah, but i'll tell morgan that. >> reporter: apologize, sarah. no output. >> no problem. raising prices, they're passing it along to the consumer or they're taking the hit >> reporter: a little bit. on both sides. little bit of a hit to gross margin but they're able right now because of the strong economy, sarah, to raise prices as well. now, when things are really good and interest rates are low,

because some of these products, these rangers that this will be finished up today, over $20,000 if your financing it, you can afford it if the economy -- sorry, kristen, if the economy is good. the economy won't be this strong forever. they're able to pass through slight increases we'll see if that's something they can continue as well and, sarah, sorry i didn't ask about currencies next time i promise. i will. >> it's okay brian sullivan, thank you very much. >> reporter: thanks. >> at that polaris plant in alabama. beth comstock out with a new book what she has to say about the state of globalize ai, big business her long-time spent at ge. "squawk on the street" with the dow up 75.

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what laws were broken? >> well, people lost their homes. people -- the banks took all these risk. >> what laws were broken >> i guess, you know, it's

being, in some cases, reckless or stupid. >> who was reckless and stupid was the waitress in las vegas, who had six houses leveraged at 100% with no income, was she reckless and stupid or was the bank reckless and stupid i'm not defending either, by the way. >> yeah, yeah. >> i'm saying the bankers should have done more due diligence or was the appraiser who appraised the house at the last sale because the last sale took place at 50% more than the prior sale who broke the law? >> all right that was former economic national counselor gary cohn, commenting on the financial crisis ten years later banks have been hit hard in recent days. joining us for a closer look, ron kruszewski

do you agree with cohn, blaming the banks? >> what the american public is upset about is that the banks got bailed out and they didn't we're ten years by that, but we can't forget that there was a lot of economic pain. >> what about banks right now? valuations have lagged during the course of a nearly ten-year rally that we've seen on wall street how do the valuations look >> you have a yield curve that's flattening on one hand you have words in the bank that are deposit betas. that will no longer drive earnings and loans are tepid, couple that with increasing capital and banks are treading water at best, certainly lagging. >> there's a piece about mortgage standards because applications have been so week, maybe they start easing them to get more customers are we approaching anything regarding or resembling danger

>> i don't see that. i don't see anywhere near the housing bubble that we saw in 2007 or the instruments that helped increase leverage in that secto sector. >> a number of banking executives, the consumer has never been healthier from their perspective as they look across the board at their different connections. do you see that as well at stifel >> we do as we sit here today, we can talk about lions, tigers and bears. the fact of the matter is that the economy is very strong today. when you look forward the next couple of years with all the stimulus, fiscal stimulus and all of that, i see the economy on very solid footing, which is probably why we're negotiating trade today. >> because if not now when, is that your point? >> yeah. look, everyone is getting all upset about the china trade. we treat china as an emerging

economy. we need to renegotiate our trade policies with china and what better time than now >> but that -- i mean, some people would agree with that, but say this tactic of imposing tariffs, is there any historical example where it actually worked >> well, i'm not sure what the tactics are and how we're going to get there many would argue the tactics of nice diplomacy for years and years and years hasn't worked either i can tell you one thing, larry kudlow is a smart guy and i know he doesn't like trade -- >> tariffs. >> tariffs at all. i think this is negotiating. look what happened with nafta? all kinds of bluff and thing and what happened with nafta is a balanced deal. >> that wasn't done yet. still waiting for canada to come around you think it is? >> well, with mexico, yeah. >> trade negotiations continue today back in washington so you're optimistic about president trump's renegotiation of trade deals >> i am.

i think that we need to do it. i think the tactics -- i don't always agree with the tactics or the tweets often, but i think the basic business aspect of renegotiating with china when we're at low employment and strong economic and they're facing more of a recession, and we need to -- ten years from now, we have better have retraded -- redone our trade agreement because china is a growing economic power and their trade practices with the united states today are unfair to the united states. >> a lot of people sympathize with you, but jack ma, alibaba said today that this trade war could go on, what, 20 years? >> jack ma is talking his own book, too, okay? >> his leader's book zblor. >> or the government. >> cannabis, bitcoin, these pockets of success some argue we've seen the past year, is that signs of actual new market being created and the market

responding >> i think it's both, okay on one hand, it's hard to talk about cannabis on national television. >> we're getting used to it. >> we are getting used to it and that's probably a market and a market that will develop, subject to laws and social and all of that. bitcoin, people confuse bitcoin with black chain i will tell you, i personally think -- i'm going to get all kind of how stupid i am tweets but bitcoin alone is not something i would be throwing a lot of money at. >> because >> i think that without -- in today's markets without a sovereign backing, without an ability to understand and have some sovereign control behind a currency like this, it is hugely risky and money is going to be lost. >> all right, ron. thanks for weighing in more now on the financial crisis, bitcoin. >> a lot of things were born out of the financial -- including my

company. >> ron kruszewski, from stifel >> retaliatory tariffs on the u.s. we'll take you live to beijing and get the latest from there. former vice chair of general electric, beth comstock, will weigh in on global trade nsnsnd lot more. "squawk on the street" will be right back (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school.

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i'm sue herera here is your cnbc news update. china says they will retaliate against tariffs. we'll have a live report for you from beijing in a few minutes. south korean president moon jae-in greeted by north korean

leader kim jong-un in pyongyang as they hold their third summit of the year. talks to focus on how to achieve denuclearization on the korean peninsula. russia's defense ministry says a russian reconnaissance aircraft was brought down by a syrian missile killing all 14 people on board, blaming israel for the crash, saying the plane was caught in the crossfire as four israeli fighters attacked tarrings in syria. space-x has signed the world's first paying passenger to fly around the moon he is the founder of japan's zozo clothing company. he reserved the trip for a group of artists to travel with him for free in the year 2023. you're up-to-date. i'll send it back down to you guys sarah, back to you. >> sue herera, thank you welcome back to "squawk on the street."

i'm sarah ize eisen live with cl quintanilla and david faber. china has fired back, announcing new retaliatory tariffs worth $60 billion of u.s. exports. eunice yoon is live with us from beijing with the latest. eunice >> reporter: thank you, sarah. china has made good on its promise to hit the u.s. back with tariffs $60 million worth of american goods, expected to kick in one minute after the u.s.'s on september 24th the number of items hasn't changed from the original list but the rates are lower in the range of 5 to 10%, to match the u.s.'s items that were supposed to be hit with a 25% tariff, such as lng, will be hit with a 10% tariff china did say if the u.s. raises its taxes to 25% that china would match those rates.

often the list, small aircraft, wheat and lng. saying this is a forced response to u.s. unilateralism and trade protectionism. chien wra hopes that the u.s. will stop trade frictions. there's been speculation that the move by trump would kill off planned negotiations in washington the man who was supposed to go to d.c. was the vice premier he is the point person for dealing with u.s. trade issues for china. however, what the widespread belief here is, is that the latest move by trump has made it so politically difficult for him to go to washington, meet with the u.s. treasury secretary as he had planned because of that now, we're starting to see "the wall street journal" reporting this morning that the chinese delegation has been downgraded, or at least the chinese are considering sending the vice commerce minister now, as he has been there a couple of

weeks ago. guys >> we'll continue to watch how that political theater plays out. thank you, eunice. eunice yoon. joining us at post nine, a treat for us, former ge vice chair beth comstock out with a new book called "imagine it forward: courage, creativity and power of change. congratulations on the book. >> thanks. >> to hop on to eunice's point, how do we read how the chinese are going to play this >> they've been known as playing the long game. anyone in business who deals with china knows they're five steps ahead usually in thinking forward what their plays are, very strategic, willing to be patient. i think we need to think about that. >> and high tolerance for pain shanghai down, gdp slowing >> things have gotten more complicated. their economy, their consumers like the life that they have that may be a different factor with what's happening now. i do think we ought to assume

they're able to deal with the long term in a way that few countries are. >> when jack ma suggests this could go 20 years, does that sound ridiculous or not? >> at what level, at what intensity? it seems hard to imagine you would have that intensity for 20 years but what does that mean? we've entered a new arena with how we think about the complexity of trade. >> how would you evaluate company's response to all this it's happened quickly in the past year. >> companies are getting in there. i thought it was interesting you had tim cook's comments earlier. you look at a company like apple, ge, the company i worked for. you have interests in both places and you need to see this resolved to some way i think it's been interesting that tim has been out there, trying to get in the middle of it i don't know if business says tim, you're our guy, we're going to have you represent us, or more business leaders step forward. i imagine we'll see more of that. >> you're on the nike board. >> i am. >> with tim.

you know him pretty well. >> i do. >> how has nike responded? >> nike is doing quite well in china. every company has had to find their way to be local in the country, like china, and global at the same time and nike has done that well. so, it's hard to pick a path when you're trying to be both global and local. >> to the point of your book, one of the main messages that you're trying to communicate about business and leadership is it's worth taking risks. >> it is worth taking risks. absolutely. >> is that how you see nike's new campaign around colin kaepernick >> i see it as part of the incredible knowledge of their consumers. they know their consumers. they know what's important their consumers want them to have a story, to stand for the story of the athletes and they know their consumer really well. >> did the kaepernick decision, the campaign, did that go to the board level? >> they certainly let us kno about it mark runs the company very well. he doesn't need board approval to run an ad. >> i just wondered if there was

discussion at the board level. >> they're always discussing things that they're doing with the campaigns and what they're doing. they're really good at it, so -- >> beth, the book is about embracing change and transformation in organization, certainly during the time you were at ge, that was the case. we both know a lot of shareholders, probably including you, i'm not sure -- >> i'm still a shareholder, yes. >> -- suffered as a result in part it's one thing to transform and another thing to actually do so. unfortunately, destroy value so how do you sort of switch off between the two? >> well, it's complex. i think that's the issue i mean, i am really sad about where ge is, certainly the perception of ge it's a great company i worked there pretty much my whole career nbc years and ge years as one company. and it's frustrating it is a good company what people have a hard time grasping is the complexity of transformation, a company of that scale think of what all ge had to go through, conglomerates falling

out of favor, the complexity of the company. it's hard to do the kind of core precision operations and reboot and replant the seed for the future you have to give ge credit for trying to do that. >> although some would say the focus on transformation may not have had enough focus on simple execution, particularly at one of the key businesses we know well, certainly oil and gas or the power business where things really went off the rails. >> well, you have to look at it, at a point in time -- i tend to advocate the future. some of these things, you need a longer term perspective. i remember when we started getting into clean energy, there was a lot of anxiety about that. and i think now ten years later, you have a hard time saying that wasn't what was needed we all worked together at nbc during the arrival of digitization ten years later, netflix, with an amazing position in the market, you would be hard-pressed ten years ago to say some of those moves were smart. >> true and it's hard to get an organization to change. >> it is.

>> certainly one that's been doing something the same way. >> it is. >> netflix exists in part because it started as a digital company and others were never able to make it work for them and today still we watch. >> i know. that was one of the reasons i felt the need to write my book, was to really try to open up the fact that it's really hard in established companies to change. cultures are slow to change. people are afraid. we're afraid of losing something, our job we're afraid of losing face. we're afraid of losing position, whatever and so people hang on to what they know. and if anything, i mean, you look at the ge situation and say could things have moved faster you bet. is it complex to keep the kind of short-term perspective and the long term together you bet. and you need to bring the culture along. and certain things could move faster. >> look at ge -- just to finish this, when you do look at what's happened there -- >> yes. >> $500 billion market value, down around $100 billion right now, what do you think what went wrong? >> i think there was a lot that went right in my time there, it was 6%

organic growth over the course of the tenure. take an industrial company, be able to drive new growth, globalization that happened. as i said earlier, there was a lot of complexity in cleaning it up and the conglomerate model that is no longer viable that's what you have to look at. we want simple answers in the era we live in. >> timing of the portfolio change, for all the criticism he got, his speech on globalization, may of '16, before the election. he was saying globalization was under attack. >> yeah. >> you're going to have to source locally everything companies are saying now. >> yeah. >> times ten. >> exactly. >> so do you think it was a strategic success but tactic al necessity? >> you have to be where the world is going i think it was a recognition

that the world was shifting, capabilities were shifting i think it's also just knowing what's happening in the market. >> you were the highest ranking female executive at ge do you think we have enough female representation at some of america's largest -- especially industrial companies >> no, and i don't think we have enough difference. what i was trying to do with my book was bring it back for making a case, difference, people who can think differently. they bring their gender, backgrounds and we tend to hire people like ourselves. that's a human flaw and companies have been perpetuating that we need more difference. >> yet so many female chief executives have recently departed big companies and have not reappointed female ceos. >> yeah. i can't attest to what they've done, but you have to look at the track record for most ceos hopefully, there is progress being made, seeing more women going on board it's still not enough. i think there are just some big issues, too.

in the company i worked for, great efforts early on in recruiting women, especially at the undergraduate level. as women advance through their careers it gets more complex, family issues, demands of jobs so it's not an easy answer i think more companies are willing to accept that, doing the workplace changes they need to have more flexible jobs to allow people to move at different paces. >> finally, to the degree that companies are able to pivot from within and change culture, how would you rank the u.s. versus, say, european or asian, big companies? >> big companies in general have a problem, right what we were talking about with david earlier, legacy, complexity, scale, all these things expectations of dramatic growth. european companies are older just because they're european. i have been intrigued at looking at companies in the u.s. like wa walmart, trying to reboot themselves being both digital and hysical.

we have to cheer on our companies, our older companies, because we need them to reinvent themselves it's harder for them. >> sounds like a great read. >> i look forward -- it's very personal you'll see i tried to share my personal story and make it for mid-career people, who we need in our organizations. we talk a lot about the leaders but we need people in the middle of the organization to embrace and push for change. >> great seeing you. >> really great seeing you guys. thank you. >> beth comstock the book is called "imagine it forward. it hits book stores today. >> today thank you. as we take you to break, look at general mills, big loser today, food company missing the street estimates for quarterly sales. it won't just take better profits for food companies these days big miss across snacks, yogurt brands the stock is down a little more than 7.5%. shares have fallen 25% this year "squawk on the street" will be right back

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in the largest ever stock trade.

welcome back to "squawk on the street." i would like to welcome my guest. thanks for joining me this morning. >> my pleasure. >> i listened to a wonderful interview with beth comstock she said china has always had the long game. can i infer from that that the u.s. has always had the short game when it comes to china? >> i think that is an issue, rick let's face it. we have presidential elections every four years president xi is president for life his capacity to wait and wait and wait is much greater than ours. >> yeah, no.

i think so, too. many are complimentary having a long-term plan especially in this country, everything is in the immediacy of the moment. we have brian sullivan at a polaris plant. prices are going up. didn't we learn during frac'ing that global marks set commodity prices should we be shocked by that >> we shouldn't be surprised by that you look at the big commodities, global conditions will dominate bilateral tariffs between the u.s. and china i don't think that's the big deal my bigger concern in terms of the fallout from the tariffs is on the investment plan with the u.s. we know we're seeing a big, by, big boost in investment. that's exactly what our economy needs. in the aftermath, first round of tariffs, we saw polling that said i'm not so sure we're going to go forward. another round like this makes you worry about that outlook for investment in the u.s. >> and everybody is worried. i certainly don't want to

diminish this topic, but the markets seem to be dealing with it i guess the biggest issue, and i'm going to cite "the new york times. they did an article in july that said that initially the cost for a middle-class, average family of tariffs tariffs is 127 a year. when it gets ramped up which it is doing now and knew this in july, it would ramp up to 270 a year contrast with tax policy institute's notion that the same average middle class family saves 930 on taxes do you agree with these numbers and what they say about this issue regarding cost to an average family >> i think the numbers are what they are the most important lesson that comes out of them is the tax bill and regulatory reform had an enormous positive impact on the economy. if that has outweighed the negative impact of tariffs so far, that's absolutely true. the most important number, how much do families benefit from rapid economic growth.

if we cut off the growth, what are they losing. that to me is what's at stake. >> i guess my point is i don't want to dismiss anything investors should be aware of in the windshield, but the point of the matter is we spend more time worrying about 127 and $270 being taken away, spend hardly any time on $930 added in. my final notion is in the end, doug, do you think if this gets resolved that collateral damage in the short term is worth the long run notion of being able to tackle china on firm ground when our economy is solid >> it is a big if. it gets resolved my concern is i don't know what that means this administration stands down, say they met our desires agree that they're participating in the global trading system, i don't know how that happens.

>> we are on a hard break. thanks for your thoughts. >> thank you, rick santelli. jon fortt has what's coming up on "squawk alley. >> the new iphones onset, are they any good? find out coming up op "squawk alley. -- on "squawk alley. now i'm thinking...i'd like to retire early. let's talk about this when we meet next week. edward jones came to manage a trillion dollars in assets under care by focusing our mind on whatever's on yours.

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welcome back to "squawk on the street." stocks near the best level of the day, s&p 500 up by a half percent. industrials part of the big move mostly railroad companies doing heavy lifting. shares of union pacific and csx and norfolk southern drive in that action. watch the locomotive type stocks back to you. >> thank you. kimball musk, brother of elon musk, joined cnbc on the closing bell we asked him about the going private tweet from his brother that rocked the company and its stock. have a listen to what he said. you are a board member, the symptom is down significantly. he said the company is going

private, funding secured do you wish he hadn't sent that tweet? >> my brother is working hard to do the right thing for the shareholders that would be up to my brother >> that would be up to my brother. if you're critical, tesla and the board, and have been raising corporate governance questions, you point to this interview. we pressed him on a number of topics, elon's behavior, what kind of advice he was giving, whether he was focused jussie lon jussie -- just elon is doing great. you can use that tom farley was on with us yesterday, criticizing the board for not acting fast enough to remove the tweet, to answer investors on the question of going private. he was tweeting out the interview, this is the problem. >> it is not a particularly strong board, not a lot of independent voices, and those on the board like james murdock my guess is wishes he probably had

never done it, but -- >> but he is there and you talk of lack of independence, close brother. another thing, new york state comp. comptroller. "squawk alley" is up next. don't go away. ♪

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