2019 "squawk box" begins right now. ♪ >> let's get a check on how we're setting up for this morning's session. after yesterday's attempted rally, we did close off the highs of the session we are looking at a slightly lower open s&p 500 looking to lose about four at the open dow looking to be down 21. nasdaq going to be off by about four and a half points overnight in asia, we did see a gain we did have some weak data when it comes to retail sales as well as industrial production for the months of april in china we have an up day. hang seng finished higher by half a percent.

>> the two-year note at 2.176% >> the ten-year hit a low sense october 2016 this morning. still just positive that german ten-year, but still china data, i would say, less than expected, but still showing that theme of china picking up again the retail sales were plus 7%. it was meant to be 8%.

>> came off the trough before we hit another 300 billion with 25 prz. then we'll see what happens. >> for sure. but ahead of that -- >> right >> but -- >> they're definitely -- i think that, you know, we're going to hear, in fact, this is pretty interesting. it's a blunt force, but it's all we got it's all we got. they can work in terms of prodding a country that needs to keep things going as they, you know, try to move into the 20121st century. it's not ease why i to move it a billion and a half people in terms of quality of life and frgs else.

so add manned, and these aren't too similar economies sort of trying to come to grips. these are die metrically opposed ways of approaching commerce one of them is not level and there are some problems we need to find brsh. >> it's going to be interesting to see >> are you surprised blankfine is on board for tariffs. >> why don't we find out what he had to say >> even the most free market types finally are thinking maybe it's time to -- >> you want to get -- >> we're talking about it. >> you want to let the viewers in on -- >> promos now. they can't wait now. they're calling people into the room >> at the edges of their seats >> okay. >> he was tweeting yesterday about the tariff debate. he said the following. tariffs might an effective negotiating tool saying it hurts us and misses the point.

china relies more on trade and loses more as a labor strike where management and workers both get hurt. the process may demonstrate relative strength and resolve where compromise needs to happen he then tweeted as to who ultimately bears the tariff costs, u.s. buyers may eventually switch their processes to domestic or nonconference companies and may more than now. chinese companies lose the revenues not great, but part of the process to ais either pressure to level the playing field. >> he hasn't been anti-tariff use before necessarily, but i was surprised by the extent of his support. >> yeah. >>we don't like tariffs.

>> but the ends justify the means. >> it's weird. we'll see how long it lasts. i think in the markets, i'm not sure it ends up hurting our economy to the extent where the markets really reflect 10% or 20% drop oom not sure even if we go to these -- >> to the 300 billion -- >> i'm still not sure that happens. if it did, and as we pointed out, there's an election here. there's no elections over there. he doesn't have the same -- >> the only time frame is november 2020. >> for us. >> exactly >> for this trade war because of our time frame politically >> i think the interesting thing is the way that the rhetoric this time around has picked up much more in china and a much more domestic nationalistic turn.

>> i hope we're not seeing ccp chinese communist party try to get the populists on board with something that is not going to really hurt the ccp.

they don't want to change it they don't want to change can it if the people end up suffering pain, it's like, okay, let them eat cake. we're 55,000 here per person that hasn't slowed down yet. thaetsd the question it will be discussing with bannon clearly he is going to be in support one would imagine if there's a stronger tone from trump towards china. i imagine you might be critical of why he ever softened it.

>> it was gak and forth. a little squabble yesterday is not a strong -- you know, it's a strong to weak strong to weak >> why didn't you start that earlier and maintain it? as you are pointing to it, it's a lot of back and forth. >> we talked about this already. let's get to eunice. china reporting weaker than expected retail sales numbers overnight. let's get to eunice for more on the impact of tariffs on regular people and china is here as well as businesses. good morning >> that's right. that's right it's evening here. it's evening here. where i'm coming to you today from a store for luckin coffee, which is a chinese start-up that's going to be debuting in the u.s. on friday, and this company is trying to capitalize on the fact that chinese consumers are just feeling a lot more price sensitive these days.

that just has been fueling a lot of fears that president trump's tariffs are going to hurt what people have been hoping for recovery in the second half of year they're going to have to come in the chiends government is going to have to come in, and, in fact, we heard president trump saw president trump's tweet overnight about how the chinese who probably have to stimulate the economy here, and, in fact, the foreign ministry weighed in on the trump administration's comments about the chinese

economy. just to maybe show -- give a sense of the sensitivity of the authorities here, there were a lot of people today on social media asking what the impact of a trade war would be on ordinary people, and the responses to that request were blocked. i think that that really does show that the government here is worried about how the public is going to respond when it comes to the possible impact of the trade war on them.

>> they're rising up in any way, and that's something that the authorities would be worried about. however, right now i don't think the temperature of ordinary people just like middle class people or farmers is at the level where there's going to be protests, where you could see unrest is in the export sector because there have been a lot of job losses in those sectors, and people have been complaining, and saying that there are measures that the government is taking to try to stabilize the sector or help certain companies, but that a lot of that -- those initiatives haven't really come to fruition, and they're not immediate enough that's something that the authorities here would be worried about. >> eunice yoon, talk to me about

luckin coffee. do they try to make sure their consumers know that they are a domestic brand compared to starbucks being an american brand, and has that picked up of late more than in the past? >> starbucks used to have a store in forbidden city, and then it was booted out this is a company that really wants to make sure that people know that it is a chinese company and in addition to that, it has been marketing a lot that it understands chinese consumers. especially young chinese really,

really well. that's one of the reasons i'm standing in this store because this is what they call a pick-up store, and it's essentially a coffee counter as poedsed to a cafe they say that starbucks focuses on the cafe, and the young chinese like to pick up their coffee and go and have deliveries you don't see any rash register in the store because luckin says, you know, who uses cash these days young chinese don't.

>> people like to have warm food and warm drinks. i'm not surprised by that. >> i'm surprised you said tiananmen. could we sit here and have a conversation about deenman and stay on the air? >> you know, i'm not in front of a monitor. i can't see what is happening and if we are getting sensored or not >> iefs surprised to hear you bring it up. >> it's possible if there were pictures -- we're not sensored, right? you and i are not sensored we can have a conversation about it it's just that chinese people might not see it.

>> the 50 start-ups with the best chance to up end multi-billion dollar industries. the cnbc disrepresenter 50 list will be unveiled next, and there are some eye-popping valuations and big implications for future big ipos as we head to break here's a look at the biggest premarket winners and losers in the dow. we're back in a couple of minutes. don't go anywhere.

>> number five, rent the runway continuing to transform the way women shop, dress, and now decorate their homes the five-time disrupter now is worth $1 billion with $1 11 million members. number four, drab. the southeast asian giant is expanding far beyond ride sharing. now a platform for everything related to transportation with partnerships with the likes of microsoft. expanding its reach into financial services and

insurance. sfb three, the am we company it rebranded from wework earlier this year as the co-working company pushes into apartments, hotels, and retail recently valued at $47 billion, the company took its first step to go public >> wework is always ready for an ipo. we will choose the right time to do it, when it's correct for the mission of the company >> number two, didi chuxing. didi offers a dozen transportation options to 550 million users around the world while it's big data arm called didi brain tackles traffic and lodge it'sics. >> and number one, indigo ag a 3.35 billion ag cultural check nolg start-up thattic manies microbiology with art firnl intelligence to improve yield, sustainability, and profit for growers of commodity crops like cotton and corner wrosh it connects growers and buyers, tracking indigo crops from seed

to table >> you have be to able to connect consumers and the buyers of that grain with the farmers that produce it. >> you can find our full list at cnbc.com/disrupters, and take a look at the rest of the top ten, including air bnb at number seven. it's making the list for the seventh time it's also the only silicon valley start-up in the top ten good rx and casper makes the list for the first time. same with the chinese social media and e-commerce platform that came in at number ten now, this is the fifrpt that more than half of the disrupter 50 list come from outside the silicon valley region and, if part, that's because we just saw so many ipos of some of the giants supper as lyft and uber >> and in terms of country representation to china, sort of pick up -- >> we had three companies coming from china we also will it coming from singapore. interesting diversity, and also diversity around the united states we had a number of companies in boston as well as chicago.

>> and julia, didi and we clearly are a lot bigger than indigo at number one what are the factors that get indigo to the top? >> we look at a number of different factors, including how fast these companies are growing, and we get data from these companies as well as from a number of outside sources. also, how big the market is that they're disrupting a range of quantity takive and kwaul takive metrics are all combined here as we calculate where they should fall on the list the ag tech industry is so massive and just at the beginning of disruption. >> we always talk about how all these companies are staying private longer and, therefore, the total amount of their valuations has risen compared to if we snap shotted this ten years ago. what are the trends over the last year or two >> we just had six of the last year disrupter 50 go public, and an additional two were purchased. you graduate from the list, and we are expecting a number of this year's list to go public. the next year they're about six that we think are likely to have an ipo, and that's in the next

12 months. scloo casper, peleton. air bnb, the we company. >> i -- >> it's -- because it will be the best deal of the century because it's virtually unused, people virtually unused, peloton. >> that's not true the handle bars, i've got some tee shirts hanging on drying on the handle bars. on the other side. i've got socks and things like that, says and then further down you can -- >> not only did you have to pay $2,000 for that clothes source, but have you to pay $40 a month as well to keep it >> that's one of the subscription things that you need to personally come in and say why are you still -- >> this -- i feel like you're unusual in this. a lot of people are very passionate about their pele diagnosis tons >> they're about to go public. >> anyone can use it i can't get anyone -- >> the music i love it. >> you use it? >> yeah. >> you do -- you don't -- you do the live classes or do you -- >> i don't do the live i do -- >> the people on tape saying

come on and playing -- >> you're one of them at home going, yeah. >> turn out -- >> he just watches this is a transformative technology for -- >> even if you don't use if, it's transformative to other people around you. anyway, thank you. >> i need a human being berating me >> someday, though -- doesn't that happen here >> it happens here, but i need a trainer. >> can you see the ceo of the top condition. i understand go ag david perry at 7:20 a.m. eastern time you'll see julia again as well >> coming up, a new ruling on uber with big potential implications for other big economy companies and workers. that story after the break then at the top of the hour, guest host will be "new york times" columnist tom friedman and former honeywell ceo larry bossiti. the markets and a lot more, and steve bannon will be on. -driverless cars... -all ground personnel... ...or trips to mars.

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welcome back u.s. labor agency out with a new memo that says uber drivers are contractors, not kbooemployees. the letter from the general counsel said they set their own owns, are free to work for uber's competitors, so they can't be considered employees under federal law. the memo is likely to carry significant weight in a pending case against the company and could prevent drivers from joining a union, although it won't affect scores of lawsuits claiming uber drivers should be completed as employees under federal and state wage laws. under the obama strais, the nlrb argued that many gig economy workers were misclassified as contractors. this is somewhat of an --

>> coming up, wake and bake. hot stocks on the move this morning. we had an -- reporting earnings last night, and we got stocks to watch next plus, the wild ride in the markets. we'll talk trade turmoil and the impact on stocks as we head to break, take a look at yesterday's s&p 500 winners and losers through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from using feedback to innovate... to introducing products faster... to managing website inventory...

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>> now down 45

s&p indicated down seven nasdaq down 13 seems like kind of a weak close yesterday. we were up over 300, and -- >> we had a lot of names that you would think would rally. granted, they were idiosyncratic stories. alphabet closed lower on the session by percent copper didn't rally. yields were still down it just wasn't very convincing in terms of indicators >> we still had 0.8% of gains for the dow and the s&p. so out of 11 sectors certainly not as bad as monday evens it posted a wider net loss the ceo expects high grade pot to continue to be an issue for

the next 18 to 24 months if you live long enough, just about anything could be in the teleprompter i never i went to school in colorado in boulder. i never thought i would be reading -- >> about cannabis. >> a teleprompter about the results for whether, you know, high grade pot is going to be tough to keep in stock. >> dheef kmus strategist for citi good morning to you. >> good to be sheer every here,

and we won't discuss roach clips. >> i've been -- your most recent note diving in on cap-ex spending intentions. what were the sectors that stood out to you >> the overall it data actually showed slight improvement from what we were seeing previously we do this every three months. really just drawing what the companies are indicating i'm going to take energy out, and we'll come back to that. up 6.6% for 2019 versus 2018 it's improvement from 6.1% three months ago and 4.2% six months ago. companies dwul have kind of indicated that they are going to pick up some of the capital spending consumer discretionary is the strong leader there. areas where we've seen weakness surprisingly i.t. has pulled back to attack hardware and semis. they've actually cut back some of the capital spending numbers. in semis, that's good news because it tends to draif chip

pricing higher and supports the stock prices. >> our biggest concern is late this year we could see pull-backs >> does this boston the economy in the quarter to come or the year to come or the stock market -- >> it should help us the next couple of quarters current quarter and the next quarter. i am concerned that because we have very tightening financial conditions in the fourth quarter last year that the markets pull back and spreads kind of wideern. there's a nine-month lag by the late third quarter into the fourth quarter we may have a wobble economically. >> switching to trade on may 7th, you wrote a deal is still very likely. is that still your view today? >> i think over time, yes. the president has shown in the past his willingness to do

tweets as a form of negotiating in the public spectrum >> there's a political element of both sides trying to show to their constituents and their population they're fighting for that every inch. if there is a deal we will be told it is the best deal ever. >> are you are you -- if you are expecting a wobble later on in the year economically, and right now we have the uncertainty of all the trade headlines, what do you do >> it's a tougher market two and a half, three weeks ago we put out a note about the complace ensy much the market, and we saw it in our model, proprietary models at 4.33, 4.38

we get there in september of last year, for instance. that will be really -- it's complace ensy, and you could hear it. people raising their targets you were seeing discussions about melt-ups in markets, and you have the whole tone of the market that was different three weeks ago. we raised that spectrum saying, hey, there's some risk in the vulnerability. now, we didn't expect if it was the transtory comments from the fed or the trade issues that would be the catalyst. our target is 28.50. we thought we would go above that earlier part of the year. >> year-end target is 28.50. >> we're not pounding bulls, sorry. >> with this weight i can't run that fast anyway the context of you don't really have the greatest setup. you did earlier in the year where sentiment was very depressed. where earnings could be beaten on the first and second quarter. now it's going to be a little bit tougher. it's more about trading within the market >> as always, thanks for joining us great to see you >> mu pleasure thanks >> a showdown. former white house advisor steve bannon face off against "new

york times" columnist tom friedman it's a debate you don't want to miss that's coming up in the next hour of "squawk box." [ slow dance music plays ] ♪ sfx: record scratch music (plays throughout): [ 'watch me walk' by spencer ludwig ] yo dj, can i put in a request? ♪ don't have no sass about this ♪ ♪ i'm on my way i'm on my way ♪ ♪ can't take no class about this ♪ ♪ i'm on my way i'm on my ♪ like this! ♪ this is a moment you plan for.

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>> there's a focus on pharma meg. >> good morning, joe it's a $40 billion business.

>> when you said wells fargo expects the revenue growth to pick up in 2020 is it because of the drugs that have launched and they expect them to hit peak sales or closer to peak sales. drugs like the drug that was recently approved? >> that one probably will take a little longer to get to peak sales. part of the issue with this year is that they're facing some patent expirations and biosimilar generic competitions. that's slowing tlingsz down. wells fargo expects that to clear out by 2020 and see more growth in some of the new drugs. after all the big media news, the top media squawk picks to watch, including this one, which is up more than 25% in 2019. as we head to break, a quick

check of what is happening in the european markets right now we've got the german dax down by .6%. stay tuned you're watching "squawk box. every day, visionaries are creating the future. so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.

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zplaerchlt use new deal being presented within the noisy sector our next guest sees some clear winners here to discuss is tony, director of research at smead capital management we get -- we're interested in this i'm looking at your notes, and i find myself -- i think we dwell on media a lot it's okay.

we're in the media the rest of the world cares. i think they do, don't they? >> absolutely. >> they're -- yeah they're popular investments, joe. >> like, if you come out of school, you don't want to be a steel analyst, i don't think, do you? i think a media analyst is, like, probably a consumer good it's just interesting. let's talk about your top three picks. our parent company is one of them let's start with another company that we know well. a ceo we know pretty well. you like discovery, and that's different than a lot of -- it's smaller and more niche and some news recently about discovery as well and golf. >> yeah. i mean, discovery, they like to talk about passion programming golf digest is just another one of those things you added in a portfolio where they can feed that cult base that they've got of viewers they've got the best portfolio of non-scripted television programming, right

they control and own their content. they don't have to pay highly paid actors and actresses out in hollywood. they've got one of the best margins of the business. they are use bik tus they can be anywhere they can distribute through anywhere, and so they're populated on most all the ott platforms out there. by the way, they traded something like 7 1/2 times forward earnings i understand you would rather be a media analyst than a steel analyst. there's not a lot of love for something like discovery, and you if look at the valuation multiples, it's very, very cheap. >> for one reason or another, did that big acquisition, but still not big enough to stay independent. >> we own it it's our top name in our portfolio. we would like to own it for a long time. we think that's the best way to compound money right now

you know, vertsds getting taken out. >> because you could -- well, if imauto going to say comcast, but you could substitute "squawk box" for dom cast here whether he says that comcast should be considered a consumer staple we can't live our lives without it it's the drug delivery system for all of the above, and its core cable business is growing and has pricing power. do you think i could put.

>> don't have a problem with that at all. >> look, it would go into a recession proof recession-proof you wanted to try to build one it is, it's the drug delivery system for all the stuff we're talking about. you know, especially as streaming turns on -- the ott platforms that are going to proliferate. you know, netflix has been a first mover. you know, congratulations to them but you know, there's a lot more that's going to get streamed as we go on here. and comcast with the rollout of 5g, they're going to be clear winners in that. you are not going to be able to live -- right now you can't live your life without having that as your main thing that you view your tablet through, your phone through, when you're at home, and certainly, your tv through, and everything on the internet so, at "squawk box," joe, it's a

staple, sure, absolutely there you go. >> i guess -- you know do you have nickels to say about comcast or should we move on we should move on to disney, if we must. no, disney is a great company, obviously, a great ceo it's been trading at all-time highs recently and up about 30% over the last year the one-year return which just trails comcast, in fact. but let's go ahead we have time let's talk disney. >> doesn't sound like you want to. >> no, i'm kidding we're frenemies. we're frenemies. >> and the deal that links disney and comcast -- >> and hulu, which you can talk about both with what happened, because i wish we could get a china deal like that that would look pretty good for both companies, didn't it? >> it looked -- yeah, it looked great for both companies so, disney -- look, they've been slower to build out their ott offering, right? but they're doing it and they're doing it successfully. and now with this deal where they own the operational control of hulu, they've got this

trifecta, right? i mean, espn plus, disney plus that's going to get rolled out for $6.99 a month starting i think in november, and then now hulu i mean, they're going to have massive inroads into your life, into the life of the onsumer the consumer seems to like the ott, the streaming media they're going to have it, right? and better yet, they have the content by which to populate the things you're going to watch through those chassis out there. so, no -- and comcast, we can talk about that, too, but comcast is going to win in this game as well we like them both. >> tony, quickly on comcast -- long term, is there ever a threat that cable gets hit because of ever-improving mobile technology >> well, you know, not any time soon they're increasing their mote. they're increasing their market share. they have pricing power. sure, 5g's going to be a thing, but as the bandwidth has

expanded, the demand for that and the ways that you can utilize that has increased exponentially. 5g's just going to be another story there, and we think 5g's going to be a very big thing we believe it's going to roll out faster than what some may assume michael frees, firm liberty, would tell you it's maybe three to five years, we're all going to have a 5g phone in our hand so that's a great story as well, but that doesn't mean that comcast is going to get marginalized by that you're still going to need that for everything you do in the places you live and outside of that. >> tony, your top three picks all sort of traditional media companies. does that mean you think netflix is overvalued? >> wow absolutely we do netflix -- look, in this hulu deal, they look to us like a sitting duck they were the first mover. they created a great, you know, widget out there that consumers like but this is -- you know, think about business 101, supply and demand the offerings, the choices

you're going to have available to you are proliferating as an example, the number one most-watched show on netflix is "the office. well, who owns that? it's nbcuniversal. you know, look what disney did three years ago with netflix they started tapering back on the content that they offer to netflix, and they've done so in a meaningful way over the last three years, and now they're going to have their own direct-to-consumer i don't know if i were nbcuniversal, wouldn't you do the same? wouldn't you peel back on the content that you have available to netflix out there "friends," i believe, is the number two most-watched show out there, and warner brothers is going to have their own direct-to-consumer as well so, content -- or sorry, netflix needs to keep on the treadmill of spending money and throwing money to hollywood to try to continue to have new content to maintain its subscriber base it does not sound like a great business model to me, and they burn cash each and every year. >> all right, tony, we're going to end it there. you're definitely coming back. i think i speak for all of us --

>> because he likes comcast. >> i didn't say that's why i just thought he was good. >> well, i'm just speaking -- >> that would be outlandish to be promoting as a homer? no wilf >> i was just going to say, it's funny, joe, that you want "squawk box" to be thought of as a consumer staple -- >> a luxury good >> a premium product. >> it's such a luxury -- >> like a handbag -- >> fast-growing luxury goods when we come back -- thank you, tony. and tony will be back. wilf, get ahead. >> a showdown you don't want to miss "the new york times" columnist tom friedman will be our guest host and we'll also be joined by former white house chief strattist steve bannon, talking trade markets and more

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plus, we'll be joined by former white house chief strategist steve bannon. plus, we head to the farm with the ceo of the top industry disruptor, indigo agriculture. how they're bringing machine learning and ai to the field. plus, a first on cnbc interview with j&j's alex gorsky "squawk box" starts right now. ♪ why can't we be friends, why can't we be friends ♪ >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ good morning, and welcome back to "squawk box" here on cnbc i'm joe kernen along with melissa lee and wilfred frost. in student dwroe for the hour, tom friedman, "the new york times" foreign affairs columnist and author u.s. equity futures at this time -- tom, it's good to have you. we'll have some time for stuff other than tiger i mean -- >> tiger and bubba

we're on the eve of something really important here, you know, so. >> how about moving -- but we digress. we do have some headlines, but just for a second while i've got you here, and something we definitely won't argue about, how we can stay on this subject -- how about moving the pga to right after the masters, and then tiger wins the masters, and it's at beth page, where tiger's already won a u.s. open there. suddenly, the pga is right up there. it's no longer 0.6 major it's like a full major. >> what's interesting, joe, he has not played since augusta i was sort of surprised by that, you know what i mean that he didn't throw in one there to sort of get tournament-ready but it's going to be fascinating to see, not that i doubt he's -- >> you know who says he's not scared, brooks and why would he be? what is he, 3 out of 6 or 3 out of 7 in the majors. >> and you watched him last week, i mean -- >> right then you've got everybody else by the way, folks, tom friedman, for being a representative of the common man, he's one of the

best golfers i've ever been around >> appreciate it. >> he's get some pretty nice memberships under his belt, too, that we won't talk about you agreed to come on. >> i agreed to come on, because i came to watch you talk to steve bannon this is a pay-per-view is this not a pay-per-view >> that's not me talking, it's you -- >> even better >> me and bannon finish each other's sentences. you're the one -- this is matter/antimatter. the universe might -- >> sorry about that. in the meantime, it's a busy morning for economic numbers we'll get april retail sales, expected to rise by 0.2% also out, the new york fed's empire state index, and homebuilder sentiment and builder. macy's is expected to report earnings of 35 cents a share and revenue of $5.5 billion. we'll have that news as soon as it's out and mcdonald's will let its franchise owners decide which

breakfast items to serve on an all-day basis. the design is meant to simplify operations and cut down on wait times. another escalation in this trade war. president trump leaning into his threat to slap even more tariffs on china and $325 billion worth of its products. he said he's looking at it and described the ongoing trade war as what he referred to as a little squabble. he's also projecting optimism, saying that the u.s. is winning. >> this has never happened to china before our economy is fantastic theirs is not so good. we've gone up trillions and trillions of dollars since the election they've gone way down since my election so, that's the way it is that's the way it stands we're going to do very well. >> all right, let's talk about the trade war with our special guest this morning, tom friedman is author of many books. what's your latest book, tom >> "thank you for being late: an

optimist guy thriving in the age of accelerations." >> what was the one before that? >> "that used to be us: america lost its way in the world we invented and how we can come back." >> how many do we need -- would the segment be over? >> the world is flat >> we can't -- >> we're good. we're good. >> so, when you sat down, as we agreed on golf, we also agreed that something needed to be done with china >> yeah. >> and of all the things that trump may have undertaken, this is one that you're friendly toward. >> yes, i am you know, joe, you and i can disagree whether donald trump is the american president that america deserves right now, but i am absolutely certain he's the american president that china deserves right now, because it needed someone who was going to actually take on the trade relationship between the two countries that was misaligned. how did it get misaligned? well, for so many years, when we bought their toys and solar panels, t-shirts and tennis shoes, they bought our soybeans and boeings.

and occasionally, it got out of whack and we would come to them and they'd buy more boeings and soybeans, you know two fundamental things have happened today, joe, that i think have changed this equation one is they are now competing head to head with our most cutting-edge companies so, china 2025 is not about soybeans -- it's about artificial intelligence, new materials, aerospace, supercomputing so, one, they're now competing head to head with our cutting-edge companies and two, all these companies, their technologies are all dual use. things that will turn on your toaster will also turn on your missile. so, why we had to take this on was, if they're going to compete with us the way they did before, okay, cheating on some of these things, when it's about ai and supercomputers and they can kind of protect all their companies, grow them to giant size inside china and then unleash them on the world, that becomes a strategic challenge to us, number one and number two, the reason this is getting complicated is the

huawei story, that if they've got the world competing on the 5g space and we've got the 5g space, but huawei now isn't just a company that you buy, it actually becomes embedded in your whole telecom communications system, if you don't trust their values, you know, you can't afford to have huawei in your system when we've got a problem with our allies who are building 5g on their huawei platform. i say this, joe, because this is going to get more and more complicated i think than people realize. it isn't just about the trade imbalance. it's about the very character of trade between our two countries. >> isn't there a self-interest, though, on the part of the chinese? there's an argument to be made that there's a self-interest for them to move towards a model where intellectual property is protected because they are developing their own technology that needs intellectual property, that they need to evolve to accept those values of being private-sector companies as opposed to government-sponsored sectors because a company like a huawei might want to compete in the united states and actually sell products here instead of being

banned, potentially, by executive order later this week. i mean -- >> that's a good point, melissa. the only thing i would say is i've been hearing that story for about 20 years, you know and it never quite crystallizes yet. but the point i think you're getting to -- and again, the reason why this is a hard moment, it's not just about the trade imbalance, it's about the character of what they want to sell and we want to sell, and therefore, values matter the difference between the values of their system and our system become really important when i'm not buying your toys and t-shirts, but i'm buying your telecom system, so you're going to be deep inside my economy. and therefore, if i don't trust you're going to use that telecom system in a fair way, but that you may use it for espionage or whatever -- >> no trade deal's going to solve that. >> exactly and that's why this is hard. this is really hard. but where i really agree with the president -- it took someone to call the game the game had to be called. you know, china got rich over the last 30 years i think using three things -- one is hard

work, smart investments in infrastructure, emphasis on education, delayed gratification, one basket. second basket -- cheating on wto rules, stealing our intellectual property, nonreciprocal trade arrangements, all kinds of shenanigans. and number three -- the u.s. fleet in the pacific because our presence in the pacific assured everyone around china that they could be dominated by china economically but would not be dominated by them politically and geopolitically and the problem was now these have really gotten out of whack, and somebody had to call the game, and i think trump did it. >> this is going to be very, very difficult, as you say. >> yeah. >> and you are going to be on with steve bannon. i know you did read his -- it was in the "washington post. >> yeah. >> this is what was really interesting to me, is that six understandings -- one of them is chinese state capitalism is highly, highly profitable for its owners, the ccp, and they've done this by stealing

intellectual property, technology, and innovation of foreigners and if they were not able to do it, bannon says that in china, they'd be rapidly outcompeted by the germans, the south koreans, the japanese, and especially the united states. they would not be the superpower or the heir apparent to the world hygemony if they weren't doing this in this fashion, so how in the world could they give this up? >> that's why it will be hard. take the german robotics company they just bought kuka's probably the best robotics company in the world i think a lot of people would say. china just bought it now, imagine they take it back to china now, they protect it the way they protected huawei or some of their other companies. they grow it on the china platform to a huge scale and then they unleash it on the world, you know. so, you know, i don't know if i'd go quite as far as bannon. there's a lot of innovation in china.

i don't know i'd go exactly that far, but surely they would not be where they are right now, okay and that's why, a, we had to call the game, but b, this is going to be hard, joe. this goes really much deeper than just the trade imbalance. and we're at a moment now when we're in a world of internet of people and internet of things where everything's connected to everybody else the difference between your values, melissa, and mine start to become important, you know? especially if i'm building my future on your telecom system. >> tom, is it possible to undo the catch-up that china has done and is that the aim here because their innovation now does rival that of the u.s. >> yes. >> they've already successfully stolen that ip and on top of that, if the rest of the world isn't in agreement with president trump's approach, can china not continue to make advance gains because there is innovation in south korea, japan, and germany. >> right. >> and china's investments in those countries is more important in a relative sense than it is to the u.s., so

there's less incentive to play hardball. >> i agree with the president's aims i don't agree with his means had i gone around this, i would have wanted, one, a signed tpp it represented 40% of global gdp, particularly on the asia-pacific rim and tpp was all about these issues -- intellectual property, software protection, et cetera i would have signed tpp -- >> what do you mean signed it? ratified because the democrats -- >> i would have made it a top priority -- >> would the democrats have gone along with it? they wouldn't go along with their own guy. >> let's forget -- because a lot of republicans were opposed to it, too. i would have made it a top priority -- >> you had a better chance of passing it with republicans than with democrats -- >> i agree i would have made it a top priority -- >> otherwise, president obama would have done it -- >> because of that, i would have made it a top priority i was a huge tpp fan second, i would have gotten the europeans completely on my side. i wouldn't have wasted my ammunition on aluminum and steel tariffs with them. then i would have call xi jinping, the president of the

china, and said you send your top three negotiators to hainan island, i'll send my three, we'll do all this in secret. nothing on twitter, nothing in public i'm not going to try to embarrass you, but in private -- three things we need to negotiate with china, leverage, leverage and leverage, okay? and in private, i'm going to have that leverage on my side. i'm going to nail you, but we're both going to come out and say everybody's a winner we're all going to know i won more than you, because i got more leverage, but that's how i would have done it doing this in public in this way -- hey, xi jinping also has politics, too. there's also twitter in china, and this is turning into a big nationalist, who's got the biggest guns here, and that is not a way to address a really complicated, politically explosive problem. >> but sometimes dealing with autocratic regimes, you need to almost play hardball -- >> joe, i want to play hardball, just in private. >> so we're doing this now and you know an election's coming up, and i know how you feel about the next election.

so, that -- president xi has the benefit of not facing an election. >> right. >> near term and they might try to run out the clock and hope that there's a different administration since you're for the country on board with this, are you going to continue to support trump's efforts to get this done, or are you going to immediately start criticizing him in terms of the slowdown with everybody else at "the new york times" >> i'm on record multiple times as saying i think the president's on the right track on this. it's really important -- >> it's going to be tough -- you know, people are waiting for a stumble here, they're waiting for a stumble in north korea, they wait for a stumble on -- you name it. >> but joe, i can agree with his ends and say these are not the means we would use. >> but we didn't do tpp. we're here where we are right now. we've got to try to get something that's good for us at this point, so, he's piloting your plane -- >> right and if i -- >> it's not a 737 max, but he's piloting your plane. try to support -- you're supporting a pilot on this. >> if i were him right now --

>> the captain. >> -- i would throw away my twitter account and do all of this in private. >> then he'd be held hostage by the mainstream media, which i wouldn't want to be if i were donald trump. >> not all of them. >> okay, all right right, he still has fox, which we know is a den of racist and -- >> not going there >> all right, you don't have to. coming up, cnbc unveiling the 2019 disruptor list today, and we are talking to the winners. melissa's going to indigo agriculture is changing the way farms produce food the company's ceo is going to join us. and then later -- he's here for now. we'll see if he's still here when bannon actually comes on from berlin. tom friedman, ready to square off. they have more in common than this -- >> we talk >> anyway, former white house steve strategist steve bannon. they'll debate the president's handling of the trade war, the economy, and much more stay tuned you're watching "squawk box" on

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>> announcer: now the answer to today's aflac trivia question. who introduced tobacco to europe the answer -- christopher columbus cnbc's "disruptor 50 list" has been revealed and julia boorstin has more on the company that came in at number one julia. >> melissa, thanks so much well, agriculture is a $3 trillion-plus global industry, and we've seen a growing number of venture capitalists investing in companies that are applying digital technologies like artificial intelligence and machine learning to the global food system. this year's number one disruptor has become a leader in the ag

tech revolution. take a look. indigo ag number one on the 2019 cnbc disruptor 50 list is an agriculture technology start-up that mixes microbiology with artificial intelligence to improve yields, sustainability, and profits for growers of five commodity crops -- corn, cotton, rice, wheat, and soybeans. it's disrupting agriculture in two ways -- first, its seed treatments allow farmers to grow more using less water and fertilizer second, its digital marketplace connects buyers and growers, helping them differentiate their eco-friendly crops, adding value across the supply chain, from seed to table. founded in 2013, indigo's technology is being deployed to more than a million acres of farmland around the world, a number it expects to quadruple by the end of this year. the company has raised $650 million in venture capital to fund its growth and has an estimated valuation of $3.5 billion.

>> julia's going to stick around joining us now is david perry, president, ceo, and director of indigo ag. david, welcome congratulations for landing the number one spot on the disruptor list >> well, thank you we're grateful to be here. it's a big moment for indigo, obviously. but more importantly, i think it's a big moment for agriculture. you know, agriculture's a $3.2 trillion industry, one of the largest in the world, arguably, the most important in the world, and has been behind the curve in adopting new technologies and new sustainable practices. >> can you give us an example of how exactly your technology can improve either yield or efficiency or any metric that you want to use for farmers? >> absolutely. so, one core technology we use is microbiology, microbes that naturally exist within plants and evolved over hundreds of millions of years to protect plants against stress. so, those microbes can specifically protect plants against insects or disease or

reduce the amount of nitrogen they need. so, improving yields and reducing the amount of chemicals in fertilizers needed. >> how do you get paid what are farmers paying for? >> yeah, so multiple things. we now have 11 different lines of business, so that includes microbiology it includes digital agronomy as well as marketplace and transport. each has its own business model. >> when you see in a whole foods or advertisements, no gmos, and you see that as a huge selling point basically from a lot of people that invoke science, supposedly in other settings, but then with gmos have no idea how these things work, do you worry that you're going to be tarred with the same brush that you're introducing something that could be harmful down the road or mutated or things like that i think it's -- i see what happens with the gmo industry, and i guess every rationally designed drug that we have designed, we wouldn't want those, either, since we use

genetics and we're playing with life and things like that either you see what i'm saying? is that a concern for you? >> i competely understand what you're saying. the gmo debate will probably expand beyond the time we have available, but also that everything we do is naturally occurring. we don't create anything -- >> that doesn't appeal to -- >> that doesn't necessarily mean it's safe, but it does mean it's not genetically modified so, everything we use is also in nature today, so already part of the environment and already part of the food supply so, think about probiotics for plants >> i don't know whether that necessarily, you know -- >> how does climate change affect you >> carbon dioxide's naturally occurring and tom thinks we're all going to be dead in a few years. >> how's this affect climate change -- joe didn't want to ask this how does climate change affect your business? >> two ways, really. what we do is help farm -- the things that we're doing help plants resist stress, such as heat, drought, et cetera.

>> makes them more resilient. >> makes them more resilient to that, and those are the things that come with climate change. then over time, as farmers change their practices, we're actually reducing their footprint. in fact, you can even flip that around and make farming carb carbon-positive, so be part of the solution. >> you're expected to quadruple your business. in terms of quadrupling your technology from 1 million acres to 4 million in just this year what's your plan to be able to grow that quickly? and what's your growth outlook beyond that? >> so, we're expanding in three ways we're expanding geographically so we now operate in five countries around the world, and we just established an office in europe we're expanding the number of products that we sell to those customers in each country. and then, of course, we're expanding the number of farmers in each country. and we've built a really large platform off of which we can grow, and we think we can sustain that for some period of time. >> now, you also have a transport business

why does it make sense for a company creating microbiology focussing technology for seeds to also deal with the transportation industry? it seems like two very different things >> the way we think of agriculture is that it requires systems innovation so, the fundamental problem with ag is that it's a commodity business so, today, most farmers only get paid for volume, bushels of corn so, if you don't get paid for sustainability and you don't get paid for quality, you're not going to invest in those things. so, really how we think about the world is systems innovation. and one of those pieces is you have to provide traceability from the farm to the buyer and transport allows us to do that. >> if a farmer who has not used your product before were to apply it this season, what percentage in yield increase would they get and in ten years globally, how much can yields be increased >> today it's about 6% to 14%, depending on the crop and the region, et cetera. and we believe the possibility from just microbiology alone is

in the 25% range >> and last question, are you going to go public i mean, a lot of people on this list go public eventually, or you look at an uber or lyft and you say, no thanks >> that is the plan. we don't have a specific date in mind, but you know, we think we have the opportunity to build a big and valuable company, and we'd probably do that better independently. >> david, great to have you. julia, thank you david perry of the number one company on the cnbc disruptor 50 list, indigo ag. and we'll be covering the disruptor 50 all day on cnbc look at the lineup coming up karen seidlin becker, with clear, the stadium start-up. coming up, a first on cnbc interview with johnson & johnson's alex gorsky. then steve bannon is our special guest. as we go to break, look at u.s. equity futures

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still to come on "squawk box," johnson & johnson ceo alex gorsky ahead of analyst day. that's next. then, politics, policy and your money. tom friedman and former white house chief strategist steve eyill baquare off. th wdete trade, the state of the global economy and much more. a solution. introducing... smartdogs. the first dogs trained to train humans. stopping drivers from: liking. selfie-ing. and whatever this is. available to the public... never. smartdogs are not the answer. but geico has a simple tip. turn on "do not disturb while driving" mode. brought to you by geico.

markets are volatile, investors are jittery, so is the expansion done >> i don't think so. this is a very unusual expansion, going into its 11th year, but there's something very strange about where we are right now. normally this late in the expansion, you've got some exuberance in some part of the economy, housing or autos or capital spending, and that really isn't present usually you need a boom in order to get to a bust and the second thing is the federal reserve's being very patient here normally at this point, the federal reserve would actually be killing the expansion by pushing rates up too high. that's not going on. so, we think the economy will grow more slowly, but we think it's possible that this expansion could last quite a few more years. >> what do investors do? >> there are other economies where expansions are younger, where the possibility is for stronger growth. i think people should make sure that they are well diversified from an international perspective. >> great, thanks, david.

johnson & johnson holding its analyst day earlier. the company announced that it plans to submit applications for at least ten new drugs by 2023 meg tirrell joins us now with a special guest. hello, again, meg. >> hello, joe. and that special guest is chairman and ceo alex gorsky alex, thanks for having us here. >> great to be here, meg thank you. >> so, you detailed this plan for ten new medicines by 2023. your pharma growth is projected to be a little bit slower than the rest of your peers for 2019. what is the biggest growth driver in the near term that you're going to be focussing on today? >> first of all, welcome to our pharma day here in new brunswick. it's hard to believe j&j started right here more than 100 years ago. we've had a few chances to talk

at this investor day, and what we're most excited about is, first of all, if we look back over the past seven years, we've launched more than 18 new compounds at johnson & johnson i mean, and these are products that are making a huge difference for patients, in hiv, multiple myeloma, lymphoma, cardiovascular disease and of those 18, not only have they touched millions of lives, but 11 of them are now more than $1 billion in sales, and that's led to a cagger of almost 8% and while we've done that and we're really proud of that performance, we've also prepared for the future so we're going to be talking about today are of those existing compounds -- we have more than 40 line extensions, 10 of which have almost $500 million of opportunity, and we have ten new compounds that we'll be launching between now, or filing, between now and 2023, each of which have over $1 billion worth of opportunity you know, within those, things in oncology, things in immunology, neuroscience we're particularly excited about, because we're going to help a lot of patients, but we also

think it will be great for business. >> because of patent explorations you're facing this year, do you anticipate growth will be a little bit slower compared with your peers wells fargo says 3.5% this year versus 7% in 2020. >> i think our performance in the first quarter is reflective of the strength of the business model at johnson & johnson that's build for decades of performance. even in the face, in our pharmaceutical business of more than $3 billion in patent expiries we're facing this year -- it's a competitive industry -- and about a $40 billion portfolio, we saw growth in the midsingle digits in first quarter. so, yes, we would expect it to slow, but what you're going to hear about today, these new indications, the new product launches, reaching more patients with new indications -- all that shows that this is a business that's really built to exceed the market growth rate that we think is usually in the 4% to 6% range. that's how we expect to continue to grow our pharmaceutical business going forward. >> well, the focus here today, of course, is your pharma business but one of the things that's really weighed on your stock, especially since december, has been these lawsuits around your talc products, your baby powder

products you said over and over again here when we visited you that you're confident in the science, that the talc products are safe, they don't contain asbestos. but clearly, there is sort of a confidence shaking on wall street and maybe even with your consumers. so, what are you doing day to day to make sure that they have confidence in your products? >> well, meg, it starts with our 100-year-plus performance of doing things in an appropriate and responsible way, and that's certainly what we think we've done here. and we are a very litigious industry, but what's most important is that we stay focused on serving customers, stay focused on innovation and really bringing these new products to market of course we're spending time educating our consumers about the issues that you raised, but here today, you know, again, we're going to be talking about these next several generations of products, and i think that's where most patients and most consumers really want us to stay focused so that, ultimately, look, we can cure hiv, we can find a cure for alzheimer's and some of these other conditions that we continue to work on. >> well, as your pharma business is so big and the growth is

really driving the whole company, does it make sense to keep the other units together? does it make sense to keep your consumer unit? >> well, we think so, because it gives us an opportunity to seek out new health care solutions wherever these opportunities may occur. you know, whether it's in our pharmaceutical space, which again, you're going to hear about things like gene therapy, r&a, new cell-based therapies, that are really revolutionizing the way that we're treating patients and actually leading to cures. but in our medical device area, we've got digital, robotic surgery that we're extremely excited about, again, that's really going to change the way surgeons are conducting surgery each and every day in the operating room, and our consumer products group look, consumers are so important in all of our health care decisions. we think having a good hand there is important for our business as well. >> alex, thank you so much for having us this morning. >> meg, thank you very much. >> guys, back over to you. >> all right, thanks, meg and alex gorsky. he will be part of our cnbc healthy returns summit next tuesday. the one-day event will bring together top investors and

executives to explore what's shaping the future of health care innovation. it will feature exclusives with united therapeutics ceo martine roth blatt, former fda commissioner scott gottlieb and more don't miss it. learn more and register now at cnbcevents.com. still to come, former white house chief strategist steve bannon says the u.s. and china are in an economic war which the u.s. cannot back down in scs l join us after the break to diusthe trade war and much more we're back in a couple minutes incomparable design makes it beautiful. state of the art technology makes it brilliant.

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we are the piggy bank that everybody likes to take advantage of or take from, and we can't let that happen anymore. we've been losing, many years, anywhere from $300 million to $500 a year with china and trade with china we can't let that happen the relationship i have with president xi is extraordinary. it's really very good, but he's for china and i'm for the usa. >> that was president trump on the status of the u.s./china trade talks. former white house chief strategist steve bannon in a "washington post" op ed says that china and the u.s. are in an economic war and compromise is not an option let's welcome steve bannon, live from berlin this morning i understand, steve, there is a three-second delay, so that should be interesting. but we'll ask questions, and you'll look very, very thoughtful as you consider

exactly what you're going to say for three seconds. but just bear with us on that. tom friedman, "the new york times" foreign affairs columnist, is also here, and he'll be joining us a little bit later to react and maybe have some thoughts of his own, steve. so, a little squabble. i don't know if you saw that sound bite i read your op ed piece, and i understand that the president gets very colloquial at times, but in your view, this is anything but a little squabble >> yeah, joe i think what's interesting is that in your co-host for this hour, tom friedman can tell you that it was almost two weeks ago to the week that tom came back from beijing and came to my office and we sat in the war room just down from the oval office and had this exact discussion china has been running an economic war if i talked to cnbc, at your conference last summer and the many times i've been on here --

china's been running an economic war against the industrial democracies for now 20 years and eventually, when the companies, as tom laid out in his op ed piece this week -- when the companies stop making money, people realized, with made in china 2025, one belt, one road, and huawei's 5g rollout, this is a master plan to become an economic hedge mont this is why that 175 to 200-page contract really really about the trade aspects of it, how many soybeans they're going to buy, et cetera. the fundamental parts were to go into deep verticals of state capitalism and demand transparency and accountability, to demand monitoring and enforcement. and that's why when the chinese finally woke up after nine months of negotiating with president trump and bob lighthizer, they refused and basically walked away from the deal, because they understood that they'd been running an economic war on this, that this is not a trade deal. this is a truce in an economic war, an armistice, so to speak, and they weren't prepared to do

it i think you've seen over the last 48 hours what their response has been, trying to jack up the hypernationalism but as tom friedman ended his column, this is not a front-page business story this is history in realtime. it's the most significant thing that any president could possibly do. this cuts to the core of what the united states is going to be in the future and what our relationship, our geostrategic relationship is going to be with china. >> well, that sounds like when we talk about the stock market, we have analysts give us near term, immediate term, and long-term projections, and i think we need to break this down into that as well, because long-term, it seems like this is going to go on for years, but there's going to be near-term developments that are going to be required by whoever's watching this. we're going to need to know something within the next month or as the election comes closer in 2020. we're going to need some type of agreement, some type of understanding to talk more

later, because with what you're presenting to me, steve, it looks like a lose-lose i don't see how china ever would agree to what we need them to agree to, to get a real trade deal >> i disagree with this. i think it actually will be a win-win. the system that china has, particularly the slave labor they have now in the chinese population, this kind of -- this is about this radical cadre in the ccp. you cannot possibly have this totalitarian surveillance state. it can't exist you have the industrial democracies, okay? what we're trying to do, and i think what trump is trying to do, very thoughtfully, is to bring them in to really a world system, a system that tom friedman and others have talked about. the problem is we allowed the city of london, wall street, and the corporatists to create a system that worked for them and didn't work for working-class people, whether those people are in ohio or michigan or wisconsin or here in germany this is why donald trump's president of the united states it was the -- as j.d. vance points out, it's the sending of

the factories to china, the loss of the jobs and the importation of the opioids because of this crisis of kind of angst that has developed this crisis in the upper midwest. that's why joe biden kicked off his campaign in pittsburgh people understand that this is where the presidential electio of '20 is going to be decided. it is where the presidential election in '16 was decided. this can be a win. the chinese business model cannot continue, and it won't continue you can stop it by stopping the forced technology transfers, allowing the intellectual property and industrial espionage to stop and stop financing it we have full capabilities in the west to stop this right now and help china evolve into a real industrial power along rules, the rule of law and everything that they've agreed to for 20 years that they haven't played by, not just not played by, done the exact opposite and i think it's now time for people to stop harping you know, the fear project, particularly the wall street cheerleaders and their pom-poms, the fear project didn't work the stock market didn't implode. the u.s. economy didn't implode.

in fact, with trump's trade policies, we're getting a boost now from trade import prices are dropping employment's up. so now they're going to go to the farmers. they're going to try the fear project by the wall street junta and the wall street corporatists to take trump off this focus he has to really bring the world together in peace and prosperity. >> steve, i guess my point about it being lose-lose -- i don't know how we could expect china to agree to give up some of these core principles or advantages that allow them to compete in technology. as you point out, a lot of that has been -- have been through ip theft. so, in your article, you say germany, south korea, japan, you know, if they were precluded from stealing the intellectual property, they'd be -- also irans in a lot of these industries what would cause them to agree to any type of -- you know, to

come into the 21st century like you want them to do? what would cause them to say, sure, we'll do this? they won't >> they won't unless they're forced, and that's what this agreement's about. remember, what they walked away from was the detail that lighthizer had in this agreement on both realtime monitoring and enforcement. and this was not to have some regulatory apparatus this was to put into chinese law. so, they couldn't sit there later on and retrade the president, retrade the united states the way you do this is you do it you cut off the technology, you stop the forced technology transfers. you saw this npr piece where the companies that had all the technology ripped off didn't want to raise their heads. they were afraid of retaliation. you stop the retaliation and most importantly, you get the wall street hedge funds and the money managers and the investment banks and you cut off the capital. if you cut off the capital, you stop them stealing the technology, you stop the forced technology transfers, you stop them from exporting deflation

and overcapacity by these subsidies. if you just make them play by the rules they've already agreed to, okay, it will be a transitional period, but on the other side, china will actually join us as an industrial power we're not sitting there -- this is not against the chinese people i have a great affinity. i've lived there i've owned businesses there. this is about the radical cadre, the ccp, that has an unsustainable business model it's incumbent upon us we have all the cards. we have all the cards. now, that's what donald trump's showing immense leadership in trying to do this. it would be easy for him to sign some trade deal where they bought more soybeans and have the cheerleaders on wall street say this is terrific, have the stock market go up for a moment, right? but what he's doing is looking at the long term what people criticize him about, he doesn't have a strategic plan he's got it, and i think tom friedman understands it. he just wrote about it this cuts to the core of what the world economy's going to be, and it plays to working-class people, whether those people are in germany, england, or in the united states.

>> it's all being done in a very public way, and i think one of -- and i'll let tom speak for himself -- but his view is that maybe diplomacy by tweet or, you know, talking so much that both sides can't save face and it becomes, you know, here we're seeing the nationalism rise on both sides tom, you think it might be better to do it behind the scenes. >> yeah. i mean, i really agree with so much of what steve said and wrote today, and have been saying this for a while. and the stakes of this moment i think people don't fully appreciate, and i think that, therefore, the difficulty of this moment i don't think people fully appreciate steve, give me your analysis of the politics so, i happen to believe china's misreading of trump and america on this issue is actually one of the biggest intelligence failures of the chinese government ever, and it was an avoidable failure, because a lot

of what you've been saying, i've been saying, i actually learned from the american business community in china they actually flipped on this issue a couple of years ago. but i picked up the "washington post" today, and i saw an article about how republicans are now really breaking with the president, particularly from ag districts. give me your analysis of the republican politics on this issue and whether you think the president will be able to hold firm >> remember, tom, when you came to the white house this time two years ago, you came back from beijing, we had this exact discussion the biggest pressure the president's got is coming from his allies it's both the republican free trader -- you can't have free trade and the system is half mercantilist and half free trade. that's what trump's going after. and i think you're correct, the politics of this is that the republicans have really put the most pressure on him his allies on wall street have put the pressure on him. not understanding that this is

the main thing, this is what it's about this is going to set the world in one direction or the other for the next 20, 30, 40 or 50 years, and we've let this drift for so long with people that really didn't have their national interests in mind they had their self-interests in mind that's why this is so important. i hate to say it, i'd like to see a process started like in mar-a-lago you had president trump and president xi more directly engaged. i think liu he, who's a reformer, and lighthizer are fantastic as negotiators i think this needs to be principles i think it needs to be principles face-to-face. but i've got to tell you, there is no chance donald trump backs down from this i think he's looking at the good of people on a global basis, and i don't see him backing down on this i think it's going to set the framework for the 2020 election. this is as important as it gets, but i do agree with you, i think we need the leaders and i think we need to take the heat down and i think they need to get behind closed doors and start a process that's going to take a long time to take -- this is not going to take place overnight or at the g-20.

the differences are too fundamental. >> steve, what are you hearing from -- you're over in berlin now -- what are you hearing from europeans? because they actually -- this never should have been a story about us and china alone this always seemed to me a story of both the europeans and our asian allies it is why i supported tpp and why i did oppose this deal with aluminum tariffs on europe i think we all needed to line up shoulder to shoulder on this it should not be us alone, because if you talk to the europeans, and i'm sure you have, they have the exact same problems we have what are you hearing over there? what are they saying about our strategy >> see, but i think trump's strategy is working. thee bilateral deals with korea, increased defense spending, bilateral deal with japan, now getting into it with the eu. it's here in germany their business model of advanced precision manufacturing is what's going to be gutted first. they are the tip -- you look at made in china 2025, it's the

great -- you mentioned in your article, kuka, the great robotics company is the centerpiece that they've taken it's germany's business model -- when i talk to both politicians, think tank people and businesspeople, they understand the storm is right over the horizon. they're going to be the tip of the spear. they're really going to be, i think, the first industrial power that's really gutted and the europeans understand but you've got to remember something, the eu were just like hillary clinton and these people -- the elites in our country -- tom, you know this -- they thought the rise of china on this business model of china was like the second law of thermo dynamics, a physical reality we had to accept we're the declining power, they're the rising power donald trump said you've got it wrong. we're not only the rising power, we're the dominant power, and we're going to re-form the world along the lines of free-market democratic capitalism, and here's how it's going to be. you've got to break -- you've got to lance the boil. and that's what donald trump is doing right now. i think our european allies are going to come around i think they're going to individually come around to

this, because i think they see the wisdom and the toughness of what trump's doing. >> steve, it's always been clear to me the chinese wanted to negotiate with mnuchin and not lighthizer, because i think lighthizer is someone who knows every carpet the chinese have sold us over the last 30 years how do you think that will play out in the administration? >> i think you're dead spot on i think bob lighthizer -- i look at president trump from my m&a days at goldman sachs, is trump is like the chairman/ceo of the company in a massive bet the company m&a, and lighthizer's the deal lawyer. bob lighthizer, there's no gap between lighthizer and president trump. lighthizer is the guy that does the execution. that contract, when people actually end up seeing it, i think we'll see how thoughtful it is, how well crafted it is, how it actually works for the chinese, it takes care of a lot of their corruption issues this is about transparency it's about accountability. it's about realtime monitoring, and it's about enforcement what lighthizer did with lee

ha -- and liu he, people need t understand is a reformer, understands what needs to happen with the system. it was the hawks it was after the belt road initiative forum in china when the hawks got around xi and said, hey, why too we need the americans? we've got to toughen -- this is nothing more than a port treaty from the 19th century. this is what started the 200 years of humiliation we have to shut this down now. so, that red line they sent around was basically saying, we're not going to take any of the things that lighthizer and liu he have negotiated for nine months, the basic architecture of the deal. that's why this is a defining moment and every president beforehand have blinked, clinton, bush, obama. this is what we need lighthizer, you told me you're going to get this. let's power through this. >> i want to talk about lansing the boil, steve.

i understand the long-term, the goal of this i actually agree with the goal of that myself as well but overlay politics on this -- if lansing the boil causes an economic downturn, if lansing the boil causes a decline in the stock market of more than 10%, and it's around election time, what happens to the resolve? >> first off, i don't think that's going to happen but i think you realize with joe biden launching in pennsylvania, this is going to be the debate the american workers, the men and women that saw those factories leave, the american farmers understand these are patriots they put the national interests of the country before their own personal interests they've seen the elites totally do this for themselves they understand. they finally -- they have a voice in the room that's looking out for them and looking out for their children and grandchildren. this is -- china's business model is an existential threat to the industrial democracies -- the united states, germany, england, japan, korea, all of us it has to be done now. there may be some short-term pain, okay

but donald trump, and i think others, understand we have to power through this now, it turns out that the numbers on trump's plan are actually better. the 3.2% growth is driven by the decline in exports from china. the import prices are falling, right? but a lot of it's tied to this so, right now, this is working i happen to think, and i think trump believes and the people around trump believe it's going to continue to work, but i've got to tell you, he's not going to back down from this this is the core of why he's president of the united states this is the core of american decline. this is the turnaround of america. this is bringing manufacturing jobs back. i believe those citizens in those northern industrial states will say, hey, this guy finally stood up to them, started bringing the supply chain back, and i'm with him. >> steve, this is -- i don't know if we'll do this again. i'd like to. i'll let you know next time we do this, tom and tom will be back maybe you'll be back i don't know if we'll have a great shot like that of the brandenburg gate, but this has been compelling, and we appreciate it, and we wish you

well and safe travels, steve bannon and tom, you're going to stay for a while longer. >> thanks. >> excellent. all right, it's going to be in just a second -- we could do more, but we've got to go. we've got macy's headlines coming up. macy's is going to be out with earnings so, i'm going to wait about three seconds and now say it is 8:00 a.m. on the east coast. you're watching "squawk box" here on cnbc live from the nasdaq market site. >> so well timed. >> in times square i am >> i don't know how you do that, joe. >> at least doing this there are a lot of other times where i'm totally thrown off anyway, futures right now are indicated down about, on the dow 39 points, 40 points the s&p down six and the nasdaq down about 15 points do we have macy's? >> yes, macy's is out with first-quarter results. we'll look at how the chart is reacting to results. up 44 cents. it's a beat. up 5.5%. it's moving around quite a bit courtney reagan has latest numbers and also talked with the

ceo. court. >> good morning, melissa for the first quarter, macy's' earnings beat coming in at 44 cents, beating estimates of 33 cents on revenues of $5.504 billion, in line with estimates. even though earnings beat by 11 cents, the retailer is just reaffirming its previous full-year sales and earnings guidance and for the comparable sales this quarter, that's licensed plus owned merchandise, that grew 0.7%. analysts actually had been looking for a slight decrease, so that was a beat, too, and the results mark six quarters of comparable sales gains now, the department store saw sequential sales trend improvement in physical stores and online sales grew double-digits for the 39th straight quarter so, all that goes into that comp number and i spoke with macy's' ceo, jeff gennett, and he said when it comes to the impact of tariffs on macy's' business, that the initial three trauchs that went into effect in 2018 didn't have a big impact on the business because it didn't infect many of the categories that macy's sells, except for furniture, and now that's going to have more of an impact as

it's been bumped up to 25% as of friday, but gennette said "the team has a plan in place to minimize the customer disruption for that bump to 25%," but if tranche four goes into effect on the remaining chinese imports, including apparel and footwear, he said "that would really impact our categories. and "when you do the math, it's hard to find a path through that wouldn't impact customers. still, macy's has been working to shift production and othe solutions with vendor partners and regarding the overall state of the u.s. consumer, gennette says that "we don't have the tailwinds that we had this time last year, but the consumer is still healthy, wages are still rising, confidence is still there and we believe that we can compete in this environment. but of course, there are so many unknowns with this tariff and trade discussion that everyone's just trying to do the best that they can in the retail business to have these discussions preemptively in case sort of the worst-case retail scenario comes through. >> so, it sounded like gennette was saying that they would have to raise price if the final round of tariffs were there.

did he talk about the consumers or what he believes is the consumer willingness to pay higher price for apparel and footwear >> no, he didn't, because i think he's just not -- he's not sure exactly how much they're going to have to test that, because they're hoping that if they have to raise prices, that it won't have to be the full amount, that some of these other mitigation strategies -- the negotiation with the vendors, moving some production -- will at least help cushion that blow, but he said, look, the math is hard to work out any other way where you don't see prices go up and the customer really taking on some of that pain. >> and this is a trickier thing because they can't really pull forward a lot of inventory because of seasonality and fashion issues, right? >> exactly and that's so interesting, because for so long, it's been thought that it's good for retailers to be able to bring in inventory and do it in a quicker way, this fast fashion model, because you can respond quicker to changing customer demand. however, that also are the folks that are going to be hurt more if the tariffs happen. so, it's really an interesting

dichotomy that we're dealing with here and it's very, very hard, i think, for these retailers to really plan. >> all right courtney, thank you. courtney reagan with the latest on macy's. let's talk more about macy's earnings and the broader retail sector with cnbc markets commentator mike santoli, here with us. this is good news. i mean, this sets a tone for maybe -- we've got walmart tomorrow and a bunch of other retailers. >> sure. definitely good news, both in terms of i guess what macy's is saying about ways to navigate around the tariffs, but also good news in the context of how the stocks have been punished, and they're very cheap if you look at the big kind of asset-heavy store chains like macy's, like gap, they've really been hurt pretty hard. so anything that looks like first quarter was okay, you can more or less pencil in what the estimates are for this year. it's good. i don't know that they're any more a bellwether about the domestic consumer economy as much as they used to be, but the fact that they're operating okay in this environment probably is okay. >> walmart and target probably would be more so the bellwethers -- >> different category -- less cheap, considered to be more of an everyday kind of shop kind of

thing and obviously with slightly more advanced online -- i do wonder, macy's says 39th straight quarter of double-digit growth we actually don't know what that number is, the base or anything else. >> i was talking about that with gennette i said that's great to have double-digit numbers of online sales growth we don't know what the baseline number is and eventually the law of numbers will make that trend end -- >> unless it's very, very small, because we don't know. >> we're going on ten years. i mean, macy's -- i don't think it's super small based on what we know about macy's' market share online and the categories in which they compete, they actually do quite well. >> mike, i guess the other clear bellwether is april retail sales coming out this morning. >> right. >> do you think the market is in a mood to focus again on those fundamentals, whether it's earnings or macro data, or is this still going to be a very trade, twitter-based week? >> i don't know about twitter-based. i think the market has obviously gotten a little bit unsettled, so it's trying to figure out exactly where the right level to reset to, but i do think market

wants to know that the u.s. economy, broadly speaking, was in a decent spot when this new round of trade frictions started up so i don't think we're yet hoping for weak domestic economic numbers because somehow we hope it makes the fed friendlier not really the case. even though that was the reaction in china seemingly overnight with their numbers. >> i mean, i think the yield on the ten-year really speaks volumes in the past couple of sessions i mean, it really hasn't moved it's gone lower today because of fears about global economic growth. >> absolutely. back in -- really back to where we were in march in in ways. flat treasury yield curve, the rest of the world has basically historically low yield curve so, i think we're now bracing for something very -- you know, a global soft patch again. but i don't think that the market is in the mood to want the united states to kind of succumb to that at this point. >> and the last hour of trade or so changed your mind on whether this is a strong bounce or -- >> a little bit. look, it puts some distance

between us and those lows, and i think right now, a 5% pullback from a high based on what we know -- i don't think an investor would say that it has to go much lower to account for the realities right now in terms of u.s. economic fundamentals and what we know could happen with china it's just about the trading dynamics right now were people badly positioned by this, too bit more of that bullishness before something yields. >> the moving day average is 28.60 or so and on monday it was 28.01 -- so -- >> we're back in a zone that's been highly trafficked over two years. >> exactly. >> and we've kind of fought it out a few times now. >> right, okay guys, thank you. courtney and mike santoli. >> are you looking at your -- are you on twitter >> no, i'm not. >> got any emails or -- people, just -- >> the reaction to the bannon -- >> one thing, to pick up on -- >> oh, you're going back to macy's >> no, because somebody's going

to be right here and somebody's going to be wrong, that if this is as big as a moment as i think it is, joe, with china, and as steve bannon argued, the trump put -- the assumption that the market's just going to bounce back on this -- that could be really a miscalculation, or we've miscalculated. >> we'll talk more in the next -- unless bannon's right that part of the 3.2% gdp was because of, not in spite of, the tariffs. >> but i think there will be a significant transition >> tom, what about the comments we got from macy's' ceo there? similar tone too often, oh, if we see the extra tariffs, it will be terrible for our business is that something that you'd like to see business leaders step away from and actually support this strategy because of the long-term benefits, despite potential short-term -- >> that one's outside my skill set. i don't know enough about the retail business and -- >> but in general, across companies? >> yeah, i do believe that this moment was coming. and itwas inevitable and i don't think we can go forward as an economy without resolving this issue but i think it's a much bigger

resolution challenge than people realize, because it's about the core identity of the two economies. and so, this is not a small moment. >> all right, well, we're going to talk more about it. i think in terms of the universe, we basically -- is anyone left out if we've gottfriedman agot friedman here and bannon here? somehow, you were not -- it was weird. >> well, we've never been -- we've talked about this issue. >> the universe is not end there was not matter/antimatter -- >> we think we're still here. >> but are we really i don't know. >> how many times do i have to be on the show to realize that i'm a -- >> because i see you on other shows! and i've said, who is that man >> oh, no, no. >> on "morning joe," i don't recognize -- >> i'm the same -- >> they bring out the worst in you. and i bring out the best >> that is not true! >> coming we haven't talked tiger yet. an important watching closely for clues about the health of the economy. that's due out at the bottom of the hour

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welcome back to "squawk box. let's see how we're setting up for this morning's trading session, and we're looking at a dow that could open as many as 57 points lower. s&p 500 looking to lose eight at the open nasdaq looking to be down 22 these are, by the way, among the worst levels in the premarket trade. here are some of the stories investors are going to be talking about today. a "new york times" report says pilots from american airlines pressed boeing executives to work on a fix for the plane's flaws. the paper says that came weeks after the first fatal 737 max crash. the pilots argued that boeing should push authorities to take an emergency measure that would

likely result in the grounding of the max boeing executives resisted the report says they didn't want to rush a fix and they expected pilots to be able to handle the problems president trump reportedly getting ready to sign an executive order that would ban u.s. companies from using telecom equipment made by firms that pose a national security risk that's according to a reuters report that says the auto would pave the way for a ban on doing business with china's huawei, even though the executive order won't name specific countries or companies. it's been under consideration for more than a year but has been delayed several times and it's a busy morning for economic numbers in about 30 minutes -- well, 15 minutes, in fact, we'll get april retail sales, expected to rise by 0.2% rainstorm out this morning, the new york fed's empire state manufacturing index, industrial production, homebuilder sentiment and business industries. >> joe, i think it's an interesting question we were talking about in the break -- has the market priced -- >> let me do the intro -- we have a sound bite, then we'll

get to this. because the trump put, if he stays strong here -- >> stays the course. >> our news-making interview of the morning featured white house chief strategist, former white house chief strategist steve bannon, and guest host tom friedman if you missed it, here's one of the highlights >> every president beforehand -- clinton, bush, and obama -- have all blinked. trump didn't blink he could have cut a deal that made him look like a hero. he said, we're not doing this. we're not going to be retraded this is what we need lighthizer, you told me we're going to get this. let's just power through this. >> your point, tom -- and i don't know whether it has to do with what you just heard and whether you think that steve bannon knows what the president is likely to do on this -- but if he stays as strident as bannon would like him to, you think the trump put that we've seen -- >> right. >> we saw another one yesterday, when he said it's a small squabble, and it comes back. if he really is going to go scorched earth, that maybe the market hasn't priced that in

yet. >> what i and bannon agree on is this is actually a big moment. it's actually not about the trade imbalance, per se, bring it down a little, bring it up a little it's actually about a clash of two systems that was in the making for a long time it's finally come to a head. and the question for me -- and the chinese, i think -- i think china's misreading of this moment in america and trump was one of the greatest intelligence failures of the chinese government i think they misread this moment and the evidence is not just where people like me are, but really, democrats have been quite quiet on this as well. actually, they've been going along with the president so, if this moment is this big, it's going to be i think a longer, deeper, more disruptive fight, joe, and i think that's going to clash with the political needs of the president going into this election we already see signs of that with farmers and it's going to be the question, who's going to be right? >> the only wild card i could earlier, you said when you were asked something about macy's, if that's what you

said -- for you, it'd have to be below your pay grade couldn't possibly have been above your pay grade, but below your pay grade to say what would happen with the stock. >> i just don't know that much. >> and i don't either. were you surprised by the first-quarter gdp, that it was that strong, above 3%, in the face of these tariffs? >> but the tariffs really have just come in i don't think they affected so much this quarter -- >> but also you saw -- >> i've been seeing the economy's wrong -- >> the import/export picture can make a difference for gdp. >> yeah. >> are you absolutely certain that if we go full bore on the $300 million at 25% -- do we know that that will cause second-quarter gdp to be below 3% and if it doesn't hit the stock market, if the stock market somehow shrugs it off and trades on earnings or something else, do we know for sure that this moment you're talking about is by definition a negative for the stock market i don't know. >> i don't know. i don't know i don't know but i do think that -- not pricing on the stock market,

just pricing it in terms of the stability of u.s./china relations -- >> and the stability of the world, yeah. >> and the world that it's going to have a lot more waves emitting from it than i think people have priced in right now, if what steve bannon said about how firm the president will hold -- >> yeah. >> and i raised the question with him, joe -- front page of "the washington post" today has already got grassley representing iowa farmers saying, hey, this, you -- i talked to the president, he doesn't listen to me, so. >> why didn't the tone of the talks, therefore, sour earlier if this was always an issue? >> that's a really good -- i've been following this very closely, and put he in the category of people who thought hey, this deal's coming together they've bracketed around a few issues, but it's really coming together and i think liu he, the chinese negotiator, had the rug pulled out from under him by hardliners around xi jinping. and i think we need to bring xi jinping more into this conversation i think he is someone who has overreached on islands in the south china sea, overreached on

making himself a president for life i think he's overreached on the trade issue. and i think we're talking too much about trump and not enough, because it's so nontransparent, about decision-making there. but something happened there people there yanked him back, and it had to do with internal chinese politics >> but president xi is still going to be all powerful until 2020 trump faces a challenge before president xi does. >> no question, and that's why i don't know whether he's going to be able to sustain this at the speed, scope, and scale that's going to be needed, wilfred, to actually make a differentiated difference in the relationship between us i just don't know that trump's going to be able to do that. >> bannon pointed out -- or someone did -- that this negotiator that is a big reformer, mr. he, that we don't know his future -- >> he got demoted basically on the last trip. >> >> you cannot only be demoted, you can end up doing hard time, theoretically. >> he can be executed. >> there's actually a very small circle -- he's actually quite

close to xi jinping. he's been with him for a long time, but there's actually a very small circle around xi. it's not like there are 30 people there, you know, who can step into this role. so, look it, i'm invested. i want the stock to do well. but part of me just says, wow, this is just a bigger moment i think than we fully priced in. >> the message from bannon was clear when he was asked specifically what happens if the stock market pulls back, what happens if gdp goes down just before the election? he said, oh, no, trump will stick by it. the question is, do you believe that, you know and i think that's the outstanding thing -- >> i think that's what steve wants to believe, what he'd naturally say, but we don't know. >> we don't know. >> either one way are or the other, we don't know, and the president's very sensitive to polls, as is xi jinping, which is again why i would take this private. but i also think, wait until they meet on june 28th wow, at g7, that's a long time. >> a lot can happen. >> this is one where i'd like to see the president literally get on a plane, say let's meet in

tokyo. you know, i do believe the one thing i would disagree with what steve said, we're not going to solve this in one negotiation. if we can move the ball down the road, you know -- foreign policy is more about optimization than maximization if the president can move this down the road, i'm happy with that, because i think the structure that needs to be syst disassembled is so big, we won't make it in one fell swoop. >> you said the president might sign an executive order leading -- >> huawei. >> huawei, yes one of the things that was confusing, how do we explain the difference on huawei between the uk and germany versus the u.s. i mean, if it's an issue of national security, which is implied by the u.s. position, surely they'd be aligned. >> yeah, i don't know enough about it, why they're reading it differently from us, but we've arrested basically, you know, the head of huawei i mean, she's sitting in canada waiting for extradition. and i think it's just the

beginning, because wilfred, all this -- >> is this positioning, though, for the trade talks by the u.s.? >> no, i think it was driven -- when the story came out, people said the president didn't know about it i think it was driven by counterintelligence -- i think from the fbi, you know, from the intelligence side. so, we just don't know, but i get back to this point -- when the world gets this interdependent, your values and mine, the difference between the two start to really matter and every one of these systems -- whether you're talking about dgi drones or huawei, they're all based on servers. they're all going to be built into the architecture. and if you can't trust -- as we were saying in the break, if huawei had a siri or an echo, would you have that in your house? huawei, tell me joe kernen's phone number you know, i kind of wonder >> i'm already worried about that we don't have time, i don't think, but just really quickly -- is bolton hyping the threat from iran right now >> you know, what worries me

about iran is this, and what i've learned about the middle east is in the middle east, the opposite of bad is not good. that is, if you destabilize iran, it's not -- the idea that a good regime's going to come in, you get more like syria -- >> don't you think trump is hesitant to commit anything? >> i do. i think there's a big difference between trump and bolton on this. >> all right, to am is leaving us now did you have a good experience >> i did it was great fun it was great fun an interesting show. >> you didn't have your -- >> i didn't have my -- >> your co-conspirator. >> the people who are always nice to me. >> your co-conspirator but you had your golf buddy here. >> i know, it's good. >> you know you have something in common when both of us hear there's problems in cyprus and we're like, the greens, what happened and they're talking about some country where, some little, tiny place. and anyway, that's -- >> just one coming back -- >> inside joke. >> if tiger wins and you have him on monday, i am here i'm forcing myself on the show. >> first bannon, then tiger. >> that's right. >> this is a dream week for you! >> you're going to be out the

window -- >> thanks for joining us, tom friedman, "the new york times" columnist and author of "thank you for being late: an optimist's guide on thriving in the age of acceleration. we'll be right back.

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welcome back to "squawk box" on cnbc, live from the nasdaq market site in times square. we're just minutes away from the latest retail sales number actually, seconds away rick santelli is standing by at the cme in chicago rick, the numbers, please? >> well, let's start out with may empire this, of course, is more realtime 17.8 17.8 that's a terrific number as a matter of fact, that's not only the best number of the year, that's the best number going back to around thanksgiving of last year. on retail sales, i have a dud here because i don't see it on some of the screens. let's see if it's showing up yes. actual number, up 0.1% up 0.1% on retail sales. and, okay, we're starting to get a couple others. looks like, actually, i'm going to have to go down 0.2% on retail sales i don't see all the minutia out

yet, so i do apologize i'm trying to pick it off on other news services. retail sales, month over month down 0.2%. that's the only information i have thus far. we can talk about the fact that interest rates are moving lower rather aggressively. as a matter of fact, we are now sitting on the low yield close of the year, right around 2.36%, 2.37% in ten-year notes, definitely an area you want to pay attention to overseas, lots of yield movement, too. flight to safety in bunds, which is impacting our treasury yields italian yields moving higher so, all i have is down 0.2% on the advance. i don't have any of the ex-autos, ex-gas or control. i do apologize i'm going to kick it back to melissa lee. >> that you, rick. rick is in chicago steve liesman is here. you could have more details. >> rick does a good job even when he doesn't have the numbers. i do a terrible job when they're in front of me retail sales down 0.2%, a miss

ex-autos up just 0.1%. big decline as expected in motor vehicles, down 1.1%. furniture's a goose egg. a lot of negatives here. electronics down 1.3%. let me cut down to the core, which is the core, which is zero that's the number, the retail number that feeds into gdp ex-a, building materials, food services the reason we care about that is that's the number that goes into the calculation of growth. that's a zero with a slight revision to last month, up 1.1% compared to 1% i don't know that we have a read now on the consumer, because -- and i guess we have a guest here who's going to help us -- but we had a lousy february, a spanking great march, and now we're kind of lousy to middle of april here so we're looking how the consumer is, how the waning of the initial tax cut stimulus is working its way through the system we expect the consumer to be in

pretty good shape because employment's been good and wages have been good, and whether or not he and/or she is spending is really one of the questions we have. >> we should say, the reaction in the markets seeing yields going lower. it was already falling because of a low german ten-year, but falling a bit further. add another voice to the conversation, as steve just mentioned, we have a guest here alongside us michelle meyer from bank of america merrill lynch. michelle, how much worse is this than expected and the fact that last month was revised fractionally better? does that offset the bad news for april? >> yeah, it was a little bit softer than expected but of course, you have to look at the drivers the headline, as steve said, was dragged down by autos. we knew that already from the unit auto sales. and then when you look at th core control, it's flat on the month. but last month was so strong so, i think the reality is that there's just lots of distortions to the consumer data of late and you want to look at a moving average. the moving average shows the consumer's probably expanding on an annualized basis in realtime

somewhere mid2% pace, which is still perfectly fine for consumer spending. >> and you do a mid-2% on 70% of the economy, you're going to say we're going to do mid-2s on the overall gdp number. >> exactly right. >> plus or minus. >> that's how the economy's addiadd ing right now, and that's kpistent with the labor market data are running around 200,000 a month. the economy is above potential we're creating more jobs and we need to keep up with the break-even and the economy is running above its potential, but we're going to see these types of noisy indicators. >> how are you thinking about the tariffs increasing and also if another round goes into effect >> that's the big risk factor, of course, is around the tariffs. so, the current tariffs, which are now up to 25% -- a lot of those items are excluded from the consumer basket. they're more of the intermediate goods, so they're not going to hit the end consumer in a really direct way but if you get the expansion to all of chinese imports, then you're talking about a consumer that's going to be directly impacted and that's going to essentially be like a tax to the consumer.

and i think you will certainly see an impact in real spending on the back of that. >> how much does it impact your gdp forecast, if they all come in as much as touted >> yeah, so, you know, you can look at the direct and then you have to think about the indirect linkages so, on the direct side, if all of those would go in, it's about a 0.3% to 0.4% hit to gdp growth, but if you have a deterioration of financial conditions, a deterioration in confidence, business confidence and consumer confidence, you're talking about potentially a much bigger drag. so that's where i think the risk factors lie is what's the perception out there around these trade wars how much do consumers cut back in the faces how much do businesses get worried and cut back you're already seeing that in the survey data and it could get worse if the trade war continues. >> michelle, the president yesterday wants the federal reserve to match, using his word, chinese stimulus into the economy. >> yeah.

>> there's two separate issues here, and we need to separate them you know, one is this idea of the president sort of urging the central bank to do policy. the other, though, it makes some economic sense, right? if we play this through, china stimulates its economy, lowers interest rates that should depreciate the yuan. and relatively strengthen the dollar should that be a cause for the federal reserve to move? it's not a crazy idea, right >> well, it comes back to this idea of kind of this little mini currency war that we've been seeing now for the past several years. so, in that respect, no, you have to think about financial conditions broadly and one of those financial conditions is the dollar so if the dollar's strengthening a lot, that's a tightening of financial conditions and that's a headwind to the economy. and in theory, you could argue that could be a reason for the fed to consider cutting interest rates. but i think the fed needs to be very careful right now in terms of how they respond to this trade war and these tariffs, because if it's a temporary trade war, if these tariffs go

into place and then are taken away, it's not necessarily appropriate for the fed to change the course of policy, but i think it's something more permanent and is going to have a lasting impact on the economy, then i think the fed has to think about the downside risks and how they want to get ahead of it and preempt those risks. >> they can reverse their policies as quickly as the tariffs -- >> sure, but it hurts their credibility to do that so, if they cut on the back of what they think is going to be a hit to the economy from tariffs, then tariffs go away, they can't say, oh, oops, we're going to hike, we're going to take that back that's a little bit hard for them to do. >> for what it's worth, my opinion, the fed doesn't know what to do here. >> yeah. >> and i will tell you that having read almost every fed comment made about trade, they don't know what sign to put on the inflation impulse of this. >> you mean transient or not transient? >> is the impulse from tariffs, does it end up raising prices on the front end and perhaps being deflationary on the back end not quite sure how consequential

this is -- and i will give them some sympathy on this, why because they haven't had to model a large increase in tariffs since like the 1930s. >> yeah. >> and nobody really has -- and maybe it ends up being inconsequential to the outcome, because if you have an economy like the u.s., which is, compared to say britain, less exposed to foreign trade in total as a percent of gdp than other countries, maybe if you have, for example, overwhelming domestic growth as a result, that it gets papered over and it doesn't show up in the data. >> steve, what if we start to see more of a global slowdown, whether it's europe, whether it's china, whatever, as well? does that increase the possibility of an insurance card if you're starting to look at, gosh, all the factors now lining up -- >> that's an area where i'm personally disappointed with the economics profession the world became more globalized, and i don't think they've updated their models to understand how global growth affects u.s. investments i think there were estimates out there. there was a period of time when

we had unusual global strength it was 2017, i believe it was. >> yeah. >> the estimate was that that ended up giving a half a point extra to u.s. growth then it came off, and that might have hurt sort of the back half of some. we don't really have a good feel for the way that global growth, gdp of different countries affect each other. >> i think it's because it's not just the direct linkages through trade or currency or trade and the traditional ways, it's through the connected system we're such a global system that when something happens, it bleeds into another economy -- >> in ways it didn't ten years ago. >> exactly, and that's why it's so hard to model. >> that's a very good point, a really good question, and we need to figure that out. i think global weakness ricochets back on the u.s. but may not be the determinant of outcomes in the u.s. >> yields are dragging down. ten-year 2.36% this morning. >> wow. >> steve, michelle, as always, thank you very much for joining us >> you got it. all right, coming up -- what

is coming up congress ready to probe boeing 737 max as well as faa oversight at what will be a closely watched hearing today. what does the scrutiny from washington mean for the company? and are we likely to see boeing's executives testify any time soon? yale's jeff sonnenfeld will weigh in aft terhe break stay tuned you're watching "squawk box" on cnbc everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market.

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♪ memories. what we deliver by delivering. welcome back to "squawk box. futures right now indicated down

triple digits, down 120 points following some of the numbers that we were just talking about. 122 now on the dow, 16 on the s&p, and the nasdaq down 43 or so and we were talking about yields dropping >> yeah, i mean, they were dropping even prior to the weak data, and so, there were some concern even before we got that data in that there would be some weakness ahead 2.364%, the lowest level since march 28th at this point. >> and as you said, the move, if you look at the intraday move, most of it came before this data, but it's accentuated by the data because the german ten-year had a low this morning since october of 2016. i'm just bringing up the german one. the ten-year it's still, i think just positive -- no, it's gone negative. >> negative. >> it was just positive this morning. so in fact, that's a full 13 basis points move on top of what it had this morning. so the german ten-year has continued its slide throughout

the morning. we did get german gdp, 0.4%, in fact in line, and of course, a slight improvement from the previous one the chinese data was soft this morning. >> it a. >> retail sales, fixed asset, all below expectation, still in the 5% or 6% growth -- >> not good enough. >> but the very strong march is not continued in a sort of accelerating pace, even though the growth is there. but this has worsened. the last couple days, the sentiment has been slightly soft data this morning as opposed to any trade headlines. but as michelle was saying, retail sales data wasn't terrible it was a little worse than expected, but on an average basis over the last two or three months, it's pretty good all right, we have some possible bad news for uber drivers. a top official at a u.s. labor agency says drivers for the ride-hailing giant are independent contractors and not employees. therecommendation by the general counsel of the national labor relations board who noted

that uber sets their own hours and are allowed to work for competing services means the drivers may not be able to join a union, but it won't affect dozens of lawsuits pending against uber, arguing that drivers should be classified as employees for federal and state wage law purposes. a regional labor director will make a final ruling on this issue. in a statement, uber said it is focused on improving the quality of independent work while preserving drivers' flexibility. the house transportation and infrastructure committee is holding a hearing later this morning on the grounded boeing 737 max aircraft but don't expect any boeing executives to testify. phil lebeau joins us now with more on what we can expect today on capitol hill. >> wilf, this is all about the regulators being questioned about why they approve the 737 max and why some of the systems, specifically the mcas, the flight control system that's at the center of this investigation -- why did the faa regulators sign off on that system when they certified the 737 max? so, there's going to be three regulators who will be questioned today on capitol hill the acting faa administrator,

the ntsb chief, and the d.o.t. inspector general. and really, separate from the grandstanding -- and there will be plenty of comments from members of congress saying, what in the world are you doing and how did you approve this plane to be certified? a couple of key questions -- one, did the faa not consider -- did they not review the mcas system as a critical safety risk and if that was the case, who signed off on that who made that decision because in hindsight, it was not the correct decision also, when might regulators approve these planes to be back in the air as you take a lookat shares of boeing, keep in mind that the company has said for some time that it expects to do a recertification flight for the 737 max with the new flight control system, with the mcas software fix that's likely to happen in the next couple weeks. what will the regulators say about that and again, as you mentioned at the top, wilf, we will not be hearing from any boeing executives

they have yet to be questioned on capitol hill about what they knew, when they knew it, and their thought process in terms of bringing the 737 max to market. >> phil, did you see that story that suggested the american airlines pilots had sent a letter to boeing in between the two crashes? >> yep. >> what's your take on that, if it were true, what would the implications be? >> well, and there was an audio tape that "the new york times" had a chance to listen to and to review, where it was a very tense exchange between the pilots from american airlines and executives for boeing. what's interesting is the commentary from those executives, that matches with what the company was telling other airlines, other lease operators of the 737 max as well as the public. they did not believe at that point that mcas was by itself responsible for the lion air crash. now, we know since then there was the ethiopian airlines crash, and there's clear similarities between the two, and that's at the heart of those

crashes. again, nobody has said specifically mcas is 100% responsible. but clearly, it played a role in both of those crashes. guys, what stands out there, the tonality of the comments from the safety -- the head of safety for the americans union, the pilots for american airlines i mean, it's clear, they were worried way back in november, and boeing continued to say, look, we think that the system is okay. >> yeah. phil, stick around joining us now, jeffrey sonnenfeld, yale school of management senior dean for leadership studies and president for the executive leader institute and cnbc contributor always great to speak with you you say this company, boeing, is headed for an existential threat what can be done at this point seems like every day there's another story that comes out that either puts into question the company's board, the company's management, and even its own, you know, safety regulators within the company.

>> i think that's actually right, melissa analysts have been reassuring us that this can't be a long-term threat to the company. i'd like to believe that myself. i have faith in the management, which has underperformed here. i think the board has underperformed, and i think we have a lot of regulatory issues, but analysts have been reassuring and i think i probably have some holdings of this company so, i've been rooting for them but the reality is there's some real danger signs out. there's a loss of credibility on many fronts, and there is -- people say, well, there's no alternative. that's been the investors' reassurance, that they have, i guess is the airbus -- what is it -- phil would know -- 2300 neon i think is the plane, in terms of midsized efficiency but we saw in april, no orders came through none i mean, last year, i think we had about 30 orders came in in april for this plane, a very popular plane. we've maybe 32 of them or so, not even, were sold in the whole first two quarters of the year so far this is a problem. we have credibility with regulators we have people, passengers are wondering now if it's boeing, we

won't be going. >> sure. >> so, there is -- >> you know, phil, i want to bring you back in because he brings up a good point in terms of the no orders it's understandable that no orders -- they're not making the planes right now at this point in time, either they stamped down production -- >> they're still building thane barclays downgrade from last month or so when they surveyed more than 1700 flyers, a big problem is they would not go to the point where we should be concerned about that pipeline? >> you are asking a couple of different questions, should there be concern of the pipelines? absolutely if you are an airline and there is increasing demand worldwide there is so much growth and so much demand for air travel, from the airline perspective may get to meet that what do you do do you walk away from your 737

max order? that sounds good right now yeah, walk away from it, don't go back to the max your competitors may have the neo and they'll keep on adding flights and market share now you are sitting there and saying wait a second, what am i going to do here with regard to the other point you brought up in terms of whether or not people will get on these planes, the expectation in the industry is that there will be a huge backlash potentially initially but overtime people will say yeah, well they certified and proved it i will get on it >> the thinking is if you are not a customer, i am not going to go on and airlines may say i can't buy a plane that customers are not going to feel safe on. jeff, back to you. phil has a good point. it is hard not to switch at this point. is this a threat if they are not

going to lose much business because there is not an alternative. >> it is hard to switch but to have that in your hip pocket if people right lane not going to get the plane, they're not going to fly them empty either management are working hard in individual private meetings. but, he has been meeting privately with a lot of major air carriers, we don't see the orders coming through. you are wondering why is there some great problems brought into deal with the liability issue? we are looking at estimates on $2 billion or so to make everybody happy in terms of the loss flights there is some rumors that norwegian air and british air had some deals going there are things to readdress and reassure air care. this is such a bipartisan

concern on safety that i really do think we'll hear some questions socome up. they won't be the gold standard alone anymore. they can tell us about going forward on how to get it clear people are expecting the m-cas to be clear this month i don't know how likely that'll be we want to see what's the process. southwest airlines is bad. how come our mcas system is not functi functional how come we didn't know it is not working. >> a lot of questions for this committee today. thank you so much gentlemen. >> jim cramer is there in san francisco. jim is joining us now. we have this two shots of bannon

and freedman that was like surreal. >> i loved it. >> i was thinking about you. you know i thought about you, cramer i don't know how long have you been saying stuff to both of those guys about china does anybody listen? and now they're saying it is right. the whole time the tweet this morning that you guys pointed out consensus play >> i know. >> you can't do business there i keep on hearing from all companies here >> mr. wonderful yesterday just give me a level plain field >> right >> that's not too much to ask,

is it? >> let me bought out something that they're not being sold. they know they're already doing business it is pirated. we have a really different world here i think that when you see the two people agree this morning, what they are saying, what is bannon is saying is this is the most popular universe of america. >> it is >> do you think, tom freidman' point and people don't realize how important it is. and bannon says the 3.2 is not spiking the tariffs but the gdp and because of what's happening in terms of export

i think if you relie y from the chinese. unless you are so integrated in society. >> future is slipping over the course of the show this morning. retail sales a factor in that and the yield move, what's your take >> i think the yield move is making people feel listen, we are going to go back to recession and trade war continues. the stock don't react like that. reaction of the future has been wrong. stay tuned if you look at alibaba up four and now it is up little. we don't trust anything. nothing. >> we got through a lot of problems in this country here is one of the tweets. pray that china beats the u.s. in the standoff because democrats have to win. >> anyway, thank you, jim, we'll

see you. >> great show this morning bannon stuff reading that was a lecture >> serendipity, all of a sudden they are here. thank you, jacksonvilim, we'll n two-minutes. in the transportation industry without knowing firsthandness the unique challenges in that sector? coming out here, seeing the infrastructure firsthand, we can make better informed investment decisions. that's why i go beyond the numbers.

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okay, make sure you join us tomorr tomorrow it does not get any weirder. >> thanks wolf thank you melissa. make sure you join us tomorrow, "squawk on the street" is coming up right now ♪ good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber, cramer is in san francisco. future is stumbling a little bit, largely disappointing u.s. sales down prosecute xi speaks for th