good morning it is 11:00 p.m. at huawei headquarters it's 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ good tuesday morning, welcome to "squawk alley. i'm carl quintanilla with morgan

brennan. obviously we've lost some gains. dow's up 35 points we're going to start with huawei and the impact the chinese smartphone company continues to have on u.s. technology. the journal has a report this morning called trade fight, threaten 5g growth in the u.s. larry hafrty of lgh investments. good morning to both of you. i'd love to get your take on how this arm's race that's shaping up between the u.s. and china is informing your picks if at all right now in the short to medium term >> well, carl, you can take this in two ways. one is to just say it doesn't really exist or it's going to get resolved and that's really becoming increasingly impractical. if, in fact, you assume that, then the -- where you go is pretty easy. i think apple and google are the choices followed by probably

facebook and stocks such as amazon and netflix where you might have had some valuation concerns as i have become more attractive because you don't have the situation of risk in china. however, what's going on here is very, very high stakes poker, and i think the likelihood that there's a near-term resolution is very, very low, and of course hawaii and 5g are in the middle of it. and i think at this point i have to say that this is really something that is mission critical to the united states. 5g is an absolutely -- we can't lose it technology, so the government has to play very big time hardball on this, and if there are financial ramifications on this so be it. >> yeah, but joel, i want to get you in on this it seems like the trump administration is making the argument that huawei is not to

be trusted just because it's chinese, not specifically because it's doing a bad thing that they can dem straonstrate o does this end? even if there is a trade deal to be had, i don't understand how we get past the huawei thing. >> yeah, and that's the kind of problem. the huawei scenario we're looking at right now and we've been talking about for only two weeks, it feels like months, it differs very much so from the zt situation of last year where there was direct implications of zt and some of their wrongdoings. huawei there is a little bit what's kind of the, you know, trump's play here. definitely there's some guys whispering in his ear that if we don't do, put steps and measures in place to kind of pull back some of huawei's ambitions especially in 5g, that the u.s. could kind of fall behind. on the flip side, you know, the white house is walking down a slippery slope, and if we -- if there are any missteps along the way intentionally or

unintentionally, this could really show some negative ramifications for years to come. >> larry are we entering a tech cold war so to speak >> i think there's no question that we are. right now it's limited, but the -- you know, situation if you look at history, the balkens was limited in 1914 and that blew up eventually, and that could be where we're heading, but the idea here is that we really, i don't think, can compromise here. this 5g there's no question is critical for national security, and hopefully i think the best thing that's going to happen here is china goes its way on 5g, and we go our way, but there's no chance in my opinion while this party is in power that there's likely to be compromise on this, so we're going to probably do it without

huawei, and that's going to have earnings ramifications down the line for companies that are suppliers to huawei, and it will have positive implications to people who were suppliers to the united states companies that are developing these technologies. right now we're in never never land, and one thing about never never land is it's not a good place to be when you're an investor and hopefully cooler heads will prevail, but you know, i think we're just in a -- we're just in a long pause, carl, until this gets resolved, and it will be resolved one afternoon or one evening and then we can go back to our business. once it's resolved, the valuations are just terrific on these companies, especially since the one thing that you can be real sure of here is interest rates aren't going up. >> i hope i'm there. i hope i'm in the office on that day where this all goes away joel, "the times" tries to take a look at whether or not we can actually go our way and huawei goes their way as larry says they say even if trump is successful in isolating huawei,

billions of bits of data will flow through undersea fiberoptic lines and through satellites can connecting the two competing internet environments. this is not like just slicing something in half, this internet world? >> yeah, exactly and i kind of agree with larry, you know, under the current administration, you know, it doesn't look like a deal's going to happen imminent, but with donald trump's track record my gut is eventually we're going to see some sort of deal, agreement. a near term resolution doesn't look in place, especially with the g20 meeting a month out. but trump has to think about a 2020 election. china doesn't. they can play the long game. here in the u.s. the administration doesn't have that luxury if the economy takes a turn for the worst, and we all know we have a president who watches the s&p on a daily hourly basis, something's going to get done if the economy deteriorates further. we've seen the confessions rise from the supply chain already, hence there's just really people are trying to figure out how to handicap this situation. semiconductors, we could be at

risk of a squeeze in the near term, from investment in the medium term. there's no visibility. the hope trade has already been unwound that we saw peak in early q2, so i've got to think there's still good ways to be long in this market, whether it's cisco, microsoft, and large cap, look for the cloud complex as well. there's still great secular growth stories in the u.s. my advice avoid the semiconductor chain until we get some resolution. >> joel, you just touched on it, but the other news of the day, i just to want get kwyour thought on this quickly, that is payment and fin tack, including this global payments merger today your thoughts? >> yeah, it was kind of widely expected over the weekend given the friday headlines, and we view the deal kind of that it

was nevitable, you had five serve make the move for first data this seemed like the most logical play, and again, the synergies are fantastic. the deals pretty much loved across the street, and i think another name in this space to just look at for a play in the long side, you know, a name like paypal continues to benefit from the monetization theme, whic continues to accelerate, and even some of the payment -- the payment names as well, mastercard, visa which are both highlighted in a pretty well written piece over the weekend >> a lot to think about, guys, for all of our viewers, joel, larry, we'll see you guys soon thanks very much. >> thanks, carl. coming up, does the doctored nancy pelosi video prove that facebook as we once knew it is over that's what our next guest is alleging she's going to join us next. and later, the first goods subject to the new tariffs arriving here in the u.s., of course jeane wells is there liv. what's coming up at the bottom of the hour? >> morgan, everything i'm wearing today and i mean everything, is from china except for the ring, and that is the

first ship from china since the new tariffs hit. coming up, what is it ingog to cost you, some new estimates from the new york fed with a

twist that's guys, get in here!

who's a good boy? it's me. me, me, me. hey guys! you're gonna want to get in on this. i know how to those guys in here. let's pause the internet on their devices. wohhh? huhhhh? [ grumbling ] all: sausages! mmm, mmmm. bon appetite. make time for what matters. pause your wifi with xfinity xfi and see the secret life of pets 2 in theaters. but and then he had a press conference in the rose garden. >> that doctored video of nancy pelosi slowed down to make the house speaker appear intoxicated causing quite a stir on facebook over the weekend re-raising

concerns about the spread of misinformation on the social network. facebook defending its decision to keep the video online in an interview saying, quote, we think it's important for people to make their own informed choice for what to believe our next guest calling the internet the latest of facebook's dirty tricks and the end of the platform as we once knew it. joining us know editor at large cnbc contributor kara swisher. good morning my take on this is the problem isn't that facebook is keeping the video up, it's that facebook has become an important source of news and has developed no mechanism for showing people what has been vetted for accuracy and what has not. what's your take >> yeah, i agree with you. i wasn't necessarily advocating for taking it down i just think the way they handled it as usual was cloddish youtube took it town, and that was the ceo's decision and she'll get praised for it or not praised for it she made a decision. in this case they left it up, and then they didn't properly

label it i mean, if you look at the label, they're so confusing and you don't understand what's going on i understand facebook is working on a new labeling system for things like this, but it creates an incredible amount of confusion if they don't explain what's wrong with the video, especially if their fact checkers have determined it a hoax why can't they just call it a hoax or put satire on it or something that is very clear, especially as high profile videos that there's something amiss here and people need more signals, i guess. >> and kara, i think that the way facebook is approaching this issue of bad content measuring their success as a platform and combatting it by how quickly they identify it or take it down, this is a crucial element. facebook isn't defining what the problem with facebook is, it's defining what the problem with people posting on facebook is, and those are two separate issues >> sure, absolutely, and i think, you know, again, they don't have to take it down they just have to handle it

correctly, especially after donald trump tweets it and it becomes a high profile thing i realize the difficulty of this is massive, especially as people keep uploading these things but they built it, and therefore they need to build rules they need to build rules that are consistent they need to do guard rails that are correct, and they just don't seem to -- they seem to just jump from one thing, they stumble from one thing to the next it's hard to anticipate this stuff. i get it it's just they built it and they should have really clear rules in place and stick to them to say they're giving us accurate information about this video is ridiculous. it's not accurate. i didn't even understand the labels on it, and i'm pretty good at understanding labels >> kara, this really seems to get to the heart of the problem for me, which is they do seem to have some rules, and they do seem to take some content down saying that it breaks those rules, but what i can't get my head around is is this a communications issue, or is this really just an operational and protocol issue because some stuff seems to be

subject to these rules, and some doesn't. >> well, yeah, haphazard was the word i used. i'm like what? i don't know what are they doing? is there some person in there deciding this? is there a machine deciding this just the transparency of what they decide to do is really -- it's haphazard, and then they hide behind this idea of free speech and censorship. they're a private company. they can handle this stuff they're not the government, and they aren't subject to the first amendment, the first amendment itself what they can do is be very clear, very transparent, label them in a way that is easy to understand if they want to keep a controversial video up they do, they take down things that you don't know why and you don't understand, it creates all kind of ak rcrimony from the le, from the right i again get the outcry it's confusing. >> they're finally seeing some impact on engagement on core facebook by about two minutes a day for u.s. adults. i mean, we keep saying this and

quarter after quarter obviously advertiser interest remains intact is the ship starting to turn a little bit >> i don't know. i don't know obviously, you know, as you know every tech company in the short history of all these tech company, you know, goes up and down when's the last time you used net scape? what about yahoo what about aol this is how these things happen. there's a degradation in the product experience, and i think this is one of the things. i thinkso i think some people just get tired of one thing mark when i met him called this a utility. if it wants to be a utility, it's got to keep the power lines. you have to cover the power lines in rubber please so we don't touch them and get electrocuted things like that i think that's their responsibility to create a clean and clear system, even if it's difficult, and i want to just stress it's difficult, and i would not want to have this job, and so that's my -- that's the issue is like if they want to have this job, they have to do their job, and i don't think that's too much to ask >> kara we're talking about

facebook right now, but this also highlights what may be a bigger, broader threat on the tech landscape in general right now, and that is the nefarious roles that ai can play in things like deep fake technologies. do you think society and investors are taking those risks of that future technology into account right now? >> well, this video is a light fake this is just a compilation video. when you get to really serious stuff like deep fakes, i don't know what they're going to -- if they can't handle, i could have done this on my computer myself, and i'm real bad with all kinds of things. the issue is when it gets to be very sophisticated what rules do they have in place i know they're working on them, and they are working on a system to deal with deep fakes. they really need to move a little faster and make it 100% their priority and be communicating with users and the press and regulators all the time about what they're doing.

that's why you get an interview like monica bickerd did with anderson cooper. she's incredibly intelligent she works really hard, it just creates much more confusion if you don't really understand what the -- what the laws are, i guess. what is the law of facebook? and i'd like to know it very clearly, and it can change, too, by the way >> yeah, and it seems to be changing as situations present themselves kara always great to have you, thanks. >> thanks a lot. the dow coming off its first five-week losing streak since 2011 it's currently up 58 points. take a look at the names trying take a look at the names trying to turn things around this get it! crowd chanting: get it! get it! get it! (crowd groaning) (crowd cheering)

narrator: give your town a reason to celebrate because every goodwill item you bring home, brings job training and more to your community. goodwill. bring good home. morning. we got a loty py (

straight ahead don'ty

european markets are set to close in just a few minutes following this weekend's e.u.

elections. our villa marks joins us in london on the race to replace theresa may after her conservative party bombed at the ballot box. >> thanks so much this was the worst electoral performance by theresa may's conservative party in 200 years they came in fifth in the european parliamentary elections here in the u.k. that's put a huge amount of pressure on them in an already difficult time with their leader theresa may having announced her resignation last week. there are ten candidates in the running to replace her it's not quite as big as the democratic party's presidential field just yet, but it could be growing, and amongst those, a lot of them saying they are prepared to take the u.k. out of europe without a deal, and this is what investors are going to be watching closely is to see whether those trading conditions between the u.k. and europe could be severed overnight at the end of october that's the current deadline for a deal to be reached between the two sides, and even those who in

the past voted to remain inside the european union back in 2016 during the national referendum, even they announced saying they have to deliver brexit otherwise it will be extinction time for their party. amongst those candidate s we'll see that race start in earnest in the beginning of june once theresa may officially ends her role as prime minister following president trump's visit to the u.k. here. >> yeah, willem key developments thank you for bringing us the latest let's get over to sue herera now for a news update. >> good morning, everyone. here's what's happening at this hour a man carrying a knife in each hand attacked a group of school girls waiting at a bus stop outside tokyo killing two and injuring 16 more before then killing himself. president trump offering his condolences while touring a japanese naval ship as he was wrapping up his state visit to japan. >> on behalf of the first lady and myself, i want to take a moment to send our prayers and sympathy to the victims of the stabbing attack this morning in

tokyo. all americans stand with the people of japan and grieve for the victims and for their families. >> iran once again rejecting 12 demands set by the u.s. last year that were included in a new nuclear treaty saying they were unrealistic. an iranian foreign ministry spokesman says the landmark nuclear deal is still alive. there's no need for fresh talks. here at home, the number of new diabetes cases among u.s. adults keeps falling, even as obesity rates rise, and health officials aren't really sure why. new federal data found the number of new diabetes diagnoses fell to about 1.3 million in 2017 that's down from 1.7 million in 2009 you are up to date, that's the news update this hour, guys, back downtown to you carl >> sue, thank you very much. when we come back, how the president's trade fight with huawei is impacting u.s. carriers 5g plans. in the meantime, hanging onto gains here's, s&p up three

points and the dow up 35 we're back in just a moment. the cnbc trend talker live data board

the cme group.y prtg n 2f

welcome back to "squawk alley," the first cargo subject to the 25% tariffs is arriving in the u.s over the weekend jane wells is in san pedro, california, with

more on this first shipment. >> reporter: yeah, we're at the port of long beach, and you are looking at the first ship to arrive since the new tariffs hit, the oocl tokyo. only about 12% of the containers from china on that ship are sun subject to the tariffs the other 80%, apparel, other stuff like that not tariffed yet. lets me give you an example, there are about 2,000 jessica simpson suitcases on that ship before the tariffs they were each averaging a little under 15 bucks. now they're about 17 bucks apiece that's an extra $4,000 there are 72,000 bags of dental flossers on that ship. before the tariffs around $0.42 a bag, now almost $0.49. that difference is almost $5,000 steven ferrera who consults with fortune 100 companies to talk about how to manage their ocean freight says some american companies are pressuring chinese companies to lower their prices to mitigate the tariffs, and a

handful can play hardball. >> so when a big retailer like menard's for example, they're telling the factory you sell it to me at this price, it includes everything, the ocean freight, the duty, the tariffs, the fees. >> reporter: but most of the time american importers are paying, and he says they average $15 million per ship extra now starting now so what's it costing to you? i saved the best for last, check this out economists at the new york fed said on average the american household will pay about 800-plus dollars more this year because of the tariffs, double the impact last year, but the most of that, $600 is not due to the actual tariff. it's due to things like reconfiguring your supply chain or work arounds. that's what most of the cost is. the actual tariff cost is only about 211 bucks, and that is down from last year. wow. i'm freaking out. >> jane, i'll take it. that is an interesting piece of

information, piece of data right there. i'm really impressed you're wearing high heels at the port you showed us that before, and kudos to you on that one jane wells. >> i'm not wearing them now. >> okay. one such chip in the trade war is huawei. the journal out with a piece over the weekend reporting the chinese smartphone company's rise is littered with accusations of theft and dubious ethics this as u.s. tech companies continue to turn their back on huawei as a result of the u.s./china trade war joining us now to discuss this, ba acme capital cofounder, gentlemen good morning to you. sean, i'll start with you, do you see everything that's going on with huawei as a chip in the u.s./china trade tensions or is there something that could last a lot longer >> this is something that could last a lot longer. there's two sides to the debate. there's that old economy side buy more american exports. on the new economy side it's this dual use technology, and it does hit things like mobile

communications with 5g, artificial intelligence, robotics, lots of other issues you're not going to be able to fold them into the current trade discussion and find a resolution. >> you've been doing business for what the better part of almost two decades now, this report in the journal, the idea that huawei is littered with accusations of theft and dubious ethics, did that surprise you? >> it's surprising a little bit in terms of the accusation, yes. there's been a lot of copying and a lot of things that have been happening in china between u.s. and chinese companies for a long time. it's nothing new, frankly. >> sean, if we are in sort of a cold war in tech between the u.s. and china right now when it comes to 5g with huawei as one of the first incidents, do you end up with the equivalent of containment policy two separate networks or collections of networks, and how can that even practically work in a digital

world? >> that's a great kwechquestion the u.s. and soviet union didn't tratd d tra trade. i read somewhere they traded $2 billion a year. we trade $2 billion a day with china. we're going to have to find a way to work around this. with the recent orders on this export orders from the u.s., you are seeing essentially a rise of two internets a u.s. western version and a chinese version. companies have tried to work around this before, but we're in a new normal when it comes to trade in u.s. and china and being tied to all the national security concerns. >> hany, we've got reports now that alibaba is considering listing in hong kong, this on the heels of comments from mark cuban last week, stooeeve bannot name a few suggesting the idea or floating the idea that maybe chinese companies shouldn't be allowed to go public here in the u.s. do you think that's a scenario that could actually play out >> i don't think that was a primary driver for alibaba listing in hong kong when it was doing its ipo was considering

doing a dual listing between hong kong and the u.s. the primary driver was frankly that hong kong wouldn't allow dual stock or dual share, dual class listings the hong kong stock exchange has revisited that decision. i think that's why alibaba is thinking about hong kong i think a lot of the trade tensions going on between the u.s. and china and the tit for tat kind of movement is more of an ideological issue it is than frankly an economic issue. >> sean, you had president trump in japan over the weekend talking trade there. a lot of times we just focus on the dynamic between the u.s. and china right now, but how much could all of these other potential trade deals with other partners factor into how this long-term impacts the u.s. >> that's a great question the u.s. administration delayed tariffs or at least a decision on tariffs on european auto and auto parts by six months, begin what's going on with u.s., china we have to get the u.s. nafta

ratified through congress. it's possible you just won't have enough oxygen this calendar year to, because u.s. china just takes the rest of the year >> so going back to what you were saying about the digital economy and the flow of information given the trade between the u.s. and china, for me it isn't even just an issue of the u.s. and china because other countries are still going to use huawei equipment, if the issue is the equipment so is it even possible to sort of x out all the places that have a different standard about what chinese equipment they're going to use and say we're not even going to accept data from those countries? and if not, what are we really fighting about >> that's a great issue, and the pentagon is very worried about that it's not just about building physical infrastructure. it is about that flow of data. if you're a u.s. service in a military operation in a foreign country and you've got to use a foreign built 5g network, that attack surface has increased substantially, is that a way you

cannot just hack the physical devices but also intercept data flows. that's the real concern, and this is as the last person mentioned a big issue of like great power politics it's the rise of china and how the u.s. can better manage that, and we haven't figured that out. we're in the middle of that right now. >> hany, is there anything in terms of the u.s./china trade situation right now and things that are transpiring that would make you change the way you're investing? >> no, i think that there is one case of catastrophic risk, actually, it could be a contingent across the entire sector one of the things that's happening is china is really trying to protect itself from social discord one of the things that they've been pushing and pushing off is the ability for social networks to enter china technology from a technology perspective, one of the things they're worried about is technology that basically starts disseminating information and creates the rise of the chinese citizen much the same way that the arab spring happened, i think the chinese government is

worried about a china spring if that happens it's going to be a catastrophic risk economically for everybody on the planet. that's the one thing here i think in the trade tensions that people are not talking about enough china has to save face some way, in some way in this trade war, and they have to protect its citizens from what they call social unrest. >> so wait, the citizens would be unrestful because what? they're not allowed access to american products? >> so if you think about how china has been the galapagos island for the last two decades in terms of protecting itself, protecting itself citizens from social discord and social unrest. >> that part we get. >> for the last 20 years they've had great economic growth. the rise of the middle class, things people making money hand over fist, i think if the economy starts to pull back and people start to be getting disenchanted, that's where social unrest can come in, and that's why the communist party has been such a hard line

enforcer of the rules around social discord and harmony and even going to the great lengths of having the cameras, the facial recognition software et cetera. >> sure, and by the way, on the 70th anniversary year of the people's republic. >> and that's a great point. about a year ago we put out a note about this. the idea is how do you grow the economy to keep gdp per person along the lines of korea and taiwan if you're the chinese government leadership you're thinking we've got to avoid this middle income trap we've got 725 million smartphone users. tiananmen square part two or anything that resembles the arab spring >> thanks for joining us. >> and 40 billion in two-year notes up for auction just moments ago. rick santelli can tell us what the demand looks like from the cme in chicago absolutely, johnny, it was a

great way to start 113 billion in supply between twos fives and sevens i gave it an a as in apple 41 billion two-year notes, 2.125. the one issue market for about the last hour was trading 213 1/2, 214, lower yield higher price. as a matter of fact that was the lowest yield of the dutch auction since january of 2018. bid to cover 2.75, that's like out of the park strong since 2018, august of 2018 46.6 on indirects is the only metric that was like average, and if you look at 27.2 on direct, super strong since may of 2016. no matter how you slice this auction, it was a really strong one. so let's get in the heads of those that tried to participate. what is it about the short end that seems to make investors so bold well, my guess is they're looking at a fed that either is on pausers going to ease, which should make grades go down that seems to be the logic

embedded in this at least at this point in time i always like to keep things realtime, and i know there was just a guest talking about social unrest with regard to how the economy fairs in china that has been a common refrain among all the discussions i've ever had about china for the last ten years, that all the progress that has been made moving the middle class into a higher ecostrata things like putting an extra chicken on everytable once a month, all those issues, better food, better aspect towards some of the western culture, whether it's jeans, all of that contributes to the growth of china and the stability of the people, over a billion of them it's something to consider with regard to should there be any pullbacks in the economy another big issue with the economy in china and now with the u.s. based on what the u.s. commerce department did last week is the u.s. dollar. think about it, many now of course are looking at all the countries that may be currency manipulators and the commerce

department is setting up all of these things, these issues that would be considered should that designation occur and things happen in that regard with regard to other economies but here's the problem i see first of all, look at a chart of the dollar index since january 2018, year-to-date boy, it is just a steady eddie higher now a charge starting in january of 2016, and you can see that for the most part in the first half of that chart, they correlated the dollar always gets its own life in other areas. but obviously after the volatility we had at the end of last year, they have definitely frayed a bit, not only interest rates in the direction of equities but also the dollar now why do i bring all these things together? because we know the president would rather have a weaker dollar but in the end interest rates moving down right now, which confuses some. the main prism to view this movement in my opinion should be

paying especially close attention to the green back because market driven rates supposedly are augustering for feds to cut rates. at least it's somewhat market driven all of those should gain up on the dollar at some point in the future should investors really pick up on the notion that what's being reflected in lower rates is more of a u.s. economic development than a contamination by overseas markets and policy carl, back to you. >> all right, rick, thank you. rick santelli. coming up tomorrow, do not miss an exclusive with the ceo of mcdonald' sves,te easterbrook 9:00 a.m. eastern time o when i reached this accomplishment, it was like, it's here, it's happening, it's now. "squawk on the street" we are the ones who break through.

we're back in a moment.y %w%[

here's what's coming up halftime report at the top of the hour we're debating the future of the tech trade as many stocks in that universe have been hit pretty hard. is a comeback in the cards plus, dow component kevin o'leary just bought might surprise you. and the biggest oncology conference in the country, one firm downgrading a big bio tech to a sell. stephanie link owns it uh-oh, she's going to tell us whether she's going to bail. it's all at noon on the half. cannabis stocks among the year's big winners outperforming the s&p so far this year koun cowen's got a new report following its week long cannabis summit in toronto.

it sees a potential inflection point for cultivation in canada. joining us cowen senior cannabis and beverage sector analyst. thanks for joining us, great to see you. conclusions, you've got a few of them what's the big one >> that capacity challenges will finally resolve themselves that's been the big sticking point, when we do our survey work consistently in the marketplace we're finding that about half the market is out of stock, so we can see that there were products that were once sold on the ontario e-commerce platform and they're not available anymore. >> so cultivation takes a leg up. >> that's right. >> is that going to be easy to do or is that a stretch? >> we're starting to see early progress with that in the calendar first quarter earnings that we saw from aurora two weeks ago. there's evidence that it's happening. >> you cover a lot more than cannabis you cover alcohol, tobacco, when you look at premium cannabis, what market, existing market is that most like >> it's a lot like alcohol in terms of the price gaps that the

license producers in canada are trying to achieve. it's like 3x versus value pricing which is consistent with what we see in bourbon and vodka. >> in terms of institutional investors getting into the cannabis market, how much of that hinges on federal laws here in this country changing >> well, we've seen a lot of institutional investors start to get really comfortable with it canopy growth having gotten an investment in constellation brands last august went a long way in terms of getting investors comfortable with the exposure. >> do you expect those laws to change here in the u.s. on a federal level? and if not, i guess how much opportunity is being missed out on >> the state's act which would be kind of the easiest pathway for more traditional s&p 500 companies to get involved in u.s. cannabis, we don't think that gets done in the next 12 months >> how much instead we're left with the patchwork of legislation as we see today? >> for the time being. we think it's a better likelihood in 2020 or 2021, either closer into the election,

but preventing states from getting referendums on the ballot or in the next administration >> clear what's going to determine who actually has a premium edge in this market? and alcohol is more developed, people know, but is it clear what actually makes something premium versus not >> there are two factors that drive premium positioning in the marketplace. number one is potency where consumers have been drawn to higher potency in thc, the other is the cultivation methodology, if it's organic. >> finally, we spend so much time talking about legislation here, they're chasing it all around the world, right? where would you say is the biggest chase? >> so right now germany is the most active market internationally. it has a pretty robust medical program, but at our conference we talked a lot about mexico where policy changes are going to make for a much more vibrant medical market later this year >> fascinating, and as i said during the break, you guys have really covered this space well,

thanks vivian, good to see you after the break, bringing the first self-driving truck to market, what the cofounder of u tusimple told me about that. and the impact of the u.s./china trade war on that business that's next. in the meantime, dow's up

six points

hey! i'm bill slowsky jr., i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. welcome back to "squawk alley. are you ready for dlooifr res deliveries the u.s. postal service is testing the technology

for the first time it is partnering with a self-driving truck start-up to test the viability of carrying mail on the long haul route between phoenix and dallas this is a pilot program. last week, i spoke with the cfo about how self-driving could transform the trucking sector. here's what he had to say. >> today it takes a truck driver five days to go from east coast to west coast because of the limitation on how many hours one person can drive each day, so about half the time, the truck is actually sitting idle in a truck stop with the technology, this can be shortened to two days because a truck can drive 24 hours a day and so you think about what that means, that will change how end customers think about their logistics infrastructure and their supply chain and so we're certainly very excited to be in the middle of all this and we're very excited today to be working with usps. they're very forward looking in terms of adopting new technology

into their existing fleet and making their transportation more efficient and more safe. >> yeah, and certainly we've seen a shortage for years now of truck drivers here in the u.s. in terms of the pitch you make to companies, be it the postal service or other partners that you would like to work with on autonomous trucking, what are the economics and how do you break down those long-term cost savings? >> the economics are, i would say, very staggering for this industry labor cost today is about 40% of operating costs on per mile basis and fuel is the other 30% and so the biggest cost, really, is labor and so, if you're able to reduce the cost of labor, today, a trucking fleet is about -- it's a low margin business, it's typically 15% gross margin business, 7% ebitda margin and so if you're able to reduce the labor cost all of a sudden you have a 50% gross margin business so think for fleet that's very attractive and for them to acquire this

technology, the payback period for them is also quite attractive >> now, we've heard from other companies, particularly in the ride sharing market, like uber, who have said autonomous could still be years away. what does the time line in terms of autonomous trucking look like >> i think in general the industry today feels that for autonomous technology, the first to commercialize will be in the trucking space, primarily because there's a stronger value proposition to the end customers and, two, the implementation tends to be a little bit easier because we're primarily doing highway driving. we're offering a hub to hub solution so that's delivering goods from a customer's distribution center to another distribution center. for us, the road map is we are still validating the technology today so we're being very careful. we have safety drivers in the truck at all times, and we think that we'll be able to have factory production ready trucks by 2023 or 2024 range.

>> tu simple is a chinese start-up obviously we've seen tensions flare around trade talks and the like between the two countries how closely are you monitoring that and is it the type of dynamic that could affect tu simple's business plans here in the u.s. >> as any technology company that operates in both markets, we are monitoring the situation closely. the reason we have two headquarters is because these are the two largest transportation markets in the world. the products for both markets will be a little bit different because we're addressing different situations, we're working different oems and hardware partners. so, today, we're not affected by the trade war but it's something that we're monitoring closely. >> monitoring closely like so many other companies tu simple is actually a trucking tech unicorn it's now valued at more than a billion dollars. they've raised money from investors like nvidia, also chinese online media companies guys, tusimple has also been in the news in recent weeks because it was the subject of reports

that amazon was looking to potentially acquire the company. i asked about that as well batted town those reports, said don't comment on rumor and speculation and the longer term plan for tusimple is to be a stand alone company that is selling these autonomous trucks. >> i mean, he's right about the highway element. what happens when we really start dealing with crowded streets and urban corridors, right? whether this has any implication on how hard it's going to be in the city >> yeah. i think all of this is, you know, big question marks and things that need to be worked out by regulators and that's why you're seeing pilot programs like this one with the postal service to gather more data and sort of get a better sense of this technology and what a broader rollout could mean but in general i think you're going to see it adopted first on these long haul routes where it's specifically freight involved. meantime, guys, i want to flag another, what i would call, kind of a strange story in shipping as well. huawei is now reviewing its

relationship with fedex after the shipping giant rerouted without explanation, huawei says, two packages destined for a huawei address in asia, rerouted those packages to the u.s. huawei reportedly claims that fedex also attempted to reroute two additional parcels as well a fedex spokesperson telling us, "we value all of our customers who entrust more than 15 million packages a day with us we regret that this isolated number of huawei packages were inadvertently misrouted and confirm they are in the process of being returned to the shippers." this, i think, is getting a lot of attention right now a, because huawei itself flagged it, and b, because i think it just draws, you know, into attention logistics and how some of these shipping networks move around >> yeah. absolutely >> but more will be revealed there, i tnkhi >> trying to hang on to these gains here, dow is up 15 and the

s&py "squawk alley" is back in three minutes.y prtg n '91yyyyy

boeing and visa working overtime to keep the dow afloat here, trying to offset the drag from goldman and intel on a day where amd is up another 6% >> oh my goodness, it's up 9.5%.

it's near the highs of the day on this computex announcement. this stock having another run. >> transports continue to underperform keep an eye on that, it tends to be an early indicator in midst of all the trade talk. >> busy afternoons ahead let's get to scott wapner and the half >> i'm scott wapner, is the biggest sector in the market in serious problem? the tech front and center this hour it is 12:00 noon and this is "the halftime report." >> announcer: tech trouble the sector is down more than 6% in the month semis, really getting slammed. down almost 15% in a month the dow is down now five straight weeks, the worst streak since 2011 with several big name sectors in correction territory, do investors need to prepare for another big drop and a big move on boeing >> you're going to get a major correction you're going