dow is looking down by 240 points nasdaq is off by 90 points s&p down by 28 that does it for us today. make sure you join us next week. right now it is time for "squawk on the street. ♪ good friday morning, welcome to "squawk on the street," i am car quintanilla with jim cramer and david faber. final day of may we are closing the worst month of the year. the president announced these surprise tariffs on mexican imports. europe is down 1% plus oil looks to end its biggest

monthly drop since november. the president's surprise of warning on new tariffs in mexico >> plus, extremely challenging red flags for gap. >> uber's turn around. mass expectations. futures are down as we get ready to wrap up a rough month for stock. the president announced the u.s. will impose a 5% tariff for mexico goods mexico's president says he and his country will not respond to provocations and adding the disputes must be resolve through dialogu dialogue we'll talk to peter navarro. >> jim, you said something came from left field. >> i think they're precamp now

there is kudlow's camp with mnuchin. this is about trade. you speak to peter navarro it does say that's a camp we are concerned about, huawei, should we let them take our 5g products and vice versa the chinese putting together unreliable and then there is this camp we did not count which is national security camp that suddenly is really in there. it is punitive i don't know how much the chief economic advisers are being consulted now. >> well, we can obviously talk about the economic impact of 5% tariffs of all imports on mexico

of $330 billion? >> no, bigger than that. >> 352 >> autos as you pointed out many times giving up a home near a lot of those plants are the largest. >> bm 3 is going to be there >> the amount of things that go back and forth and components are added and there is that. there is also this idea that you are using tariffs in a way that has nothing to do with trade and you forgot it to be a destabilizing factor here, decision makers when it comes to business >> the president has the right to use the emergency act in 1974 he signed it specifically. it is one of any tools that any administration has >> $600 billion trade.

they did 371 i think what people have to realize is -- the nafta, the scribn germans and the japanese have really adopted nafta in a way that i think they would recognize. there is a toyota plant, the man rushed to build there wiis lookg real stupid. >> they would move production of u.s. bound cameras from china to mexico what are they thinking right now, guys? >> you are dealing with the china/trade war and china making decisions within that and are starting to as you point out, carl, the journal has a story yesterday move your supply

chains and make the decisions you put off. we hit of this that comes out of nowhere and it has nothing to do with the trade dispute i would think that it adds to your overall inability to make a decision or increases on uncertainty which we hear about so often which being the enemy of capital spending. >> the president says this is going to force -- >> so you think, you really believe he's using this as a tool to try to get automakers to bring manufacturing back here everyone thou even though we say it is about the immigration process. >> you are double win.

no matter what you do. forget on the constant corona. >> right off the bat by the 4%, head wind eps. that's twelve months >> i will buy avocado avocados -- chipotle, wow. what i think is happening the president talked to people and you are talking to one of them later, you should ask them they think the jobs are going to come back and more importantly they think the people who left this country to open plants, bad actors >> two questions for whatever answer, one is where do you get the workers. you can hire them then for a certain amount of money usually seven times over china who loses them if they migrate

to a fresh production center >> you pay 6 bucks an hour in mexico, all in with healthcare 6 bucks an hour that's ahead of minimum wage a lot of people move from china to mexico. >> we are having a trade discussion about china when this is not about that. >> this is not msnbc >> this is about immigration crisis on the border where a bunch of central americans showing up everyday with their children and the president blames the democrats but is he going to meet with them about immigration even though he walks out on infrastructure. >> what substantially stop the flow one theory we do see decline seasonably because it gets hot maybe immigration takes off a little bit >> how about gang in honduras and el salvador and guatemala?

this is not about trade. we have a trade agreement. this puts in jeopardy of the usmca as well. >> i came home last night, it was pretty good. and then i see it and i sai said -- my work piece is nothing. what the heck am i doing >> you did say on twitter to someone asking about the market that the administration, the way you put it is does not care about markets right now. >> right now they really don't care >> they think apple rot. there are 2 million people working for apple. the largest taxpayers in the united states. what are you doing

>> what's the problem? >> it is a world that they seem to want to bring back. it is not a world that exists anymore. >> some people dream dreams. this man dream dreams that all these jobs are going to come back here. >> right now by complicating things, all of the manufactures in our country do the work on things and go to mexico and maybe go back to china you don't know the real source of origin is on this >> it goes back and forth. you make a transmission? mexico and that goes up to the united states, is that car a mexican car? >> i don't know. >> i don't know either >> well, that's got to be the usmca, right >> they thought it is going to

be frictionless. >> i sit there and i think wow -- what happens -- what if the mexicans say we can't deal with this. we don't have the money. what do you want to do we put up a border wall on our southern border? >> they're going to have a recession like you would not believe. most people would come here and i think you know -- honestly, for this honduras coming through. mexico got a decent economy. >> last quarter it was not much. >> you know what the credit card rate is there? it is not like they have a lot of access surplus. they can hurt us >> right now if you look at the western part, they're going to

buy their natural gas which is negative to them and building pipelines. now they're saying wow, we are taking it from our country we are not going to use natural gas. >> remember the chinese -- >> we fight with the chinese if i were ge ge germany, i woule shaken >> you would be shaken if you were germany >> bmw have made a commitment to mexico all their new plants open this year >> maybe that's why german's bund are yielding, minus 20, a record low >> that's a really great idea if you run it what do you do if you run a billion dollar fund of college fund, 50 billion bucks what do you do >> you buy u.s. treasures.

the greatest deal in the world >> at 2.15 where are we in the 10-year? >> oh, i am sorry. it takes us back to the stock market >> what do you do right now? >> he can't cut it now additional uncertainty as a result of this move. we have not talked about the gap and consumer >> do kohl's and abercrombi abercrombiabercrombie -- >> what do you do right now as

an investor? >> you can't you have to just sit >> you want to sell the stuff. tu you can reposition >> maybe that's why money market took it 100 billion. >> june is usually 401 k week. it is discouraging time. >> maybe we buy -- put some work in, i don't know i was thinking 550 share >> do you disclose where the cash flows are >> yes, i do >> where are you now >> 15. >> is that is high >> it is supposed to be invested i got my hands up and david it is not -- remember when we went to club met, hands up, gimme,

gimme. >> sandals for you, partner. >> when we come back, a closer look at uber and as jim said we'll talk to peter navarro, white house's trade adviser as the president threatens mexico with these tariffs coming up at the 10:00 hour back in a moment welcome to seattle. where people are into coffee, tech, and retirement planning. the perfect retirement for me is doing the things that i want to do, not the things i have to do. unlike seattle, less than half of americans participate in their employer retirement plans. so what keeps people more engaged in their retirement? i want to have the ability to easily transact online, great selection of funds, great advice, everything in one place. helping people in their working years and beyond. that's financial wellness. talk to your employer or start a plan at prudential.

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>> more retail earnings as we get for that sector. growth and comp were shy in consensus for costco gap is tumbling in a 4% decline. this quarter was extremely challenging and we are not satisfied with our results i think it was citi said it is hard to find the right spot. >> i am going to take the other side >> costco has a very big mexican

business costco got 177 stores. i love costco report i thought it was future caantas every single line. the best thing of the costco thing, i know it was said kind o of as a joke someone did buy a $4,000 ring at costco it is a reminder of the breath of the pattern they have it is the second largest company. when things settle down, i like that i don't know what to say about ga gap. you are getting old navy >> 2020 they're going to split old navy from the economy. >> what time was that tweet? na, never mind >> 3:30. so david, here is what you need to know about gaap stores.

this is something that i lea learned -- gap had negative 10 nobody makes it a double digit down that's what my work is showing over and over again. over a 40 year period my father taught me. when they are down 10%, down that thank you very mumuch, you credit that does not mean gap can't pull out and it is not jc penney by the way, there is a piec piece -- jc penney has to fall back that's untrue. they got the cash flow meeting all their -- gap is disasterous. >> they're going to continue to close the gap-ran stores

overall. old navy will be a separate company by this time next year, not sooner negative 1 it was up 3% last year >> you want the old navy side. i don't know what to say that was terrible. that was the non-start of the night. the start of the night was okti. >> having that conversation again is not really about consumers? >> this is inventory cycle and the promotion cycle that enters into it. >> a lot of stuff ahead of the tariffs. they're the ones that moved out

of china >> he's joking around. it is the apprentice two goes in and one goes down. >> if you are a book supply chain manager, it is we'll get cramer's mad dash and count down to the opening bell at this hour do not go away to a single defining moment... ...when a plan stops being a plan and gets set into motion. today's merrill can help you get there with the people, tools, and personalized advice to help turn your ambitions into action. what would you like the power to do?

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we got about 3.5 minutes want to do ahmad dash, we'll take you right to the opening bell >> wow i want to say something positive i know it is out of keeping of everything you are hearing i had the ceo of pioneer on last night. he's a bit of an engineer, i have known him for three years when we were producing 5 million barrels in this country about eight years ago, he said we'll do ten million in five years we are doing 12 million. last night -- all new premium, we'll be in control on our destiny when it comes to us.

>> that's quite impressive >> our saudi arabia. jimmy carter says coal -- a guy that says five going into 10 and it does 12 and now says 17. this is a feel-good story, i am not backing away from something that's positive. >> that's all you are thinking about really >> not just avocado, david but -- >> you are going to pass it along your customers >> how am i going to pass along? >> i don't know. >> a lot of automakers or whatever it is they're trying to figure out >> i can't pass it along >> it is millennials i am dealing with >> i got beyond burrito, man >> i don't know. >> you are not going to take a

20% hit for your market. >> i am paying dishwashers $17 an hour, okay? >> when you joke about closing your restaurant, is it a joke? >> no. we are going to destroy our margin this is not msnbc. we are a small business and you know we are blessed with a decent balance sheet we are figuring out our profit right now. it is rather reduced by what has happened >> you are not alone this morning. a lot of people who run companies are trying to figure out the same thing what will it mean if we go to 20 or 25% in constellation fell off, we have to pay 25% more we'll not be able to pass on the

modello price. we'll not be able to do that >> let's get to the opening bell >> at the big board is blackrock celebrating the retirement and nasdaq lo gigicbio focusing on treating diseases. is it all about kansas city southern >> yes >> i really think that there will come a time three or four days, this is shocking maybe by tuesday people will start to buy healthcare and provided biden will continue to surge the polls. we are down to a short list of

what we could buy without concerns of washington and labor cost very short list. and we'll pick it to mexico, there is a lot of different research of who got a lot. >> housing ing can come back bes rates are much lower i got to tell you, i like verizon and humana t >> the president tweeted mexico have taken advantage of the united states. mexico makes a more which you

kn fortune from th united states. time for them to do what's easily done. >> when you shoot people they feel repulsive if you want a war they have in israel or the green zone, you do mass security. those are small. those are small walls. >> it is not about walls right now. >> it is about presenting themselves at the border with their children saying i am here. they're not trying to sneak en here i am. our law right now -- we process you and we release you we'll decide whether or not you will be able to stay in the country. >> the founding fathers --

>> we have been struggling with immigration for years and various efforts legislating it obama never got anywhere in terms of trying to address it. >> what does it have to do with the price increasing mobile >> ulta and este lauder can still work here. >> they can. >> i have one word for you ota. hit it up. >> ota >> hit it up >> we should point out the month is not nearly as bad as december

was. bulls minus bears is sort of december >> you have to wait for these scardy cat fund managers and you go back and take a hard look of what's coming down >> i like the uber call. i am saying that there are companies that are doing okay. i have in my hand of a group of stocks that are really no not -- never mind, that was z zara, that was bad i feel like i am david blayne. okta >> there is company that is we can buy. >> i want to work at okta and having a promotion

uber did have 20% year on year gaap reserve new growth. a billion dollars operating loss they tripled their operating cash burn. this is what dara said last night about competition, take a listen >> in the u.s. if you listen to the conference call, they thought about competing more brands competing more on brands and products is a healthy competition than throwing money at a challenge we have seen that. will things get better or worse, we can't predict sitting here today verses where we were three months ago, we are uncomfortable in our chairs. we are left uncomfortable. >> all right, jim. the platform numbers were not what i wanted.

>> look, for uber eats, 109% we see them start to break out uber freights more it is starting to earn big business it is the platform that has more than 10% then it is not a cap story right now it is still a cap story, i think dara is going to move it into a platform. that's very good i don't recommend buying thinking today until we are down a lot more >> uber was not bad. i feel more confident that this thing is not a black hole that so many people portray it as >> it is about platform. >> they seem to have some believers. they continue to lose enormous amount of money. >> if they do platform it, i think they have something. if they are just a cab company, i think they can't i am giving you some options

willi willi uber was not a disaster. i think a lot of people think it is a disaster, it is not >> guys, i want to update on our ongoing of sprint and t-mobile and their attempts to get approval from the antitrust and the department of justice to complete their deal. there is no reporting from bloomberg or reuter on this. as you might expect perhaps given what the fcc has mandated in terms of the boost mobile business and the six-year wholesale agreement that would go along with it there is a lot of people congregating around the asset and try to understand and have been meeting at the doj for the last ten days of what they can do to create the conditions for a fourth competitor in the wireless market to replace the competition that is loss by number three and four getting together my understanding, they're not looking for a whole new

infrastructure right away but creating what they would call a competitive environment for facility base, entrance to come in for the next few years. amazon, would they be interested in buying and getting the stores and the wholesale agreement. charter, and comcast, you got the boost mobile guy who has been on our air and love would be apart of anything that would buy us back, he's trying to get apollo and you got at bunch of people trying to get a great deal if there is one to be had as of course t-mobile and sprint trying to get their deal approve. where does that stand? the latest i am hearing is 50/50. >> whoever gets it is going to

be a big winner. look at what happens constellation and modello. >> if amazon were to buy boost, they think it would equal to what amazon did to growth. they're saying verizon should go down on this this ises t this is the fcc, although it has not been finalized you can see why they would be interested in it because it comes along a lot of thing that is would be potentially very beneficial >> this will be a great story there is more work to do in the next week ahead. they have been meeting everyday, everybody is down there. they're trying to put something together it does not have to be immediate. they don't have to put up with competitor right away.

>> he's already got spectrum and he's trying to create business on it. >> he's trying to figure out which one would be the way if they get it so you don't get caught and trying to process it. is there anybody doing really well on that list? >> yeah. that's a very exciting story >> i thougvery soon after, 11:0 think it was late and carl icahn has complaints against occidental and of course it was buying anadarko and the great back and forth it was not a lot of back and forth, it was one way, occidental was being incredibly offensive. he comes out yesterday

listen, the chances of it going anywhere are small but what icahn has done is raise all his objection. jim, you spoke to him. look at some of the language that came along with icahn yesterday and he's smiling because that kind of gives him what he wanted to say and we'll get to what he's really after here the financing cost were astronomical the board management team and expensive financing, they could have raised cash other ways to meat chevron's bid he goes onto say there it is the $10 billion preferred and t the -- he didn't like any of it. shareholders should have the right to vote here, they didn't or they won't. he fully admits, themr. icahn tt

they're going to close this deal his position is i am going to do books and records. i know you are go toi close the deal day one reported occi was there for anadarko nobody came for occi in the intervening weeks. nobody showed up unclear if there is a buyer for occidental but he raises a lot of concerns including the price of oil >> the pioneer last night was saying vickie holub was being dramatic i think he questioned how automatic that whole whether it is astronomical?

that was just so much and money. a lot of people feel the 8% she borrowed from buffett was the last straw >> jim, you got to follow the story. >> you and i can span the story for quite some time. the story today. >> let's get to seema mody just when we thought trade policy is a separate thing heighten tariffs as regards to border secure, that's something the market is trying to get its head already, we had weaker than expected reading from china. soft german retail sales, that's all setting us up for a lower open here. take a look at the global market snapshot you will see over night, europe

is down 1.3% the japanese neikkei is closing down 1.3%. it really comes down to the automotive industry. basically 30% of u.s. imports according to goldman sachs if you take a look at the japanese automaker under significant pressure over night, mazda and nissan and toyota is down as much as 2% to 7% looking at some of the global automakers chrysler and general motors and ford are down as much of 3% to 5%. look at other companies with exposure to mexico and this idea that tariffs could constrict the flow of goods to and from mexico. that's pushing the rail stock lower. a significant amount of exposure down 6.5% in early trade

these two companies saying in two critical role. not just today but for the month sitting at a loss of 10% on that note the last trading day of the month. s&p 500 are now lower than 5%. china is closing down nearly 6% for the month. the broader emerging market does have a waiting, dump 7 points, 6% carl, we are down. back to you. >> thank you very much one thing we have not talked about is the fed we now have a 73% odds of september cut, 92% of december cut. >> jesus, it is kind of an unnatural event. it is an event that no one thought is going to slow the economy. may was a weak month of our economy. we have rick santelli here who

may have more of a handle on this than any one of our network. auto sales are weak. may was weaker than we expected. >> let's get with rick in a minute copper lower since the middle of january. the pace is back to where it began. >> wow >> what a movement of pesos. very unstable. citi is doing quite well in mexico credit card rates are between 235 and 40%. that's lucrative business. that's not what we want to pay that's what the interest rates are. that's where they make money >> yes, it is. >> 35% to 40%. can you imagine? >> i can't >> it is a little early because there is so much euro. >> rick santelli is here with chicago pmr.

>> absolutely. our april read on chicago pmi, 54.2 that's the best going back to march. march 58.7, these are firm numbers. ultimately i will tell you the numbers i have been looking at today. we'll get right into it. german's cpi german's cpi moves from -- these are big drops. i wonder what room mario is locked into now. let's get right into the chart, let's look at a two-year note yield, this has not happened since january of 2018. if we look at what's going on with 10-year, let's look at one week chart of tens on the day it is down four bases points these are big drops. now, let's get to the bund

intraday toying with minus 20 bases points shoot that chart back to july of 2016 because we have not dabbled at these levels. should it close? lower than 19 or minus 19 bases points this may be one time where the u.s. of what's going on with mexico and all the uncertainty of trades and tariffs. we may let this one pull the bund down just a little bit. finally everyone is talking about the in version let's look at three-month of ten-year minus 18 bases points these are monsters is it different this time snl does it really matter? i will tell you what matters traders here are paying attention to the in version and they're akicting accordingly. is there a bright spot the dollar index is looking pretty good. one week chart there back to the gang >> nice to have you here, man. >> awesome >> i will tell you what, it is

safer here i was sitting by joe and steve this morning, wholly cow i needed 16 announcers >> see you in a bit, rick santelli here in the house when we come back, peter navarro, the president's threat unnerves the market some what. we are down, 35 for s&p. ♪ ♪ here i go again on my own ♪ goin' down the only road i've ever known ♪ ♪ like a-- ♪ drifter i was ♪born to walk alone!

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have go play american tower having a really good quarter american tower very good quarter. i got to tell you, if you want to make money today, want to make money today, buy american tower. a lot of people felt they were going into three, we now know the justice department wants -- >> not right away. >> people are shorting this thing left and right they felt that when t-mobile gets together, okay, with -- you're. >> you're going to pay less, right. >> -- it is a windfall for them and a great company. james caplet, he's terrific. >> what about tonight? >> okay, we have z scale, you know what they do, they do, you know and then we have ginni rometty, talking about educating young people in a world where they're being left behind. and ginni rometty is the leader of trying to change that going to one of their institutes good stuff tell peter navarro --

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good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at post nine of the new york stock exchange markets having a rough friday on a relatively rough week. we're down 277 as we process the surprise mexican tariffs along with comments on retail and chin k a trade. >> surprise mexican tariff threats. we'll take you live to the white house and speak with the director of the white house trade and manufacturie ining co, peter navarro. >> why officials in china may be smiling. live to beijing. >> one industry that could get hit the hardest by the tariffs on mexico and what the president may need parallolitically to wi re-election. consumer sentiment with rick

santelli >> yes 100.0 on the nose. this replaces what was a 15 1/2 year midread that was 102.4. so we did move a bit lower but that is still a very awesome number that takes you to september of last year. the last time we're at these levels but, we all know the current story seems to take precedent. at some point, if some of the issues with mexico recede, there is ten days out there, we have to deal with these issues. maybe this number will have more significance but right now, solid number, but the markets are solidly concentra concentrating on other areas carl, back to you. >> rick, speaking of which, stocks are heading sharply lower today as trade fears fuel renewed recession fears. the president delivering a surprise trade bombshell, the u.s. will impose a 5% tariff on mexican imports until illegal immigration across the southern border is stopped. cars and car parts among the biggest u.s. imports from the

country, shares of gm, ford, fiat chrysler falling in early trade. joining us, the assistant to the president, director of the white house trade and manufacturing council peter navarro. thank you for the time today. >> good morning, carl. how are you >> great i think investors might be curious to the timing of all this and i wonder if you think it came as a surprise to the market and was not at least well telegraphed? >> there should be no surprise that president donald j. trump is taking a firm stand on border security this particular measure, if you look at it from an investor's point of view and corporate point of view, what we have in mexico is the export, one of the high exports of illegal aliens it is a criminal enterprise. any given day, 100,000 illegal immigrants transitting through the entire country of mexico they're transitting with the help of these transnational

criminal organizations that are making billions of dollars off this trade what we're asking the mexican government to do is three things one, most of this transit comes from guatemala along the small 150 mile border. numerous choke points, very easy for the mexicans to interdict there. two, it would be very easy for the mexicans to break up these tra transnational criminal organizations and the supply chain. and three, the mexicans have promised to help us with asylum, they can keep the asylum seekers on their side of the border. the numbers that we're facing, carl, here, is staggering. this is a crisis the statute being invoked here is the international emergency economic powers act. it requires two things one, a national emergency, clearly we have that at the border two, it requires a threat to our economy, our foreign policy, national security. clearly we have that as well so if you just go down the

checkpoints, national security, drugs flying over here, gang members, crime, if you look at the economy, we see illegal aliens flood into our cities and deprive people in those cities and good paying jobs so that's the big picture. i would suggest to investors to look at this calmly, look at what we're trying to do, this is actually a brilliant move by the president to get mexico's attention to get them to help us so far they have been just standing by and they have the power to help. the two institutions that have the power to help us, the mexican government and congress. congress has done nothing. mexican government can really help us here that's what we're asking them to do. >> understood. if we agree that it is a legitimate use of the powers act, and that there is a crisis at the border, how does tariffs and the potential to push mexico into recession help them fight the problem any better >> so the use of -- what we're

doing is using the regulatory method to address this threat. tariffs are one such use of the threat what is happening now is mexico, by being a bystander in this criminal enterprise, is imposing enormous cost on the united states on a welfare system, criminal justice system. we have got -- look, carl, this week, this week we had over a thousand families and unaccompanied children come over in a single group, they walked over from juarez, texas, juarez, mexico, into el paso, texas, a single group and we got unprecedented numbers of children that are coming, cases of fraudulent use of children to gain entry and so these things are devastating to the dhs, the department of homeland security, to our customs and border pro section which do a great job at

the border these are real costs on the american nation that mexico could easily take care of if it chose to act so this is a very modest approach i want investors, please understand, we're starting at 5%, doesn't kick in until june 10th, mexican government has plenty of time to work with us on these measures. and this is an emergency that donald trump said he was going to fix during the campaign 2 1/2 years in, this is going to be a smart way to do it. >> but, peter, it also hurts the american consumer. why would you punish americans we imported $350 billion worth of products from mexico last year everything from cars to fruit and vegetables to appliances why raise american consumers' prices on all of that stuff coming from mexico in. >> so this is one of the misunderstood aspects of the trump tariffs. china, for example, bears the burden of the tariffs in the form of lower exports, lower prices for their products, lower profits for their companies.

the government of china has born a burden of those tariffs in the form of lower tax revenues and lower rate of growth >> but so is the american consumer. >> no. no the governments of china and mexico will pay for it and the producers in mexico and china pay for this here is how it works a tariff goes on, that puts pressure on the chinese and the mexican producers to lower their prices otherwise they can't sell. with china, for example, when we put the tariffs on china, we could buy the competing products in places like vietnam or produce them here, that forced the chinese to lower their prices, same thing will happen with the mexicans. so we bear a very small burden of these tariffs please understand, if you just look at this from the macro level, we had tariffs on dishwashers, solar panels, half the chinese exports to this country, steel and aluminum, and we see virtually no inflation in our data, yet we're growing at

an unprecedented rate of growth. we hit over 3% last quarter and last year. no inflation, so these people say that somehow american consumers pay for this, it is simply not true. countries are paying -- >> look at the stock market, peter. look at constellation brands, an american beer company. they import mexican beer over the border they're going to pay analysts are saying their earnings will be marked down 5% to 10% who pays if not the american companies that pass it on to the american consumers >> i think you're making my point in a way where the mexican producers of that beer that is coming over the border will have to offer lower prices, they'll have the lower profits, meanwhile, we'll get the tariff revenues, but let's -- this is not a tariff war here with mexico and any way, shape or form this is a measure to get mexico to do what it should be doing, in three different areas

seal the guatemalan border, break up the transnational -- >> you're imposing tariffs at a time you're trying to push a free trade agreement with mexico that is the definition of a tariff war >> let's talk about the united states, mexico, canada agreement. this is -- let's agree that nafta was one of the worst deals in american history. but let's also agree the u.s. mca is one of the most sophisticated trade deals that has ever been done the president with ambassador robert lighthizer has done a beautiful job of getting that to congress it is congress' move and congress' responsibility to pass that bill on to fast track we're waiting for them to do their job. we're waiting for them to do their job on border security we're waiting for them to do their job on infrastructure. we're waiting here trying to do our job, but the president's job is to defend our borders and defend this nation and the crisis at the border is untenable. we cannot continue to have

100,000 people transitting through mexico at any given time, coming to this country, and wreaking havoc with our national -- >> to be fair, you keep talking about them wreaking havoc. as you pointed out, most of the people most recently are families with children and have been for a long time nobody is disputing it is a crisis i think some would dispute your characterization of people >> this is a humanitarian crisis let's face it here, these criminal organizations used over 4,000 children to fraudulently enter this country over the past year over 4,000 children used as pawns in this transnational criminal organization game so i think from an investor's point of view, because this is what your hoe show is all aboute message is let's be patient, let's be calm, let's watch this, this is an imperative to solve this crisis. >> we are about a lot of things including investors and

corporate executives, many of whom watch our network as well and i wonder what they're thinking now as they try to understand the landscape they're dealing with you got a trade war with china, which we haven't even talked about. you're trying to make decisions in terms of capital investment and everything else with the possibility that is go to be ratcheted up and now you're dealing with this unexpected tariff on imports from mexico that could go as high as 25%. as a corporate executive, trying to make capital allocation decisions, doesn't this make your life a lot more difficult and uncertain? >> i think the model we have from steel and aluminum tariffs who should inform corporate executive decision, what we saw with the steel and aluminum tariffs was a tremendous influx of investment into this country in steel and aluminum capacity there is those jobs and those factories came home. we're seeing the same thing in our negotiations with china, corporate executives are recognizing that the supply chain is better off

in other places. bring that here. we have seen -- we spent 20 years off shoring our supply chain around the world how are we losing over 70,000 of our factories, over 5 million in manufacturing jobs so corporate executives, i think one of the messages to them is it is really a good thing to invest here in america we have a stable economy we have a sound dollar and this is a good place to be so that's -- >> is that the underlying message you're trying to send through this tariff on mexico? it is not just about immigration, it is also back to the agenda of trying to reshore jobs here in the united states in. >> not at all. this is strictly about national security and threats to our economy from illegal immigration, from a criminal enterprise i get back, if you want to really speak to corporate executives, think if you're a corporate executive, wanting this criminal operation in mexico, you have this entire supply chain that spans across the entire country of mexico,

deep into guatemala, honduras, coming across our border you have bus lines, all sorts of transportation and people who feed these people and they make it easy for them, you give them scripts so they can falsely claim asylum here and get in and they know that they just walking across the border is going to overburden our system this week, over a thousand families and unaccompanied children walked over the border in a single group, in a single day. that is not acceptable to this president. that should not be acceptable to anybody in this country. this is what we need to solve, this is what this is all about and president trump is going to -- >> you solve it through legislation here in this country, you solve it through negotiation with the mexicans, we have a president who walked out of a meeting with pelosi and schumer because he says he won't do anything with them because he's being investigated. how can we get anything done

here >> that's a fair question. i would say to you the president is going to get this done by invoking the international emergency economic powers act and taking appropriate measures. this will get everybody's attention. and they're our friends. they're our allies but let's face it, they have been standing by and lettinging this happen. there is a transnational criminal organization that thrives and the entire country of mexico, they're a conveyor belt, a conveyor belt for illegal immigrants coming from central america. that has to stop today. >> peter, speaking of getting people's attention, as we wrap up and let you go, is there any number on the s&p, people have thrown out 2600, that would get the white house's attention and inform a view that says the short-term pain is outweighing long-term potential? >> the important thing for me every day i come in here is to create good jobs for the people who work with their hands. the president wakes up every day, thinking about how to grow

this economy it is astonishing we could be having people talk about a recession when we have one of the strongest economies in the last 30 years. historic low unemployment rate for everybody, historic low for african-americans, hispanics, women, productivity rising, r e rising wages, waive of deregulation that is holding prices down. how do you get 3.2% -- well, look, what is the stock market it is a leading indicator of the economy. this is a strong economy it is going to keep growing strong so i would say -- >> the estimates are tracking at 1% barely this is not a 3% economy anymore. that's the first quarter >> well, the first quarter was tracking at 2% and we hit 3.2%. and i would remind you, when you think about tariffs, that full one point of the 3.2% growth wr rate was attributed to the tariffs on china

when we reduce our trade deficit with china, that means more factories and jobs on home soil, faster growth, and that means less money going over abroad that can come back here to buy america. that's a separate discussion i want to emphasize here that this issue with mexico and the tariffs is about national security and national emergency and a threat that this president is going to handle firmly and if congress won't help them, and mexico won't help them, we're going to move forward this way i believe mexico is going to respond very favorably and quickly to this. and so investors, be patient, trust in the president, he's gotten you the best economy and the last 30 years, he's gotten you 3% growth, with nobody said you could get 3% growth. everybody was going to stick with 2%. this is a great president doing great things we have to solve our border crisis >> peter navarro, we appreciate your time, we took too much of it today we'll see you soon come back. >> anytime >> as we're talking, guys, the press secretary sarah sanders says the president has not had a

conversation with lopez obrador about these particular round of tariffs. we'll see whether or not this turns into a broader conversation we tried to ask whether he thought this was a surprise to the market. >> i don't understand his position or the administration's position that the u.s. consumer doesn't pay. that is not how tariffs work the whole notion that chinese and mexican governments are paying for these tariffs is flat out wrong. and everybody in the market knows it. >> mr. navarro seemed to try to posit this theory, they'll swallow the entire price increase at the home of the producer that is kind of what i read into his answers. >> there is no question it makes the mexican exports less competitive. >> therefore the 5, 10, 15, 20%, whatever the market may be, while we're collecting it in the treasury is being swallowed by them >> we also -- >> that is not necessarily true. i don't believe at all as were a number of things that he said there. we didn't talk about -- >> we didn't get to china.

i wanted to ask, when the president says stop the flow, is there a metric they will be graded, some cutoff, a target goal, anything like that also, the idea that if mexico's economy is hurt, how are they able to do this any better than they're doing? >> there is a little silver lining for mexico here that is its currency is getting absolutely pounded down more than 3% against the u.s. dollar. that makes mexican exports more competitive and almost completely negates the 5% tariff that we would feel as u.s. consumers. if he goes to 25%, it is a different story. if it is the intracompany trade we hear a lot about, going back and forth across the border, that doesn't really matter in general, that should be helpful for mexico to have a lot weaker currency as we're seeing right now on this idea that their economy does get hurt. we'll talk about this all hour, all the different angles and industries hit china is reacting to the new front in the trade war we'll hit that angle with eunice

eun live in beijing for us. >> the foreign ministry said president trump's new tariffs on mexico merely show that no country is safe from what it described as u.s.' bullying policies beijing has been attempting to project itself as the stable leader in contrast to washington beijing is also likely pleased with this latest development because it has been wary of the u.s. mca and that the u.s. would potentially use a clause in it that could hurt its own relationship with canada as well as mexico. so this clause is aimed at limiting ties for three countries to economies considered nonmarket in addition, mexico has been seen as a winner in the u.s./china trade war many american companies here have been talking about shifting production or just shifting production from here to there because the tariffs on chinese

goods are so high. but as for the trade talks, president trump's announcement probably won't instill a whole lot of confidence in the chinese negotiators that trade deal with the u.s. will actually stick instead, it is more likely to reaffirm what appears to be the current strategy in china and that is to hunker down and wait things out separately, china looks as though it is laying the regulatory and legal ground work to go after foreign and likely american companies as well as individuals. the chinese commerce ministry today through the state media said it is creating an unreliable entities list and this list would review foreign enterprises, organizations or individuals who don't obey market rules, the spirit of contracts, and who carry out a block or cut in supply for chinese enterprises for noncommercial purposes so this decision looks like it is a direct counter to the

threatened american action against chinese telecoms giant huawei the trumpadministration has been moving to prevent u.s. companies from providing vital components to the chinese company. and this announcement by the commerce ministry seems to be targeting those u.s. suppliers, potentially for sanctions from the chinese side so it is really unclear right now what the specific measures are going to be and when they would be implemented, but this is the big fear within the international business community here that individual companies and individual people could be targeted by the chinese state. guys >> eunice eun, thank you. joining us to talk about the market impact of all this, john stoltzfus and mike santolisanto, michelle myer. michelle, first to you what is the growth impact of all of this >> so the more that we get into

trade war now with the threat of tariffs, on mexico, escalation potentially between the u.s. and china, all that does is create a high level of uncertainty and it creates a challenge for the u.s. economy. so q1 gdp growth was strong. above 3% growth. q2 is tracking lower with financial conditions tightening as we're seeing with the stock market selling off, with greater uncertainty. we start to worry about what the trajectory will look like going forward. particularly in terms of business investment and also just in terms of global trade flows are going to be down volumes are going to be down that creates some challenges too. >> so we go individual sector by sector, start with the autos and the auto parts, so much trade going back and forth between the u.s. and mexico. what do you do with the auto stocks now >> right now it would seem late to sell them at this point they already have taken a hit and they have been -- they have shown weakness on a number of

lines. we would have to think this, that this is likely leading to a crescendo. there is not a heck of a lot more you can do it becoming -- administration is becoming a one trick pony in terms of its approach to settling the trade dispute. it is by raising another tariff. the market doesn't like it, it is very clear that it is stating that the amazing thing we have to say is that the market is as off as little as it has been since the first tweet on may -- may 5th as i recall and the irony is on april 30th, we were at record highs in the s&p 500. we drifted, what, we're down 6% from those highs at this point, and adding greater percentage lower now. we have to think this is ultimately is resolved, it has been pointed out not only on this desk, but by other commentators, this costs the american consumer, there is an election coming around in 2020, this doesn't look like a great way to influence people and make friends. >> so, mike, as you think about

the decline for may, in the context of the overall market, which is still up double digits for this year, how severe of a problem between what happened in china this week and what is happening in mexico today do you think it is for the market >> it is starting to look like a little more of a breakdown with today's move down. down 6.5% in a month what is interesting is for as unexpected as today's measures were, on mexico, it just pushed the market in the same direction it was already trending. which is to assume challenges to growth for the second half of the year globally, to buy bonds and compress bond yields a lot, to essentially screen for the fed to do something about this and ease policy, and to kind of create some kind of a valuation discount on cyclical stocks which have been happening all month. so i wonder if we already stretched far enough in this direction that a lot of that process has been under way the problem is once again with this new policy, there is no process that we can kind of

track and handicap on an ongoing basis. it is very discretionary it seems capricious in terms of how it is initiated and applied. so the market wants to step back now. it is creating a big gulf between stated fed policy and what the bond market is implying >> jpmorgan says it seize the fed cutting in september and december they say if tariffs on mexican goods go to 25, the fed may well need to cut by much more than 50 basis points john that's why we're not down more than -- >> we don't want to jump to conclusions right now. this is a day by day kind of thing and we do know that highly unconventional presidency can rerr reverse positions pretty quickly. we're headed into the eye of the storm at this point. and i've got to consider -- the main thing i think is consider the secular trends that remain in tact. the pain that is potentially

inflicted on economies, far and wide across the globe, and the likelihood that that will lead to a resolution. somewhere around the corner, and we think this is the crescendo the darkest hour usually before the dawn i think we're far from the darkest hour now and we may not have to get there. >> will get worse before it gets better. >> david, the indignation that is felt by so many here, within the market place, within the media, politically on this, is well felt. the thing about it is we, for 60 years, we had a policy that essentially gave away our innovation, gave away our competitive edge for many of our corporations and gave away our jobs the administration is trying to reverse that from what we can see. but it appears to be in a highly heavy handed and unconventional manner >> that's specific to china, i would think. as you point out, what we're doing with mexico is trying to deal with an immigration crisis

through some -- a tool that is not used in that way what does this do to business confidence >> we have to say it certainly shakes business confidence to a significant degree, but we do think that businesses become more accustomed to work within prices since 2008. getting through 2008 was an extraordinary event for everybody. including the fed, business, the consumer and workers and it has created a different environment. we're more resilient may not be happy, but we're showing up for it. >> this is the bull case among many global fund managers will own some stocks. if they own any at all, they'll own ours >> that's why the u.s. trade is at a premium emerging market stocks are up again today for the third day in a row, we have been trying to find a bottom here. >> places like vietnam benefit you can go to mexico >> it is true. the rest of the world also already felt its pain in terms of market decline before we did. >> michelle, the president has said repeatedly he wants the

federal reserve to cut rates is he pushing them into doing that this year will you change your forecast in. >> clearly the odds of a rate cut have increased just look at what the market is pricing, 75 basis points of cuts by the end of next year. i think it is a function of how the trade war evolves now. if we get near term resolution, if there say resolution at the g-20, if markets recover, i think the fed can get away with not cutting interest rates given what they're seeing from the domestic economy, the labor market is still strong and initial jobless claims at low levels core inflation with a temporary weakness in q1 the data this morning showed subsequential growth in terms of cyclical inflation if we avoid a scenario where things escalate, i think the fed is comfortable, and that's the message they're sending. the risks are clearly skewed that things are going to get worse. if they do, the fed might be left with no choice other than to cut interest rates, to underpin the economy and prevent

a worse case scenario. >> president on the tape once again. in order not to pay tariff if they start rising, companies will leave mexico. mexico must take back their country from the drug lords and cartels. the tariff is about stopping drugs as well as illegals. is it about migration and drugs or is it about bringing -- repatriating jobs? >> the fact is we have a usmca dealing with all of these issues ostensibly and has been negotiated >> beyond that -- >> sounds like he negotiated -- >> for 25 years we had a policy encouraging global companies to view north america as a single production block and you wanted that. it was helping -- that was the intent now, with a 17 month window to the next election, are companies going to say let's reverse that or are we going to stand still >> isn't it unrealistic to think we could try to get the u.s. and

mexican supply chains not interrelated as they are now how many years of -- >> a trade agreement negotiated that is going to be up for -- that is going to the mexican legislation, the irony of all this. >> we had the agreements that were just about ready to happen. and suddenly this is throwing everything into turmoil. we would think of it as highly regrettable. but we don't think it is the end of the road on this. everybody has a stake in this. and this may bring everybody to the table and perhaps if everybody is willing to let some people save face, others lose a little bit less than they might, we might come it an agreement and ultimately tariffs are so impractical. and everybody is held to some kind of constituency worldwide doesn't matter if it is president xi to the communist party in china, doesn't matter if it is the president of mexico it his party or our president to his. everybody is held accountable. and the consumer has considerable power now across

the globe when you consider the strength of the consumer in china, the u.s., and well developed middle class in mexico >> john stoltzfus, mike santoli, michelle myer, thank you, all. when we come back this morning, more on the trade threats against mexico and one industry that could get hit the hardest. it is the last trading day of what has been a tough month for stocks some of the laggards on the s&p for may, you'll take a look at those new. dow down 269 about 50 pois f e ssn w.ntofthseio be good while i'm gone.

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good morning, everyone i'm sue herera with your cnbc news update at this hour a south korean newspaper is repo reporting that north korea executed a senior envoy involved in nuclear negotiations with the u.s. as well as four other high ranking officials. north korea has refused comment. the senior envoy was purportedly killed in march. secretary of state pompeo holding a joint press conference with his german counterpart in berlin he says the u.s. will not stand in the way of a system that the europeans are developing to shield companies from american sanctions with iran as long as the focus is on humanitarian aid. >> those items that are subject to sanctions we will do our best to enforce the american sanctions regime that has been put in place but for those that aren't, for humanitarian goods, things permitted to move, whether they move through insects or another

mechanism that are lawful and appropriate. >> a levied breech along the arkansas river prompting an evacuation of a rural area in western arkansas that was holding steady at record levels offering little relief to areas enduring historic flooding. you are up to date that's the news update at this hour back downtown to you guys. carl >> sue, thank you very much. u.s. automakers face the new challenge today. this threat of tariffs on mexican imports. phil lebeau joins with us more on what this means to some of the names that are down about 5% today, phil. >> yeah, they're all under pressure when you look at the value of the vehicles that we import from plants in mexico, it is an astonishing figure 124 billion total parts which doesn't get a lot after tension is one of the biggest components then you have cars, suvs and pickup trucks and then add in the heavy duty and the medium duty trucks. it is $124 billion among the automakers, this is the reason why we have seen a

steady increase in auto production in mexico, going back over to last 15 years, now totalling over 4 million vehicles annually. general motors, the number one vehicle importer from mexico, look at silverado, look at the sierra pickup truck, these are the vehicles that are coming in from mexico, from general motors nissan also has a huge presence down there, 45% of its north american production is in mexico i mentioned the parts suppliers, take a look at american axle it is under pressure as well 35% of its north american sales, they come from -- that should be -- that's incorrect there i wrote china. it should be mexico. when you look at north america, for the auto parts suppliers, as well as the automakers, that is ground zero, guys. that he's why these tariffs, if they go into effect, would be devastating for them >> is there any way to reverse it, phil the president suggesting in a tweet that mexico has taken a big share of our auto industry, bring it back, bring the jobs back, bring the factories back is that realistic?

>> you can't turn a switch right away, sara these are integrated supply chains, global supply chains, not like you can sit there and say, you know what, this tariff goes to effect, let's build a plant somewhere in indiana and open it up a year from now doesn't happen like that that's why we haven't heard anything from the automakers when i reached out for a comment today. they all said the same thing we're not commenting we'll let the trade association say something. they have been down this path before with the trump administration and that's why they're hoping that this tends to be like some of the other threats from the trump administration, they -- we don't see them put into effect >> phil, thank you phil lebeau. now time for our etf spotlight, changing things a bit here not autos but retail xrt down again, on pace for a worst month since november 2008, talks about costco, gap, earningings report that is not being well met by investors.

see that stock down over 12% 10% same store sales decline at the gap stores and it is down as well with weakness overall even old navy which will be spun off as its own separate entity in 2020. sara, a tough we can for ek for overall. >> dow down 257. "squawk on the street" will be right ba ck

welcome back market trying to find some legs, though the sell-off continues, down 268 we're seeing some improvement midsession in some of the semi names. president just tweets an order not to pay tariffs if they start rising, companies will leave mexico, which has taken 30% of the auto industry and has come back to the u.s mexico must take back the country from the drug lords and cartels. the tariff is about stopping drugs as well as illegals.

kayla tausche joins us to break down that tweet. there is a lot in there. >> reporter: there is a lot on the president's twitter feed his frustration with mexico is palpable, it was bubbling over with the rising number of border crossings that resulted in hastily put together tariff announcement last night. remember, president trump in february used his emergency powers to declare a national emergency on the southern border that's currently being challenged in court. and while he used a slightly different economic power to declare the emergency that allows him to put those tariffs in place, trade adviser from the white house peter navarro said earlier this hour that's completely legitimate. >> the use here, what we're using is using a regulatory method to address this threat. and tariffs are one such use of the threat what is happening now is mexico, by being a bystander in this criminal enterprise, is imposing enormous costs on the united

states >> reporter: this is an approach that got the green light from the white house counsel's office navarro calls it a modest approach because of the way the tariffs gradually escalate he was trying to argue as did white house acting chief of staff mick mulvaney this should not have any impact on the new nafta, the usmca that's not how lawmakers see it or the business round table, the u.s. chamber of commerce and the head of the senate finance committee chuck grassley who in a statement yesterday called this a misuse of presidential authority. and then there is mexico mexico's president lopez obrador tweeting his own response saying that social problems cannot be resolved by putting new taxes in place. i asked press secretary sarah sanders earlier today if the two leaders have spoken since those tweets she said they have not but the two countries' teams have been in touch back to you. >> kayla, thank you. joining us now to discuss the market and economic implications, michelle

caruso-cabrera, cnbc contributor, back with us, and kenny pupari, cnbc contributor, also back. michelle, how is mexico likely to respond >> we saw lopez obrador gave his daily news conference, he does every morning at 7:00 a.m. and spoke for an hour. he can be very fiery and hewas actually very soft spoken very not purposefully not provocative. he has been this way ever since the campaign, trying not to poke the bear, so to speak. his response was we're goi ing send the foreign minister. there has been a surge he did acknowledge he said we have a lot of people coming through, a lot of people coming through honduras, they're very frustrated by it as well as is the mexican population. they would like it to stop as well. >> is your sense that they can do something to prevent the tariffs from going into place? >> i don't know. what i would say is that peter navarro i think gives the

mexican government too much credit in their ability to control what is happening with migration. mexico is the very, very corrupt place. you can be sure that these criminal gangs, that he rightly points to, have their talons deep within the regional governments, the local governments, and incentivize them to go along with the whole process. i'm not sure the same way we talk monolith monolithically about china from the top down, that's ditto for mexico there are parts of mexico that are lawless and controlled by gangs, not by the government >> so if they were to do something about this, that they're not doing already what would that look like is it construction of something, some edifice, is it more about enforcement? >> i think it is more enforcement. mexico changed its immigration policy, right. he came into office in december, he wanted to be -- i'm talking about amlo, had humanitarian intentions they gave out new visas to people in central america with

the idea being we'll give you a visa to stay in the southern part of mexico, hoping they won't go north they had a huge surge. they had many people come. they had to reverse that policy and earlier this month they started to crack down, trying to stop, reverse the visas, and made it much more difficult. so i think much more involvement of the military to try to stop them coming north. >> is this the sort of thing that makes you rethink where you think the market is going this year >> i think it is at least today, right? though i'm not so sure i think this is going to continue. i think this -- he announces this, creates all this drama, the market sells off i do think there is going to be conversations and negotiations between the u.s. and mexico and this is going to, unlike where michelle said, she he thinks there is parts that are lawless, i think they're going to make some progress, and i think that's what he wants to see, progress he wants to see somebody trying to assist in this immigration issue that, you know, both they have and we have. >> what does that mean you're not negative on the markets? >> i'm not that negative on the

market i think the market will find stability in here between 27 and 25, churn for a little bit and start to focus once again on fundamentals these political issues and trade issues will continue to cause a lot of noise and in short-term volatility in the market in the long-term, they don't price stocks unless it starts changing the fundamentals. until we really see that happen, then i think the markets will be okay if it drags on, if it drags on, the fundamentals could change. and that would be another conversation i think it is too early to say because i think mexico will come to the table and i think that they will show that they're trying to make a change and i think that will be enough to satisfy the markets. >> michelle, is there any hope to really stem the tide of these families, particularly women with children who were leaving honduras or leaving guatemala or leaving el salvador and all these central american countries where they are conceivably under threat from gangs or don't want their kids to become part of gangs and making the trek? >> we would have to change our immigration policies at the

border i started my career in spanish television univision. and we covered immigration insei incessa incessantly. that was 30 years ago. back then, people who were coming were young, solo, men didn't see women and families. >> they were looking for jobs. >> looking for jobs. but central america was engulfed in civil war it was extremely violent back then this argument that now it is worse, don't believe that. it has been bad for a very long time what has changed was if you go back to around 2011, we started to widen our definition of why people could come, domestic violence became one of the reasons why you could try to seek asylum, political asylum used to be political asylum. when i was at univision, i interviewed the one guy, he was the second person in modern history to have received political asylum being from mexico it was extremely strict. it has gotten much wider you include domestic violence, you include gender issues, you incentivize women coming those were done for humanitarian

reasons. for good humanitarian reasons. but can't make those decisions in a vacuum. to borrow the phrase dynamic scoring from omb, if you make those decisions, at least other consequences, you have to figure out what are we going to do now as a result of changing the incentive structure. >> thank you both. good to see you. as we go to break, look at uber haven't talked about it much this morning revealed a billion dollar loss in the first earnings report as a public company shares down more than 10% from the ipo on may 10. but up 1.5% or better today. dow is down 279. 'rba aer bak (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math.

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the ten year kneeled is near two year lows. one chart suggests a bounce ahead. find out more online more "squawk on the street" is coming up.

time for the san tentelli exchange >> all of the businesses, we're over at norquist how you doing, grover? let's get right into it. we have joe biden leading democratic candidate not all tax cuts or gains are created equal. he thinks capital gains tax is much too low they want to raise that up so it seems that there is not an equitable feeling by many with regard to tariffs or taxes in which direction is most beneficial your thoughts? tariffs are taxes on people that use imported products. we need to get the tariffs down as quickly as we can we can get the taxes off the american consumer.

he wants to repeal all the republican tax cuts. you can calculate what it would cost if you biden became president with a democratic congress. i wants to good back to the obama tax rates and increase the capital gains tax. that is not high enough. every time we cut the capital gains tax rates, the economy has gone up. every time we increased the capital gains tax, it's hurt the economy and revenues fall. the only reason to increase the capital gains tax is to tell them you don't like them >> the organization for

economic cooperation and development is not working on a new global minimum corporate tax rate that doesn't sound too promising. thoughts there, grover >> look, whenever the bosses get together, they like to set up a monopoly this is opec for tax hikers. so they all sit around the room and agree to raise taxes together they won't cut taxes because the europeans fully understand the that president trump if re-elected will take the corporate freight 21 to t-- ratm 15 to 21 particularly corporate rates, we've seen how successful it's been to drop them. the europeans cannot compete with that. they want us to join their opec cartel never, never, never. >> the president likes to say, hey, his tax reform is like rocket fuel for the economy. but many are writing articles

that they don't think rocket fuel is the best way to describe his corporate tax reform how do you see it, grover? >> when reagan cut taxes, we had a year and ten months of strong economic growth. the entire time the national media said it's only a bicoastal recovery nobody is doing well we carried -- we, the republicans carried every state but minnesota in the next election because the american people knew that the reagan tax cuts had been successful people know that the unemployment numbers are down, that rages are going up and new jobs are being created that they've got lower taxes can you try to argue that the economy is not doing well but reality trumps all of the rhetoric we're getting >> excellent, grover, thank you for your thoughts. david faber, back to you >> thank you. nice to you have so close by

sarah is also close by she'll be here later as well, of course, for what promises to be an interesting end to the trading session. >> we just scratched the surface. lots to unpack on this mexico story. we have a player to talk about it into the close. we'll speak with mexico's head of trade and the nafta office. ask him how this move impacts the deal, future relations with mexico and whether mexico is thinking about any sort of retaliation. so it will be good to get his perspective and his response we'll keep an eye on the sector performance from autos to food companies, restaurants, i mean there is so much exposure back and forth trade, whether american companies are importing or selling to mexican consumers. >> sometimes within the same company. chutely. >> "squawk alley" is next. dow is down 273. don't go away.

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good friday morning. welcome to "squawk alley." we're at post nine of the new york stock exchange. we say good-bye to the month of may today. we begin in washington president imposing this 5% tariff on all imported goods from mexico beginning june 10. it triggered a renewed selloff in stocks, automakers being hurt the most what does the tariff mean for the sector >> this comes at a time when the auto industry overall is at record production in mexico. in terms of the number of vehicles coming from mexico up to the u.s. an