that's called a golden cross it's wonderful this is the time to own goldman sachs. >> abbott labs stay with the stock. this is exactly what you want from your company. delivering buy more >> thanks, all thanks for being with us that does it for us on the halftime rort. "the exchange" begins right now. it sure does thank you. hello. i'm brian in for kelly today here's your lineup at this hour. the market's next test no, it's not earnings. it's the debt ceiling. nancy pelosi says that they need a deal by tomorrow to pass it before congressgoes on its lon august recess. if you make it, will they come not if it's not good the netflix takeaway and the lessons for all the other streamers from a quarter to forget and say good-bye to the family trucksters and hello to grasshopper juice. get ready to bone up on dog food earnings that's all up in rapid fire.

and "the exchange," we begin with today's market. dominic chu. grasshoppers are green but the market is red. it's not red by that much. look at this near not so far from the worst levels today off by about one-third of 1% the nasdaq off by almost half of one percent. netflix a big part of that down move today we'll talk about that later on in the show. one area of general positivity with regard to technology and communications services, check out semiconductor stocks this vaneck ticker is up over a percent today. near its best levels of the session. if you take a look at this etf, it's up 42% since the lows that we saw back in december of last year, up 19% over the last couple of months and we are seeing about almost a three-day winning streak here for this etf semiconductors, a positive sign in this down market. if you're looking for the stock of the day, the best performer in the s&p 500, it's tobacco on

the international side of things phillip morris international, up 10%. look at that stock surge up here earnings better. sales better forecast better. and all because of, or not all because of, in large part that smokeless kind of like combustible, noncombustible product that they have internationally. it's approved for the u.s. now we'll see what that does for their bottom line. phillip morris international, stock of the day >> we'll see you in a few minutes. america, you have a lot to digest out there and to think about around these markets earnings, trade fights, brexit now there's another potential threat rearing its ugly head it may be the biggest deal of all. that's the debt ceiling. let's go to ylon mui with a look at where we stand as the clock counts down. >> well, brian, there are signs that the administration is getting closer to a debt ceiling deal with congress but road blocks remain. on cnbc this morning, treasury

secretary steve mnuchin said there is agreement on the need to raise the debt ceiling for the next two years there's also agreement on top line federal spending numbers and the need to offset any increases in spending. >> i don't think the market should be concerned. i think that everybody is in agreement that we won't do anything that puts the u.s. government at risk in terms of our issue of defaulting. >> now optimism there from the treasury secretary, but a source inside the white house tells me there are still several issues that need to be resolved chief among them, identifying roughly $150 billion worth of those offsets. also the need to find a way to ensure that congress can rein in any future spending bills. and also there are poison pills on several of the appropriations bills that have already passed the house. now house speaker nancy pelosi did speak with secretary steve mnuchin just after he was on our air, brian she told reporters later that

the negotiations are still live. back over to you >> ylan, good stuff, thank you so what will it take for any deal to come together? is this actually one of those rare bipartisan issues congress will come together on? just how much money of your money is at risk if they can't or won't cross the aisle joining us, libby cantrell and stephanie. will we get a debt ceiling deal? >> we're cautiously optimistic that not only will you get a debt ceiling deal. you'll get a deal that will address the sequester, the draconian spending cuts that would be a big headwind to gdp and you might get it before congress recesses. so i -- to your point -- >> don't we have to get it before they recess they leave for august and then what is it, september 8th and -- >> you are probably referring to secretary mnuchin who said in a letter to congress on friday there's a chance, a scenario under which the debt ceiling would be hit by early september

before congress resumes from their recess there's probably a little bit more slippage there than he indicated. i think that was just one scenario but this is definitely putting pressure on members to come to an agreement >> stephanie, right behind you is the building where all of this is happening right now along with the offices are you seeing some of these representatives run around with their hair on fire is there a sense any of kind of panic in d.c. yet about this debt ceiling issue >> what's kind of funny is they are trying to convey a level of calm so kind of the opposite. and we've heard pelosi now for weeks trying to message through the media like don't worry the debt ceiling, we know it's important. please don't worry it's just as we start getting closer to these deadlines, whether artificial or real, and as libby mentioned, there's a little bit of debate among democrats around how legitimate that early september deadline is and rule of thumb, i always kind of believe is true and nine out of ten times true, congress will

wait until the absolute possible last minute to do something hard this is hard the budget caps deal is going to be hard. so if they can punt a little bit until early september, they will try. but the white house has made it very clear they want a deal before congress leaves democrats then can say, here's what you need to do for me >> i see -- the white house and democrats, do they get along i'm not sure they get along that well they can say they want to do this and the democrats can say they want to do that a lot of things we thought could never happen have indeed happened what happens if the two sides don't come together? >> so i mean, if we -- if the nation defaults on its debt, i think that is the absolute third rail i really don't think the market expects it and i think that's the right bet. i'm very certain that congress understands that they hate each other to your point, democrats in the house seem to hate this president and the white house and yet they do work together. it's not like they've passed

nothing. they've even passed previous spending bills and some of these have run into problems if everyone remembers the government shutdown of january of this year, late december, over christmas it wasn't easy but you don't need to mess with the debt ceiling to use -- to have those fights be over the debt ceiling. >> look, from our view, it would be catastrophic if there were a breach of the debt ceiling but that is highly unlikely. as stephanie said, there's a lot of political appetite. and not only among house democrats, the white house, but also majority leader mcconnell in some ways he probably wants this deal as much as anybody else does. >> i can remember, we hosted a lot of primetime specials, markets in turmoil during that debt ceiling i think it was in 2013 because the dow was down around 500, 600 points in a day. hold up. stay with us, though especially you, stefanie i want to go to a separate story because we have another developing story in washington, d.c., right now. a new proposal by elizabeth warren

taking direct aim at private equity she wants to rein in and rein it in let's get more with john harwood. >> elizabeth warren framed her campaign around economic populism talked about tax increases on the wealthy. a wealth tax and various other measures, backstop corporate tax, a corporate minimum tax today she's targeting private equity with, what she says is performing legalized looting on the american economy the basic principles of the proposal that she laid out with other senators and members of the house are one, to prevent private equity firms from shielding themselves from the obligations of companies they acquire, like pension obligations. secondly, to limit their ability to extract cash from companies they acquire through fees, bonuses and dividends. she also, as she's done previously, called for the reinstatement of glass/steagall, separations between commercial and investment banks to prevent

what she considers reckless speculation and to tie this in with financial services for the average person she wants to have the postal service partner with community banks and credit unions in order to provide low-cost checking and savings accounts for people who don't have them. significant share of the american population does not have banking services now. she is tying this program together by saying she's going to end that and, in part, to finance it by tracking down on wall street. >> and people may say, john, the post office actually, japan, their post office is actually their largest bank it has trillions of dollars under management john harwood, stick around let's wrap stefanie and libby into this conversation i don't know if private equity is going to resonate with most i don't think many think about private equity what might resonate is the fact that every retailer that's gone bankrupt and emptied out a mall or lost jobs has been a private equity deal in the last couple

of years >> yeah, i mean, well, look. we need to put this in context and this is, welcome to the silly season the 2020 campaign has obviously begun in earnest every -- all of these candidates' plans have to be looked at in that context. this is a very kind of salient talking point for elizabeth warren as she goes out on the stump. the reality, though, and this is important for viewers to keep in mind, there's a long way from the rhetoric to the actual reality. and the reality here is this would need 60 votes in the senate to ever get effectuated and it is going to be very hard to find 50 votes, let alone 60 votes, on something as dramatic as this. so i would take this with a massive grain of salt. yes, this might kind of fill into the -- resonate with the populist instincts of senator warren and her following, but i highly doubt this gets -- >> go ahead, john. >> i agree with libby, this will have trouble getting 50 votes.

i think trouble getting 40 votes right now. however, i would be interested to know what libby and stefanie think, and on the debt ceiling, i agree with them. we'll not have a breach of the debt ceiling if these proposals were adopted, how would it affect the private equity industry and how would it affect the overall economy would it have a sharply negative effect on the economy or could something like this be implemented without significant drag on economic growth? >> stefanie? >> i think, libby, i would love to hear what you think on this >> well, look, like anything, this could kind of weigh on animal spirits, on risk appetites and make the regulatory environment much more uncertain. this is -- is this really going to have a meaningful impact on the macro economy? probably not but could it actually impact some industries? for sure >> maybe more in your wheelhouse, is this idea sort of policy overall because you know, and maybe it won't pass. it probably won't to john and

libby's point. however, does warren get some points by at least something out with something concrete. this is what i stand for here's my proposal i'm not getting up on stage and saying nice things in front of an audience. here's a direct proposal it probably won't pass but at least i've got policy. does that give her points, especially as the democratic field starts to get whittled down >> someone, not me, i wish i could take credit for this, said elizabeth warren is a candidate where you have a problem and she says, well, i have a plan for that she has really comprehensive plans for everything which is advantageous. that's kind of her brand is to be very thoughtful i just totally agree with libby here and john. i mean, let alone are there not enough votes i just don't know -- this is such a complicated plan. i think it is unfair to think that most voters have time to care this much about financial services industry and know so much about how it works. this is not most people's --

>> i get it. >> that's true, but, look, i'd like to step back because there have been complaints for quite a long time the american economy devotes too much resources to financial engineering. that finance consumes a larger share of our economy than it should the question is, a is that a legitimate problem and, b, does this address that problem? i don't know the answer. >> i can tell you this much. the stock market has shrunk by half since you and i started doing this job in part because the private markets got bigger and it's an easy target because generally the highest paid man in the world in terms of income is steven schwartzman. >> and how is he taxed yeah, he's taxed the capital gains. >> he gets -- warren buffett can say my secretary is taxed at a higher rate than steven schwartzman. >> we'd probably all agree if any of this plan were to be signed in law it would be that part rectifying this carried interest loophole, if you will. there's been bipartisan support for this in the 2016 campaign. and all republican candidates

supported rectifying this carried interest loophole. if any of this part of the plan is signed into law, it would likely be that >> you don't have to cook the whole pie. just a slice libby, stefnie, john, good discussion on a bill proposal just coming out today. we're getting started on "the exchange. >> coming up -- it turns out content is king. and netflix is learning that the hard way what's next for the company, and was this just a second quarter fluke? toys "r" us is back. well, sort of. and companies are starting to realize that the world is running out of magic countries to manufacture their products. what they are doing to compensate, and how much will it cost them? this is "the exchange" on cnbc how do you gauge the greatness of an suv? is it to carry cargo... or to carry on a legacy?

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all right, welcome back to "the exchange. less faang, more sloth that may define the markets lately the s&p 500 has not shifted more than 1% in either direction in over a month but is that only due to a lack of catalysts, or is it something maybe more concerning? let's bring in nancy tangler, chief investment strategist. and our own bob pisani bob, i feel like we're waiting for gudeau, guffman, certainly

waiting on something because earnings aren't doing it what might or will move this market >> i think earnings are doing it 1% from an historic high we've moved up 20% this year, and earnings are flat this year. the market is really pricey here, brian. you'll need to resolve the trade conflicts. see better numbers on global growth then we'll hit highs until then, look today we had amazing number of companies that basically said guidance was okay in the second half of the year ebay and novartis and honeywell. that was a surprise. those are pretty good companies. i think the market is fine right now. i'm just worried about whether global growth slips a little more in the second half. >> we're still waiting, nancy, on a lot of numbers. earnings season is just in its infancy. but tonight there's not only a big company out there, but there's a big company that you own that's releasing numbers and that is microsoft. does microsoft, a, is it a good value for your clients and their money and, b, does it really

have the power to maybe move the macro market >> yeah, good to be with you, brian. and hello to bob listen, the stock is still relatively attractive on our valuation metrics, but sales growth has been faster than price appreciation so you have a stock that is still attractive it's all azure all the time. growth has been about 70-plus percent year over year we expect them to come in, in the mid-70s this quarter i don't think -- i think the company beat on earnings and revenues i don't think it's going to do much for the stock price, and i don't think it's going to pull up the market. a lot of the good news is priced in for the moment, and the stock needs to consolidate before it can move up dramatically again >> i would say on microsoft, the two things that are important is cloud and subscription-based services remember, that subscription base

is really important these days that microsoft 365, that's a big component for their growth i would note you see sap was down today, nancy. they've got a big cloud business and their cloud business hit a bump and that's trading down. and i think that's one of the reasons why microsoft is trading down, too, almost 1% so i'd say cloud and subscription base we want to hear about >> yeah. i want to switch gears for something that you have been right on the mark of it's the consumer. starbucks, home depot, mcdonald's names you've talked about on this network they've all done the retail sales number was very solid the other day. looks like the consumer, he or she remains strong bob may disagree but has it peaked out at 20 or 22 times earnings? do we still want to own things that people that make burgers and coffee >> well, oh, brian you just make me laugh yes. and thank you for that compliment yeah, we think there is some

room starbucks more so than mcdonald's at this point because starbucks has the global drag in china that we expect at some point to see pick up but it is a worry that some of these multiples have gotten pretty hefty and the growth is not as dramatic going forward as it's been so we've been trimming back on some of those holdings, but we still own them, and, you know, we've been wrong about plenty of other things, but that's a space where we've been right >> starbucks, mcdonald's, home depot, every day new high list all three of them. all the time the consumer is just doing fantastic. >> now at, what, 21, 22, 24, 25 times trailing earnings? even on a forward earnings basis, it's hard to argue any of these names are cheap. you talk about valuation all the time the macro mark set 17.5 times forward? >> historically that's very high that's the problem we have i said we're up 20% on the year. earnings are expected to be flat in 2019. now they are arguing things will

get better in 2020 that's what's holding the market up the old idea, we'll get a nice re-acceleration of earnings growth in 2020 i hope that's the case but, remember, that's an old wall street story. and i'm a little worried about the slowdown in global growth at this point >> me, too, bob. me, too. that's the concern that we move sideways for a while >> we've got watch those global pmis the south korean central bank cutting interest rates today that could have been our lead. nancy and bob, thank you we appreciate it on deck, china no longer the cheapest option to make all of our stuff. so coming up, how tariffs and rising costs are changing the global game. later -- sales of vaping products like juuls have soared while traditional cigarettes have gone up in smoke. but big tobacco is not taking i lying down they're fighting back. we'll tell you how -driverless cars... -all ground personnel...

...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. welcome back to "the exchange." here are some of the movers at this hour. shares of union pacific, they are moving higher. the company beat on earnings per share but did come in a bit shy on revenue due to weakness in energy company projecting that freight volumes would be down about 2% for the second half of the year. still the market doesn't seem to care the stock is up nicely ebay hitting a one-year high on the back of strong earnings there. company reporting that earnings were 6 cents above the consensus forecast primarily benefiting 4% from having more buyers on the site company also raised its profit outlook and ebay shares higher

as well. and wayfair, it's down after announcing its coo and cto will retire later on this year. stock has been on a tear this year up already about 60%. all right. three stocks to watch. now a cnbc news update here's rahel solomon >> here's what's happening at this hour. 231 to 199 vote the house voting to raise the minimum wage. the chance for passage in the senate are dim despite speaker pelosi's optimism for the measure >> why we're so happy this morning is this. the raise the wage act gives up to 33 million americans a long overdue raise. 33 million americans and lifts so many people out of poverty. >> hundreds of pages of

documents regarding hush money payments by michael cohen were made public today. it shows that days leading up to the 2016 election, president trump spoke with aides rushing to squash stories about alleged affairs the president had. prosecutors have decided not to file any more charges. and a representative for paul mccartney announcing the former beatle is writing music for a stage version of the 1946 movie "it's a wonderful life." he's also collaborating with lee hall, the script writer of "billy elliot" and "rocketman. and that's the cnbc news update at this hour. brian, back to you >> busy man. just on with ringo starr something you and i may have talked about >> on a morning program you may have heard of. >> appreciate it we're nowhere near being done here's what's ahead on "the exchange." >> coming up -- content. content, content chewy gets set for its first earnings report. no more counting the likes in a

and it may be the death of the station wagon. >> this is the automobile you should be using. the wagon queen family truckster. you think you hate it now, but wait until you drive it. >> that's all ahead in rapid fire

it's that time of the program. we call it rapid fire. we'll run you through some of the most interesting and important or at least interesting stories of the day here now to walk you through them and bring the heat, seema mody, dom chu and leslie picker. netflix shares are sinking today. following a big miss for global paid subscriber growth in the second quarter but, netflix not blaming its competition for fewer people signing up instead, ceo reed hastings says its content slate simply was not strong enough. seema mody, content is still king, but do you buy it? what's the lack of good shows or competition? >> i think it's competition when you look overseas. there are a growing number of local competitors, streaming players offering localized content in countries like indonesia, thailand and india at 50% of a discount to netflix why would you buy netflix if you are sitting in india and want access to "game of thrones" or

other great shows? >> i brought this to you because every time i look at your instagram, you're in another country. literally. i'm in london, india >> she's our travel reporter >> we have a travel reporter >> it's seema mody >> oh, my gosh we've been here too long what are people talking about? are they talking about netflix is it on the tongue like it is here >> it's among those who are working professionals and perhaps a little more worldly. they went to college here, went back to india. those individuals likely do have a netflix subscription, but others typically don't because it's too expensive similar story for apple. if they want to own an iphone, it's the top 5% in india own it. >> the crown jewel, rusty, boring is the new black? >> i don't consume as much of their original content as many others do. what i would say is that when i first signed on to netflix, it was because of the content library they had we all know that content library is somewhat getting smaller. especially on the television

front. >> "friends" gone. >> the one on which netflix fell 10%. >> i've said it before i, like many other americans, i'm sure, are dealing with the resource allocation issue at this point i have a certain amount of money i want to spend on online streaming content. and i'm going to make a choice at some point. i'm going to tilt towards, hey, i can spend like 20, 25, $30, 40 month on this max. is netflix going to be one of those options? right now for sure, the disney streaming service will be. and not because i'm drinking the, you know, kool aid so to speak with disney. i have a baby that loves mickey mouse, clubhouse and those are going to resonate more i'll pay for that. i don't know whether i'll get rid of netflix was the content may not be as relevant to me >> maybe the price hikes everyone was concerned about, whether their customer base is sticky enough to stay with them in the face of the competition, in the face of people like dom trying to make choices about how

much they want to spend on streaming services maybe price hikes are an issue for them it's interesting that over the last couple of months we've seen these numbers trickle out for shows like "stranger things. how many are watching that when they see us murder mystery and we're seeing -- >> they're numbers if i was a guest, i might -- oh, 700 million people watched the new adam sandler movie really >> yeah, according to who? >> i wonder if that was part of the strategy to make people say, oh, people are watching these things these are hits but then when earnings come out, we see a dchbt story. >> next up, online pet retailer chewy.com set to deliver its first earnings report since its public debut after the bell today. stock has been on a tear since its ipo up more than 40% reporting 67% sales growth for the fiscal year. all right, seema, can we expect it to keep up its momentum >> that's the key question it comes down to amazon. that's the key competitor to chewy's business in response to prime day, you

saw chewy implement a number of discounts to get their customer or stop their customer from buying a similar product on amazon's website so that will be the key. how is this discounting strategy impacting its bottom line? not just for the first quarter numbers. we already got a look at preliminary numbers during the ipo road show. it's about second quarter and 2020 guidance. >> i should have asked the man, the only one with a dog as his avatar on his social media feed. >> i would say, yes, amazon will be the de facto competitor of record for just about everybody who sells stuff online my point is, i don't ever view -- if there was one part of my life that is not amazoned right now, it's pet stuff. >> why >> because i go to either a chewy or i don't use chewy, i use a competitor called pet flow also petsmart, right, which owns part of that so there are all these pet specific retailers that i will go to first before amazon. especially when it comes to food and that's the stuff, by the

way, that people spend more on food and vet bills, than they do -- >> general mills, if i remember right, paid $7 billion -- >> for blue buffalo. >> for dog food company blue buffalo? >> yeah. >> pets are a big business are you a pet owner? >> i'm not a pet owner i live in a tiny little box in flat iron. >> like a little -- >> goldfish? >> i had a goldfish growing up >> mine died >> mine died i named them trip l. it because there were three of them, like triplets the average customer on chewy's website is $334 a year >> it's expensive. >> it's expensive, but people are willing to spend that money. the question that investors have surrounding these earnings is how much of the stock price appreciation is due to momentum. and excitement around this space versus actual fundamentals >> i have an 85-pound dog and another dog coming in november

>> oh. >> chewy does a great job. do we get box fatigue? the food i have to order, the box i'm like, what am i going to do with this box my 4-year-old, that's his christmas gift is playing in the box. at some point i have to get rid of it. >> i just said i have to use prescription dog food because one of my dogs has a bowel issue. that is $80. >> your dog appreciated that >> $80 a bag for a 27 1/2-pound bag of dog food. >> i love my dogs. i've bonded with them. >> how old is the dog? >> i have one 6-year-old and a 3-year-old >> how old is the poopanese? >> 6 years old >> a long way to go. >> my dog died at 18 had some issues there at the end. don't miss cnbc's exclusive interview with chewy's ceo then stain gram says it's testing the removal of like

counts but right now it's only in australia. the company says it's trying to offset some of the pressure people feel to make users feel more comfortable sharing posts instagram says users will be able to privately view their likes. and all the influencers who just -- like are having a heart attack right now don't worry. their marketing partners will still see the data is this a good move? >> they'll still get paid. >> instead of saying 72 likes it will say dom chu and others. >> i think personally, when snapchat was first coming out with their product, one of their key selling points is don't worry about, you know, public opinion about your posts snapchat is the vehicle so you can send these selfies or whatever else you're sending to people and no one is going to judge you. you'll not get that public judgment luike you would for instagram and facebook and the like this could be a reaction to that idea that sentiment that people don't always want to be judged by what they want to share but i do -- >> then don't share it >> i agree with you.

just don't share it. >> i'm not a big social media person, but it could -- >> and you don't have a dog. what do you do >> what do i do? >> she works she actually works >> you do a lot of really good reporting. >> i have a job. >> there are a number of brands that advertise and market on instagram. as you say, that data will still be shared with them. >> privately >> but there's some level of social importance that we may not attach to those likes but others do. especially influencers that could really change the models that take away the like option >> fair enough next up, could this be the end of the station wagon as we know it. volkswagen is dropping the golf sports wagon from its lineup it's part of a pivot more to the suvs and crossovers which account for more than 50% of total american sales buick, the only american automaker left with a wagon in its lineup and it does not even call it a wagon, although, dom

chu, you're younger than i am. >> you are also a car. i love that we'll talk about this with you. >> do you think it's a wagon issue or a volkswagen issue? >> it may be a volkswagen issue. in my town there are still a ton of audi, which is a volkswagen product. audi all roads the station wagon looking things also bmw 3 series station wagons out there? >> really? i have not >> i have not either >> you live in new york. all you see is an uber >> what i would say is you haven't seen this kind of station wagon prevalent in america in a long time i remember the last one that really struck the tuning fork in my soul was the cadillac ctsv wagon. remember that one? >> yes >> that was like four or five years ago. that was the last time i found a station wagon that was, wow! >> how about a 1991 mercury country squire where i could lay out in the back seat, never touched either side of the car parents smoking in the front >> the kind you can face the

back you'd sit in the back and get to watch all the traffic. >> put dom's dog on the roof so you don't have an issue on the cross-country trip >> or how about this >> you want to have a winning car, i'll say it right now rf-6 wagon they sell it in europe they don't sell it here. it's europe but -- audi, bring it here. >> that's a crossover. doesn't look like a station wagon. >> but it's an awesome car >> this is gross research has found that grasshoppers, silkworms and crickets, bugs, all pack up to five times more anti-oxidants than a glass of fresh squeezed orange juice researchers say they're an excellent source of fiber, and vitamins as well 82% of americans could consider trying edible insects. could cricket smoothies, dom, be the next thing to head to the nearest juice bar? >> i've eaten insects. >> what have you had >> worms, crickets,

grasshoppers not fried -- yes, they were fried. >> was this in a foreign country? >> they were in houston at a great restaurant down there. bugs, not a big deal we've talked about eating bugs before why wouldn't you just find another fruit or vegetable that gives you the antioxidants you need >> it's five times as much >> get a pill. >> they are important. we're focused on anti-aging and wellness >> what do you think of the story? >> what i will say is unlike here in the u.s., where insects are not part of our diet, in many countries like thailand and africa, they do eat insects. it's part of their diet. seen as a good source of protein. 20 grams of protein when it comes to grasshoppers. listen -- >> i'll probably never host this show again strangest thing you've ever eaten? >> oh, gosh. >> what's gosh >> strangest thing -- >> ostrich >> ostrich >> oh, i've eaten kangaroo >> i've had kangaroo as well >> i would probably say kangaroo >> kangaroo and ostrich.

>> snake >> rattlesnake >> go to australia and not have our likes on instagram and -- >> it's going to be delicious. seema mody, dom chu, leslie picker you win. companies are leaving china in droves thanks to u.s. tariffs. what the supply chain scramble means for the global economy, and what china is doing to stop it, next we call it the mother standard of care. it's how we care for our patients- like job. his team at ctca treated his cancer and side effects. so job can stay strong for his family. cancer treatment centers of america. appointments available now.

- my degree from snhu has helped me tremendously. (gentle music) the flexible class schedules allow me to go to work full-time,

run my catering business and be a mom and parent. when i reached this accomplishment, it was like, it's here, it's happening, it's now. we, at southern new hampshire university, are the ones who succeed. we are the ones who break through. welcome back to "the exchange." one year into the trade war and more than 50 companies have announced or are reportedly considering plans to move their production out of china. a new piece in "the economist" takes a deep dive into what it calls the slow unraveling of global supply chains and why we're seeing an exodus of manufacturers from china for more we're joined by the author of that special report, vijay, u.s. business editor for the economist and he also lived in china for six years

are these threats or are these permanent moves out of china >> global supply chains are undergoing the biggest transformation in three decades. and the surprise is, it's not mainly because of the trade wars that's just pouring a bit of gasoline on the fire the two main reasons are, we're at the end of the cheap china sourcing model and the other is that, really, globalization is becoming slow-balization. the auto cluster in america. >> would the pace of the departures be the same or be less if we did not have the tariffs? >> of course, it's increasing the pace no question. >> is there a way to gauge you just said companies would still be leaving even if it wasn't for the -- >> you have to ask, why would they leave among the reasons, for example, technologies we're seeing a lot more application of artificial intelligence, predictive annual lytics that's changing the way markets

are looking at supply chains allowing them to go faster the other point is supply chains are getting shorter. the amazon effect. the on-demand economy means it's more useful to have supplies closer to the economy where you can deliver quickly. one-day delivery will become a two-hour delivery and ultimately a report in the special report amazon is thinking, how can we get to 15-minute delivery. >> you can't do that from china. >> you can't but i guess that fine line vijay is the gap between what people are willing to pay for convenience and what they are simply willing to pay. >> this is the tension you put your finger right on it. as we move from an old model of globalization that was make it incredibly cheap, sell it at walmart for a few bucks. that was an efficient model. cut costs 1 or 2%. we're now entering a messier world of slow-balization but smarter, shorter, faster supply chains and that's going to create a lot of possibilities for companies that want to do, let's say, rapid turn around more innovation.

innovation loops get faster when you're closer to the customer. >> so you look at india, for example. >> sure. >> india has been winning some of this business the thing that people may not realize about india is india uses british law contracts are much easier to enforce in india than they are in china is india going to be the big winner here? if not them, who >> so there's no one big winner. in fact, even china is not a big loser. here's why china itself is a major market and that's part of -- even with its slowest growth in many years, which has been headlined in the last couple of days, china is growing more today. once you account for the base effect of how big its economy is than it did 20 years ago or ten years ago. it's adding more new consumption than any other big economy and so the factories that used to supply the world are pivoting to supply china and the rest of asia >> we remember china the united states was china decades or centuries ago >> you bet >> we were -- the united states

in the late 1800s was the low-cost manufacturer. we took jobs from the uk. >> right >> because we had child labor in 1908 and seven-day workweeks. so we -- china is having that evolution that we had, are they not? >> they are. one of the companies i report on, apparel industry, hagar. they make slacks i asked their supply chain manager, are you leaving china no, they're extremely auto mated and child labor compliance is better there than some of the countries we may deal with >> once they get that scandal, then we come calling and then they go back >> vijay, appreciate your time philip morris and altria teaming up to take on the likes of juul as traditional cigarette sales drop alieniticco's push for a hethr cone alternative, next here, it all starts with a simple...

hello! -hi! how can i help? a data plan for everyone. everyone? everyone. let's send to everyone! [ camera clicking ] wifi up there? -ahhh. sure, why not? how'd he get out?! a camera might figure it out. that was easy! glad i could help. at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. welcome back shares of philip morris are rising after reporting strong earnings, and now its hottest product has been approved for sale in the united states. let's get more now on this story with frank holland >> reporter: it's the fastest

growing product in the nicotine business, a cigarette that you heat up instead of lighting up with matches or a lighter. you put this stick inside of an electronic device to release the nicotine it launches in the u.s. this summer but is sold in 48 markets all around the world this quarter sales grew by 37% philip morris saw its cigarette brands decline by 3.6% the company also telling cnbc.com about two out of three customers convert from a competing cigarette and smokers look for healthier alternatives. it has just about the same amount as cigarettes but iquos contains fewer chemicals than in cigarette smoke. iquos could help people transition from cigarettes and that desire has been behind the

growth, brian. >> thank you very much >> reporter: thank you get this, toys 'r' us, they could be back from the retail dead details on the retail resurrection of your kids' favorite store next.

happening right now in d.c. president trump meeting with the prime minister of the netherlands. let's listen in. >> thank you, everybody. thank you very much. steve? >> have you ruled out sanctions? >> we're looking at it we're looking at it very, very difficult situation for a lot of reasons. things could have been done better in the previous administration the previous administration made big miss takes with regard to turkey and it was too bad. we haven't announced that yet. >> what would your message be to supporters >> well, these are people that love our country i want them to keep loving our country, and i think the congresswomen, by the way, should be more positive than they are

congresswomen have a lot of problems when you look at the statements they made that were so bad and horrible to our country, you look at what they said, john, what they said was something that is hard to believe they could make statements like that. and i could go page over page over page, many, many statements, whether it's about us, whether it's about israel, whether it's about the world trade center and all of the different things said. it was a very terrible thing i'm not happy when i hear that i've said it and said it strongly i will tell you the congressm mn and women have an obligation in this country they have a big obligation and the obligation is to love your country. they have such hatred. i've seen statements they've made with such hatred towards our country. i don't think that's a good thing. they should embrace our country, love our country

things would be better thank you very much, everybody thank you. >> with the pentagon's jedi contract, any chance you might intervene in that contract >> which one is that >> the pentagon's -- >> amazon? >> the amazon and microsoft. >> i'm getting tremendous complaints about the contract with the pentagon and with amazon saying it wasn't competitively bid. this has been going on for a long time, i guess probably before this administration it's a very big contract, one of the biggest ever given having to do with the cloud and a lot of other things. we're getting tremendous complaints from other companies, some of the greatest companies in the world are complaining about it having to do with amazon and the department of defense. i will be asking them to look at it closely

not only complaining from the media, or questions from the media, but different companies like microsoft and oracle and ibm. we're going to take a look at it, a very strong look at it thank you very much, everybody >> right this way. thank you. >> and that does it for "the exchange." "power lunch" begins right now brian, thank you very much welcome, everybody, to "power lunch. i'm tyler mathison melissa lee is alongside president trump speaking just now about the defense department cloud contract where amazon and microsoft have been competing. let's bring in eamon javers at the white house. he ended on a busy note, eamon >> reporter: the president is talking about there the so-called jedi contract, it's about