tensions in hong kong escalate. of 12th straight weekend protests as police used water cannons for the first time. ♪ manus: welcome to "daybreak: europe." ae question, are we just on staging post, all out 25% tariffs? morgan stanley warned of a meaningful risk in the trade war of escalation and a risk of a global recession. if we move to 25 percent on all imports and it sticks. that is the new level of conversation. escalation risk. nejra: extraordinary times. one trader talking about the fact that president trump can wreak havoc in ways no one ever thought of. weird would be one definition of it. dollar-yen, we have already traded through that. dollar-yen is the very personification of where you would want to lean in to. yen againstlook at the lira. demolition derby. the chinese vice premier, willing to solve the trade problem by dialogue and calm attitudes. you wantn't think that to buy treasuries at the lowest level since 2016, where might you put your money? gold, the highest level in six years. etf's sucking in

secondly, i argue that control of escalation, and not just the costliness of escalation, in the modern era is incredibly difficult. modern kinds of politics make , once you start a war, controlling the scope and scale of it is very difficult in the modern era. two reasons. one is domestic politics and the problem of hawks rather than doves. if you are following the news out of india and pakistan last week, one of the specialists of south asia was saying part of the force that i have pushed the hand of india or pakistan into different stages of back and forth over kashmir was the fear of looking weak. in a democracy, that can be a significant problem. even in a non-democracy, it can be a significant problem. if the military in pakistan let's say views a leader's decision as too weak in the face of a rival, that could be the end of the government. controlled make escalation, once these activities start and people start dying, difficult to control. the other is a communication problem. it's difficult to know if you would like to engage in limited war, whether the other side is going to as

and china, whether received further escalation or some de-escalation which is still possible.itrket is certainly very negative. i think we will see further bouts of risk off and with downside risk to growth growing, i think that will be spill away effects into other asian currencies. shery: we are already seeing that in the south korean won. the minister -- the finance minister say they will need to take steps on fx regardless of currency levels. there watching closely if the market becomes unstable. we are heading toward the bok rate decision this week as well. how will this play into the calculations of policymakers? >> i think it is very complicated mix for policymakers in the region. we have already seen them ease policy in response to weakening growth. and the rate cuts by the fed have helped asian currencies to cut rates without having to worry too much about destabilizing their genetic financial markets. -- with trade tensions heading into new territory, it is fair to say asian central banks will need to do more to provide support to growth. our measure of financial con

and also, just the trade war seems to be escalating, unfortunately, not de-escalating.e will come together and talk and start coming up with some solutions that the more protectionist direction we're heading in. unfortunately, it's not that at all. in terms of the eu and what's happening in the rain forest, it's all been joined together. some of the environmental concerns are being conflated with the trade war's. so it's very uncertain. in the short-term i think you're right,. we could see more profit-taking. it's 8% in august along. i'll just jump into say president trump is arriving at the g7. we've seen him taking part in that press conference earlier on today. he was talking with the egyptian president. today, we see him arriving from that press conference, please pictures coming to us live from biarritz. he said a lot already this morning. the redhead line across the bloomberg moved gold prices, risk assets, as well. so you're saying perhaps we topped out in the short-term. what about gold volatility? i have a chart which shows the extent of the surge we've seen in

escalation to oil has its worst day for four years. we will start with the us china trade war because president trump has announced a major escalation in us tariffs on chinese goods, saying that china has broken its promises made in negotiations. the announcement has rocked markets as we saw a moment ago, sending stocks and commodities tumbling. here is what has them so worried. resident tom says that from september one, the us will impose a 10% tariff on $300 billion worth of chinese imports that are not already subject to us taxes. this comes on top of the 25% tax already imposed on chinese goods worth $250 billion a year. but they will hit consumer goods such as electronics, toys and footwear. us business groups have been quick to condemn this escalation. the us chamber of commerce that represents 3 million firms says it will only inflict greater pain on us business and undermine and under wise strong us otherwise strong us economy. president trump began his tweet with praise for the most recent round of negotiations, describing the

sox -- stocks are absorbing the escalation ahead of the weekend, trump escalating as well as tellingompanies to pull out of china. we see the all out economic war after the tumultuous august for the financial markets. can see the yen following. towardsontinued moves haven assets. earlier we saw the yen strength in past the january flash crash of 104.87. looking at economic data we are expecting later this hour, we tradingect mainland data and singapore production after a week gdp. -- a weak gdp. and the philippine markets are closed. thank you. let's take a look at the first word news. hong kong police are defending an officer's decision to fire his gun as the best option area clashes with protesters escalated overnight. at a press briefing, police said the action was necessary as protesters were charging them. police have arrested 36 people following sunday's protest, including several violent crashes. -- clashes. a new businessman leader after a political process that featured no other candidates. he will be the third leader since macau was handed back to china in 1999 after centur

even the sfmta saw a cost escalation of 40%. so this concludes my presentation, and i'm here to answer questions. >> commissioner fewer: thank you. so, mr. chan, i think what supervisor mandelman asked was sort of a cost analysis about the current situation of our escalators. so we spend money to repair them. do escalators need to be replaced because of weather or feces? how much do you think this will -- putting a canopy will offset the overall cost of the maintenance, also the inconvenience that happens when our escalators are not functioning? >> we were trying to get that cost from our maintenance and engineering group. i'm going to turn to carl and mark to see if they know. i had not heard back from me. >> so we don't have a cost yet. we got numbers from them, but we're trying to make sure that they're accurate. what we also were looking at were the number of maintenance calls and also the days out of service. i can say that looking at other escalators, for example, at 19th street station, there was a number of days out of s

real concerns about the escalation of the trade discussions, the escalation, the rhetoric between thetween the us and china. holidaymakers on a flight from heathrow to spain had to be evacuated after smoke filled the cabin shortly before landing. the 175 passengers on board were told to use emergency exits to leave the plane and slide down the chutes. british airways has blamed a technical issue. 0ur reporter michael cowan has more. the final minutes of a british airways flight to valencia. 0ne passenger described it as being like a scene from a horror film. ba flight 422 a scene from a horror film. ba flight 422 took off from heathrow yesterday morning, but ten minutes before landing in valencia, passengers were surrounded by an acrid smoke. very quickly, you couldn't see the passenger two seats down from you. it became very thick, and we were descending quite quickly at that point. there wasn't an official announcement about what was happening, but people were saying "get down, get down", so we were to try and breathe in the clean air towards the floor of the cabin. try and breathe i

world war i, i make an argument about how the nature of escalation, or the appreciation of how escalation works, changed world war i. it became much more salient. and the destructiveness of a conventional -- nonnuclear, but conventional -- global scale conflict was graphically and tragically displayed in that conflict. that sort of sets the wheels in motion for the development of new ways of intervening in the war which i talk about in the interwar period as a period of experimentation. governments are just declare a war and acting in intervention and staying out but rather doing things without calling them war or doing it less covertly. that showcases the first case study that i look at, which is the spanish civil war in the late 1930's which featured a series of external interventions by italy, the soviet union, and nazi germany, which were members of the nonintervention committee but actually were actively participating in the war. they never owned their participation. they called them volunteers are effectively concealed them. that is the first chapter. i then pick up the pieces after

escalation ofn the situation in hong kong today and a de-escalation of the trade source. these two things related? marty: i don't think they are for thatt all, except the chinese leadership has a number of things they have to deal with. the trade war with the u.s., civil unrest in hong kong. it is part of the atmosphere of challenges that xi faces, but i don't think they are linked directly at all. vonnie: what does it mean for the likes of taiwan? i'm sure taiwanese are watching this closely as well because if china were to make some sort of stronger effort to tamp this down, that could spell trouble for taiwan. marty: you know, it's not rocket science to point out that what's happening in hong kong is of unbridled interest to the taiwanese, who have been thinking about stronger political links. vonnie: i just want to point out that we are seeing pictures at the airport, others are live pictures. bloomberg's chief content officer marty schenker stays with us. guy: let's bring another voice into the conversation. joining us on the phone is , to give us a sense of what is

this coming amid escalating trade tensions.is saying this may not be the last of yuan weakness. marketpan is a strategist and joins us from singapore. given what we have thing -- seen with the chinese yuan, how much longer are we expecting the yuan stay above the seven per dollar level? jingyi pan: good morning, thanks for having me. [indiscernible] if wed not be surprised see prices ending at level. been the reason we have seeing this trade tension escalation coming sudden. away not going to go anytime soon. [indiscernible] a rude awakening from president trump's latest tweet last week. it is viewed as a retaliation method, this [indiscernible] the pboc letting it go at the end of the week. i think they are both in a situation where they are ready to stake out the fight. we may see tensions persisting for a while. it could keep the yuan weaker until the end of the year. shery: this will come at a cost for beijing, right? sandought the line in the at seven was because of concerns of capital outflows and de-anchoring currency co

-iranian escalations just continues. sanctions last month and iran increased its enrichments of uranium. iraq we have seen two iransions targeting the militia. morning, thet this droneonfirmed that one was shut down. this is the second incident in yemen since june. with me to discuss this is a very diverse group of experts, and all of them i would call friends. . will start from the far left senior fellow at the foundation for defense of democracy. a senior fellow at the center for american progress. she follows yemen very closely and is a nonresident fellow at the middle east institute. to my left is a senior fellow here at the hudson institute. thank you for hosting. thank you for our c-span audience following this, for those who are following us on twitter as well. how we are going to do this is we are going to start off by very short opening statements. the "maximum pressure" strategy. is it working, what has changed in the region. then we will have a discussion amongst us and turn it to you for questions afterward.

i think it's stephanie escalating and i think there's more of a sense now for a long time was almost like a theoretical exercise but i think now that people are seeing that this is having real affection oh we have things like germany possibly facing a recession we have all these real world issues now that are suddenly making people realize that the trade war is a global issue and that something needs to happen something needs to be dealt with let's listen in to the o.e.c.d. chief. and had something interesting to say about the effects of the trade war and what the numbers because this is quite interesting let's listen in to what he had to say hopefully we will get a deescalation simply because the escalation has cost the world so much we were forecasting growth of about 4 percent for the world economy by this time and next year a year ago and one year later here we are saying 3.2 percent if at all maybe even lower so basically it's almost it's almost one percent the total cost of the $3.00 tensions so far can be measured very precisely one percent of the world's economy you're talkin

they have a ready done so much in terms of escalation, what next? thatis like we're in for a long trade war that is going to keep ramping up. i don't think there is an end in sight. i think both sides are digging in their heels on this, so it looks like the world economy is going to be hit by the escalating impact of the trade war and of the impact of the trade war and of the impact that will have on the asian supply chain. let snouts talk about japan, because the world's third largest economy released its latest growth figures this morning. it expanded 0.4% from the previous quarter, which is stronger than expected. that is thanks to brisk domestic demand. but, economists expect trade tensions and cooling global demand to weigh on exports in the future. earlier i asked the managing director at anyway parthenon about the long—term impact of trade tensions with south korea. the long—term impact from this, the industry highlighted in the trade restriction currently, is that south korean companies, which are large buyers from —— forjapan, may choose to

debra: an escalation in the u.s.na trade war, president trump announcing another 10% tariff on $300 billion worth of chinese goods starting september 1. this has the potential to head to american consumers more directly. it will impact a smart phones, laptops, and children's clothing >>. for decades, china has taken advantage of trade. taken advantage of trade versus versusted states and countries in asia and southeast asia. it is time for that to stop. president trump has said we are dong to fix that and to that, it requires determination and that is what you solve this morning. the uk's new prime minister has seen his parliamentary majority cut to just one. that is after boris johnson's conservative party lost a by election in wales. democratsxit liberal one bank a special ballot. for the tories has been recalled. koreahas removed south from a list of trusted export destinations of amidst as collating tensions that are threatening global supply chains. the move is reckless according to south korea and said it could

clashes with protesters escalated overnight.the action was necessary, as protesters were charging them. police say they've arrested 36 people following the protests, including several violent clashes in the western new territory. macau has chosen a pro china business after a political process that featured no other candidate. he will be macau's third leader since the territory was handed back to china in 1999 after more than four centuries of rule by portugal. unlike hong kong, this appointment because little public controversy, highlighting their week opposition movement. north korea has followed up a string of recent missile tests with what it says is a new super large multiple rocket. casey in a says the latest tests were successful," kim jong-un as saying it is a great weapon. president trump says he is not happy with continued weapons test, but that short range launches are not a violation of sanctions. he also expects to meet kim again soon. a russian rocket carrying a humanoid robot has failed to dock at the international

again, this is not necessarily de-escalation, just a splitting of the escalation.e now get it in two chapters. vonnie: shawn donnan in washington, d.c. in the last little while, pboc op-ed,ls wrote in an that it has responded to pressure on the renminbi by to theding market in keeping things stable. for more on how these trade headlines are weighing on global markets and today's inflation report, let's bring in michael pond from barclays. spread ating the 2/10 1.49. zero, does that change the thinking on whether a recession is in place? a relief rally, selloff in treasuries, higher nominal yield as a result of the headlines that you were just discussing. a longer-term picture is not a great one, as indicated by the markets. the markets are saying because of the trade war, there is a higher risk of the u.s. heading into recession because of global factors, and the slow down the we have already seen in business investment, spending, ism data we got earlier this month was not healthy. hitting lows back in 2016. payroll growth has slowed, at the end from 2.10 of last y

it is complete de-escalation and a whole different tone. in particular, that tweet on friday that had the market concerned about a potential escalation. we are looking at the de-escalation the key will be the reaction from the chinese. tadeo, she will continue to cover the g7. we have an important press conference coming up. one of them president macron and trump together. joining us is marie owens thompson. thank you so much for joining us on this monday morning. let me ask what you take from this optimistic turn, this consolatory turn that trump has taken in terms of the trade war? buta: it is very good news, i think it is impossible to extrapolate on any of these sentiments, be they good or bad. i think we are going to be stuck in oscillation between negative tweets and positive tweets, and that the trade issue will not go away for the duration of this administration. matt: what has -- what have your clients been doing? we are seeing big drops in equity indexes over the last couple of sessions. risk assets are still trading at a fairly h

long.rags the stoxx escalation. hong kong protesters disrupt ports while carrie lam warns the city is on the edge of a dangerous situation. surprise exit. john flint comes to an abrupt end as the global industries. welcome to bloomberg surveillance. i am francine lacqua. these are your markets. the one to watch out for is remember the -- is remember the. we are seeing stoxx 600 down to 6%. euro-dollar 11133. we are getting euro area services for the month of july. that is pretty much what we are expecting. you can see that this move is also having an impact on s&p futures, down from 1.1%. a sick resources are the ones losing the most. -- basic resources are the ones losing the most. , we will have plenty more from your markets. let's get to the bloomberg first word news in new york city with viviana hurtado. viviana: china is asking its businesses to suspend imports of u.s. agricultural products. firm will wait to see how trade talks grass. this coming after trump escalated tensions last week. he proposed tariffs on

but somehow at the last minute a deescalation has been made possible and there was another escalation this year in february but of course it's also important to point out that the action india has taken in india and that's to me is unprecedented and is massive when compared to the last 70 years of india's interventions and india's decisions when it comes to its own parts of push me also it's important to point out that both countries are making statements through ever since this decision has been made to the. markets on time this time around khan is expected to speak indian prime minister narendra modi's speaking to the nation over the radio at later this evening and the so that's also something that is not the norm for both of these are of course about the issue of kashmir so a father escalation is something that the this region as well as the international community is worrying about however i do have to point out that according to india this has not been an act of aggression according to india this move has been about integrating push me for the into the country about bringing deve

zone -- a de-escalation zone is now -- from theve pulled back turkish border.p to 17 kilometers are pulling heavy weapons entry, but only from the countryside, not from the towns and. it is nothing close to what the turks were asking for. they wanted them at least 30 kilometers away from the order, but this is a u.s. brokered arrangement and it is something that turkey is going to have to live with for now. >> the nigerian government has been criticized for failing hundreds of girls and young women who were victims of human trafficking. a report by human rights watch revealed an unknown number of nigerian women have been forced into sexual wintry and sza labor. it found the victims, some of them in their teens, received little or no help despite their traumatic experiences and an existing system neither failed to help or sometimes breach victims rights. human rights watch recommended an overhaul of the country's support them and says nigeria's government had to do more to prevent trafficking. more from the nigerian capital. girlsdreds of nigerian and young wome

you have the escalation. their strategy was predicated on escalation in our strategy to.the question is if the u.s. policy going to be fundamentally based on sanctions alone or is it going to have something else? that's why i mention for her it to be truly successful to get iran to the table we need a regional component. iran felt isolated at the tail end of the iran-iraq war. >> are there any signs that their regime internally is going to give in? >> each time he floated a prisoner swap once in florida the idea with legal talks even so yes iran is negotiating publicly. that's a measure of success. iran's red line from april and may until now in negotiations have changed. they say multiple different things. we will only negotiate with the america we returned to the jcpoa and only negotiate with oil way for. which one is the? each country is publicly negotiating now. we should see it as a public measure of negotiation like in a country like ours korea they are doing military things to build leverage for when they come to the table. >> mike fatima explained the waiting it o

that's right and it's a rapidly developing just mere hours after beijing 1st fired off on its escalation of terror of situation just a few hours for president trump so then announced via twitter literally escalating this trade war with $280.00 characters tweeting that come september the u.s. will impose a 15 percent tariff on $300000000000.00 worth of chinese imports and then in october on children $50000000000.00 remaining products an additional tariff of up to 30 percent so that is a dramatic escalation and it does come in response to china earlier in the day issuing its own escalation on tariffs on $75000000000.00 worth of u.s. goods and the response to all of this has been a lot of chaos in the u.s. markets the dow jones closed more than 600 points down as an indication of how much u.s. businesses and investors are depending and counting on this great very big chinese market to continue to be consumers of u.s. products and the fact that this happened today does come at a very sensitive moment in trump's presidency because over the last 2 weeks we've seen him and other white house off

that is why we are seeing this escalation.t the stock market is more interesting this go round. the treasury market is equally interesting. shearing.good, neil it is supposed to be about jobs day, but somehow i don't think that will be the case. in the 9:00 hour, our john farrell, in a conversation with free trader mourns kudlow, on the president and the president's -- with free trader lawrence kudlow come on the president and the president's taxes on china. this is bloomberg. ♪ viviana: this is bloomberg surveillance p let's get the bloomberg business flash. allianz getting a boost from pimco in the second quarter. pimco attracted $25 billion of new money. this after a push for overseas outside clients, operating profit from nonlife insurance missing estimates following -- falling 5% from a year ago. campbell soup inking a deal to sell international operations p this includes australian biscuit maker arnett. the dealer completes the soup maker's asset plan it announced last august. this would pair down its debt. investors wil

this weekend has seen a sharp escalation in violence. they have given warnings to the crowd, they are now going ahead. bringing an end to almost two weeks of calm here. today, police launching a relentless barrage of tear gas. there's more tear gas canisters being brought forward as some of the protesters are literally picking them up and trying to throw them back. forcing us to take cover. move, move, move. the air thick with smoke. and anger on both sides. 15 officers injured, 56 protesters arrested. this is certainly the worst situation we've seen, the most violence, the most tear gas, and the most resistance from the protesters. the question now is how long will china tolerate these scenes? and just across the border, chinese troops, some dressed in civilian clothes. appearing to role play protesters. staging drills, armored trucks by the stadium. a dark reminder, they're able to move into this chinese territory if hong kong police lose control. >> ian, you were showing how the situation there is escalating further? >> reporter: that

asian markets sharply down on monday and this escalating trade war we a tit for tat tariffs being gone back and forth between the united states and china announcements on friday markets futures for those markets were sharply down over the weekend they proved to be true monday sharply down across asia now futures in america also look like they are going to be down those markets haven't opened yet but indications are the open lower but not as low as we thought over the weekend because futures had softened a little bit something else it's quite interesting on monday the chinese currency the yuan is down to a year low now this is reaction obviously to the market that the trade war that's been going on between these 2 countries now we know that they're supposed to be further negotiations next month in september but no details have been released about that so there's concern just where the next step is where this trade war goes from here at a concern to that we have a global slowdown in the economy so there's concern that this trade war could also prompt a global recession tom lange is tryin

is the situation escalating or de-escalating? ofnne: in the last couple hours, things have taken an unexpected turn. this crowd getting more riled up in the last couple of hours after protesters alleged that they found a man who was apparently a mainland public security officer who was apparently pretending to be a protester. he fainted on the ground. they dragged him over to the departure hall, where we are standing at the moment, and this crowd is now surrounding this man. and some reporters we have seen were trying to protect him. at this point they are just being squeezed by throws of people who are still not willing to let him go. they are trying to tend to him. we had firefighters trying to diffuse the situation, but they also retreated. they weren't sure how to get through here. i think things are getting a lot more intense here, and potentially getting out of hand. guy: getting out of hand. yvonne, let's talk about what the protesters want. when you talk to them, are they worried about provoking beijing? are they worried

as it is it right now is stephen investors here in wall street are fearing an escalation of the bands which could trigger a financial shock a worldwide over what some coal some kind of black swan we already have trade tensions between the us and china going on which it seems to continue to escalate the situation is taking a toll on and global economy on top of more recently did trade war appears to be evolving into some kind of currency war and now the i'm going protests in hong kong new geopolitical risk to be run eataly argentina which it feels a. particular case rhetoric from beijing claiming that their 1st signs of terrorism are starting to appear. markets and investors are still anxious that the situation is not getting any better while stocks ended region and to its 10th straight day of declines the last time hong kong stocks such a long blues industry was in june july 1904 those that you mentioned trade there is a worry that was obviously driving markets today what exactly were investors say to have them so worried a basically stephen it that the chances of a recession happenin

and china escalation ends. and i'm not sure based upon my reporting if i can say that it ends outside of the trump white house. selina: what's really interesting when you go through the treasury department statement. shery: we are seeing they're relying on that act that i mentioned earlierier -- earlier on the show. the 1988 omnibus trade and competitiveness act. in the treasury department says requires the secretary to analyze the exchange rate policies of all their countries. we had consistently talked to analysts saying that china does not qualify as the currency manipulater according to the 2015 trade act. but they could in the 1988 act, that is more subjective. given this, it's become very clear that this designation has become very politicized. and president trump has also hinted at the possibility that the u.s. might intervene as well. has this latest action from china, and also the u.s., raised those odds? >> yes. wholeheartedly yes. and in terms of the financial regulatory structure that you just allud

there is the september 1 deadline in escalation. a further 300 billion.weekend, wilbur ross was in latin america saying as soon as this week, we could have the rulings with regard to u.s. applications to trade with huawei being announced this week. we will have to see what happens to those rulings, which shows china has taken a gamble and lost some degree of confidence that something would and out better on the huawei fight. we have to watch for that going forward. those are two clear mark spurs and on thursday, the administration of trump will be watching trade data to see what pain china is feeling on the export front. 730, is that fair value to you? that is your forecast for year-end. claudio: that is year end. if you are talking equilibrium models, the equilibrium model we have is a heaven .5. we are talking offsets to tariffs. this week calculate as an offset to the 10% but if we go to 25%, aboute talking a move to 7.8 and change. clearly that goes up. the problem with these calculations about offset and tarifftes escalation is they are back of envel

dispute going into this summit a man or mackerel said he wanted to use it to make progress on the escalating tensions over iran and trade help tackle the amazon rain forest fires and kill divisions using multilateral cooperation at the end of the 3 day meeting it seems the french president has succeeded on several fronts there were unresolved issues though the u.k.'s prime minister boris johnson received only a vague promise of a future trade accord with the u.s. and was no nearer to a deal on breaks it with the european union i think it's the job of everybody in parliament to get this thing done making it what the people want i also think by the way it's what our friends and partners on the other side of the channel want they want they want this thing done they want they want it over last year trump refused to sign the final g 7 statement this year has scrapped it replacing it with a one page summary of the meeting so with no commitments in writing the challenge will be to. compel leaders to act on the furball promises they have made such a partner al-jazeera spirits. brazil has rejected an

vonnie: that is a serious escalation in rhetoric. at what point does it because a lot -- does it become a lot more probable that this becomes a military event? this point, we haven't seen any signs of that. they continued to back carrie lam, the chief executive. they continue to back the hong kong police force. we've been speaking to experts and officials who have set at this point, the government tactics may be working. their strategy right now is to wait this out. don't offer any major concessions and wait for these protests to fizzle out. perhaps want the -- perhaps once the summer vacation is over and some of these students get back to school, things will fizzle out. at this point we have seen the crowds get smaller. not the 2 million we saw weeks have marked 10e straight weeks of protests. potentially it is getting a little more violent as well. the hong kong police showed off new water cannons as well. perhaps they are getting prepared for further escalation if they need it. vonnie: yvonne man, bloomberg correspondent at hong k

do you expect further escalation? jeffrey: no. our view is the escalation is already baked in here.ou have the increases coming on the first of september this weekend, the first of october, and then december 15. our view is your get all of those imposed with a small chance of a mini deal that would put off the imposition of some of those tariffs, but that is not our base case. in general, we have seen the market narrative around these talks with pretty quickly between things are improving when they talk, and when they happen and nothing gets resolved , then you see the markets wingback the other direction. the rally we have seen in this week, for example, is mostly aspirational. markets reacting to something that is not there. vonnie: how much of the positive will be dependent on whether we see a market selloff or not? if markets continue to hold up, there is no incentive for president trump to come to a trade deal, isn't there? jeffrey: that's right. the domestic politics in america and china make getting a deal difficult. that will not change regardless of what the market does. bu

the escalation and rhetoric are harmful. one pocket of strength within the industrials, aerospace and defense as they have more money to raise the budgets lockheed martin hitting a down today. sarah? >> thank you, seema. for more on today's sell off, let's bring in president of well wells fargo institute and victoria fernandez joins us by phone. steve grasso with us you spent the day on client calls, on strategists calls, what did you tell your clients to do? >> i think you got to look in this environment for stable growth where you can find it, defensive yield and defensive quality. right? really kind of sure things up. we finish the day on some key levels, the 28, 22 level on the s&p is the august 5th lows, below that the 200-day moving average. the vix is 200 and change. i think it's time to pull in the reigns and be a little more defensive. sit on your cash and be patient putting it to work because we don't know where it's coming, volatility will be. >> give us an example what defensive quality means to you >> you can st

will escalate. and become uncontrollable then that will have significant impact on hong kong's credit rating hong kong's current credit rating schools a similar to those of the united states there are a lot better than mainland china's because hong kong is seen as economically and legally independent the process could mean a downgrade either because they make hong kong a more difficult place to do business or because evidence of beijing asserting itself would undermine the independence that many consider makes hong kong special a downgrade would mean hong kong's government and any firm listed here payson or to borrow. hong kong's economy was already sluggish way down by the us china trade war and sky high house prices were beginning to dip. and move away. from that impact of the. political instability so. many people are going to enter the market in this kind of situation the protests could tip hong kong into recession it's too soon to know the full impact of the protests economic data takes a month

the financial times is focusing on this trade war escalation.ince this was printed, washington has named china a currency manipulator, which president trump promised he would do on day one in office which he hasn't done until now. they have had many opportunities to do that, but the statement they have come outwith. we have been talking about this trade war the tariffs and what is going on with china and the us, but it is now alleged that baiting has unleashed their most potent weapon, which is weakening their currency, and it has the impact of an unfair advantage to chinese exporters. the us is saying this is unfair, they claim it is a currency manipulation. it happen in 2008, the last financial crisis, the chinese currency weakened. it went past the cracking seven and it is about seven to $1. it does come with potential of biting the chinese back. it makes purchasing us goods for chinese consumers much more expensive, global oil is priced in dollars and any chinese companies, borrowers of dollars at the moment will find is very difficult to co

how he wants it to to these escalating measures.rican domestic reactions accurately because the perception is beginning to be that the president is taking the u.s. down a tricky path and it is not paying off economically. francine: i feel like we are that heder the metrics measures his success five, is a stock market, how much is based likes it? the stock market matters a huge amount for this president and the agricultural move is interesting because that part of the population has been critical to, states important to him, that may lead him to rethink his current game. but he has some time before he needs to demonstrate he wants a deal but if it hits growth we will see some changes. tom: let's talk to somebody with a nobel prize in international economics. this is paul krugman's wheelhouse. the news flow has been extraordinary. a little bit dated over the last 24 hours. china is clearly signaling it is not canada or mexico, it is too big and too proud to submit to what it considers bullying with china a major currency minute later

have, thats won't this won't continue to escalate? >> larry kudlow is one of the doves in the white house. he is the one who wants the talks to happen. he said there was a productive, constructive conference call between deputies this week, and he said the chinese want to come to washington in september for talks that could lead eventually to a meeting of the principles. the chinese may decide that is off the table now just because they don't see a path forward. meeting inre is a september, it wouldn't be -- i doubt it would be trump and xi getting together at this stage. it would take a lot of arrangements between the lower-level people to get anywhere close to having the two heads of state in a room shake hands on a deal. i think we are a long way from that. emily: we are going to continue to follow the headlines as they come in. sarah mcgregor and peter coy, gene munster, thank you all for joining us again. newident trump announcing rounds of tariffs, one set on october 1, $250 billion worth of u.s. goods, the 25% tariff will 1,e t

president donald trump over his escalating trade war with china what has he been saying today. they have indeed when it comes to trade it's quite interesting here everybody is actually on the same page that they would like to make sure that china plays by the rules or in fact that the rules are adapted to a chinese economy that throws subsidized goods onto the world market now the difference is 6 countries here at the g 7 would like to change the multilateral rules if you want off the w g o for instance in order to take care of that it is only the united states that likes to go it alone and with more pressure and in fact today the white house reinterpreted a statement that donald trump when he initially said he has 2nd thoughts about escalating the crisis with china what he meant is not he has 2nd thoughts about touring too much all into the fire but not not bring enough oil into the fire in other words more pressure and that is news that does not go down well with the others here the other world leaders here at the g. 7 all right karen maginnis in n.p.r. it's thanks for that v