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Is the world a hypochondriac when it comes to China?

This is a rush transcript from "Special Report," January 7, 2016. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

GORDON CHANG, EAST ASIA EXPERT: After Monday's debacle when the circuit breakers, these are the provisions that stop trading losses, once these kicked in, I figured there was going to be calm for at least three or four weeks, a couple months, because Chinese leaders couldn't really stand the volatility. But what happened? You know, on Thursday, today, you know the circuit breakers kick in again, and the reason is because they took their currency, they dropped it lower, and that caused a panic. So this was a panic caused by Chinese officials, and we now have to worry about the competence of Beijing to manage their own economy.

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BRET BAIER, HOST: Well at that closing bell today, the Dow lost 392 points, the worse single-day drop since September 1st. And you can take a look at the rest of the market there. The real big concern here is what happens going forward as China's economy looks to be faltering, and the world is taking its cue from China.

What about that in the foreign policy decisions for this administration? Let's bring in the panel live from Washington, syndicated columnist George Will, Ron Fournier, senior political columnist of "National Journal," and syndicated columnist Charles Krauthammer.

George, what about this whole thing, China sneezes and everybody catches a cold?

GEORGE WILL, SYNDICATED COLUMNIST: I think the world may be a hypochondriac in this case. International trade is about 23 percent of the U.S. GDP, and of that 23 percent, only 16 percent is trade with China. This has an interesting echo in the American presidential contest because the leader for the Republican nomination has for six months been telling the American people that they should live in fear and trepidation about the strength of China. Now the weakness of China seems to be preoccupying us, and Mr. Trump, with his unerring sense of how to make matters worse, has said today what we really need is a 45 percent tariff on imports from China, which would not only raise the cost of living for Americans but would certainly deepen the slowdown in China.

This is all very reminiscent of the late 1980s when we were told Japan was at the wheel of the world and we were just going to be passengers in Japan's world from now on. Since then Japan has had decades of stagnation. It's not clear that the China-phobia that we've been urged to have looks quite so scary as it used to.

BAIER: Yes, China has problems, Ron. I mean, it's clear.

RON FOURNIER, SENIOR POLITICAL COLUMNIST, "NATIONAL JOURNAL": They do, but George is exactly right. Who was the leader of Japan is going to take us all over and eat our lunch movement? That was Donald Trump. And George is exactly right that it's not China's strength that is the boogeyman. It's actually the frailty of their economy.

The fact of the matter is our stocks were probably a little overpriced. They probably need a correction anyhow, and our economy is relatively stable. Unemployment isn't as low as it should be and our growth isn't as fast as it, or as big as it needs to be. But the fundamentals are certainly much better than China's. And chances are -- most of the people I talk to today think that our stock market is going to snap back. And China has some serious problems that will have a ripple effect for us, but Donald Trump has got this back-you-know-what-wards.

BAIER: Charles, take Donald Trump out of this equation and the politics and 2016 out of this, and talk about, you know, this situation in China as it relates to the Obama foreign policy and how it ripples through the world.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, look, the Chinese are our principal rivals in the world. You could say the Russians, but in the longer run the threat is the Chinese.

And I agree. The idea has been that the Chinese are overtaking us. You get the Tom Friedmans of the world, I'll leave out Donald Trump here, who come back and rhapsodically speaks of a command economy and the shiny new bullet trains. They have completely overbuilt. Their infrastructure is essentially a weak one. But they have spent enormous amounts of money.

They have a command economy, and the model, that was supposed to be the model that would supersede the liberal democratic capitalist model. And it looks as if it's not working that well. In the short run, yes, it's obviously going to hurt our markets, and the Chinese have applied a certain short-term stimulus with this hunger for raw materials and the spike in the price of them. And now that its demand is down, there's a collapse of the raw material prices. But in the longer run, is it not in our interests that our chief rival in the world, expanding as we speak in the South China Sea and developing an enormous military and a sophisticated one, is actually may not be the locomotive that we have been afraid of? So I look at this as good news in the long run, lousy news in the short run.

BAIER: All right, Secretary Kerry meantime talking about the Middle East and specifically Iran, saying that this Iran nuclear deal, the compliance with it, could happen within days, which would mean sanction relief for Iran. Take a listen to the secretary today.

(BEGIN VIDEO CLIP)

JOHN KERRY, SECRETARY OF STATE: The joint comprehensive plan of action from which we are days away from implementation if all goes well. The foreign minister made it clear to me they intend to complete their obligations with respect to implementation day as rapidly as possible. And we are currently engaged ourselves in making certain that we're prepared to move on that day. And I think it could come, without being specific, sooner rather than later.

(END VIDEO CLIP)

BAIER: Now, Iran has shipped in recent days, we're told, as you take a look at the graphic, 25,000 pounds of low enriched uranium to Russia.
Interesting inspectors have to verify that Iran's stockpile is below the agreed upon level. Iran has yet to get rid of its supply of uranium enriched to near the 20 percent threshold which was only a step away from weapons-grade material. George, there are Democrats up on the Hill who have a problem with Iran on another front, on their missile testing, on their thumbing their nose at the world.

WILL: Missiles, which of course are what at the end of the day make nuclear weapons technology ultimately lethal and a threat to this country, missile technology was just left out of the entire framework of this agreement. We had that statement there that x amount of or all of their nuclear material, their enriched uranium, is being sent. Do we really know and whose word do we have to take for it on this, how much they had? We had the same problem with Assad and the question of him surrendering chemical weapons. And it turns out we didn't know how many he had and he didn't surrender all of them. So we're still in the position of having to trust people we don't know about things we can't confirm.

BAIER: All right, Ron and then Charles, quickly, on Iran.

FOURNIER: Well, that was always going to be the problem. We can't trust these folks, but we do have to deal with them. And my problem with this is, in addition to missiles, something that was left off the table in the negotiations were our hostages there. We have a reporter, for example, with the "Washington Post" who is still sitting in jail after we've cut a deal. And it gets down to, as it does with everything else with this administration, a question of competence and credibility. Even if you support this deal, do you really believe that this administration going to be able to hold our end accountable and make sure that the worst-case scenarios don't come out of this thing?

KRAUTHAMMER: Kerry is totally oblivious to the asymmetry here. Once we say that the adherence starts today, that means that we released $150 billion and they have it and it's not going to be reversed. It means the sanctions are lifted. And the Chinese, the Europeans, and others are not going to lift them -- are not going to impose them again. On the other hand, we know that they've been doing the missiles illegally, and we have no idea of knowing what the baseline of their uranium was with this ostentatious shipping of it abroad. If you don't know how much was held in the first place, you have no idea how much it has now. This is the administration hell-bent on doing this, and we will regret it for a generation.

BAIER: Charles, Ron, George, and our Brady Bunch panel set-up from Washington, thank you.

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