Former Heinz CEO: No one is going to win on tariffs

This is a rush transcript from "Your World," June 25, 2018. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, you have been listening to Sarah Sanders here.

And it's safe to say the Washington press corps is more concerned with the immigration issue than a lot of folks losing their shirts today on this whole trade issue.

Welcome, everybody. I'm Neil Cavuto. And you're watching "Your World."

And it could have worse. As I show you the Dow today down about 328 points, we had been down almost 500 points, and a lot of that over a building trade war and concerns this could get worse before it gets better, or that there are no signs of concessions on the part of any of the principal parties, namely the Chinese and ourselves.

All of this on the same day that Harley-Davidson was indicating, because of these threat of tariffs, they're moving a lot of their operations outside the U.S.

On a separate issue, General Motors has indicated that a lot of its Chevy Blazers will now be made in Mexico, not citing just the trade issue, but that it's not welcome noise here.

So, again, this could have a lot been worse. There was some confusion early on in the markets as to whether the administration was also recommending that they were urging the Chinese and others not to invest in technology stocks at all.

Then Peter Navarro ends up popping up on CNBC to say, no, no, no, no, no, they're not going to be, nor are there plans in the works for investment restrictions on China.

And that brought us down to the levels we're at right now, about 328 points southward on what was a crazy day on the markets.

We're going to be at this from all angles right now.

Let's first go to Fox Business Network's Deirdre Bolton with how it all sorted out.

Hey, Deirdre.

DEIRDRE BOLTON, FOX BUSINESS CORRESPONDENT: Hey, Neil.

You said it. It could have been much worse. So, the markets did close clearly lower, but certainly off the low points of the day. And, of course, the big headline, the Trump administration moving to block Chinese companies from investing in U.S. tech firms and moving to block additional tech exports from the U.S. to China.

Our sources are saying the Treasury Department is going to make an official announcement at the end of this week, bring us more clarity, more details on the plan.

Now, the level of difficulty is, of course, much higher when you start to talk about blocking investment than when we're just engaging in tariff spats. So the stock market heading for the biggest one-day slide in months.

That's how we finished up. You can see red across the screen. One area I really wanted to highlight are the techs, because S&P 500 tech companies get about 60 percent of their revenue from overseas. So that's the highest foreign exposure out of any of the index's 11 sectors.

And, of course, critics of our current trade policy say that China has been stealing anywhere between $30 billion and $50 billion worth of intellectual property, hard data, every year for the past decade. But then there was even a stronger report, a more recent one that came out from the Commission on the Theft of American Intellectual Property.

It has a much higher number, stating that up to $600 billion in theft that has some projections baked in is possible. But experts say, bottom line, the motivation to want to level the playing field is completely understandable.

What gets complicated is that so many American businesses are interconnected. So, for example, here's seven big tech American companies that source half of their products and components from China.

So, HP, IBM, Dell, Cisco, Unisys, Microsoft, Intel. Even Apple has sold more iPhones in China in the last three years than in the U.S. And Apple gets about 20 percent of its annual revenue from China.

Now, the Chinese president of course says China will punch back and will not be forced to eat the bitter fruit. That is a translation, a direct quote.

But as the tension rises between the world's two biggest economies, of course, investors really showed their anxiety. So, we had the Nasdaq, you can see there, closely lower, essentially 2 percent, biggest one-day percentage decline since March. Third day down in a row. So, that's the longest losing streak for that tech-heavy comp in about two months' time.

Even Asia overnight, you can see how markets reacted there. You can see Hong Kong's Hang Seng down by more than 1 percent. And, then, of course, even on our own bond market, right, there was this flight to safety in U.S. 10-year. Investors typically, of course, buy these bonds when they're fearful or they feel less certain of the future.

And prices really went up, so, therefore, those yields went down, settling 2.875 percent. And just worth noting, these yields have fallen basically for the past four out of five weeks.

So, Neil, what is clear is, investors really don't know what to make of it. We have the tariffs and now we have this idea of blocking direct investment, which is a much more muscular and, quite frankly, threatening move than tariffs, which really only apply to very specific products, Neil.

CAVUTO: Absolutely, especially when they go back and forth either way.

BOLTON: Yes.

CAVUTO: Thank you very, very much, Deirdre Bolton.

BOLTON: Sure.

CAVUTO: Doesn't Harley-Davidson know that? Not so much on the tariffs we're considering, but the response that company is getting and opting to do something that the president probably didn't envision.

FOX Business Network's Jeff Flock in Countryside, Illinois.

What did they do?

JEFF FLOCK, FOX BUSINESS NETWORK CORRESPONDENT: They're getting a double whammy at Harley-Davidson, Neil, because the steel and aluminum tariffs hit their raw materials costs.

And now the European Union, of course, imposing an addition 25 percent tariff on motorcycles made here and shipped to Europe.

And so Harley is in a tough spot. That tariff went from 6 percent to 31 percent. And today, in a regulatory filing, Harley said that is going to add more than $2,000 a bike to the cost of a motorcycle made here in the U.S. and sold in Europe. And they can't possibly pass that along to consumers.

So, in the short-term, they're going to have to eat it. In the long term, they're going to move production away from the U.S. Europe was an expanding market for Harley-Davidson. They love it over there. And U.S. sales have been down.

You look at the first quarter of this year, U.S. sales of Harleys down double digits, as guys like me get older and maybe give up their motorcycles. In Europe, it had been growing by about 7 percent.

And so those bikes, made in the U.S. and shipped to Europe, will be no more. Harley has four plants here in the U.S., York, Pennsylvania, Kansas City, Missouri, and two in their home state of Wisconsin, and now apparently bikes destined for Europe will not be made there anymore.

Instead, they will be made in places like Brazil and elsewhere, Thailand and Australia. This is not, as you pointed out at the outset, what the president had intended. His trade policies designed to keep and create jobs here in the U.S. In this case, it appears they will be eliminating them -- Neil.

CAVUTO: Amazing.

All right, Jeff Flock, thank you very, very much.

All right, Mattie Duppler is. We have got Charles Payne here, Larry Shover here as well of SFG, alternate CME trader as well.

Charles Payne, what is going on here? We knew the trade thing was getting antsy, but it seemed like the bottom fell out.

CHARLES PAYNE, FOX NEWS CONTRIBUTOR: It did, but because I think this had a little bit of a different twist.

This was investment. This is about -- the whole thing, by the way, is centered on made in China 2025. The administration, which I wish they would articulate what they're trying to do, because I understand, and I think most -- a lot of people do -- and it's the idea of curbing this ambition, the stated ambition by China to sort of be the world's tech leader in a short period of time.

And one way to get there, perhaps the only way they can get their with their own timeline, is to continue to steal our intellectual property.

So the idea is to restrict investments from companies where China has a 25 percent or more ownership. And, again, this was just speculation. It was in a few media outlets, the White House trying to take -- take it back a little bit. It's something obviously that they have toyed around with.

Peter Navarro has talked about this kind of thing for maybe two decades, so this is not necessarily news, per se. But it is -- it is a different twist, to your point. It's not -- it's not the trade stuff anymore, as much as it is, hey, we want to take direct aim at your ambitions to usurp America's perch as the world's tech leader.

CAVUTO: Well, Larry, what worried a lot in the markets is that, all of a sudden, then we were putting a general wall up on Chinese investment in general and technology period.

That's how it was interpreted. And then, later on, the treasury secretary, Mnuchin, came out to say, no, no, no, it wasn't singling out China, as if to say there's other players here, as if that eased the angst.

It actually compounded that. But what do you make of that?

LARRY SHOVER, SOLUTIONS FUNDS GROUP: Well, what I make of it is that two things.

The whole thing lacked clarity. Like, it didn't matter. Like, this whole China tweets and tirades, it didn't matter because it lacked clarity. It seemed like the White House is utterly unprepared to create any kind of proposal that can go into law.

Immigration policy is a good proof of that. Also, it lacks credibility, because we all know -- I mean, this does -- this hurts us more than it hurts them, the fact that it's going to kill Apple or Nike. It really, really hurt them manufacturing their goods there that are sent to us.

So it doesn't make any sense. People dismissed it. And I really think people are definitely blaming the China trade today. The bigger problem, though, it's really tech. We saw that breaking down last week.

Leadership has been very thin in the stock market. Without five or six super cap techs in the S&P 500...

CAVUTO: Yes.

SHOVER: ... we would be down 4 percent, instead of up 1.5 percent.

But it started to crack. The Supreme Court came out last week with a ruling on sales tax, et cetera. That chasm between growth and value has been very, very wide. The market is vulnerable. The ball will always find you when you're out of position.

And that's really what happened today.

CAVUTO: And people were a little anxious on that investment angle here and maybe finding an excuse for technology, which ran up far and fast, to sell off some of it.

But, Mattie, it's sort of this impression that not everyone in the administration seems to be on the same page. I'm getting different vibes from the Treasury secretary, different vibes from their trade representatives, different vibes from the president.

MATTIE DUPPLER, INDEPENDENT WOMEN'S FORUM: Right.

CAVUTO: And I think that's the kind of thing that scares markets.

DUPPLER: Oh, absolutely.

You finally have consensus on this panel, Neil. And that's, what the heck is the administration intending to do with these trade efforts?

Charles and I don't always agree on this issue, but right now we're both wondering, what is the objective here? And that's what the administration needs to clarify. It needs to make clear what it intends to do with all of these efforts towards China.

Now, if the objective here is to exact the most amount of pain and pressure on China possible, they need to make sure that they're not injecting pain on American businesses. And that's a concern, especially when you look at really artificially diminishing the amount of capital that can come into this country.

I worry about the impact on businesses. And that's not even getting to what tariffs are doing to American businesses, where we have already seen some of those announcements this week.

CAVUTO: Or even the threat of them.

But, Charles, the other thing you mentioned -- and this -- you can help me out here. It's always been that the Chinese are in bad shape here. They're at two-year-plus lows in their market. They have a lot more to lose than we do.

But they also have their pride, and they're not giving any ground. So, how is this resolved, if it is?

PAYNE: And this is where I disagree with Larry.

I don't think -- I think a lot of people are raising the white flag so quickly that China is going to beat us at this. They're not. If it has to go the whole way...

(CROSSTALK)

CAVUTO: The whole way could be years.

PAYNE: Yes, Sure.

Mattie makes the right point. It's sort of like when my pops used to take me out in the back. He says, it's going to hurt me as much as it hurts you.

No, it won't.

(LAUGHTER)

PAYNE: With that being said, let's look at what China did today, this morning.

Their central bank freed up banks over there to the tune of $100 billion. Right? This is to sort of...

CAVUTO: It needs a stimulant.

PAYNE: ... to do things thing on debt.

Last week, it was $30 billion. A week before that, it was $30 billion. Their foreign and reserve currencies have dropped a trillion dollars.

Their debt-to-GDP ratio is on its way to 300 percent. We aren't going to lose this. China knows we're not going to lose this. Nobody wants to lose. It's a matter of how, to your point, do you save face and resolve it?

CAVUTO: I think that's where we are.

Larry, the Chinese, remember, today indicating, you know, we don't just turn a cheek on this. And we come back and we're going to fight back.

Now, to be clear, no response to the tariffs yet with tariffs of their own. In other words, to increase the amount to match the United States, when we promised we would put $200 billion on top of that.

Some read into that a sign that the Chinese are trying to find a middle ground here, where they can talk tough, but they don't have to respond in kind and invite a war. What do you see?

SHOVER: Yes.

Well, I see that they have already done that, just what we said. Required reserve ratio dropped 50 basis points yesterday, adding all that liquidity into the market. What did that do? That dropped RMB by 1.5 percent in five days, 3.5 percent over the last month.

So they're already ready. That is going to negate any kind of trade tariff that we are going to impose. And I think they know, at the end of the day, that there's so lack of clarity coming out of the White House, that they're just preparing for it.

Also realizing that they have had a real soft patch of data coming in. So, perhaps Trump is trying to hit them while they're weak.

CAVUTO: We will see.

All right, guys, I apologize jumping on you. We have got a lot of breaking news here.

I do want to bring in my next guest, the former Heinz CEO Bill Johnson, a global read of things, if ever there were one.

And, Bill, I'm looking at this and wondering what the signals could be for us. If a company, one after the other, like GM considering making all its Blazers now in Mexico, and, of course, we have been talking about a number of other companies that have been doing the same or considering preemptive move like Harley-Davidson, that has got to have a domestic economic impact.

BILL JOHNSON, FORMER CHAIRMAN & CEO, H.J. HEINZ COMPANY: It should, Neil.

Nothing has happened yet to impact the economy here. And, frankly, the Chinese and European economies...

CAVUTO: Well, they're already leaving. Those guys are already making some moves.

JOHNSON: I understand. But they're more vulnerable than we are.

CAVUTO: True.

JOHNSON: Having said that, this is like tic-tac-toe. Nobody wins.

I play tic-tac-toe with any grandkids. And you never win. And that's what this is now. We have gotten to the point on this situation...

CAVUTO: You never won at tic-tac-toe with your grandkids?

JOHNSON: No.

CAVUTO: You're one of the most celebrated CEOs ever. And...

JOHNSON: Yes. That just shows you nobody wins, Neil. And that's where we are right now. Nobody wins.

CAVUTO: So, that's where you see -- that's where we are right now?

JOHNSON: I do think that's where we are.

I think this created a huge environment of uncertainty. You and I have had this conversation many times. Uncertainty leads to volatility. Volatility leads to more uncertainty. And we get in this vicious cycle.

And I think that's where we are now. Having said that, I think, ultimately, saner and cooler heads will prevail, and this will somehow get resolved.

I hope this is not a negotiation ploy, because it's rather ham-fisted. And there has got to be better ways to attack this issue than the one that is being generated right now.

CAVUTO: What do you make -- I think it was ratcheted up a little bit today to go after in this case the Chinese for investing in technology.

It was read as, we're not going to allow them to invest in any technology companies. And that might have been a prematurely wrong impression. But that was the one that was out there for hours in the markets. They had to dial that back a little bit.

But they're still looking at putting a limit to who can invest in technology. That's how it interpreted, hence, technology falls off a lot. So if this is more from just goods and services to, I don't know, even companies and stocks you invest in, then what?

JOHNSON: Well, then I think we have chaos, Neil.

I don't think you can stop the investment in a capitalist society. It's just the way the system works. And while I understand why the administration is going after some of these issues -- and they're sort of going where people have been afraid to tread before -- the reality is, we have to have some clarity in the communication of the purpose of what we're trying to achieve and then take a step-by-step process in which to achieve it.

And I heard about the investment situation this morning. Then I saw Secretary Mnuchin's response. And so I'm completely unclear as to what is happening. And there we go again. That creates more uncertainty, which creates more volatility, and leaves us all in the dark about what it is we're trying to achieve.

CAVUTO: Now, there used to be an old rule here following this president the last 18 months that those who doubted him would be proven wrong, and that everything ends up OK and markets come back from what look like debacles, and people who second-guessed him have been proven wrong.

So there was this now new -- or renewed trust that President Trump must know what he's doing, there's a method to all of this.

Do you subscribe to that, or is there now a reassessment, well, maybe not. Maybe this is a little impulsive. Maybe there's not a method to the madness. Maybe it's just madness.

JOHNSON: Well, I think, historically, over his last 18 months in office, he's done a pretty good job of bringing us back from the brink and achieving great success.

North Korea seems to be an example of one of those areas. But I don't know. I don't like this whole approach, Neil. I think it's so ham-fisted and so unpredictable that sometimes you create a fire out of a smoke bomb, and the next thing you know, you have got a real conflagration going, and you don't know how to put it out. And that -- I'm worried we're headed that way.

Having said that, I will give him credit for again treading in these places that need to be addressed. I just think there's better ways to do it. But I'm not yet ready to say that we're just going to pull this one back from the brink and everyone is going to be happy.

I just don't know.

CAVUTO: We shall see, my friend. Thank you very, very much.

Good luck in your next tic-tac-toe game. I give the edge to you still.

(LAUGHTER)

JOHNSON: Thank you. Thank you.

CAVUTO: William Johnson, the former Heinz CEO, if anyone knows the global landscape, it is he. All right.

All right, when we come back here, this nastiness with Democrats saying that we're going to get nasty no matter where Republicans gather.

Really?

(COMMERCIAL BREAK)

CAVUTO: Yikes, 25 minutes, right, a 5:00 p.m. deadline staring down now, as House Republicans want documents from the Justice Department on that Clinton e-mail probe and the Russian investigation. Then what happens if they don't get them?

After this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. MAXINE WATERS, D-CALIF.: And if you see anybody from that Cabinet in a restaurant, in a department store, at a gasoline station, you get out and you create a crowd.

(CHEERING AND APPLAUSE)

WATERS: And you push back on them. And you tell them they're not welcome.

(END VIDEO CLIP)

CAVUTO: Well, anyway, American Majority CEO Ned Ryun. We have got Olympic Media managing editor Katie Frates and Democratic strategist Christy Setzer.

I don't know where to begin. But, Katie, maybe you can help me with this.

This is out of control. This is just crazy talk. What do you make of it?

KATIE FRATES, OLYMPIC MEDIA: It absolutely is.

This is just going way too far, because she doesn't even know who she is speaking to, Maxine Waters, when she is saying this. What if someone sees somebody at a gas station and takes it way too far?

You're essentially encouraging anyone of any mental state, of any level of discourse, to go up and potentially harm someone else because of their political beliefs. That's absolutely not OK.

I'm so excited and happy to see at least Nancy Pelosi push back on this. I'm not sure why more Democratic leaders are not speaking up and condemning this.

CAVUTO: Well, there were a good number. To be fair, there were a good number, Elijah Cummings and all saying...

FRATES: Good. Good.

CAVUTO: ... that, even when it came to the Sanders situation, she shouldn't have been taken out of the restaurant.

But, Ned, I'm worried more about the increasing vitriol. And we're seeing more and more of it. And anything could happen in that environment.

NED RYUN, PRESIDENT, AMERICAN MAJORITY: No.

And I think really what we're seeing is, to sum up Charles Krauthammer, we conservatives, we think the left is philosophically misguided, and many on the left think we're evil.

And I think you're seeing this rhetoric ramp up where borders are now bigotry and American presidents standing up for the America taxpayer, well, this is Nazism and the second coming of the Holocaust.

And I think what the left is trying to do is say, the debate is over in our minds because we consider your ideas to be irrational. We don't consider your ideas to be legitimate.

And if they can dehumanize the other side, that's what they want to do, because that justifies driving opposing thought from the public square.

The thing that troubles me, Neil, about all of this, this kind of incitement to physical intimidation and bullying is not to be normalized. It's not normal for a constitutional republic. It's only normal in banana republics. And if the left wants to beat us, try doing it at the ballot box in 2018 and 2020.

CAVUTO: Do you worry about that, Christy?

As a Democratic strategist, and a darn good one, and a very calm person, I might point out, that your party could be ruining it for itself, that it's actually scaring some people with that kind of talk, whether you agree or disagree with the politics behind it.

CHRISTY SETZER, DEMOCRATIC STRATEGIST: I just think it's impossible to put Maxine Waters' comments like this in a vacuum like this.

The defining feature of Donald Trump's campaign was not that he was going to shake stuff up in Washington or that he was a great businessman. It was this incivility. Right?

He started talking about how, I like people that were not captured about John McCain. Then you looked as his rallies, where they were filled with him actively asking them to take violence against protesters.

(CROSSTALK)

CAVUTO: If that is what your view is, do you think that the response, responding in kind, then, if that's your view, is justified?

SETZER: I don't think that -- no, I don't think that we have responded in kind.

I think that Democrats are saying, look, we need to make it just a little bit uncomfortable.

(CROSSTALK)

CAVUTO: You have got whole groups that target a homeland security secretary at a restaurant.

(CROSSTALK)

SETZER: No, no, no, no. Not with violence, Neil.

(CROSSTALK)

SETZER: That's an extraordinarily important difference. Not with violence.

(CROSSTALK)

CAVUTO: Please listen to me.

Sarah Sanders, her incident, Secretary Nielsen outside her home and in a restaurant, then Maxine Waters justifying it. I could go on to talk about Florida's Pam Bondi and what she dealt with at a movie.

(CROSSTALK)

CAVUTO: Stephen Miller and be called a fascist while he's out.

(CROSSTALK)

SETZER: Protest is a healthy part of the American tradition, not violence, not violence.

(CROSSTALK)

CAVUTO: You're fine with this. You're fine with it.

But if it were done in reverse, you wouldn't be fine with it.

SETZER: I would be absolutely fine with it. I would be fine with it, because, again, protest is absolutely fine.

What is not fine...

(CROSSTALK)

CAVUTO: You just said when you didn't like it what Donald Trump and his people were doing the same.

SETZER: I'm sorry?

CAVUTO: You didn't like it when Donald Trump was doing that.

SETZER: No. What Donald Trump was saying was, I want that guy to be taken out on a stretcher. What Donald Trump was doing was actually what Ned Ryun was just talking about right now, which is dehumanizing the other side.

CAVUTO: All right, I don't get it.

(CROSSTALK)

CAVUTO: All right. OK.

Mattie, do you believe that this is going too far?

(CROSSTALK)

SETZER: By talking about how they're animals and infesting America.

CAVUTO: I understand. I heard you.

SETZER: That's very different.

CAVUTO: Mattie, has this gone too far? Mattie, you're in awe, aren't you?

FRATES: Yes, yes. Absolutely, it is.

CAVUTO: Katie, I apologize. I apologize.

(CROSSTALK)

CAVUTO: See that? I lose my place, because I get so wrapped up in it.

(CROSSTALK)

CAVUTO: Is it your sense that this gets worse, though? Are you getting a sense it gets worse?

FRATES: So, this is the problem.

It's that this is escalating rhetoric. You're essentially saying mob someone outside of a gas station.

RYUN: Exactly.

FRATES: And, again, you don't know the intentions of the person who may then go on to do that.

So what if someone is attacked? What if something violent happens? And then you turn around and you say, well, Maxine Waters was telling people to do that. It's not a good idea and it's not a healthy dialogue.

(CROSSTALK)

SETZER: Do we remember the Pizzagate conspiracy, how a crazy conspiracy actually led someone to take a gun to my, my local pizza place, actually, and try to shoot it up because they had heard this crazy idea on the Internet and by Alex Jones and others that Hillary Clinton and John Podesta were up to no good?

That led to actual violence.

CAVUTO: Well, I don't want to get in a tit for tat.

(CROSSTALK)

CAVUTO: I sometimes feel like I'm separating my teenage sons.

But, Ned Ryun, I do know this. We have all got to bring the octane down a little bit on all sides here.

RYUN: We do.

CAVUTO: But how do we do that?

And should it be incumbent people to just to say, there has got to be a better way? Whether the Elijah Cummings approach, this has got to stop, whether Sarah Sanders' approach, I just politely up and left, and I tried not to make a big deal of it at the scene, what is it? What is the answer?

RYUN: No. I think we have got to start policing our own. We have to start policing ourselves on the right and the left.

And I was encouraged by Nancy Pelosi saying that Maxine Waters' statement was unacceptable. I think we have to be honest about it on the right, too, when we see unacceptable statements. And I have said this again -- I have said this before. I will say it again.

When Donald Trump -- I love 85 to 90 percent of his Twitter feed. When he is talking about bloody face-lift, you will never me defend that. I want him to focus on the positives and policy and all these things.

When it becomes personal, I think we need to call out our side and say, this is not how we have more civil discourse in the public arena.

(CROSSTALK)

CAVUTO: Fully agree. Fully agree.

At our core, guys, we're all human beings.

RYUN: We're all Americans.

CAVUTO: And we can agree to disagree. But we don't have to be asses in the process.

And none of you are, by the way.

But I want to thank you all very, very much.

And, Katie, I apologize.

(CROSSTALK)

FRATES: No, no apology needed.

CAVUTO: I get so apoplectic. And I don't even know why. And it's not even dinnertime.

(LAUGHTER)

CAVUTO: All right, by the way, we're close to the witching hour, 5:00 p.m. Eastern time, that document deadline. But right now there's indications the people who have put out that deadline aren't going to get the response they want in time for that deadline.

Then what?

(COMMERCIAL BREAK)

CAVUTO: All right. Between a deadline coming up in about 15 minutes from now and, of course, this is the week we're going to see some big testimony up on Capitol Hill, much of it is behind closed doors.

Let's get the read from former Justice Department official Tom Dupree.

Tom, what is the biggest thing you're waiting for?

TOM DUPREE, FORMER JUSTICE DEPARTMENT OFFICIAL: Well, the biggest thing I'm waiting for in the short-term is whether the Justice Department complies with the congressional demands.

As you point out, the clock is ticking. They have a document deadline, production deadline at 5:00 p.m. this afternoon. We will see if they turn over what they're expected to turn over. My guess is that they are not going to satisfy the demands of the House Republicans.

And I think we are going to see this dispute continue to escalate in the days ahead.

CAVUTO: All right, then they would want to take even aggressive action against Rod Rosenstein. Right? What would it be?

DUPREE: Well, let's see.

They have got a wide variety of means at their disposal. At one end of the spectrum is just the continued drumbeat of public criticism. They can amp that up several ways.

One thing they could do is, they could issue subpoenas. Another thing they could do is, they could actually instigate contempt proceedings. And then at the extreme end of the other spectrum, it would be impeachment proceedings.

I'm hopeful that they're not going to go there and that cooler heads will prevail and they be able to sit down and work all of this out before we get to that point.

CAVUTO: Where is all of this going?

I mean, especially with the Peter Strzok testimony later on, are they more interested in his case, finding out what he knew and what was the backdrop for his comments he was making about then candidate Trump, or what?

DUPREE: Yes. I think that's a lot of what was going on.

I mean, I think right now, from the perspective of Congress, there was so much that was going on behind the scenes in 2016 that Congress wants to know, what was your reason for doing this? What was your reason for handling the investigations the way you did? What was the reason for getting these wiretaps and for conducting the surveillance?

Were you using an informant? Was it a spy, that sort of thing? And the fact is, DOJ is not in the business normally of turning over documents. And so I think, institutionally, there's a huge amount of reluctance to give Congress what it wants.

But Congress is beating the drum. They're on the warpath. They're trying to fulfill their oversight function here. And so I think we have a real collision that's not in any -- is not going to be sorted out in the near term.

CAVUTO: When I have looked at a lot of the comments from those identified, like Peter Strzok and Lisa Page, and these other unidentified individuals, and then, of course, now I know how James Comey felt about then candidate Trump and how Andy McCabe felt, his number two.

I have not run across one piece of evidence to show a pro-Trump person or someone who was biased to like -- to like Donald Trump. Now, I might have missed it. But, again, doesn't this feed the narrative that that was a stacked deck, because that certainly that stacked deck mantle has been claimed by a lot of Republicans that they were out to get him?

DUPREE: Yes, I certainly haven't seen anything along the lines of what you're talking about, Neil.

It all does seem to be one way. I guess what's surprising and frankly disappointing to me is that some of these folks, Strzok in particular, and Page, that even though they were nominally professionals, that they just weren't able to put aside their political biases.

Look, the fact is, is that pretty much everyone in the country harbors inner thoughts, their own political leanings.

CAVUTO: Right.

DUPREE: But I think, for most people, and certainly for the vast majority of people in the FBI historically, they been able to put these biases aside when it comes to the sacred function of law enforcement.

CAVUTO: But did you share whatever opinion -- we all have opinions. You would be vanilla if you didn't.

But did you -- these were aggressively shared and aggressive opinions at that. When you were there, was that -- did you kind of know what your colleagues felt, whether they were investigating someone or not?

DUPREE: No, not in this way.

CAVUTO: Yes.

DUPREE: I think what is unusual about this, Neil, is that these were political comments they were discussing in the context of an ongoing political investigation.

It's not as though they were investigating some bank robber and trading texts about the presidential election. I mean, not saying that would be OK, but that would be very different.

CAVUTO: Right.

DUPREE: What they were doing here is, they were carrying out investigations involving the very candidates who were running at the same time they're engaged in this correspondence about how they can advance their own political views through their official duties.

That is where it crossed a line.

CAVUTO: Yes.

You would just love to get the context for these remarks. What was going on? If it's just hatred, I don't know if that is even better or worse.

Tom, good seeing you again, my friend. Thank you.

DUPREE: Likewise. Thank you, Neil.

CAVUTO: All right.

How about just eliminating ICE?

With all this controversy about separating kids from their parents at the border, and then now trying to reconnect them with their parents, sometimes far from the border, maybe just get rid of ICE. Some people are actually urging that -- after this.

(COMMERCIAL BREAK)

CAVUTO: All right, groups in protests all around wanting to get rid of ICE.

That's right. After the separation of these kids from their parents, a lot of folks saying, you know, the problem isn't these coming into our country. It's the folks who are trying to keep them out and the way they go about their business. So, they're actually saying, get rid of ICE. Put ICE on ice, if you will.

Former ICE agent Claude Arnold on that.

What do you think of that?

CLAUDE ARNOLD, FORMER ICE SPECIAL AGENT: Well, I -- first of all, people don't understand the breadth of ICE's mission.

Immigration enforcement is half of the mission. It has an entire component, homeland security investigations, that investigates all crime related to the border.

It's the investigative arm for all of DHS. It's the second largest investigative entity in the U.S. government and it investigates a lot of things, drug smuggling, human trafficking and smuggling, child pornography, export of illegal technologies.

It has a huge national security responsibility. It's the second largest representation on the Federal Joint Terrorism Task Force after the FBI.

So to say you just need to get rid of ICE, I think people don't understand all that ICE does.

(CROSSTALK)

CAVUTO: Well, a lot of them were saying, right after these apprehensions, well, does it change and does their mission statement change given on the administration? It was this administration that, led by Jeff Sessions, said, we're going to enforce a policy where we can, yes, separate kids from their parents, something that wasn't done, at least not the same way exactly, in the Obama administration.

So do you have to pivot depending on the administration?

ARNOLD: Well, I think there was a pivot done on how enforcement was conducted during the Obama administration.

And, really, it's just been a return to the status quo. But people have been -- they have developed a sense of entitlement that you can just come to the country illegally and expecting it's OK.

CAVUTO: Oh, no, you're quite right. People forget how we were apprehending underage kids and then who were -- drugs deals and all. You're quite right about that.

ARNOLD: Right. Right.

CAVUTO: But who calls that? Do you answer then to whatever the presidential directive is or what?

ARNOLD: Yes, of course. You're part of the executive branch.

ICE does what the president tells them to do through the executive chain of command. I mean, it's the executive branch.

CAVUTO: So, if there were no ICE, to these people's interests, the protesters, who would handle this border stuff?

ARNOLD: Well, here's the important thing here, Neil.

What is going on is, the same people who want ICE abolished, they opposed there being any wall on the border. They oppose changing the loopholes that encourage and allow people to stay in the U.S. illegally.

So, the last stand against those who make it in here illegally is ICE. So if you get rid of ICE, then you completely have open borders and no immigration enforcement. And that's by design. They want that to happen.

CAVUTO: Amazing.

All right, Claude Arnold, thank you very much, former ICE agent. He's put himself in a lot of harm's way over the years just to deal with that.

People should remember that, no matter what your feelings on this particular issue.

We will have more after this.

(COMMERCIAL BREAK)

CAVUTO: Thirty seconds away from that deadline. What is Rod Rosenstein going to do? Is he going to give the Republicans what they want?

Tomorrow, we will get the read on all of this from Republican House Judiciary Committee Chairman Bob Goodlatte. He also was one of the fellows who came up with a plan to settle this immigration mess. His measure went nowhere, but that doesn't mean that immigration progress couldn't still come up somewhere.

A one-on-one with probably one of the more powerful players on Capitol Hill tomorrow, Bob Goodlatte.

We will see you then.



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