Where does President Trump's relationship with Russia and Putin stand?

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WH planning second Putin meeting amid Helsinki firestorm

President Donald Trump hopes to host Russian President Vladimir Putin in Washington this fall; Gen. Jack Keane reacts.

This is a rush transcript from "Journal Editorial Report," July 21, 2018. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: I will begin by stating that I have full faith and support for America's great intelligence agencies, always have. And I have felt very strongly that while Russia's actions had no impact at all on the outcome of the election, let me be totally clear in saying that -- and I've said this many times -- I accept our Intelligence Community's conclusion that Russia's meddling in the 2016 election took place.

(END VIDEO CLIP)

PAUL GIGOT, HOST: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

Following heavy criticism from Democrats and Republicans, President Trump this week walked back his comments on Russian election meddling, claiming he misspoke Monday during a news conference with Vladimir Putin when he said he couldn't see any reason why Moscow would have interfered in the 2016 campaign. Those comments causing a firestorm and putting the president at odds with the U.S. Intelligence Community and members of his own party in Congress.

This, as Secretary of State Mike Pompeo gets set to head to the Hill next week where he's sure to face a grilling from lawmakers over just what was discussed at the Helsinki summit, and as the White House prepares for a potential second sit-down in Washington this fall.

Retired four-star General Jack Keane is a Fox News senior strategic analyst.

General, good to have you here.

GEN. JACK KEANE, FOX NEWS SENIOR STRATEGIC ANALYST: Good to be here, Paul.

GIGOT: After this week of back and forth, where do you think the president's relationship with Russia and Putin stands?

KEANE: I think it's in an early stage of relationship. He's keen on having relationships. You know, he often talks about President Xi which is the long-term strategic threat to the United States of America to be quite frank about it.

GIGOT: China.

KEANE: As a result of that Mar-a-Lago meeting, and I think he credits himself as a result of a relationship he was able to make some progress on North Korea with China. Whether that actually bears the fruit we think it may remain to be seen. But I think he uses that as a framework, ongoing to have relationships and possibly even though the disagreements are significant, we may be able to make some progress. I think that's about what this is.

GIGOT: OK. He's determined to have that relationship. That would be suggested by the second summit invitation. Do you think that's a good idea?

KEANE: I don't have any problem with leaders of the world coming together with profound disagreements to talk to each other. I basically think it's actually a good thing. Listen, they're not going -- Ukraine intractable, Syria, intractable, but can we extend the new START treaty for five years that's going to expire in 2021 as a result of these two presidents coming together? Yes. They don't need approval of Congress or the Duma. Can they agree for no nuclear proliferation and put pressure on North Korea and also put pressure on Iran? Is that possible? I think so.

GIGOT: OK. Let's talk about the domestic politics here because you know to have an effective foreign policy, you need domestic support. And the way the president handled that press conference has really hurt him in terms of his ability, I think, to maneuver inside Congress and have the support he needs. Why did he get such at odds with the Intelligence Community judgment about 2016, when he really didn't need to?

KEANE: Yes, I mean, listen, Monday was a disaster. I think it was a low point of his presidency, to be sure. I don't get it, to be frank, Paul. I mean, I know that they put a huge effort into working the issues, prepping the president, preparing him for the four-hour summit, either the bilateral with staff or the one-on-one, but why didn't they prepare for the press conference?

GIGOT: The most obvious question --

KEANE: Yes.

GIGOT: -- that he would get at that press conference.

KEANE: Yes. It is an appendage to the summit but it is the only place where the whole world is watching you. I'm not in an executive position like that, but I have had a few press conferences in my life, because things bad happen around my commands, and I rehearsed it, and I would say to the guys, OK, tell me what the outcomes are, all right, and tell me what the tone of this is going to be. Those are the two things I was stuck on, what were the outcomes of that press conference and what should the tone of the president be. Both of those were wrong.

GIGOT: How much tension is there between, say, Jim Mattis and his view of his Russia and DOD people, on one hand, and also the intelligence services, Dan Coats, the director of National Intelligence, and their views of Russia and Putin with the president?

KEANE: You know, there's a lot of misunderstanding about this. In talking to the people around the president, who I know, the president drives foreign policy and national security, make no mistake about it.

GIGOT: Correct.

KEANE: And listen, I think this president -- I mean, despite this week of criticism, he's the toughest guy on Russia since Ronald Reagan, and the facts are on the table. Look, the Trump defense buildup comparable to the Reagan buildup. It has to last a few more years to be sure. Increasing the defense budgets in NATO. We have deployed additional troops on the eastern border on the Russian border. OK? Not to the degree we need, but to be sure, Putin is paying attention to all those three things. Fourth, what we've done in Ukraine in terms of anti-tank weapons. And of course, we've responded twice to Assad's chemical attack, and that's his ally. We're pushing back on Iranians, and that's his ally. Putin is paying attention to that. He's paying less attention to the rhetoric that goes on here.

GIGOT: You mentioned NATO. Let's listen to the president to answer a question from Tucker Carlson on Montenegro.

KEANE: Sure.

(BEGIN VIDEO CLIP)

TUCKER CARLSON, HOST, "TUCKER CARLSON TONIGHT": Membership in NATO obligates the members to defend any other member that's attacked. Let's say Montenegro is attacked, why should my son go to Montenegro to defend it from attack? Why --

(CROSSTALK)

TRUMP: I understand what you are saying. I've asked the same question. Montenegro is a tiny country with very strong people. They have very aggressive people. And they may get aggressive, and congratulations, you are in World War III.

(END VIDEO CLIP)

GIGOT: Deterrence is the core function of NATO or any alliance like this. Does a comment like that suggest some doubt about whether or not we're willing to commit to that level of deterrence?

KEANE: Yes, absolutely. I mean, one of Putin's major objectives -- certainly he resents the fact that Russia strategic buffer from World War II to the president is gone and that strategic buffer was Eastern Europe. And they had an agreement in the ‘90s that, you know, these countries would not become a part of NATO, but they ran towards NATO because they feared the intimidation and the coercion of Russia. That's what Montenegro is all about. They want to get underneath the tent and get some level of protection. That comment there obviously denigrates the whole concept of what this is about. I think they eventually will likely probably come in because of the same reason all the other Eastern Europeans are in there.

GIGOT: Right.

KEANE: The president will support that, and they will be part of Article V collective defense, fight for one on behalf of the whole collective operation of NATO.

GIGOT: But if you are Putin, you look at that and say, maybe just a tad little bit --

KEANE: No doubt about that. I think he looks at Angela Merkel to be quite frank about it. There's guys like me sitting around Putin and saying to him, if we took the three Baltic capitals, would Merkel really commit her infantry?

GIGOT: That's exactly --

KEANE: That's a question.

GIGOT: It is a question. It is an important one.

Still ahead, Republicans are under pressure to stand up to Russia following the president's inconsistent statements this week. What Congress can do to contain Putin and maybe President Trump, when we come back.

(BEGIN VIDEO CLIP)

SEN. TED CRUZ, R-TEXAS: 2018 is around the corner. Our job is to ensure what happened in ‘16 doesn't happen again. I believe it will if we don't act.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, R-KY., SENATE MAJORITY LEADER: There's a possibility that we may well take up legislation related to this. In the meantime, I think the Russians need to know that there are a lot of us who fully understand what happened in 2016, and it really better not happen again in 2018.

(END VIDEO CLIP)

GIGOT: Senate Majority Leader Mitch McConnell under pressure from members of both parties to respond to Russian election meddling and reiterate support for the American Intelligence Community following President Trump's controversial remarks this week. So what can Congress do to contain Vladimir Putin?

Let's ask Wall Street Journal columnist, Bill McGurn, editorial board member, Mary Kissel, and columnist and Manhattan Institute senior fellow, Jason Riley.

Mary, I recall clearly last week you said the summit with Putin was a bad idea. Has the week made you change your mind about that?

MARY KISSEL, EDITORIAL BOARD MEMBER: No, it hasn't at all. I think it is safe to say this was not a highlight of the Trump presidency.

Now, as to what Congress can do, they are a little limited, of course, because the executive branch is the one that sets foreign policy, but we have seen Congress impose some pretty significant sanctions on Russia, most notably, after the invasion of Ukraine, and they could do so again.

GIGOT: But how much damage here? Before we get a little more on Congress, how much damage here do you think this has done after the full week? He reversed himself and he has second invitation to Putin. How much damage has he done to his presidency after this week?

KISSEL: I'm not a Chicken Little, Paul. I don't think the world is going to end because of one disastrous press conference. However, Trump did take a hit. I think he looked subservient to Putin, I don't use that word lightly. And I think what he's done is unified Congress around the idea of cracking down on Putin. And he's raised concerns among the allies, too. Let's not forget about them. They rely on us, in large part, for leadership, whether it's in the Baltics or in Eastern Europe or NATO, as General Jack Keane just talked about. And I think the prestige took quite a big hit this week.

GIGOT: Jason?

JASON RILEY, COLUMNIST & SENIOR FELLOW, MANHATTAN INSTITUTE: I think they have spent the week trying to clean up this mess. That gives you some idea of how much damage they think was done this week. Hurting relations not only with the Intelligence Community, but also with the European Union and NATO. And also domestically. Mary is right. Trump supporters like the fact that he doesn't back down. He plows ahead. He doesn't apologize. Here he was standing next to Vladimir Putin, had the chance to tell him, we know what you did, don't do it again, and Trump went wobbly. And I think that he hurt himself domestically as a result of that.

GIGOT: Bill, what about the disagreements we're hearing about between some of the intelligence officials and the White House? Particularly, Dan Coats, the director of National Intelligence. He was -- seemed in an interview to be stunned by the news that the president has issued an invitation for Putin to come in the fall, and issued a statement after the summit defending the Intelligence Community.

BILL MCGURN, COLUMNIST: Right, well, look, we all know that the Russians meddled. Everyone knows that. I think even President Trump knows it because he walked back his remarks earlier. Look, he's still the president. And I think the storm will pass, probably because another storm will come up in its place.

(LAUGHTER)

But I would like to see -- there are interesting ideas out there. First of all, we know from this that the sanctions really bite, right? We know that the Russians, particularly Vladimir Putin, really hate those sanctions. I think the actions this week will make it much harder to lift those sanctions, which is a good thing. And there are other interesting ideas. The "Washington Post" had a story saying we ought to move our troops from Germany to Poland. To me, that would be an incredible step forward.

GIGOT: Speaking of Congress, a 98 to nothing vote this week by the Senate warning the president not to take up Putin's request to have -- to come and have Russian prosecutors interview American officials who might know something about Bill Browder, who is one of the authors of the Magnitsky Act, a sanctions bill that passed in 2012 and has sanctioned I think about 51 Russians.

KISSEL: Yes, Putin is trying out the classic Cold War tactics, Paul, where he offers something in return for something that he shouldn't have. President Trump, of course, wants to question the people who were hacking into the DNC servers --

(CROSSTALK)

GIGOT: -- last week.

KISSEL: Right, in return Putin says, oh, yes, let me question these 12 Americans that I think have committed crimes against Russia. And Trump fell for it, unfortunately. Now --

(CROSSTALK)

GIGOT: He stepped back from it.

KISSEL: Because of that backlash from Congress, he stepped back. That's a good thing. That also shows that checks and balances in the American system work. But the very idea that the White House spokesperson, Sarah Huckabee Sanders, didn't immediately shut that down, that Putin request, when she was asked about it this week, to me, shows a fundamental lack of communication within the administration and a lack of understanding of Putin's method and his tactics.

RILEY: It also shows an inability of Trump to distinguish two things here, which is Russian meddling and collusion. He needs to say over and over again, yes, we know Russia meddled. They better not do it again. My administration had nothing to do with it.

(CROSSTALK)

GIGOT: They are separate issues.

RILEY: They are separate issues. He continues to conflate them and his political opponents have no problem with that.

GIGOT: Why does he keep doing that?

RILEY: I think that's all he's thinking is collusion and he's not distinguishing between the two.

(CROSSTALK)

GIGOT: He's thinking it undermines the legitimacy on the election.

(CROSSTALK)

GIGOT: But you just make the distinction.

He's giving ammunition, Bill, to his opponents. What do you think of the second summit? Good idea?

MCGURN: No, I think it is a bad idea. I agree with Jason. Look, I think a lot of what has led Donald Trump to say certain things on Russia is he doesn't want to give his enemies any quarter, and that means saying some dumb things and setting off this kind of storm. That said, I think that, again, a lot of this is atmospheric. We all get distracted about it. The president, like many presidents, gets distracted by the idea that having a one-on-one relationship with some dictator is going to improve the situation. That's a perennial problem. And I think the risks here, when you don't have something that you want specifically from them shows what can happen. Look, with Kim, at least we know what we want to do. We want a denuclearized peninsula. I don't think it's a good idea unless you are going to get something that you really want out of it and you know that beforehand.

GIGOT: All right, Bill.

Thank you all.

Still ahead a vote in the House this week on a GOP resolution supporting ICE as calls grow from those on the left to abolish the immigration agency. A look at how the issue will play in November, when we come back.

(COMMERCIAL BREAK)

GIGOT: The House on Wednesday approved a Republican resolution supporting U.S. Immigrations and Customs Enforcement as Republican leaders sought to put Democrats on record over calls to abolish the agency. Some on the left are attacking ICE amid the outcry over family separations at the border, in what is shaping up to be a defining issue in the November election.

President Trump seized on the issue this week tweeting, "The Democrats have a death wish in more ways than one. They actually want to abolish ICE. This should cost them heavily in the midterms."

We're back with Bill McGurn, Mary Kissel and Jason Riley.

Jason, what do you make of the House vote on ICE this week?

RILEY: Well, it was a bit of show there. But I think it is reflective of the country on this issue, frankly, much more than these progressive Democrats are calling for the abolition of ICE. I think majority of Americans want the border better patrolled, Paul, not eliminated. This idea that people just want to give up on border security is nonsense. It is also strange, given as you mentioned there, we've had this child separation issue.

GIGOT: Right.

RILEY: A vast majority of Americans have a problem with that. The Democrats had a good issue there. Why change the subject to abolishing ICE? It doesn't make much sense.

GIGOT: Yes, Bill, it seems to me that both sides here think that immigration is going to work for them in November. Democrats think they can make hay with the fact that DACA and the DREAMers haven't been legalized and the family separations. Republicans think ICE and the abolition of ICE is an issue for them. Who gets the upper hand here?

MCGURN: Well, I think, for the last decade and a half or so, the issue has worked for the Democrats. And I think there's a lot of suspicion that President Obama, for example, as a Senator and now as president, preferred to have the issue, in other words, accusing Republicans of being racist and so forth, than to have a resolution. I thought earlier this year that the failure to get something done on DREAMers, which is sort of the easiest part of the equation because they were brought here by others, they didn't, you know, come themselves --

GIGOT: Right.

RILEY: -- was something easier, basically, a border wall for DREAMers. I thought that might hurt the Republicans. But it looks like the Democrats are bent on shooting themselves in the foot.

The abolish-ICE thing comes across as we want lawlessness. I mean, these are the same people pushing sanctuary cities and so forth. And I'm amazed at how they are taking an issue and making themselves as unattractive as they can be to the American people.

GIGOT: Immigration seems to me works for the Democrats when it is about opportunity and fairness.

MCGURN: Yes.

GIGOT: And it works for the Republicans when it's about security.

MCGURN: Absolutely.

GIGOT: Abolishing ICE, Mary, turns it into a security issue.

KISSEL: I think that's right, Paul. The greater tragedy here is that there was a deal to be done on immigration reform. Border security in exchange for legalizing the DREAMers.

And to Bill's point just now, the Democrats wanted immigration as an issue under Obama. They didn't want a solution. And I think Republicans, unfortunately, are using the same tactic when it comes to ICE. They want an issue, not a solution. The Democrats don't want to deal so you can't put all the blame on the Republicans. But you know, I think the DREAMers here will suffer.

GIGOT: This was a developing trend among Democrats, Jason. You've got Kirsten Gillibrand, Elizabeth Warren, Bernie Sanders, three Senators, all whom want to run for president, all taking the abolish-ICE position. Is this going to divide the Democrats going forward?

RILEY: I think it will divide the Democrats, especially those Democrats who think we're losing white blue-collar workers. I don't know how an issue like eliminating ICE helps attract those. But it's how progressives have really taken over the party. Whether it's $15 minimum wage, a single- payer health care, these used to be fringe issues, held by progressives. Now they have entered the mainstream Democratic thinking.

GIGOT: I think you will see a lot of Democrats not adopt abolish ICE, Mary. I think they will just drop it and not talk about it. Trump wants to talk about it all the time. That's how he wants to define this issue between now and November.

KISSEL: I think that's why you saw 133 Democrats vote present on this bill supporting ICE. And it's also why you saw some Pennsylvania Democrats, Conor Lamb, Matt Cartwright, vote for the bill because they are in Trump country, and they realize that, and they would like to keep their office.

GIGOT: Bill, it also accentuates the issue a little bit of crime. You've got M.S.-13, which ravages some neighborhoods we know here in New York state and elsewhere, and nobody wants that, Democrat or Republican. But ICE is fighting that group.

MCGURN: Right. I think it goes back to your point. It's not just -- it's lawlessness. And if lawlessness becomes a defining part of the issue, the Republicans will gain. And they won't back -- they will prefer to keep this as live as an issue.

GIGOT: It is a shame because both sides are in their respective camps and we can't seem to get anything done ever on immigration.

When we come back, from abolishing ICE to single-payer health care, a look at the Democrats' left turn and the growing strength of progressives within the party. Karl Rove on what it means for the midterms, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ALEXANDRIA OCASIO-CORTEZ, D-N.Y., CONGRESSIONAL CANDIDATE: We need to occupy every airport, we need to occupy every border, we need to occupy every ICE office until those kids are back with their parents. We're not going to win if we don't stand for anything.

(END VIDEO CLIP)

GIGOT: That was Democratic Congressional Candidate Alexandria Ocasio-Cortez this week calling on activists to occupy ICE offices. Ocasio-Cortez, who ousted long-time New York Congressman Joe Crowley in last month's primary, is just one of the candidates pulling the party left ahead of the November midterms.

Last weekend, California Democrats dealt a blow to another party elder, endorsing progressive State Senator Kevin DeLeon over four-term Senator Dianne Feinstein. The 51-year-old DeLeon is the author of California's sanctuary state legislation and backs a single-payer health care system.

"Wall Street Journal" columnist and FOX News contributor, Karl Rove, served as deputy chief of staff and senior advisor to President George W. Bush.

So welcome, Karl.

How divided are Democrats going into this election?

KARL ROVE, COLUMNIST & FOX NEWS CONTRIBUTOR: Well, increasingly divided because you just touched on a couple of them. We've seen this throughout the primary season, that in cases of races where the Democrats had a shot to win, they threw it away by going hard left. The key example to me was Nebraska, too. This is the most Democratic part of Nebraska. It is part of the state that Obama carried, that Hillary Clinton did well in. They had a Democratic congressman until recently. He was trying to get the Democrat nod back again. And he'd have a shot in the general election. But the Democrats instead went hard left with a woman named Kara Eastman, who is in favor of Medicare for all, free college, a guaranteed job with a guaranteed paycheck. And in a Midwest district like that, that is sane and sensible, even a lot of Democrats are going to find that too much to go for.

GIGOT: But you know, Karl, look, Ocasio-Cortez, it seems to me, has a point at least on one thing, and that is enthusiasm and energy and passion. And if you stand for something, you're going to motivate people to vote. In 2010, as you know, the response from Republicans to President Obama was driven, in part, by that kind of passion. Voters know that Trump is going to have the veto authority. But the Democrats may be motivated enough to put a check on that and some of these issues may not matter as much.

ROVE: Well, maybe. But look, she comes from a very liberal district that is not representative of the country. When she goes out to campaign around the country, she's going to raise questions that local candidates are going to have to raise. In Dallas, Texas, in the 32nd congressional district, Collin Allred -- if she comes in and campaigns for Collin Allred, people will ask him, do you agree with her that Israel is conducting an illegal occupation of Palestine? Are you in favor of free jobs, free health care, free college? Are you in favor of that kind of an agenda? Are you a Democratic Socialist? Some of that stuff will work well if you are in, you know, San Francisco, but to win the House, the Democrats will have to win a lot of seats in places like Pennsylvania, Michigan, Illinois and Texas, and the parts of California that don't like how they voted in the bay area. So --

(CROSSTALK)

GIGOT: So, Karl, then what you do is you don't invite Ocasio-Cortez or Elizabeth Warren in those districts. You invite Bill Clinton or somebody who is more popular in those districts.

ROVE: Sure, but, look, this is a sentiment that is grabbing -- that is gaining strength inside the Democratic Party. Here in Texas, they nominated a rock star named Robert Francis Beto O'Rourke for the U.S. Senate against Ted Cruz. I think it is hilarious, in Texas, we have the Anglo, Robert Francis O'Rourke running as Beto, and we have the Hispanic, Rafael Cruz running as Ted. But that's the way it is.

But Beto O'Rourke came out this week in favor of impeaching Donald Trump. It may be popular in the confines of the Democratic Party, but it won't be popular in a red state like Texas.

Or take Scott Wallace in Pennsylvania one. This is a district held by a Republican, won by Hillary Clinton. They nominate the most left-wing guy running in the primary, who turns out to have contributed $300,000 to organizations that support disinvestment in Israel. And it is -- the district has the 38th highest percentage of concentration of Jewish voters of any district in the country.

So, yes. Look, it matters that you stand for something. But if what you stand for something is hard-left politics, and you're running in sort of middle America, then the Democratic Party is not going to win as many seats as it might otherwise have won.

GIGOT: One of the things we have seen throughout the special elections in the last 12 months is that Democrats have outperformed what you would have had expectations for voter turnout. That's, in part, generated by enthusiasm. A lot of this -- we saw this in Virginia, in particular, is anti-Trump enthusiasm. Why isn't the best Democratic argument were to be simply something like this, we are going to put a check on President Trump. You want checks and balances? The Republicans aren't doing it. We're going to put the check on Trump.

ROVE: That would be a good strategy, but instead, they've got "for the people" and increasing numbers of their candidates are defining their agenda by adopting left-wing positions, Medicare for all, free college, guaranteed jobs and so forth. But you're right. If they ran a sort of centrist, you know, we're going to work together, Republicans and Democrats, to achieve good things for the country, we're relatively moderate centrist liberal Democrats, we're not nuts calling for impeachment, we're not calling for the overthrow of the government, they could win a lot of seats. But that's not the kind of candidates they are nominating in some critical races. But you're right, if they were smart, that's what they would do.

Take, for example, your old stomping grounds, Wisconsin. The Iron Stash, who is a left winger running in Wisconsin, won. It turns out to not only be left wing but turns out to be a deadbeat who couldn't either pay back loans to his former wife or pay his child support payments, but he sounded good to Democrats in that district because he was the most left wing.

GIGOT: All right, Karl, we will see how this evolves in the coming months. Thanks for coming in.

ROVE: Thank you.

GIGOT: Still ahead, President Trump doubling down on auto tariff threats, despite growing opposition from lawmakers and industry leaders. So can E.U. officials work out a deal with the administration when they come to Washington next week?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: They are going to be coming on July 25th to negotiate with us. We said, if we don't negotiate something fair, then we have tremendous retribution, which we don't want to use, but we have tremendous powers. We have to. Including cars.

(END VIDEO CLIP)

GIGOT: That was President Trump Wednesday promising tremendous retribution if his meeting with the European Union officials next week doesn't result in what he considers fairer trade deals. The president is scheduled to sit down Wednesday with European Commission President Jean-Claude Juncker amid administration threats to slap tariffs on imported cars and auto parts.

But resistance to the tariffs is growing with a coalition of foreign and domestic auto companies, dealers and auto part makers, asking the president not to move forward with the penalties. A bipartisan group of nearly 150 lawmakers urging the Commerce Secretary Wilbur Ross to back away from the tariffs.

We're back with Bill McGurn, Mary Kissel, and Jason Riley.

So, Bill, there's a school of thought that says -- has said for some time, the president's trade threats are really just a negotiating ploy, that he will back away at the end and it won't go ahead. I'm increasingly of the belief that he really wants this kind of a tariff war, and he really wants to stick it to German automobiles. What do you think?

BILL MCGURN COLUMNIST: I hope not. I mean, the problem with trade wars is there are a lot of innocent bystanders that get hurt. You don't always know those costs. I think what you see especially with the European Union reaction is when you make these threats, they're more than willing to come back and do the same thing to us. You know, there's not a lot of quiet players. The Chinese would probably prefer to work out a deal quietly with us. But you get into it with the European Union, it is like a game of chicken with a truck bearing down on you.

GIGOT: Jason, the Germans, in particular, seem to be his target. He has an obsession -- I don't think that's too strong a word --

(LAUGHTER)

GIGOT: -- with German cars. I mean, it sounds to me like he's determined to do it.

JASON RILEY, COLUMNIST & SENIOR FELLOW, MANHATTAN INSTITUTE: I think he is determined to do it. You have to take him at his word. He's campaigned on this and it's something he's determined to follow through on, for better or worse, mostly for worse I think. Particularly in states that helped elect him, Paul. That's one of the things that's hard to figure out here, whether it's cars or aluminum or farm products. You have companies like Alcoa, aluminum maker, their shares are tumbling because they import from Canada. That's gotten more expensive. Alcoa is based in Pittsburgh. Trump won Pennsylvania.

(CROSSTALK)

RILEY: And Iowa farmers traveling over to China trying to preserve deals there that have been harmed due to the Chinese trade war. Trump won Iowa. Is this what those voters signed up for?

GIGOT: Alcoa is a company that was supposed -- an American aluminum maker. It is the kind of company that Trump said the tariffs would help. In the earnings call this week, you have them saying the tariffs are hurting. Their earnings are down 15 percent or so.

So I guess -- and you see this marshalling, Mary, of the domestic companies and the foreign automakers who invest here. Everybody really except for the united autoworkers which has I would say issued tepid support for the tariffs, but everybody else against it. Can Trump still move ahead in the face of that opposition?

MARY KISSEL, EDITORIAL BOARD MEMBER: Well, I think it depends on what happens to the stock market, Paul. The one indicator that he watches very closely. Look, BMW's largest plant in the world is in Spartanburg, South Carolina, a district that Trump won with more than 60 percent. Now, we haven't seen the effects of these tariffs on the markets. But I think when that happens, Trump is going to wake up.

Now, on the European side, my question is, do the Europeans get it yet? Because they didn't believe that Trump would pull out of the Paris climate change agreement. They didn't believe he was going to pull out of the Iran deal. They didn't believe he was going to put tariffs on. So if I were sitting in Brussels, I would be coming to Washington with something to offer Trump, whether it's a loosening of, I don't know, agricultural tariffs.

(CROSSTALK)

GIGOT: No, no, no. No, that is not going to work.

(CROSSTALK)

KISSEL: -- come ready to deal.

GIGOT: Car tariffs it's got to be. It's got to be on automobiles. And it's got to be, at a minimum, it would seem to me, essentially the same rate on tariffs. And I'm not sure even that is going to work because the Germans are going to say, you have a 20 percent tariff on trucks here.

KISSEL: I don't know about that, Paul. I think if the Europeans came with a deal to Trump and they could both stand up and proclaim victory and walk away --

(CROSSTALK)

GIGOT: Yes, but it has to be on cars.

KISSEL: I think both sides would be happy.

GIGOT: My point is, it has to be on cars. It can't be farm products.

RILEY: Another point worth making is that other countries seem willing to move on and make deals without us. Japan and the E.U. have gotten together to cut deals without the U.S. We lose out economically in cases like that. But we also lose out in terms of influence in the region. There's much more at stake here than simply cars and tariffs.

GIGOT: Bill, what about the danger here that this now becomes also a currency war? The president lashed out this week at the falling Yuan and the falling Euro because of the strong dollar. I don't think he understands that one of the reasons the dollar is so strong is because so much foreign capital coming here --

(CROSSTALK)

GIGOT: -- because of the tax reform and the deregulation and faster growth.

MCGURN: It is a vote of confidence in his policies, right? Got to know who your friends are.

Look, I think Mary makes a good point when she pointed out about the BMW plants over here. I mean, today, what is an American car? What is -- it is such a multifaceted thing. It reminds me, for many years, for about 20 years, there was a dumping suit by Brother typewriter, Japanese company, building typewriters in America against Smith Corona, an American company, building typewriters in Asia. It just ended. It's just ridiculous.

GIGOT: I still have my Olivetti, Bill, I'll have you know.

(LAUGHTER)

MCGURN: You were always a sucker for those foreign --

(CROSSTALK)

GIGOT: I don't know where that was made, but very stylish portable typewriter. I took it on the road in Asia.

Still ahead, Google is slapped with a record fine as the European Union accuses the tech giant of anti-trust violations. What it means for Google and its competitors when we come back.

(COMMERCIAL BREAK)

GIGOT: The European Union this week slapped Google with a record $5 billion fine, accusing the tech giant of violating anti-trust laws by requiring that its Chrome browser and search engine be automatically installed on phones that use its Android operating system.

Andy Kessler writes "The Inside View" column for the Wall Street Journal and he's founder of the Silicon Valley hedge fund, Velocity Capital.

Andy, great to see you. Thanks for coming in.

What do you make of the E.U.'s fine this week and the charges against Google?

ANDY KESSLER, COLUMNIST & FOUNDER, VELOCITY CAPITAL: Well, the fine itself is irrelevant. You look at the numbers, $830 billion market cap, $100 billion in cash, $13 billion in profits last year. That's not the problem. It is the concept of they are annoyed about 11 apps they installed, including maps and search and assistance, trying to say that's anticompetitive. But Google, Android, it is a platform. It is a platform for others to compete on. Lyft versus Uber and Spotify versus Pandora. It is a wonderful competitive environment and they compete against Apple. Bureaucrats are bureaucrats so they had to do something.

GIGOT: They say, look, when they go to a handset maker and they say if you want to use Android, you have to put these -- our apps, Google Maps, YouTube, first.

KESSLER: Sure.

GIGOT: That's favoritism to Google.

KESSLER: Well, yes, but you get the operating system for free rather than spending billions of dollars --

(CROSSTALK)

GIGOT: Develop your own, yes.

KESSLER: And Samsung, for example, puts their own apps on there. Users can hit delete and put their own apps on it. It is just like the P.C. business and the browser wars. In a sense, it became obsolete almost at the time that Microsoft got their hands slapped.

GIGOT: So you think they are looking through the rearview mirror here and technology will somehow make all of this irrelevant?

KESSLER: Yes. I mean, phones have already peaked, right? I mean, we're starting to look at what the next platform might be. But my issue is, if you're Google, what do you do? They are going to appeal. They have appealed. That's fine. But you can't let the European Commission of Competition get away with it. If I was Google, I would do the following. There's a billion-plus Android phones that ship every year. Got to figure at least 100 million, probably multiple hundreds of millions ship into Europe. You can shut them off but then you are hurting yourself. Instead, what I would do is I would say, OK, let's create an activation fee, $50, 50 Euros, and not payable to Google but payable to the E.U. You would have to write a check or --

(CROSSTALK)

GIGOT: So the individual user of the Android phone would have to pay the fee.

KESSLER: Yes, don't even let them do it electronically. Make them go to a bank or a post office. This thing would blow over in a week. There would be such an uproar and it would never happen.

GIGOT: People would blame the E.U. and not Google.

KESSLER: Exactly.

GIGOT: Are you sure?

KESSLER: Yes, it is just like the tariffs. If there's a tariff on my imported Mercedes-Benzes, if I had to pay that money to the U.S. government rather than to the dealer I would go, what do you mean I have to pay?

GIGOT: Let me ask you another issue about Google, market cap almost $900 billion, astonishing. Is there a problem in your mind from an anti-trust point of view in the way they use algorithms to steer users to certain kinds of content? For example, their content and advertisers that they want to steer it to.

KESSLER: Sure, that was the other European fine they paid for steering people towards their shopping site. You know, it is better to have transparency, to have the algorithms so transparent that if you wanted to have your ad placed first, maybe you would pay more. It's always going to be an issue with platforms, but the more visibility there's -- and you don't see advertisers complaining. You see bureaucrats complaining. But you don't see advertisers complaining because they can get to users. The nice thing about Google, you know the effectiveness of your ad. If it doesn't work, you don't run it again.

GIGOT: I want to ask you, as a market analyst, the big companies, the Facebook, Google, Netflix, and Apple have dominated the market. But you wrote an intriguing column this week saying that maybe the seeds of their decline are already planted. Explain what you meant.

KESSLER: Well, on Wall Street, it is easy to buy a stock. I'm going to buy the stock. It is going to be the next greatest thing. But no one knows when to sell. I think you need an exit strategy. The day you buy it, you figure out what is going to go wrong eventually. You know, look at Netflix. It blew up this week, right? The subscriber numbers were a million shy, and they took the stock down. When I look at the other ones, some are more obvious than others. Apple seeds of destruction or what we just talked about, is the phone market has kind of peaked. Everyone has one. They don't wear out. Similarly, Facebook, they have a problem in that, you know, they need 2-point-something billion users, doubled in five years. I don't think it is going to double again. They're not allowed in China. Russia has competition for Facebook. What happens as that growth rate kind of slows? Investors get a little nervous and start running for the hills.

GIGOT: And that's what you've got to look for as an investor. When is the turn?

KESSLER: You look for it the day you invest. And then you keep an eye on it. Say, what are the signs that I'm looking for? Because stocks go up in euphoria, right? Google, Amazon, every day the stock goes up. What is going to go wrong? So that you can be ahead of everyone else.

GIGOT: Read Andy's column to tell you when to do that, by the way.

All right, thanks for being here.

We have to take one more break. When we come back, "Hits & Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time now for "Hits & Misses" of the week -- Jason?

RILEY: This is a miss for former President Barack Obama who went to South Africa this week and gave a speech announcing identity politics. Now I'm opposed to identity politics, too. But this was the same Barack Obama who spent eight years in office making overt appeals to voters based on race and sexual orientation and gender and, suddenly, he decides this is a bad thing. This has to do with the fact that Barack Obama isn't running for office anymore, Paul.

GIGOT: So he can oppose it. Well, maybe Michelle will. I don't know.

All right. Bill?

MCGURN: Paul, three-quarters of a hit to the Republican Senate for setting a record this week, 23 appellate court nominees confirmed, the most since George H.W. Bush. I would give them a full hit except, on Thursday, they botched the nomination of Ryan Bounds to the ninth circuit for a complicated number of reasons. But it's a reminder with the Brett Kavanaugh confirmation coming up, this is a team sport and when you have 50-49 majority, you all got to show up.

GIGOT: All right.

Mary?

KESSEL: I'm giving a miss to Turkey for its continued detention of American pastor, Andrew Brunson, who has spent almost two years behind bars on trumped-up charges. A court this week sent him back to jail based on witnesses and other ludicrous things. The Trump administration is ramping up pressure on Turkey and President Erdogan to get him and other American hostages out of jail. But, Paul, I'm afraid they may have to exact more leverage on Ankara to get results.

GIGOT: All right. Thank you all.

Remember, if you have your own hit or miss, be sure to tweet it to us, @jeronfnc.

That is it for this week's show. Thanks to the panel. Thanks to all of you for watching. I'm Paul Gigot. Hope to see you right here next week.

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