Border Patrol chief: It's sad migrants are exploiting children to get across the border

This is a rush transcript from "Your World," May 9, 2019. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, this is it. We are at the brink. We are eight hours away from seeing whether the world's two greatest economic powers go to economic war.

Welcome, everybody. I'm Neil Cavuto.

And FOX on top of probably the most important eight hours of this economic's recovery life, if you think about it. At the issue, if you think about this as well, is whether the two largest economic powerhouses can come to an agreement on trade.

Right now, growing optimism certainly by day's end that was given up as a lost cause has turned into, well, a sort of cause.

Let's take a look at what's happening in Washington, D.C., right now outside the U.S. trade representative's office, where a Japanese delegation will be meeting with an American delegation to sort out the trade barriers that have been the thorny issues for better than a year now, technically, if you think about it, technically for decades now.

We have got you covered, including a comeback in the Dow that surprised a lot of people, because the president said, well, a lot of the right things.

First to John Roberts at the White House, what it's hoping for. We have got Jacqui Heinrich at Macy's in New York City on what consumers are bracing for, and market watchers Larry Glazer and Heather Zumarraga on what investors could, could be in for.

We begin with John.

Hey, John.

JOHN ROBERTS, CHIEF WHITE HOUSE CORRESPONDENT: And good afternoon to, Neil.

Just one hour from now, what could be make-or-break negotiations between the United States and China begin just about 400 yards from where I'm standing. The Chinese delegation led by the vice premier, Liu He, who arrived at his hotel just a short time ago, and the U.S. delegation led by Robert Lighthizer and Steve Mnuchin, the treasury secretary.

Now, President Trump just a short time ago revealed that the Chinese had been dragging their feet on trade talks, even reversing themselves on some core issues, including intellectual property and a strong legal framework for enforcement.

But when the president threatened at the beginning of the week to raise sanctions on Chinese goods tomorrow, talks suddenly shifted back into high gear. Listen here.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT: I have no idea what's going to happen. I did get last night a very beautiful letter from President Xi, let's work together. Let's see if we can get something done.

But they renegotiated the deal. I mean, they took -- whether it's intellectual property theft, they took many, many parts of that deal and they renegotiated. You can't do that.

We're the piggy bank that everybody steals from, including China. We've been paying China $500 billion a year for many, many years. China rebuilt their country because of us. They couldn't have done what they're doing. They're building a ship every three weeks. They're building aircraft like you've never seen.

And we're not going to be taken advantage of anymore. We're not going to pay China $500 billion a year.

So, we put very heavy tariffs on China as of Friday, and we put them on also eight months ago.

(END VIDEO CLIP)

ROBERTS: If you get the idea that the president is serious about holding China's feet to the fire, then you're thinking along the lines that he is.

Now, the president was only half-joking when he suggested earlier this week that the Chinese delegation might be balking, in hopes that they may be negotiating with President Joe Biden in 2021, instead of President Trump.

Earlier this year, before the Mueller report came out, the Chinese were waiting to see if President Trump would even be around. But now that the report is out, we know that he's going to be. The Chinese look like they're coming to the table.

But, Neil, if they do not get a deal by midnight tonight, tariffs on $200 billion worth of Chinese goods go up from 10 percent to 25 percent. And that will likely be the opening in what could be a massive trade war, because the Chinese have threatened to retaliate -- Neil.

CAVUTO: All right, thank you, buddy, very much, John Roberts at the White House.

Let's go to Jacqui Heinrich now at Macy's in New York's Herald Square on whether shoppers are getting nervous -- Jacqui.

JACQUI HEINRICH, CORRESPONDENT: Well, Neil, the existing tariffs target imports that were typically purchased by manufacturers.

But the new tariffs target goods that are bought directly by consumers. And that could have an entirely new set of consequences for both American shoppers and for stores.

If the president follows through with his threat tomorrow, he will raise existing tariffs on $200 billion worth of Chinese imports to 25 percent, up from 10 percent, and that will be followed by new 25 percent tariffs on $325 billion worth of goods.

The new tariffs target items that shoppers purchase regularly, like handbags, electronics, like iPhones and computers, textiles and clothing, furniture, luggage, dinnerware, bed sheets, dishes, cosmetics, and perfume.

According to Citigroup, about 40 percent of consumer goods have not yet been impacted by the tariffs. And this could all change that.

Here's what shoppers are saying, bracing for that change.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It does concern me I'm going to be paying more.

UNIDENTIFIED FEMALE: If it does pass and it does happen, I think I'm going to -- I'm going to see more and more. I think everyone is going to.

UNIDENTIFIED MALE: We have to trust Trump's going to do the right thing for the country, and he's using it as a negotiating tactic.

UNIDENTIFIED MALE: No, I'm OK with that.

UNIDENTIFIED FEMALE: Overall, if it would help, I would be OK. I would probably just stop spending as much.

UNIDENTIFIED MALE: Relax and let it play out and everything's going to be fine.

(END VIDEO CLIP)

HEINRICH: Some of the biggest importers of those items are Target, Wal- Mart and Macy's.

But smaller stores could also see an impact. Big retailers have been buying bulk orders, worrying that the tariffs could escalate. But mom and pop stores don't have as much of an ability to do that. The Wall Street Journal reports that that 25 percent tariff could affect a family of four by as much as 767 extra dollars a year in costs if they stick around.

If it does happen, China has promised their own retaliation. As John Roberts mentioned, the deadline for negotiation is midnight -- Neil.

CAVUTO: Jacqui, thank you very much. Very good report here.

Now, as Jacqui pointed out, $200 billion worth of goods, that would be slapped with 25 percent fines. And if that's not enough, the administration promising $325 billion worth of additional goods from China subject to the same 25 percent fines.

Now, you might be able to dodge the bullet if they're only 10 percent tariffs, because a lot of businesses will absorb that before passing it along to you. Now, if it gets to 25 percent, that's easier said than done.

The impact on both countries could be enormous. So, the pressure to make a deal is enormous. Now the question becomes, if they do get to the point where they have a deal, can you make sure that the Chinese honor it?

Gordon Chang, the author of "The Coming Collapse of China," says, don't count on it.

So, Gordon, you have your doubts even if we get to that point, right?

GORDON CHANG, AUTHOR, "THE COMING COLLAPSE OF CHINA": Well, certainly, because Xi Jinping is under a lot of pressure in China.

I'm not so sure that he is in control. He had to actually retract the commitments that he previously made, which means he doesn't have the power to exert on others his will.

Also, his idea is a state-dominated economy. He wants to steal U.S. intellectual property for his Made in China 2025 initiative. So I think that, yes, they could sign on the dotted line, but they're certainly not going to honor it. They haven't honored prior trade deals.

Why do we think that signing up another one is going to remedy this problem of failed trade agreements in the past?

CAVUTO: Of course, they haven't dealt with a president like this one in the past. And they were -- maybe either didn't expect the response that he would get to their reneging on some prior agreed points, but they know now.

So what do you think happens today in these next hours?

CHANG: Well, I think the vice premier rolls into the Oval Office and says this: Please do not increase the tariffs. Xi Jinping is under real trouble at home and he needs time in order to tame recalcitrant elements in the Chinese bureaucracy.

CAVUTO: There's no way the president is going to grant him time. Then there's no way, right?

CHANG: I hope there's no way.

But the Chinese have used this trick in various forms for decades. And in most of the times, it works, Neil.

CAVUTO: Hmm.

CHANG: I don't think it'll work with President Trump. But we're going to find out at 12:01 tomorrow.

CAVUTO: You know what's interesting too about these particular next wave of tariffs is, they're direct. They're on products that come into this country, from furniture and clothing, handbags. We are just showing some of them there, orange juice and a lot of paper product, shampoo.

I understood deodorant, which could have enormous implications for people who just stop using deodorant.

Leaving that aside, is that your sense, Gordon, that this escalates beyond what either country ever envisioned, that you get past the point of go?

CHANG: Yes, I actually do think that's going to be the case, even if there is a trade agreement, because the deal won't hold. And we are going to see recriminations on both sides.

In China right now, you have this nationalist narrative about, is this 1840 again? In other words, talking about unequal treaties, about the way the United States is disadvantaged and prejudicing China.

So, this is not going in a good direction for either side. And this means it's going to get ugly, as I said, even if they can come to some terms in the next few weeks or next few months.

CAVUTO: All right, thank you, my friend, Gordon Chang, the expert on all things China, and a very, very good read of it as well.

Let's get the market read on all of this from Heather Zumarraga, Larry Glazer.

Let's show you where the Dow finished the day. It looks bad, I grant you, down about 138 points. It had been a lot worse, about three times as worse, before the president started speaking and saying he got this beautiful letter for Xi Jinping, the president of China.

So it was interpreted as a sign that maybe, maybe, maybe cooler heads will prevail.

Heather, I have heard that one before. But what do you think?

HEATHER ZUMARRAGA, FINANCIAL ANALYST: Yes.

Yes, I think that is a positive sign for the markets. The markets took it as such. That's why we closed down on the day, but very, very much off the lows.

I think that the president's tweets are market-moving. So, if we get any positive news coming before the 12:01 deadline, when they sit down shortly here at 5:00, Chinese vice premier, as well as President Trump, on trade negotiations, the markets can recover what they lost today.

CAVUTO: All right, this would be a phase, though, of tariffs, if they go into effect, Larry, that would have a direct impact on consumers, because there's no way you can avoid the sort of surtax that would be on a host of items.

In the past, they have largely affected U.S. businesses with operations in China and working with their China wholesalers and distributors. They have been able to eat the cost or the 10 percent thing; 25 percent is another matter, hundreds of billions of dollars worth of more goods, another matter.

Then what?

LARRY GLAZER, MAYFLOWER ADVISORS: You know, Neil, this is what it's like to play chicken in the high-speed lane of a highway with an 18-wheeler coming right at you.

There's going to be pain on both sides. And, for consumers, certainly, who among us is prepared to pay 25 percent more for that smiling Amazon box that's delivered to our home? Who among us is prepared to pay up to $2,000 more for our household to buy the basic goods that we rely on that we import from China?

What business is prepared to absorb that? Certainly, no business. Businesses that export to China, like Apple and Qualcomm and Micron and Wynn Resorts, they're going to feel the pain in their corporate profits, which is going to hit our 401(k) plans.

But we're going to feel it as consumers. And, Neil, that's inflation. When those costs go up, that is inflationary. It's going to show up all around us. So that pain is going to be widespread.

We hope it can be avoided. But this is the single most important economic issue, not of the year, again, not of the election cycle, but for an entire generation. So we have got to get this right.

CAVUTO: All right, guys, I want to thank you both. Sorry, with all the breaking news developments.

We want pass along here that this China delegation, including the vice premier, the second most powerful official in all of China, will be meeting with the president. They will be having dinner, we're told, as well, at least the delegation will, with their American counterparts.

This is sort of a last dash grab at avoiding problems here. Again, if tariffs do go into effect -- and I cannot repeat enough that governments don't pay them. You do. Businesses that sell stuff to you do. And in the past, they have gotten that stuff to you sort of eating those costs. They simply cannot absorb all of these.

So, again, this will impact you, not your government.

We will have more on this. And the former Dow Chemical CEO says a lot more than just Dow Chemical and Fortune 500 companies are on the line. We all are.

(COMMERCIAL BREAK)

CAVUTO: All right, this is a Fox News Alert.

To the left of your screen, outside the Willard Hotel, that's where the Chinese delegation is staying, 100 strong, we're told, including the vice premier of China. On the right side of your screen, the U.S. trade representative's office, where they're all heading to cobble together something or get back on track trade talks that are now dividing the two largest economic powers on the planet.

There's a lot at stake here. If they don't make much progress or they don't move at all, indications are pretty strong here that at 12:01 a.m., or a little bit less than eight hours from now, $200 billion worth of tariffs on a variety of Chinese goods will go into effect.

And those are going to be steep. They're going to be a 25 percent tariff on hosts of goods, thousands of them, that will lift the price of those underlying goods by, as the percentage implies, 25 percent.

Some will be passed along to you. It's fair to say that, at this level, most will be passed along to you.

Former Dow Chemical CEO Andrew Liveris on these developments.

Do you think it will -- it will come to that, Andrew?

ANDREW LIVERIS, FORMER CEO, DOW CHEMICAL: It may.

I will tell you that tariffs are a blunt instrument, Neil. And the long game here that we all have to sort of digest in this moment of ferocity and negotiation is, we're trying to get equilibrium on non-tariff tariff barriers, things that have excluded American companies from doing business in services and technology and protection of technology in China.

These two economies will compete for the rest of this century on the long game. And we have just got to elevate out of this moment, ignore the ticker under the screen there...

(LAUGHTER)

LIVERIS: ... and just say -- and if the consumer does get some pain in the pocket, yes, but you know what?

We're fighting for this century's jobs, in the century of automation, an ecosystem where we have to rely on each other and protect each other's technology. And this administration is doing what the Chinese have done for three or four decades, putting in a plan for the long game.

CAVUTO: I'm glad you mentioned that. That's a very good point.

I mean, a lot of people don't like tariffs, but the Chinese have been imposing that on us and a host of others to block competitors into their markets. The president now is responding in kind because he says enough is enough.

But do you need to see from the president either an address to the nation to prepare Americans for the likelihood that, until a deal is reached, it is very likely that they will be facing higher prices when they go into Wal-Mart or Target, but that, in the end, it will be better for all of us, just as you outline?

LIVERIS: Well, a lot of the goods that we buy today, want vs. needs, consumption-led society that we are, with all due respect to Wal-Mart and all the stores like Wal-Mart, or Amazon and all the online, cheap is not good.

Lots is not great. If I'm losing my job because I can't actually get a job in the 21st century, maybe I should trade away that I can get the stuff cheaper in Wal-Mart.

I think we should ask Americans to look at what the game is here for them, as citizens in a very, very high-tech society, where technology and services are the jobs of the future.

And I know that's not the conversation that's being had. If we can get away from the political rhetoric, and look at what the businesses are saying about this, including the one I used to run, we need fairness from China. And this administration is asking for fairness.

CAVUTO: So, let me ask you.

In your days running Dow Chemical, one of the largest companies on the planet, you had to deal with China. You know the difficulty of penetrating that market. You know that the Chinese want in on your business, that it's not a solo affair.

This administration and what they're trying to cobble together is supposed to provide access to companies like yours and others and a host of others that right now feel like it's dealing with the Sopranos to get access.

Do you expect that the Chinese will deliver those open markets?

LIVERIS: I think, with time, they will.

I think we're -- we have had the Jintao era. We have now got the Xi Jinping era. As already reported on your show today, all is not well inside China.

CAVUTO: Right.

LIVERIS: This switch that they wanted from a state-driven economy, from SOEs, is not happening at the pace he needed it to happen.

Environmental protection, food safety, all the things that matter to Chinese citizens, the entrepreneurial ecosystem, the high-tech world that they wish to be in for all their citizens, is something that they haven't been able to deliver on.

They need a partnership with America to deliver it, that we can both trust each other.

CAVUTO: No, I know what they need. I know what they need, Andrew. And you're quite right on all the stuff you outlined.

LIVERIS: Yes.

CAVUTO: But they have ways of snookering us. They have snookered prior U.S. presidents of both parties.

LIVERIS: Of course.

CAVUTO: Now we have to have an economic version of trust, but verify from Ronald Reagan. And they can worm out of stuff. How do we make sure they don't?

LIVERIS: Yes.

Well, I start -- I end where I started. We need a president that's willing to play the long game. We have one in this president. He's not from Washington. He is not looking at compromises of the Washington kind. He's looking at ways to actually marry in this notion of access.

I want access to your market, fair. I want non-tariff tariff barriers removed. I want standards, environmental and technology equilibrated. I want my technology companies to play in your market. And I'm willing to take the short-term pain for that.

CAVUTO: That's very eloquently put.

Andrew Liveris, we will see if that's the message they have at the U.S. trade representative's office in Washington.

CAVUTO: Pam, if we could take a peek at those two places that are going to be sort of the epicenter of the economic universe right now, this is the Willard Hotel, from where the Japanese -- I'm sorry -- the Chinese delegation will be leaving shortly, and on the right, the U.S. trade representative's office.

Robert Lighthizer is handling a lot of this. He's been very, very tough on the Chinese. They have made a lot of promises to him, and then they wiggled out of a couple of things, we're told. And he blew up. The president blew up. That's when the tariff threat started.

They calmed down a little bit here, but the tariffs are still going into effect. When that delegation leaves, and whatever comes of events in that room on your right, we will let you know. The fate of the economic powers of this country and world are now up for grabs.

In the meantime, if that isn't enough to jar you, we have got tensions heating up with Iran and U.S. warships showing up in the Persian Gulf.

Just another day.

(COMMERCIAL BREAK)

CAVUTO: All right, let's see. We have got China. Got North Korea. Oh, yes, Iran.

The USS Abraham Lincoln passing through the Suez Canal just today. It's on its way to the Persian Gulf, as tensions between the U.S. and Iran certainly escalate. That's putting it mildly.

Our U.S. special representative for Iran, Brian Hook, with us right now.

Brian, is this just a show a force, or is there something else afoot?

BRIAN HOOK, STATE DEPARTMENT SPECIAL REPRESENTATIVE FOR IRAN: It's a response to various intelligence, various threat streams that we were receiving that Iran was planning attacks against the United States, against American interests and against our partners and allies in the region.

And so the president decided to reposition some of our military assets, so that we can defend against any attacks, but also to put the Iranian regime on notice that we will defend our interests in the Gulf.

CAVUTO: Now, the timing of this, with cracking down Iranian oil making its way to a host of folks, from China to even some of our European allies, isn't lost on people.

Is there a coincidence there or is that no big deal?

HOOK: It may be part of the larger story.

Secretary Pompeo announced very recently that there will be no more imports of Iranian crude oil. We will not be giving any waivers to any countries to import Iranian crude oil. This is going to eventually be a $50 billion hit that -- on the Iranian government. And this is the price that the regime is paying for behaving like an outlaw regime, running an expansionist foreign policy that has brought so much suffering to the Middle East.

CAVUTO: Now, the president criticized former Secretary of State John Kerry today at a White House event, saying he's violated the Logan Act, where you can't make talking out of power to those who are very much in power, in this case, Iranian authorities.

John Kerry shot back -- or his people did -- essentially a line that said that president was deflecting. What did you make of the back and forth?

HOOK: Look, we have one secretary of state at a time. The purpose of the Logan Act is to ensure that there aren't any unauthorized negotiations that are going on with foreign governments.

We have...

CAVUTO: Well, do you have proof, Brian, that that was in fact happening? The Kerry folks say that no such thing was happening. The president seemed to intimate that he has been regularly meeting with Iranian leadership and doing just that.

HOOK: I'm not going to go beyond what the president said.

We have made it very clear that we're out of the Iran deal. That puts us in a much better position to achieve our goals of denying Iran a nuclear weapon to sort of deter the regional aggression that Iran has been engaged in for many years now, without much consequence.

And we're also going after Iran's missile program, which you see it in Lebanon. You see it from Lebanon all the way to Syria. So we have put in place a much stronger foreign policy to deter Iranian aggression. And we would like to get to a new and better deal with the Iranian regime to replace the existing deal.

CAVUTO: All right, sir, thank you very, very much.

Speaking of all things defense now, we are getting word that the president is going to formally nominate Patrick Shanahan, the acting defense secretary and a former Boeing executive, I might point out, to lead the Defense Department. We will keep you posted on that.

Also keeping you posted on, guess what, more trouble at the border, another 100,000 migrants apprehended there in just one month. What's going on here?

The chief responsible for protecting the border is saying it's got to stop, enough is enough. Chief Carla Provost is next.

(BEGIN VIDEO CLIP)

CARLA PROVOST, U.S. BORDER PATROL CHIEF: We cannot address this crisis by simply shifting more resources or building more facilities. It's like holding a bucket under a faucet. It doesn't matter how many buckets you give me, if we can't turn off the flow.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CAVUTO: All right, on the top left portion of your screen, you're listening -- we're looking at the Willard Hotel in Washington, D.C., from which the Chinese delegation will be leaving soon to the bottom of your left screen there, the U.S. trade representative's office for those trade talks.

(COMMERCIAL BREAK)

CAVUTO: We have broken a record in seven months, what was the case all of last year, Border Patrol apprehensions topping 100,000 for the second month in a row. April had the highest monthly total of apprehensions in 12 years. And, again, we're only seven months into this year.

The U.S. Border Patrol chief, Carla Provost, joins us right now.

Chief, thank you for taking the time.

PROVOST: Thanks for having me, Neil.

CAVUTO: What do you think is driving it?

PROVOST: Well, there are a lot of factors driving it.

But I think the message is really loud and clear when it comes particularly to the family units, that, if you bring a child, you're going to be released into the country.

CAVUTO: So this move that was held by a judge to support the president's move to keep anyone who's trying to enter here in Mexico until all of it is adjudicated, how will that change your job, or will it?

PROVOST: Well, being able to send some of them back to Mexico while they are waiting is certainly helping. But the numbers are not sufficient for what we're apprehending.

CAVUTO: So when you hear these cases of children, there were sporadic reports that they were someone else's kids, that they were essentially being used as pawns in this.

And I don't know if there's any way to ascertain that, but it's just made your job a mess.

PROVOST: It certainly has. We're seeing numerous cases.

We have seen over 3,500 cases of fraud thus far this year. It is a very sad situation, when they are exploiting these children so that they can get across.

CAVUTO: So, the president has requested another $4.25 billion, $4.5 billion of emergency aid that is needed at the border.

Democrats have said -- some that I have talked to, Chief -- as long as it's not for a wall. I don't think the administration has stressed that one way the other. Sounds like folks like you could use it right at these centers.

PROVOST: We certainly need the money.

Our -- right now, I'm having to use my operational budget to fund this humanitarian mission. And, at all costs, really, the humanitarian mission is having a negative impact on our national security.

As I'm having to pull my men and women away, 40 percent of their time is being spent dealing with taking care of these families, processing the families. The border security mission, the mission that we were hired for, is suffering.

CAVUTO: So, if I'm trying to get into this country illegally, that's the magic pill right there, bring my whole family, and get you sidetracked dealing with that, for perfectly humanitarian, noble reasons. And there's your floodgate.

PROVOST: It certainly is.

I testified yesterday in front of Congress, asking them to act. We have got to stop talking about it. We need action, and we need a fix. We need to be able to detain families together throughout the immigration process, or the numbers are going to continue to increase.

I expect that we will surpass a half-a-million apprehensions this weekend.

CAVUTO: Those are just off-the-chart numbers, to your point, Chief.

And I'm wondering now if the added element is this family issue, and then the separation of families earlier that has just complicated things. I mean, you guys are trying to do everything by the book and be fair and decent to everyone. But it just seems like you're overwhelmed.

So, among some of the ideas I heard, giving you more personnel. Would that make a big difference, or what would?

PROVOST: Well, we certainly need more personnel. We need a lot more resources across the board.

But we need a fix to this. Border Patrol can't do this alone. I need Congress to act. I need them to take care of the situation when it comes to the Flores Settlement agreement. Allow us to detain families together throughout the immigration process.

We just cannot continue with these pull factors that are bringing these huge numbers to our country.

CAVUTO: But detain those families together, never separating them in Mexico, not the United States?

PROVOST: Even if we could detain them in the United States, that would help.

But I can tell you, my partners at ICE need the beds to be able to hold these individuals as well.

CAVUTO: Others have suggested just bring down and hire a bunch of judges to deal with all of this, to get the process going, or administrators who could just deal with the -- just the sheer volume and paperwork involved.

PROVOST: We definitely need the judges as well.

But there is no way to get through the entire process within the 20 days that we are currently allowed to detain families. So we need Congress to do something to change that.

CAVUTO: Well, it seems that you have got a crisis at the border.

PROVOST: Certainly.

CAVUTO: It seems like you have got an emergency at the border. The president and a lot of people were criticized for stating that. It sounds like you unequivocally agree with that.

PROVOST: I do unequivocally agree.

And it's only getting worse. And not only are we seeing rise in the family groups that are coming across and the unaccompanied children. We're up 23 percent this year with single adults crossing the border too. So we must maintain the ability to deliver a consequence to that group, or those numbers will skyrocket.

CAVUTO: That's well put.

Chief, that's not a right or left thing. That's just a human decency thing.

So we will see what happens. Thank you for all your hard work and all your people. It's not easy. I can understand getting caught in the middle of all of this, Chief Carla Provost, the U.S. Border Patrol chief.

Back to Washington, D.C., right now. We are waiting to hear from the Chinese delegation leaving the Willard Hotel. This might seem like, all right already, we're waiting for the Chinese delegation, but this is it.

I mean, we're less than eight hours away from deciding a fate of an economic recovery that if it accelerates into hundreds of billions of dollars worth of goods affected by upwards of 25 percent tariffs, well, you get the drill. With the Chinese planning to respond in kind, the tit for tat on this could go way beyond what either side intended.

So, what they are hoping to do once they leave this hotel, get to the U.S. trade representative's office, get the talks back on track, or at least defrost the environment, because, right now, it doesn't look good.

The president has said all the right things, that he's gotten the nice letters from the Chinese president, but nice letters, kind words, good intentions are not the same as a deal or even the broad framework of one.

That will be decided shortly. Everything is on the line, including you.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF., SPEAKER OF THE HOUSE: And I'm very proud of the work of our committees and our chairmen. They are patriotically, not passionately or not politically or in any way, going forward, following the facts, leading to subpoenas, and then, when they are ignored, perhaps contempt.

(END VIDEO CLIP)

CAVUTO: All right, so feeling very fine about going after the present attorney general of the United States.

But my skull is a little thick, but I do remember just the opposite sentiment when it was Republicans then going after the prior attorney general back in the Obama administration, Eric Holder. Let's go back in time.

(BEGIN VIDEO CLIP)

PELOSI: The Republicans have decided to go after this attorney general. And after him, who's next?

REP. MAXINE WATERS, D-CALIF.: They have not found any evidence that this attorney general was hiding anything.

REP. STENY HOYER, D-MD: We are here in this courtyard to say to our Republican colleagues, shame on you. Shame on you.

(END VIDEO CLIP)

CAVUTO: And I even heard a bunch of Republicans saying of their Democratic counterparts today that same line, shame on you.

Anyway, the Independent Women's Forum's Inez Stepman is here. We got TheHill.com's Judy Kurtz and Democratic strategist Scott Levenson.

So, Scott, shame on you. No, I'm kidding.

SCOTT LEVENSON, DEMOCRATIC STRATEGIST: Thank you.

CAVUTO: Where is this going? I mean, the back and forth, holding someone in contempt, when you were saying just the opposite, not you specifically.

It just seems like professional wrestling.

LEVENSON: I have to tell you, I think, over the last 24 hours, we have seen a bit of a Rubicon.

I think the Marco Rubio break has to be noted. When you have a Republican -- and you have to hand it to Marco Rubio for being a patriot...

CAVUTO: What are you talking about?

LEVENSON: ... over the last 24 hours, when he asked for the attorney general's resignation, in light of his contempt for Congress. He broke party lines. And I think when you see...

(CROSSTALK)

CAVUTO: Well, there were Democrats also at the time who were asking Eric Holder to be a little more forthcoming, just for institutionalism, right?

LEVENSON: A little more forthcoming is not a U.S. senator from the Republican Party calling for a sitting attorney general's resignation.

CAVUTO: All right, so Judy, what I'm confused a bit, I understand what initiated all of this.

I do think that maybe, had the attorney general after his six-hour browbeating at the hands of tough questions in the Senate, had he hopped over to the next day to the House Judiciary Committee, whatever his doubts about being scrutinized by a separate counsel, they probably wouldn't have taken the action they did.

Now, this ostensibly was because he wasn't forthcoming with getting the full unredacted Mueller report out, when, in fact, when it comes to obstruction issue, about 98 percent of it is. So what is this?

JUDY KURTZ, THE HILL: I think a lot of what we're seeing here is there's no real downside for Democrats, Neil, to be jumping up and calling this a crisis.

It excites some of their liberal base. It gets the base going. It gets them moving. And I think that...

CAVUTO: So, you -- are people in Washington buying the Jerry Nadler line that it is a constitutional crisis?

KURTZ: I think some genuinely feel that it is a constitutional crisis.

But I think some just act like it's a crisis, even if they don't maybe necessarily feel that way.

CAVUTO: Inez, what do you think of that?

(CROSSTALK)

INEZ STEPMAN, INDEPENDENT WOMEN'S FORUM: Look, I don't think this is a constitutional crisis.

This is exactly how the separation of powers is supposed to work. This is part of Madison's design. We're supposed to see these branches actually wrestling with each other. So I totally reject that notion of constitutional crisis, especially from a party that has been delegating power, the main power of Congress to legislate, right, has been delegating that power for the last century to the administrative...

(CROSSTALK)

CAVUTO: Well, it's a constitutional crisis -- because I'm not a lawyer, but I talk to a good many who are, and I watch a lot of legal shows. So I think I'm qualified on this.

(CROSSTALK)

CAVUTO: And one of the things I notice, if Richard Nixon had ignored the Supreme Court and 9-0 vote, hand over your tapes, that would have been a constitutional crisis.

It's when you ignore a court -- and he did a lot of other things to create one.

(CROSSTALK)

LEVENSON: Well, when the attorney general is held in contempt...

CAVUTO: Wait. Wait. Wait.

But if it's taken to a court, a judge, a panel, whatever, and it gets maybe not all the way up to the Supreme Court, you ignore that, then you have got some problems. Then you got a constitutional crisis. In other words, are they fanning the flames?

LEVENSON: I looked up the actual definition of crisis on the way here.

And it certainly fits this intense, defining moment.

CAVUTO: But a constitutional crisis is different.

(CROSSTALK)

LEVENSON: Again, we could sit here and...

(CROSSTALK)

CAVUTO: Now, the definition I have is yelling fire in a crowded theater.

LEVENSON: That is not a constitutional crisis.

(CROSSTALK)

CAVUTO: You don't think that that's what they're doing?

LEVENSON: No, what I actually think is, we're going through the stages of what the Constitution has laid out.

And you got to hand it to Nancy Pelosi for catching that right tone.

(CROSSTALK)

CAVUTO: And 98 percent of it is out. Let's say he wasn't forthcoming, but the report is out, 98 percent of it. Doesn't it seem like crazy town?

LEVENSON: I do think what's interesting is that at the same time we're saying there's no downside to the Democrats pursuing this, we are hearing the president say he really welcomes it.

There seems to be a bit of...

(CROSSTALK)

CAVUTO: All right, just to clarify what you said -- I thought this was the case -- but he was asking -- that is, Marco Rubio -- Holder to resign at the time. He wasn't saying this about the attorney general of United States, this one.

LEVENSON: I'm sorry?

CAVUTO: Rubio was talking about Eric Holder at the time, not, not this present attorney general.

LEVENSON: Last night, he didn't call for...

CAVUTO: No, he was referring to -- please check me, but I think I'm right.

LEVENSON: No, I thought, over the last 24 hours, he specifically called for Barr's resignation. Check that, please.

(CROSSTALK)

CAVUTO: You are right on one thing.

The Senate committee, Intelligence Committee, wants to talk to Donald Trump Jr. You might have mistaken that.

LEVENSON: Oh, no, That's right. That, I know. That, I know.

(CROSSTALK)

CAVUTO: And you were in the middle of that constitutional crisis.

(CROSSTALK)

CAVUTO: But go ahead.

KURTZ: You mentioned that crisis is yelling fire in a crowded theater.

I think, in this case, the Democrats are kind of pulling the fire alarm, calling it a crisis, but the fire hasn't actually reached that point that we're at the constitutional crisis.

CAVUTO: But is it a legitimate issue in which to have a crisis? You know, what I'm saying?

When I first heard, all right, he isn't forthcoming with the report, all right. You wanted the unredacted version, all right. It is a little weird Jerry Nadler, of all people, who didn't want the full Ken Starr report out.

KURTZ: Walked out. Walked out.

(CROSSTALK)

CAVUTO: A little weird. I get it. I know politics, and it works both ways.

But it just seems like you're creating a mountain out of a molehill. I don't want to minimize what they're saying or dismiss it, but am I missing something?

STEPMAN: Look, this attorney general has been very forthcoming with this material, actually.

He didn't have to release any of this. It could have -- he could have just released a statement. He didn't have to release all these under -- the entire report.

(CROSSTALK)

LEVENSON: But he completely misled the American people, according to Bob Mueller.

(CROSSTALK)

CAVUTO: But you would hold someone in contempt for that?

LEVENSON: That, Inez, is in conjunction -- in conjunction with the president's repeated attempts to derail this investigation. Seems to require the Congress to act at this point.

STEPMAN: But they're acting specifically, they say, because of the redactions in this case.

The redactions in this case are extremely minimal and mostly required by the law.

LEVENSON: What are we hiding?

I don't understand. If Neil's right, then 98 percent hasn't -- has come public already, what are we hiding?

STEPMAN: Because those pieces of the report are grand jury material, and that's what Barr is...

(CROSSTALK)

CAVUTO: I just want to explain, because you raised the Rubio thing.

A lot of people have seized on his remarks at the time in 2012, when he was making the case for the attorney general at the time, Eric Holder, to resign, that, if he was so insistent on that at the time, he should be consistent and say the same about this attorney general.

I think that's what you were getting at.

But Marco Rubio, what he said in 2012 about that attorney general resigning, he is not applying it right now to the present attorney general, just so we're clear on that.

LEVENSON: Thank you.

CAVUTO: It's just what I do.

LEVENSON: Appreciate that.

CAVUTO: All right, well, here's something else I do.

Thank you guys very, very much. I'm sorry to interrupt there.

Let's take a peek of what's going on in Washington right now, the delegation, have they arrived at the trade -- Mnuchin, Steve Mnuchin, the treasury secretary, has. So Robert Lighthizer will be there, presumably Larry Kudlow, the entire economic team.

They're going to try to thrash something out, I guess, in the next seven hours. We don't know whether any progress will be deemed enough to ward off better than $200 billion worth of Chinese goods getting slapped with a 25 percent tariff.

That's the hope, at least, for a lot of people who are just saying, please, please, please don't let this happen. But indications are right now that it will at one minute after midnight.

Stay with us.

(COMMERCIAL BREAK)

CAVUTO: This is outside the Willard Hotel. The Chinese delegation is leaving.

I know a lot of you are having a field day with this, someone saying Neil, calm down. It's not the Oscars.

(LAUGHTER)

CAVUTO: To me, it is, all right? You just take a chill pill. All right?

And these are our go-to -- oh, my God, there's the Chinese delegation!

(LAUGHTER)

CAVUTO: All right.

They're going to go to the U.S. trade representative's office. Oh, my God, that could be the vice premier! We don't know.

(LAUGHTER)

CAVUTO: We got Fox Business Network's Ed Lawrence.

At stake here isn't just who gets to the Academy Award, America, but whether this global economy can avoid a slowdown, especially if the two biggest powers come to a trade war -- Edward.

EDWARD LAWRENCE, BUSINESS CORRESPONDENT: Well, Neil, we have enough security as if we were at the Oscars.

Just take a look. I'm going to show you some of the things that are going on right now. You can see the Secret Service is getting cars ready and everything ready for their arrival.

The key is to watch the dynamic of when they walk in. Now, the last time the vice premier visited Washington, he was all smiles, and even showed a rare show of emotion. Now, fast-forward to a few weeks ago.

The U.S. trade representative -- or fast-forward a few weeks and the U.S. trade representative says the Chinese have reneged on the concessions here. That was all also on the president's mind today. Just listen.

(BEGIN VIDEO CLIP)

TRUMP: The vice premier is coming here today. We were getting very close to a deal, then they started to renegotiate the deal. We can't have that. We can't have that.

(END VIDEO CLIP)

LAWRENCE: And President Donald Trump says that they are going to start the tariffs on Friday on $200 billion worth of Chinese goods, going from 10 percent to 25 percent.

Also, he says that they are going to start everything else that China is importing into the United States will be there, a 25 percent tariff. That paperwork is starting now. The Chinese trying within the next seven hours to delay those tariffs. They do not want to see them go into place.

And we're talking everything from inflatable rafts to strawberries to parking meters, some 6,000 items in that $200 billion. We are waiting for the vice premier from China to come in any minute at this time. The administration also preparing that paperwork, as I said.

The Chinese say that they will retaliate. The issue is that they have basically put tariffs on everything we import into China anyway. So we will have to see what those countermeasures the Chinese are talking about right now -- but, Neil, again, waiting any minute for the Chinese vice premier to come down this street.

Security is tight here -- back to you.

CAVUTO: All right, we will watch it closely.

I notice they're traveling in Cadillac Escalades, which apparently are popular in China, if you can get them in there. Thank you, my friend.

Let's go to Retired Colonel David Hunt.

You know, the fascinating thing about the colonel over the many years I have known him, way, way back, he was equating the military and economic success of China as hand-in-hand developments.

Well, here they be even more powerful on both counts, Colonel. What's at stake?

COL. DAVID HUNT, RET., MILITARY ANALYST: Well, it goes unnoticed -- and thanks for remembering -- that the Chinese military and the intelligence service own private businesses, billions of dollars' worth of private business.

So they are absolutely influencing what's happening between us and the U.S. And the issue is that the Chinese military leadership will lose money.

So I'm not so sure the Chinese are really willing to jump off a cliff, because the Chinese military and the intelligence services will have an awful lot to say about this.

CAVUTO: Colonel, what I also wonder about is who's in need of a deal more?

They, the Chinese delegation, we're told, reneged on some earlier promises because they thought, they thought, if we're to believe press reports, that the president, our president, was getting nervous, and was concerned about the pace of our recovery and needs a deal more, so they waited him out.

Who do you think needs this more?

HUNT: From a security standpoint, Chinese, for sure. That is not a strong economy, and looking at it from a -- again, security issue.

Our economy is right -- is world-class right now. And we can afford a slowdown a lot more than China. And, again, the pressure of the Chinese military and the intelligence services on these negotiations are very, very important to look at.

Not a lot of attention is paid because they're so behind the scenes.

CAVUTO: Right.

HUNT: But I think China's in a much more weaker -- weaker position than we are.

CAVUTO: Colonel, if we got them to behave economically -- or at least have a fair and open trade relationship -- could we apply that same to them militarizing all these islands out in the South China Sea and elsewhere, because that has gone unabated throughout all of this?

HUNT: Not -- that will take direct confrontation.

CAVUTO: Really?

HUNT: They have built those islands for the obvious reasons you just said.

And we have -- no one's touched them. So they have -- you can't fly over those things. I mean, they have controlled it, the air and sea over there. And I don't see them giving them -- giving that up without confrontation, which would be a serious effort on mostly our part.

CAVUTO: All right, now, in prior administrations dealing with the Chinese, they cheat, they lie. They don't do what they say they're going to do.

HUNT: Right.

CAVUTO: Colonel, if you were president of the United States, which is a very scary thought, but actually a fun one, how would you make sure they do?

HUNT: It's an intel thing.

And we have to be willing to pick up and leave the table. And my small part -- and I -- look, Trump is the only president that could have gone to North Korea, and the only guy that could probably confront -- I know Nixon is the only one who could have visited China.

CAVUTO: Right.

HUNT: But this administration has been willing to stick -- put a stick in the eye of the Chinese, and none of them have in the past.

CAVUTO: OK.

HUNT: I wouldn't bet against us in this.

CAVUTO: All right, Colonel, and I wouldn't bet against your sentiment, Colonel David Hunt, FOX News military analyst, as well.

This is outside the U.S. trade representative's office. I don't need any snide e-mails from you folks saying that I'm obsessed with this.

(LAUGHTER)

CAVUTO: But I do wonder what the Chinese delegation is going to be wearing, because, you know, it's an off-season, right? It's May.

Anyway, we're watching that. We're going to watch if they can come to some sort of progress on talks that will avoid tariffs from kicking in tonight. The drama builds.

Here's "The Five."

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