McSally: We have an unsustainable crisis happening at our border

This is a rush transcript from "Your World," May 7, 2019. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: The talks are still on, but, this time, it is not helping stocks, the Dow diving for a while more than 600 points, before finishing down about 471, this as president Donald Trump prepares to ramp up tariffs on some $200 billion worth of Chinese goods this Friday and maybe another $325 billion worth of them on top of that.

And if you think it doesn't affect you, wait do you see the potential hit to your wallet.

Welcome, everybody. I'm Neil Cavuto, and this is "Your World."

China's top economic adviser heading to Washington for trade talks on Thursday, but with White House officials accusing China of trying to renege on earlier concessions, the chances of reaching a deal before those tariffs kick in bright and early Friday morning, let's just say not looking good, and neither were equities.

That had stocks moving down, way down.

And we are all over it with Blake Burman at the White House, where this drama is unfolding, and FOX Business Network's Jackie DeAngelis on how much Americans, i.e., you, could be paying.

We begin with Blake.

Hey, Blake.


And the talks between the U.S. and China will indeed take place later this week, although it will be delayed a day. Now it's taking place on Thursday and Friday. And China said today that its top negotiator, the vice premier, Liu He, will be a part of those discussions.

As far as the expectations for China, a spokesperson for the Foreign Ministry saying today -- quote -- "Our hope is that the two sides should work together and move in the same direction and strive to take care of each other's legitimate concerns on the basis of mutual respect and equality and strive for a mutually beneficial and win-win agreement."

Now, after the markets closed yesterday, the U.S. trade representative, Robert Lighthizer, and the treasury secretary, Steve Mnuchin, went on the record saying the talks have suddenly gone backwards.

For example, Lighthizer saying -- quote -- "The bottom line is we felt like we were on track to get somewhere over the course of the last week or so. We have seen an erosion in commitments by China, I would say retreating from specific commitments that have already been made, in our judgments."

Now, while that has made investors nervous, President Trump happens to have an unusual ally in the top Democrat in the Senate, Chuck Schumer once again saying today that he believes that President Trump should stand tough.


SEN. CHUCK SCHUMER, D-N.Y.: China will take advantage of us decade in, decade out unless we're strong with them. That's what we have to do. And it will help America in the long run.


BURMAN: Neil, we are still waiting for that formal notice to be posted that will call for tariffs to be raised from 10 percent to 25 percent on some $200 billion worth of goods.

That will go into effect first thing on Friday. When you step back here and take a look at the big picture with all of this about this delayed meeting and who is coming, who might not becoming, keep in mind, there still officially is not a scheduled meeting between President Trump and President Xi -- Neil.

CAVUTO: So, 12:01 a.m. Friday, all this kicks in, right?

BURMAN: Yes, on Friday.

And when this happens, at 12:01 on Friday, so overnight Thursday into Friday, here in Washington, either in this building or the one behind me, the U.S. side and the Chinese side are going to be sitting down face to face with those tariff levels increasing.

CAVUTO: Amazing.

All right, buddy, thank you very much, Blake Burman at the White House.

Now to FBN's Jackie DeAngelis in New York City on the potential hit to your wallet if those tariffs go into effect -- Jackie.


And the tariffs and the potential threat to hype them up certainly has the stock market rattled. And it has it rattled for a really good reason. It can have an impact not just on the consumer, but the overall economy. If businesses that use Chinese goods see these kinds of price hikes, there will be a two-pronged impact. They're either going to have to absorb those prices themselves, or they're going to have to pass them on to the consumers.

Either way, you impact profitability, or consumer spending drops. That's the threat. Now, remember, these tariffs are on everyday goods that you and I are purchasing all the time, clothes, handbags, electronics, personal care items, so things like shampoo and perfume, home items, furniture, dishes, bed sheets, even meat and cereal.

Now, businesses have said absorbing the 10 percent tariff has been difficult enough. It will be nearly impossible if you hike those prices. And it's not just about prices.


RICK HELFENBEIN, CEO, AMERICAN APPAREL AND FOOTWEAR ASSOCIATION: Our members will start rushing out of China. And many of them have already left. And they go into another country, and they have to bump somebody out.

So there goes your product integrity right out the door, and prices go up. You bake inflation right into the system. And you know what happens? Prices go up, sales go down, jobs get lost. This is what scares us the most.


DEANGELIS: A study by the Trade Partnership suggests that this could have an impact of almost a million jobs.

And when it comes to how it would impact a family of four, for example, over the course of a year, almost $800. That's a lot for a lot of people. And when you look at GDP, the estimates right now, it could shave about three-tenths of a percent off. So consider that.

There's also the probability that there could be another 25 percent tariff impacting the remaining $325 billion of Chinese imports. So that could be coming down the pike as well.

There is one bright spot here, Neil. And a lot of economists are saying it will urge people if this goes through to buy made in the USA. It won't make up for all the losses, but that is a positive point.

CAVUTO: All right, thank you for looking at the half-full glass there. Thank you very, very much.

All right, so up until now, when it's been 10 percent, a lot of companies could absorb that without passing it on to you, or most of them not passing it on to you. They say, at 25 percent, all bets are off and that you will feel the pinch.

Keep in mind that when tariffs are imposed, governments don't pay them. You do.

So the impact for our economy with Lindsey Piegza. We have got FBN's Ed Lawrence at the White House and market watcher Alan Knuckman over at the CME.

Ed Lawrence, are you getting that sense that this is going to happen, that there's not a lot of time, presumably, by Thursday, for them to agree on much of anything?

EDWARD LAWRENCE, BUSINESS CORRESPONDENT: Yes, Neil, yesterday, I sat down across from U.S. Trade Representative Robert Lighthizer. The tone completely changed.

It looks like, unless the Chinese come on Thursday and say they're going to put back the concessions that they had rolled away, then these tariffs are going into effect. Robert Lighthizer, the trade representative, made no uncertain terms. He said the president is going to oppose these tariffs on Friday at 12:01 a.m.

CAVUTO: All right, so, Alan Knuckman, I'm looking at all of this.


CAVUTO: I'm looking at the relatively limited impact we have been seeing from what tariffs are in effect now.

And the ones that are proposed, all of a sudden, everything changes that if they go up to 25 percent, if they include $300 billions-plus more in goods, and if they go from a few dozen items to better than 6,000, as is likely the case. Then what?

KNUCKMAN: Well, there's a lot of threads here.

Now, optimism wins. I have been bullish and positive from a trader's standpoint for weeks, months, years, and looking like almost a decade now. So I don't think this changes the equation that much. We're only three quarters of a percent off of the all-time forever highs coming into today in tech and the S&P. So we're seeing a bit of a pullback.

Yes, the points seem scary, but in percentage terms we're down 1.75 percent today, not really that significant. Now, when we're talking about the Trump world and the way things are unconventionally negotiated, shall I say politely,. let's be prepared for anything.

We needed to be prepared for the statement that came on Sunday. I wouldn't be surprised and I don't think you would either if there was another statement tomorrow or the next day saying, everything's fine and we just made the greatest trade agreement in the history of the world.

So be prepared.

CAVUTO: Well, that -- no, you know, you're right. I mean, history has suggested that if you have been overcome by these dips or hits -- I'm not dismissing the severity of a 473-point hit in the Dow.

KNUCKMAN: It's unique.

CAVUTO: But, Lindsey, you could argue that, if people just calmly got through these hits, they would be richly rewarded for doing so, because every time this has happened in the past, markets have come back.

Now, that's a bit of a daring journey. But what do you think?

LINDSEY PIEGZA, ECONOMIST: Well, I do think that, at this point, it is sort of a waiting game.

And although the U.S. will not escape unscathed, we do know that the vast majority of the pain is being felt overseas. When we look at the impact of the tariffs from late 2017 to 2018, it shaved off about two-tenths of percentage point from top-line GDP here in the U.S.

The impact in China was about three times that or maybe even more. So we do know that China is feeling the pain, they do want to come to the table, and they do want to reach an agreement, as does the U.S. But there is more of an economic push on the Chinese side.

That being said, there's also somewhat of a political push here in the U.S., with the 2020 elections very much on the forefront of voters' minds at this point. The Trump administration does want to reach some sort of a deal, even if it's not a perfect deal, but a step in the right direction, in order to say that he met that promise, that campaign promise, and really pander to the base.

CAVUTO: You know, Alan, I'm looking at all the big U.S. companies that have exposure to China...


CAVUTO: ... from Intel, to Apple, to Western Digital, to Micron, to Qualcomm, anywhere from 20 as much as 70 percent of their revenue coming from that neck of the woods.

So any delay in a deal could also have an impact, couldn't it?

KNUCKMAN: Yes, but let's remember, I think China has a little bit more room to delay.

There are a lot of constituents here in the United States, from soybean farmers to the supply chains for all the manufacturers, to the consumer. And, again, it's a tax on us, meaning the U.S.

CAVUTO: That's right.

KNUCKMAN: These tariffs get paid by us, the consumer, maybe not in the first step. They get paid by the importer first, but then we pay.

So there is going to be some pushback if this drags out over time. Let's remember how Mr. Trump operates. My father is a psychologist, so we can go down this road.


KNUCKMAN: He loves to create a drama arc, a drama arc, and we're seeing that come into play right now.

But every other time, until it doesn't happen, the markets have bounced back and made new all-time highs after pullbacks and sell-offs. It has been an opportunity.

CAVUTO: All right, Edward Lawrence, I mean, the argument has been from the administration that China needs a deal more than we need a deal.


CAVUTO: Is that still the ongoing sort of strategy?

LAWRENCE: And that is the strategy.

And, as you know, their economy is suffering. And one of the things that they have to balance is actually the supply chains actually moving out of China. Some companies will look at this 25 percent tariff that could be enacted on Friday and then the additional 25 percent on everything else, and possibly move some of the supply chains.

I saw analyst reports -- this was, I guess, the end of last year -- where they were saying Apple at 25 percent making an iPhone in China, it might be worth Apple moving that supply chain out of China. And that's something that Chinese just can't get back easily.

So this is something they're going to have to weigh, as companies look decisions long term down the road. Are they going to move those supply chains? Could it be a fundamental shift in the Chinese economy? And they need to protect for that.

CAVUTO: Guys, I want to thank you all very much.

And to Alan's point about looking at the half-full glass on this, just a reminder that even though we fell about 473 points today, that wasn't even 1.8 percent of the Dow's value.

Just as a point of perspective, on October 19, 1987, when the Dow fell a similar amount, a little over 500 points, it was a quarter of its value. That was then. The argument, it's a very different market now.

We will have more after this.


CAVUTO: Well, they might not have a health care plan, but it looks like the administration is moving fast to get an immigration plan going, as the U.S. Border Patrol reports 30,000 apprehensions in -- get this -- the past 10 days.

The president meeting with key senators today, all Republican, on this growing crisis, among them, Republican Senator from Arizona Martha McSally.

Senator, thank you for coming. How did it go?


Well, I appreciate being over at the White House and visiting with the president and other senators to talk about the border crisis we're dealing with in Arizona, and how we can move forward with legislation, not just to secure the border, but we had a really good conversation about modernizing our legal immigration system as well, something I have been working on for a long time.

But as we speak, our city of Yuma, Arizona, had declared a state of emergency. We have an unsustainable crisis happening at our border, hundreds of people often apprehended at the same time, unable to continue to keep them. The catch and release and the loopholes in our laws have to be closed.

And so we need Democrats and Republicans to work together to close these loopholes now and secure the border. So that was the conversation we had today.

CAVUTO: All right.

Now, no Democrats were there. The administration certainly has tried to reach out on this. Democrats say, not so. Do you know if Democrats were invited?

MCSALLY: I'm not sure what the process was there.

I just would tell you it was a thoughtful conversation. This should be a unifying issue. Border security used to be unifying. And I think there is a lot of pressure on the Democrats, as there should be, that they need to stop obstructing, because this isn't a game in Arizona. It's a public safety issue.

It's a national security issue. And everybody knows, when I'm out and about in my state, that we have got to fix the border. We got to secure it and we got to fix our immigration system.

So, I just ask my colleagues, let's come to the table and let's work on this together, so that we can solve it for the American people.

CAVUTO: Well, is that the plan then, Senator, that all of those things would be addressed in this plan discussed today with the president? Did he talk about that? Did he talk about how we would use the $4.25 billion in emergency funding he's looking for?

MCSALLY: Well, I support the emergency funding because of the crisis. And we need to push that through as well.

Again, this was a meeting where we talked about ideas to revamp our legal immigration system and secure our border, build the partnerships between the executive branch and the legislative branch, so we can set this legislation up for success to solve these really pressing problems.

So, we talked about a lot of issues. And it was a very good collaboration and discussion about how we can move forward on this.

CAVUTO: A lot of the things you mentioned, Senator, are things that a lot of Democrats are mentioning.


CAVUTO: I'm wondering, was the understanding among your colleagues there meeting with the president, you would come up with a plan that would encompass immigration reform and the like, maybe DACA, what have you, the children of illegals who are here and what to do about them?

Is that the idea, come up with a plan...

MCSALLY: Well...

CAVUTO: ... let the Democrats look at it and run with it, or what?

MCSALLY: Yes, so, again, we were just having conversations today.

But any legislation, obviously, the -- the -- our branch of government, the congressional branch, has to be the one that starts it and moves it out of committee. But they have done substantial work. And we're working with the administration on it.

We very much -- though, we're focusing on border security, commonsense issues...

CAVUTO: All right.

MCSALLY: ... and then modernizing and having a 21st century immigration system.

I meet with businesses all the time.


MCSALLY: They're looking for workers, high skills. We have got to compete with others around the globe. And this is a good step forward.

CAVUTO: All right, we will see.

Senator, thank you very, very much.

MCSALLY: Thanks, Neil.

CAVUTO: I want to go to my colleague Shepard Smith, apparently an incident in Colorado -- Shepard.

SHEPARD SMITH, ANCHOR: We have just gotten word of a school shooting in Colorado.

The location is Highlands Ranch, Colorado, where we're told one suspect is down and there are multiple victims. The school in Douglas County, Colorado, is called STEM School of Highlands Ranch.

Law enforcement sources there are telling our local station FOX for Denver and the Front Range that they have one suspect, that they're looking for two more. They believe at least two people have been injured.

Local reports indicate a plethora of law enforcement have arrived on scene there, more than 50 law enforcement agents said to be there working to close down areas around this school. Again, it's in Douglas County, Colorado, outside of Denver. Highlands Ranch is the name of the place, a STEM School there.

And again, one suspect down, looking for two more, a very fluid situation. And we're expecting a feed in from our local station momentarily there.

The sheriff in that particular county has said that they're going to have a news conference in just a moment. So we expect to have further information from him, if and when that begins.

Our local station, Fox for Denver, has crews on scene. And the latest information is that they're, as I mentioned, cordoning off the area. This is a Google Maps shot of the place, because we don't yet have a feed out of there.

But whether the other two suspects have been brought into custody is a matter for future reporting. We expect to hear more from authorities there in just a moment.

Our coverage will continue, and "Your World With Neil Cavuto," right after this.


CAVUTO: Vice President Mike Pence just making some news in Venezuela.

To Rich Edson at the State Department.

Rich, what's going on?

RICH EDSON, CORRESPONDENT: Neil, Vice President Mike Pence has just announced that the United States is going to try to convince Venezuelan officials to flip on Nicolas Maduro.

The vice president says the United States is lifting sanctions from a former Venezuela intelligence chief who last week announced that he was going to then support the opposition leader and the U.S.-recognized president, Juan Guaido.

Pence says the U.S. will offer sanctions relief to all those who do the same.


MIKE PENCE, VICE PRESIDENT: As President Guaido builds a brighter future for Venezuela, we hope the action that our nation is taking today will encourage others to follow the example of General Christopher Figuera and members of the military who've also stepped forward and taken a stand for the Bolivarian constitution and libertad.


EDSON: Pence also suggested the United States would sanction the 25 magistrates in the pro-Maduro Supreme Court if they fail to change the way they're conducting business in that country.

On top of that, the vice president also says that the United States will be sending a hospital ship to the Caribbean to address the crisis there. The ship is expected to arrive in June. And it's on a five-month mission in that region.

The U.S. has been consistently calling out Cuba and Russia for their interference in the crisis in Venezuela, supporting the Maduro regime there. Last week, Guaido tried to move, tried to get the military establishment to finish the overthrow of Nicolas Maduro. That push failed.

And since then, Guaido has been calling for continued demonstrations in that country -- Neil.

CAVUTO: Rich Edson, thank you very much.

To retired Army Lieutenant Colonel Daniel Davis.

Colonel, I know we're hitting you with these latest developments broadside here, but Guaido, as you know, sir, has been talking about getting U.S. help here, that this is too much for the protesters to handle on their own. What do you think?

LT. COL. DANIEL DAVIS, RET., U.S. ARMY: Yes.  You know, honestly, I think that these measures were a little bit strange, honestly, because I -- Guaido has been trying to get the military to flip on his side since January.

And then, last week, when you had the absolute best chance in the world, that didn't happen either. And so I don't know what these very small measures here are going to do, because most people don't even know they have sanctions on them. It doesn't give them any money or anything.

So I don't know why they would switch. But the bigger issue is, why would we want to? Because any time we have tried over the last several decades to regime-change, by whatever means, whether overt military or economic means, it has never worked out well.

And when we try to insert ourselves into another country's diplomatic situation, we basically make their problems our problems. And that doesn't help anyone.

CAVUTO: We're even seeing it in Guaido's popularity numbers. They have been declining amidst his failure to get Maduro to leave.

So I'm wondering where you see this going, with or without assurances to generals?

DAVIS: Yes, and that's something we need to, I think, really be careful about.

We don't want to continue to put America's credibility on the line by trying to advocate for something that then doesn't work, because then that actually lessens our influence that we could have elsewhere. And, again, it just doesn't work out for us.

So we need to let the people of Venezuela handle their own situations. And, look, it's a terrible humanitarian disaster. We should be able to help with that any way that we can, help diplomatically. But we need to take the military off the table, because that won't help anyone.

CAVUTO: Why do you think, Colonel -- and you and have I chatted about this before -- the generals remain so loyal to Maduro?

Now, I know they, unlike lower-ranking soldiers and indeed the Venezuelan people, they are getting food, they are getting medicine. Maduro is taking very good care of them.

Do you think we made any guarantees to protect them, offer them amnesty -- I know that was on the table some months ago -- to flip? So far, they're not flipping, or at least not in significant numbers.

DAVIS: Right. Right.

And I do think that we probably made efforts in that regard. But one thing we have to keep in mind is, there's very, very certain reporting that many of these generals are very much in the corrupt nature of the Maduro regime. They benefit from the status quo.

They're the last ones in the world who are going to want to let it -- see it end, because then their gravy train, their ticket to get all kinds of corruption and money also would dry up. And so there's -- they're not likely to do that.

So we probably should try to find some other ways, because that's -- I don't think that's a winning ticket.

CAVUTO: All right. And to your point, Maduro is still there. He is not moving.

Colonel, thank you very, very much.

DAVIS: Always my pleasure. Thanks.

CAVUTO: All right, I want to go back to my colleague and friend Shepard Smith with more on this Colorado incident -- Shepard.

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