This is a rush transcript from "Your World," May 14, 2019. This copy may not be in its final form and may be updated.

NEIL CAVUTO, ANCHOR: You are looking live at the president of the United States. He is campaigning of sorts in Hackberry, Louisiana. He is going to do some fund-raising there as well.

He's been talking up the economy, talking up the prospects for a trade deal, eventually, amid word that we just got moments ago that the treasury secretary, Steve Mnuchin, does indeed plan to go to China. No time frame has been announced here, but that the talks could continue. We just don't know how soon.

We do know that at the corner of Wall and Broad they liked these developments. We were up about 210.5 points, off our highs for the day, and making up a little less than half the ground that was lost yesterday.

So what's really going on, on the trade front?

Let's go to Blake Burman at the White House.

Hey, Blake.


And President Trump today described what's going on between the United States and China not as a trade war, but as a -- quote -- "little squabble."

Before the president left the White House here for Louisiana, the president said he was not surprised that China retaliated, said the talks between the U.S. and China have not collapsed and at this point he says it is the U.S. and not China that so far is coming out on top.


DONALD TRUMP, PRESIDENT: I think what we're winning it. We're going to be collecting over $100 billion in tariffs.

Our people, if they want, they can buy from someplace else other than China, or they can -- really, the ideal is make their products in the USA. That's what I really want. Yes, we're winning it.


TRUMP: You know what? You want to know something? You want to know something? We always win.


BURMAN: Earlier today, a spokesperson for China's Foreign Ministry said that China is going to fight to the finish and contended that it was the U.S., and not China, that had backed out of prior agreements, that spokesperson saying at one point -- quote -- "It is never China that backtracks and breaks its commitments."

Meantime, Neil, back here in Washington, even Republican leadership is starting to get leery at this notion that this could be a prolonged trade war.


SEN. MITCH MCCONNELL, R-KY: Ultimately, nobody wins a trade war, unless there is an agreement at the end, after which tariffs go away.

SEN. JOHN THUNE, R-S.D.: A lot of these, they obviously -- the costs get passed on to consumers. So there are impacts there. There are clearly impacts on the ag economy. And we're feeling that in farm country.


BURMAN: Now, the president also suggested today at one point that the Federal Reserve could help out by lowering interest rates.

This was one of his many tweets on China today, writing -- quote -- "China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are and will be losing. If the Federal Reserve ever did a match," as he put it, "it would be game over. We win."

In any event, the president says, Neil, China wants a deal. We will see -- Neil.

CAVUTO: We will see, indeed. Thank you, my friend.

Again, just to review here, June 1 is when all of this kicks in, the tariffs higher on our side, tariffs higher on their side, affecting thousands of goods.

Let's go to FOX Business Network's Deirdre Bolton on what could happen next.

Hey, Deirdre.


Well, a lot of the products that were targeted by the Chinese, not surprisingly, are agriculturally based. So the Chinese are doing this for political strategy purposes. They know that the states that produce a lot of what we export, at least in agribusiness, are states that voted for President Trump.

So decaf coffee is just one of the items on the list, nuts, frozen fruits. So a lot of these items are the ones facing tariffs. So, long story short, any Chinese person who wants to buy any of these American products, Neil, will just have to pay more for then as of June 1.

Now, last week, President Trump also threatened, but didn't yet put into effect, additional tariffs on a new list in the thousands of Chinese goods. On June 17, the office of the U.S. trade representative, of course, as we know, led by Robert Lighthizer, began the formal process that could lead to those new tariffs.

So the public hearing, that's on the 17th. And that public comment period lasts until June 24. So tariffs in theory could not be imposed until after that day, but that would really up the ante. What they're talking about is thousands, as I mentioned, of new Chinese goods worth about -- on $300 billion worth of imports per year.

So, currently, as we know, the U.S. has about a 25 percent tariff on $250 billion worth of Chinese goods. All of these decisions, of course, increasing the stakes ahead of the G20 summit in Osaka, Japan, June 28 and 29, when the Chinese president, Xi Jinping, and President Trump are expected to meet.

So, Neil, obviously, they're going to have a lot to talk about -- in the meantime, back to you.

CAVUTO: It would be funny, though, if they never even mentioned trade, like...



BOLTON: They just talk about soap operas and...

CAVUTO: Are you going to eat that, you know?

BOLTON: Yes. That would be good.

CAVUTO: All right, thank you, Deirdre, very, very much, Deirdre Bolton.


CAVUTO: All right, so much at stake in the next couple of weeks. Wall Street was betting kind of today that maybe they overdid it yesterday, maybe cooler heads will prevail. You have heard that.

We were up about 207 points, 24, the Dow 30, stocks were in the green today, something that was the mirror opposite yesterday, when virtually all of them.

Let's get the read from Susan Li. We got Hitha Herzog with us of H Squared Research, Stock Swoosh editor -- is that you call it? You are the editor. You're in charge of it. It's you.

MELISSA ARMO, THE STOCK SWOOSH: Well, I own it. I am the Stock Swoosh.

CAVUTO: You are -- cu cu ca choo, you are the Swoosh.


CAVUTO: So, Melissa Armo here.

I'm curious, when you look at this, Wall Street today vs. Wall Street yesterday, what's more accurate?

ARMO: Today really tells us absolutely nothing.

Everybody literally yesterday, all the analysts, all the experts were saying, buy the dip, this is a great buying opportunity, we're lower.

You know what? I heard you even say it. Do you really want to buy a falling knife? I don't think that this is over. And given the next six weeks and what could happen the next six weeks, if you buy here, you may be in a world of pain going into the next six weeks.

CAVUTO: So, you're guarded throughout this. How do you play it?

ARMO: Absolutely cautious.


ARMO: Do not go long anything right now taking new positions. If you're in the market long term, I believe that the uptrend holds.

However, to get in new positions now in any major stocks or even the overall market, I think would be very -- not a good idea.

CAVUTO: Yes, we're trying to read the consumer, right?

Hitha, you follow retailers very, very closely. We do know that around June 1, thereabouts, if nothing changes, a lot of goods are going to get a lot more expensive, up to 25 percent more expensive.

I had the former president of Wal-Mart here who was saying they're worried about that. All the retailers are very worried about that, because you can pass along smaller increases like the ones we have already absorbed -- 25 percent is another matter. What do you think?


Well, the consumer is not going to pay an actual tariff, but to your point, they're going to pay for the price side. So a family of four is looking at potentially $500 extra on items like apparel, footwear.

CAVUTO: Unless they find an American alternative. Right?

HERZOG: Exactly.

But you have to think about the retailers that -- or the manufacturers that have to relocate everything from China to the United States. So footwear right now, 69 percent of footwear is produced in China, and then 42 percent of apparel is produced in China.

So, inevitably, the consumer will have to pay for that price hike. The issue is, will it even happen? So I think that people -- I tend to be on the other side of the argument, saying, you know what, let's just take a step back here. Let's not get our knickers in a bunch, I guess I should say.


HERZOG: And chill a little bit.


CAVUTO: You know what is interesting?


CAVUTO: It's first time I have heard some getting in your face back from the Chinese.

You have worked and covered the area very well, Susan. And I know that Chinese state media was touting something today -- 5,000 years, we have endured trials and tribulations, hinting, obviously, that -- well, 5,000 years is a long time.

SUSAN LI, CORRESPONDENT: It is a long time, isn't it?

CAVUTO: Right.

LI: And they do plan for the long term. And I guess that's part of their thinking, this miscalculation in these trade talks, right?

They thought, OK, well, let's wait it out to the midterms. And then let's wait it up after the Mueller report, and maybe they will wait it out to 2020. There are -- there is that speculation on the markets.

I think, though, given what's happening in the Chinese economy, there's a high wall of debt at this point. You have slowing growth. You also have a weaker currency. I don't think they can afford to wait that long, to be honest.

CAVUTO: What about doing something really nuclear? They could devalue their currency, Melissa. They could also stop buying our treasuries, or worse, sell them.

ARMO: I don't think they're going to go nuclear right now because they don't want this to escalate it.

They didn't really want this to even happen at all. I think Trump is pushing the envelope. And I think it's eventually going to get to the point where it gets very bad.

LI: And how does it help them anyways by selling off these Treasuries?

CAVUTO: Yes, they only hurt themselves.


LI: It weakens their currency, right?


CAVUTO: Well, they might like that.

HERZOG: Yes, where else are they going to go?


HERZOG: When is more liquid stable?

ARMO: They're going to hang on.

But I honestly believe that it's going to get to the point where everything gets taxed. You can call it a tax. You call it a tariff. You can call it whatever you want.


CAVUTO: We pay it.

I'm so glad you keep mentioning that, because I don't mean to politicize this one way or the other, but tariffs are taxes that we pay. It's not the government.

ARMO: But it's going not to be exactly 25 percent.


CAVUTO: No, no, no, no.

But -- but, Hitha, there are alternatives, right? Some alternatives in some markets, sometimes, you have to buy the stuff from China or you don't.


ARMO: What are the most expensive -- like, what is the stuff that has the highest profit margin that's really -- that could be the cushion?

Because like, food, for example, things that have a bigger profit margin, those companies, what are those things? Those companies are probably going to absorb some of that.


HERZOG: That's exactly what I was saying. It's apparel. It's footwear.

ARMO: It's clothing.

HERZOG: It's clothing.

But these are discretionary items. I mean, there is -- this is...

CAVUTO: It's not stuff you have to, have to have.

HERZOG: You have to have to these, exactly.

So I think people -- again, we're talking about these tariffs, that consumers are really going to feel the pinch, and what's going to happen forward thinking into holiday?

Nothing is going to happen. We're going to be fine.


CAVUTO: But let me ask you.

A lot of American companies have been hedging their bets, first of all, buying a lot of goods to stack on their shelves that helped the first- quarter GDP. But a lot of them have been getting out of China or spreading their manufacturing to other locales, like Mexico, like Cambodia, Vietnam.

LI: Vietnam, yes.

CAVUTO: What do you make of that, and that that is something the Chinese fear a lot more?

LI: That's been a trend for the last five years.

It's just -- it's not brand-new. That happened in the last few years.


CAVUTO: You don't think it accelerated with this?

LI: I think it might accelerate.

China is not a cheap place to produce anymore.

CAVUTO: Yes, that's true.

LI: And, by the way, it's not just the consumers that we hurt. What about the U.S. companies that operate in China? What about the plants that Apple owns or Boeing and Tesla?


HERZOG: It is very hard to remove all of that manufacturing out of China.

It's like a slow-moving barge to get all of that manufacturing out very quickly.

CAVUTO: But they have been trickling and doing this for a while.


ARMO: I think what's going to happen is -- and this is where it's going to be between now and the end of the year -- if a deal doesn't get done in 2019, which low odds that I think that a deal does get done in 2019.


ARMO: Then China is going to roll the dice. They're going to take it into 2020, see if Trump doesn't get reelected.

However, that is very risky, because if Trump does get reelected, Trump will be emboldened through this process. And it will get worse for the Chinese then and then there could be tariffs going on I'm talking 12, 24 months longer.

And that's going to -- where you're going to see the effect then in the economy.

CAVUTO: How did you get to be Debbie Downer all of a sudden?


ARMO: I'm not Debbie Downer, but I said this to you on Saturday.

CAVUTO: I know, but you were Ms. Bullish before.

ARMO: I'm bullish. I'm bullish on the market.


ARMO: I'm bullish on the market, but that's a different -- that's a different thing, because I have done business with Chinese corporations.

CAVUTO: I understand.

ARMO: So I understand that they're going to push back hard. And they're not going to...


CAVUTO: Well, they're pushing back.

Real quick.

LI: I just want to make the real quick point, the S&P 500 has been up 20 percent since the last time we saw this, which was Christmas Eve in 2018.


ARMO: If we go right straight back up to the highs, right after this rally today, if we go right straight back up to the highs and get over the highs, then I will say, OK, great.


ARMO: I don't think it's going to happen.


CAVUTO: When we have had these China dips, if you bought on those dips, you did well.

ARMO: But one tweet takes us boop, and then we go right down.

CAVUTO: How was that again? Boop.



ARMO: That's right, one Stock Swoosh away.

CAVUTO: All right, the attorney general of the United States, William Barr, is now investigating the investigators. He wants to go back to how this all started.



CAVUTO: The attorney general, Bill Barr, is tapping a federal prosecutor to look in to what got the Russian probe going in the first place. Do you -- do you support that move?

SEN. CHARLES GRASSLEY, R-IA: Well, absolutely. And I applaud Barr for following through.


CAVUTO: All right, that was Iowa Republican Senator, member of the Judiciary Committee, by the way, Chuck Grassley on board with Attorney General Bill Barr now wanting to investigate the investigators.

Catherine Herridge on these latest developments.

Hey, Catherine.

CATHERINE HERRIDGE, CHIEF INTELLIGENCE CORRESPONDENT: Well, Neil, U.S. attorney John Durham is an experienced prosecutor whose portfolio includes highly sensitive government corruption cases, including the misuse of FBI informants, destruction of CIA evidence, as well as ongoing leak investigations.

A former Justice Department official with 27 years of experience said Durham is apolitical.


JAMES TRUSTY, FORMER FEDERAL PROSECUTOR: Durham is a career prosecutor with unassailable background. And he will do it right. He's a guy who's well-known in the prosecuting community as a tough, but fair, experienced litigator.


HERRIDGE: Durham began his investigation weeks ago, working directly with Dan Coats, the director of national intelligence, and CIA Director Gina Haspel.

Sources tell Fox that Durham is focused on the months leading up to the 2016 election, including the use and initiation of informants, whether it was based on solid evidence and properly predicated, as well as irregularities in the surveillance for an application process for a Trump campaign aide.

With the Durham appointment, a Senate Democrat leveled new criticism, as a senior Republican put his investigation on pause.


SEN. LINDSEY GRAHAM, R-S.C.: I'm not going to use this committee to get in their way. We don't need a bunch of politicians being prosecutors.

SEN. RICHARD BLUMENTHAL, D-CONN.: The investigation is a politically motivated distraction. It's a waste of John Durham's talent. It's a threat to his reputation for being a straight shooter, a serious and straightforward prosecutor.


HERRIDGE: The former director of national intelligence, James Clapper, whose actions are likely under review and now works at CNN, said today that Durham's focus is misplaced, and it ought to be on the Russian election interference -- Neil.

CAVUTO: All right, Catherine, thank you very much, Catherine Herridge.

HERRIDGE: You're welcome.

CAVUTO: Now let's go to North Carolina Republican Senator, by the way, a member of the Judiciary Committee, among other things, Thom Tillis.

Senator Tillis, good to have you, sir.

SEN. THOM TILLIS, R-N.C.: Good to be back, Neil.

CAVUTO: How do you feel about this?

TILLIS: I think it makes sense.

I agree with Chair Grassley in the segment before made that we need to really to -- if we want to reestablish confidence in the Department of Justice, the FBI, there were some questionable practices dating all the way back to the Clinton e-mail scandal.

And I think it all needs to be investigated to make sure people stayed within the rules and acted properly.

CAVUTO: Couldn't the inspector general do that, sir, or does he have a different edict?

TILLIS: Well, I have requested specifically what the scope of the inspector general investigation is.

I think that they can run in parallel. I believe there will be different timelines and slightly different scope. But it's just going to give sunshine to the entire process dating all the way back to Hillary Clinton, the creation of the dossier, and those events, which I think are important to take a look at.

CAVUTO: Senator, your colleague Senator Richard Burr has wanted to hear from Donald Trump Jr., we are told, because of some discrepancies he just wanted to clear up.

He asked him a couple of times voluntarily to come. And the word is that Donald Trump Jr. didn't. And so he's subpoenaed him. And it's caused a big ruckus, obviously, within your party, with the -- with Donald Trump Jr.'s dad, the president. How do you feel about that?

TILLIS: Well, I feel like, if I were Donald Trump, I would be worried about coming here before Congress with the spectacle that we have here.

We have had the Democrats, after I joined Republicans -- some Republicans to make sure the special counsel could do his job, he did it. He found no collusion, and he found no obstruction.

What some of the Democrats seem to be wanting to do is conflating an investigation that Senator Burr is pursuing with a complete report that found that the president wasn't guilty of collusion, nor guilty of obstruction. They need to move on from that.

But when you -- look, when you have got in the House a guy bringing a bucket of chicken and the spectacle that we're seeing over there, treating these high-ranking officials, I could absolutely understand why Trump Jr. is not going to come before Congress.

CAVUTO: But it was an Intelligence Committee under Republican control and a Republican chairman who was requesting his presence, right?

TILLIS: Well, that -- that's something that the chair will have to work out with the Intelligence Committee, and an investigation that, incidentally, is on counterterrorism.

It is not a re-prosecution of the special counsel investigation. What I want people to do here is take a look at the reality that that investigation is over. And then I defer to my senior senator on whatever other actions he wants to take.

But I do think that Donald Jr. is rightfully hesitant to come before this Congress because most of the behavior that I have seen on the other side of the aisle, not Senator Burr's, is purely politically motivated.

CAVUTO: Do you know the reaction he got among fellow Republicans for pushing that? It clearly surprised the president.

TILLIS: Well, I think that we all found out about it at the same time.

So I won't talk about how other members reacted. I just immediately went to the reality that I see Democrats on the Hill trying to reopen the special counsel investigation. And that's something that I think we should reject out of hand.

CAVUTO: Real quickly, sir, the president is talking this trade war today, and saying we're going to win, that tariffs have generated $100 billion to us, and so we're winning that.

First of all, that $100 billion figure is substantially off. But, having said that, do you worry that he is overly embracing tariffs?

TILLIS: No, I think, at this point, we have to give the president a lot of leeway.

I have spent a lot of time researching China. They're stealing our intellectual property. They're -- they're actually a national security risks. They're -- they're a bad actor that we have for the first time in decades had a president who's willing to stand up to them, because China knows what the president knows.

CAVUTO: All right.

TILLIS: If they get into a war, a trade war, they're going to lose.

CAVUTO: All right, Senator, thank you for taking the time. Good seeing you again.

TILLIS: Thank you, Neil.

CAVUTO: All right.

All right, in the meantime, you won't believe who is slamming Democratic presidential candidate Joe Biden, this time over climate change and this time over an intraparty squabble that just broke out like crazy.



REP. ALEXANDRIA OCASIO-CORTEZ, D-N.Y.: I will be damned if the same politicians who refused to act then are going to try to come back today and say we need a middle of the -- middle-of-the-road approach to save our lives. That is too much for me.

JOSEPH BIDEN, D-PRESIDENTIAL CANDIDATE: I have never been middle of the road on the environment. And I would tell her to check the statement that I made and look at my record.

She will find nobody has been more consistent about taking on the environment and the green revolution than I have.


CAVUTO: All right, so middle of the road or just rocky road?

See what we did there, the road analogy?

Anyway, former Vice President and 2020 front-running presidential candidate Joe Biden defending his stance on climate change, after attacks from Democratic Congresswoman Alexandria Ocasio-Cortez.

But this is a battle with the left and the moderate members of the party that could erupt come convention time next year.

Let's go to The Wall Street Journal's Jillian Melchior. We have got Democratic strategist Max Burns and Republican strategist Noelle Nikpour.

So, Max, as the Democratic strategist here, is it good strategy for two big names in party to be arguing over this issue?

MAX BURNS, DEMOCRATIC STRATEGIST: Well, I think Joe Biden certainly has his strategy that in the numbers seems to be paying off of sort of building a coalition outside the left.

The challenge is, against Alexandria Ocasio-Cortez, who's done more, it can be argued, for climate change in six months than the Democrats have in 20 years, do you really want to fight against that stream? Because she certainly has the more vociferous support in the party.

CAVUTO: But she won't like a moderate approach to it, right? She made that very clear.


I mean, I think one of the really interesting things here is, it is a radical proposal. It would be a total remake of the entire American economy. And she's not really backing down from that.

And so I think the risk is on the left. You saw that Obama's policies, which were, theoretically, compared to what she's doing, middle-of-the-road policies, are no longer considered acceptable. And I think even if she doesn't get what she wants, in this case, she's pushed the conversation much, much further left.

And I think the American public needs to know that if you have a candidate that's being drawn left by that far, far, far left wing on climate change, you're probably going to end up with some pretty extreme policies.


CAVUTO: But you might want to see, first of all, how it polls in some of these early primary and caucus states, right, before you leap to that.

What do you think?


Yes. And you had mentioned something that was interesting to me. Yes, AOC has done a lot for climate change, and she's introduced policies, but they're not well-thought-out policies.

I mean, anybody can throw together a plan, but it's not sustainable. Look, not a long time ago, you had Barney Frank, who I classify in the total liberal column. He came out and said that some of these policies, some of these things that they had are not even sustainable.

If you introduced them all to the economy, it would shock the economy.

CAVUTO: So, they're all for cleaner air, and a better environment and all that.

But I think, Max, what's come up is this idea that they haven't costed it out. And that's I think what Barack Obama was saying, Nancy Pelosi, some of these others. But there does seem to be a real clear divide between, I don't know, establishment Democrats, if you will, and the new wave that's come in with all that passion.

And you don't want to tick them off, right?

BURNS: Which is interesting, because you see elsewhere in the country that divide is actually lessening. A majority of young Republicans say climate change is a concern.

Senator Cornyn talked about beating climate change.

CAVUTO: But there's a big difference between that and spending trillions of dollars with an unspecified goal, right?

BURNS: Well, this is a challenge.

We have been subsidizing oil and gas for almost 100 years.


CAVUTO: That's fair enough, but this is bigger than all of the above, right?

BURNS: No, it's saying, we have money for these subsidies for these big Republican donors. We don't have subsidies for clean tech.


CAVUTO: But subsidies is a small subset, isn't it?

MELCHIOR: It's like a scale of magnitude here.

I mean, if you look at the price estimates for New Green Deal, we're talking not in the billions, but in the trillions of dollars. And I think that there's this myth that AOC, we have got money for this, we got to do like a World War II thing.

No way. This is something that is going to be fundamentally operating like a regressive tax. I mean, I know families that are having a hard time paying for air conditioning in the summer already. That's with our current system.

If you're going to do all these things that make traditional energy much more expensive, we got to be honest, this is going to fall on certainly the middle class, but it's going to hit poor Americans the hardest. It's going to be a huge...


CAVUTO: Well, Bernie Sanders does spread that out to middle-class tax hikes, because he says the rich can't bear at all. Right?


But, I mean, is this an issue that's really going to bring people to the polls? I mean, you know...

CAVUTO: Well, it can galvanize your base. If your base likes it, it will galvanize it.


NIKPOUR: It might bring them out in the polls for the primary, but in the general, depending on if Biden gets it...

CAVUTO: You don't think it will?

NIKPOUR: ... do you think that all the Bernie Sanders people that were rallied in for climate change are going to be gung-ho for Biden?

I mean, what's going to happen to that...

BURNS: Well, I think right now this time in 2015, we were debating whether it would be Marco Rubio or Jeb Bush.


NIKPOUR: That's true.


CAVUTO: You're exactly right. You're exactly right.

But is it fair to say that the passion in the Democratic Party is with the Ocasio-Cortezes, is with that wing that urges bigger thinking on some of these big issues, rather than just moderating them?

BURNS: Yes, absolutely.

And it's not...

CAVUTO: But the moderate has the better chance of technically winning, don't they?

BURNS: I don't agree.


CAVUTO: Really?


BURNS: I think the myth is that we have moved the Democratic Party to the left, instead of going to where the base has been for 40 years.

CAVUTO: But I can remember when Democrats took a hard left turn in 1972, passed on a middle-of-the-road guy, Edmund Muskie, and instead went to this guy George McGovern.

And though he had the passion and the base that loved him, he went down to huge defeat.

BURNS: And it's a much different country now.

I mean, you talk to farmers who are going to be affected in their crop yields and where they can even grow for climate change. You talk to the military that's put in multibillion-dollar climate change research plans, they certainly take it seriously.

CAVUTO: But there's a difference between multibillion and multi-multi- multi-trillion, right?

BURNS: When has the U.S. ever done anything small?


BURNS: I mean, when Ronald Reagan fought communism, we didn't say, let's do it on the cheap.

CAVUTO: Yes, but we used to have money to do that.


MELCHIOR: When we're talking about some of these proposals, like whether it scares the public, you have got AOC saying abolish air travel.

You have got Bernie Sanders adviser David Sirota saying...

CAVUTO: Technically didn't say that, as much as find alternatives.


CAVUTO: She wasn't tabling all planes.


But you have got David Sirota saying in a column that Thanksgiving is bad for the climate, it's a celebration of flesh-eating, we got to give up the turkey because we're so concerned about that.

CAVUTO: Did they say that?



MELCHIOR: And I think that's the kind of thing that is going to scare the voters.

CAVUTO: You didn't tell me that.


BURNS: If that makes it into the bill, I will oppose it too. But I think turkeys are safe.

CAVUTO: All right, for now. Well, it depends on the turkey.

All right guys, I want to thank you all very, very much.

First, the oil ships. Right now, Saudi Arabia says that a key oil pipeline has been attacked, a drone did it. And look at how it's affecting oil prices here, because these incidents keep popping up, one a day, and the days are piling up, and our ships are getting closer to the region.

What the heck is going to happen now?


CAVUTO: All right, out of office, but, boy, not out of zings.

Rod Rosenstein goes after James Comey, surprises a lot of graduates at a special ceremony, and surprises Comey himself -- after this.



MIKE POMPEO, SECRETARY OF STATE: We fundamentally do not seed a war with Iran.


CAVUTO: Well, try telling that to nervous energy traders who are watching the developments right now in the Persian Gulf and wondering what exactly are we up to, what exactly is Iran up to?

Some new developments in the region that sent the price of crude oil surging.

Jennifer Griffin at the Pentagon with what's happening.

JENNIFER GRIFFIN, NATIONAL SECURITY CORRESPONDENT: Neil, Iranian- backed Houthi rebels in Yemen claimed today seven of their drones attacked an oil pipeline in Saudi Arabia, shutting down one of Saudi Arabia's major oil pipelines Tuesday, further ratcheting up Gulf tensions after the mysterious sabotage of several oil tankers the day before.

Four oil tankers anchored off the United Arab Emirates were damaged Monday. This image shows the damage to a Norwegian oil tanker. A U.S. official says a preliminary investigation blames Iran or one of its proxy forces, but the U.S. military and White House have not provided any proof those claims.

Rising tension with Iran prompted General Frank McKenzie, the new head of U.S. Central Command, to send the USS Abraham Lincoln to the Persian Gulf region two weeks early. Officials say the Lincoln might not enter the Persian Gulf because doing so would box in the aircraft carrier.

A British general speaking from Baghdad today said, however, he saw no increased threat from Iran.


MAJ. GEN. CHRISTOPHER GHIKA, COMBINED JOINT TASK FORCE: No, there's been no increased threat from Iranian-backed forces in Iraq and Syria.


GRIFFIN: In a sign that not all U.S. allies are on board with this military build-up, a Spanish frigate deployed alongside the USS Lincoln reversed course and is headed back to Spain over what its defense minister called a disagreement over the White House's Iran policy -- quote -- "The U.S. government has taken a decision outside of the framework of what had been agreed with the Spanish navy."

The loss of the Spanish frigate is more symbolic than any real loss of firepower. In the week since John Bolton said Iran posed a threat to U.S. troops in the Middle East, Neil, no Pentagon leader has held a press conference to explain the nature of the threat or provided evidence to support these claims.

Iran's foreign minister has accused Bolton by name of trying to start a war -- Neil.

CAVUTO: All right, Jennifer Griffin, thank you very, very much.

In the middle of all of this, the White House is again looking at sending possibly up to 120,000 troops to the Middle East. Now, the president was calling that fake news. But what is the real news then? What's he really doing?


CAVUTO: All right, it was a New York Times report, so instantly the president called it fake news.

But the report says something like this, that the White House is reviewing military plans to deploy as many as 120,000 troops to the Middle East ran attacks American forces or might be planning such attacks as we speak.

So what to do and should we have something in place?

The Hudson Institute's Michael Pregent joins us right now, first time we have seen each other in the flesh. Good to see you.

MICHAEL PREGENT, HUDSON INSTITUTE: Oh, it's good to finally see you.

CAVUTO: What do you make of this? The president calls it fake news. But was he calling the report and 120,000 fake news? Is it more? Is it less? What do you think?

PREGENT: Well, these are the plans that were actually drawn up in 2009 through 2011 at the Pentagon under the Obama administration, using this 120,000 number of U.S. forces.

So the president...

CAVUTO: And where would they be?

PREGENT: Well, the president is simply saying what did the Pentagon already have planned out? And it was 120,000.

But this was a force to invade Iran. Nothing like that's going to happen. What the president is doing is putting in intelligence, surveillance and reconnaissance assets into the region to look at Iran's proxies, to look at launch sites for not only ballistic missiles or other types of rockets, but also drones, like this drone attack that we had against the Saudi Arabian...

CAVUTO: Who was behind that?

PREGENT: Well, the Houthis said it was successful, but stopped short of claiming responsibility.

But Iran...

CAVUTO: Now, they are seen as proxies for Iran, right?

PREGENT: Right. Right.

So they are proxies of the IRGC Quds Force.


CAVUTO: What about these attacks on tankers in the region, et cetera?

PREGENT: Well, that's the beauty of being Qassem Soleimani and the Quds Force. You can use proxies and wink that you had nothing to do with it, yet take credit for it behind the scenes.

And that's something...

CAVUTO: But wouldn't that be too obvious for Iran to even try, especially with this armada of ours coming to the region?

PREGENT: Well, if you just look at our news cycle, as soon as we threaten to do something, automatically, Iran has supporters on, on certain sites, meaning, we shouldn't do this. We shouldn't escalate. We shouldn't send more forces to the region.

So it plays into their hands. They're able to do it with proxies. Our country will ask for evidence. And they're able to muddy the waters and operate in the gray, which questions everything we do. So we have to look at this.

We have to look at Iran's proxies, what they're capable of doing and negate that threat and then tie it directly to Iran. They exist because of Iran. They were created by Iran. They were trained by Iran and paid for by Iran.

So we have to hold the...


CAVUTO: But then you have role of the Russians and what they're doing and who they're talking to.

And I don't -- if this is the Strait of Hormuz, through which, what, a quarter to a third of all the world's oil travels, Iran says that's theirs, that's their waterway. We call it international waterways.

So I can almost envision an incident in the strait that would set things going nuts.

PREGENT: Well, it's international waters.

So, the FTO-designated IRGC navy...

CAVUTO: What is FTO?

PREGENT: Foreign terrorist organization.

CAVUTO: Of course.

PREGENT: Iran's IRGC navy is now a designated terrorist organization.

If they close down the Straits of Hormuz, the international community will do something about it. And this would also lose Iran Europe.


CAVUTO: Let's say we have a battleship going through that. So that's why -- it's only two miles wide.

PREGENT: Right. Right.

CAVUTO: But they try something like that. What do you think would happen?

PREGENT: Well, we would blame Iran for it. The international community would condemn it. It would lose European support for the JCPOA, the Iran deal, and it would isolate Iran.

Iran doesn't have as many friends as it used to have. And its friends are in quotations. They're seeking to exploit Tehran, get oil rights. Iran cannot afford to buy Russian and Chinese equipment anymore.

CAVUTO: But you believe that the president is up to sending troops there?

PREGENT: Well, we got to do it the right way. And we haven't done it the right way in a while.

There are right ways to do it, Neil.

CAVUTO: I got it.

Michael Pregent, thank you. Good seeing you, the Hudson Institute senior fellow.

The president was busy talking today, not only about what might or might not be happening in Iran and the trade war and all that, but fighting the Federal Reserve yet again, saying if the Federal Reserve would just cut interest rates, we'd be off to the races, and China would be humbled, and fast.

The guy he wanted to put on there reacts to that, Steve Moore -- after this.



TRUMP: Last year, we hit 3 percent for the year. And we had one month at 4.2 percent.

And, frankly, if interest rates would come down a little bit, we would do 5 percent. If I get a little help. Need a little help kind. Got to get my little help there. I'm not going to be a wise guy. I want a little help.

A little lower interest rate, a little quantitative easing, just a little bit, we would hit 5.


CAVUTO: Was it me or was that like a Joe Pesci moment? Just a little bit, just a little bit, see what you can do about it.

Welcome back, everybody.

Steve Moore joining us right now, economist, on what he thinks of the president's recommendation that the Fed cut rates to sort of prepare for an economic boom he thinks would be forthcoming if it did just that, because China certainly will.

Steve, good to see you. How you doing?


CAVUTO: All right.

MOORE: By the way, I remember when Larry Kudlow and I used to talk to Trump about the economy. And we would say sir, if you do this and that, and you do this tax cut and the deregulation, we think we can get you to 3.5 to 4 percent growth.

And he would always say, "I want 5 percent growth."

This is not a new message for Trump.

CAVUTO: Would this do that? Would this do that?

If he were -- quantitative easing, the kind of thing he criticized under Barack Obama, but, you know, he's saying that would help him now, and maybe help us in our fight with China. What do you think of that?

MOORE: Well, look, go back to the summer of last year. Trump is right. We did reach a quarter of just about -- I don't remember the exact number. It was just about 4 percent growth, which is a phenomenally strong number.

And we had high employment, no inflation anywhere to be seen. And I think Trump's frustration -- and I share his frustration -- is in the midst of this beautiful picture of the economy, the Fed starts spraying cold water on it by raising interest rates.

And, remember, we had a -- the fourth quarter was not good.


CAVUTO: No, no, you're right. And things slowed down. And even, I, think the Fed, by its policy since, has changed its tune.


MOORE: Exactly. And they had to admit they were wrong.

CAVUTO: But on this, on this, cutting rates in this environment to get to 5 percent growth, what do you think of that?

MOORE: No, no, I don't think we could get to 5.

I mean, I love the president's optimism.


CAVUTO: Would you advocate cutting rates right now? Do you think the economy needs that?

MOORE: I do.


MOORE: In fact, another inflation number came out was it either today or yesterday showing still below target.

There is no inflation in the economy right now to speak of. And I'm record. I have said this many times. I think the December rate increase was a catastrophically bad decision and they should cancel it.

Now, that's a quarter-point reduction. The president wants a 1 percentage point reduction. I wouldn't go that far. But I do think that there's more of a danger of falling prices right now than raising prices.

Now, look, you -- but you can't -- I think the president is a little bit wrong on this. This trade war that we now have with China, you can't reverse the effects of that by printing money. But I'm not -- as you know, I'm...

CAVUTO: Well, but he says stuff that's even a little more curious than that.


CAVUTO: He talks about tariffs and how they're helping us and it's going to the treasury. It might be going to the treasury, but, as you and I know, people, average consumers pay that.

But he said $100 billion in tariff dough the treasury has taken in. Where is he getting that number? The best I get, Steve, is something in the vicinity of $35 billion to $39 billion since all that started. Where did he get it?

MOORE: Yes, I don't know, because we -- look, even -- let's say you put 20 percent tariff on $500 billion. That's $100 billion. But we only had a 10 percent tariff.

CAVUTO: Right. There's no way.

MOORE: Frankly, I don't know where he came up with that number.


CAVUTO: Do you think he made it up? Do you think he made it up?

MOORE: Maybe he was talking about, this is how much we're going to get with these tariffs.

CAVUTO: No, he put it in present tense.

MOORE: OK. Well, I don't -- I'm not going to answer that.


CAVUTO: I guess what worries me is that he is, quite rightly, concerned that the Chinese presuming us on splitting from a deal they had agreed do.

MOORE: And that's true. They did.

CAVUTO: And, here, he could be making up numbers, so he's no better, right?

MOORE: No, no, no, look, there was a deal.

People have to know the chronology here, because Trump is the guy with the white hat in this one and China's the ones with the black hats. We...


CAVUTO: No, they're cheaters for a long, long time.


CAVUTO: Do you worry, though, that he's hurting that argument when he does stuff like this?

MOORE: Maybe he exaggerates sometimes with money -- with -- I mean, in terms of some of the statistics.


MOORE: But we did get to 4 percent growth. He's right about that.

And, look, I think most Americans are behind him in this. And I will say this. If we get a trade deal done -- you have heard it first on your show, Neil. If we get this trade deal done, and it's a good deal -- and I think we are going to get a good trade deal done before the end of the year -- then, yes, I think we could get 4 percent growth.

CAVUTO: All right.

MOORE: That's how big this is. But the stakes are enormously positive here.

CAVUTO: You never know. You never know.

Steve Moore...

MOORE: So, will you write this down? Steve Moore said 4 percent growth with a trade deal with China. And I really believe that.

CAVUTO: OK. There you go. All right.


CAVUTO: Stamp it. Stamp it, state it.

MOORE: And we need a little -- a quarter-point from the Fed, not a full one point, OK?

CAVUTO: All right, just a quarter-point, a little bit, a little bit. All right.


CAVUTO: Steve Moore, thank you very much.

We will have more after this.

MOORE: Thank you, Neil.



ROD ROSENSTEIN, DEPUTY ATTORNEY GENERAL: The former director seems to be acting as a partisan pundit, selling books and earning speaking fees, while speculating about the strength of my character.


CAVUTO: Everyone's talking about it, Rod Rosenstein slamming James Comey as a partisan pundit, after the ex-FBI director criticized him on CNN just last week.

Does he have a point, or is this just roiling the waters, so to speak?

Former FBI Assistant Director Kevin Brock with us right now.

What do you think, Kevin?

KEVIN BROCK, FORMER ASSISTANT FBI DIRECTOR: Well, I tell you, it's -- Comey has -- he's embarked on an interesting strategy, Neil, where he's kind of casting stones at President Trump and Attorney General Barr and the former Deputy Director Rosenstein.

I'm not sure that's the best strategy. I think Mr. Comey is a little bit vulnerable himself, because now he has three separate investigations taking a look at how the FBI under Jim Comey and his special team that he assembled initiated a counterintelligence investigation against a presidential campaign.

They're going to dig and they're going to dig hard. And what -- their findings might directly address the character of the former FBI director.

CAVUTO: Well, I do remember multiple attack lines from Comey on Rod Rosenstein, who was in a no-win situation, when he appointed the special prosecutor in the first place and all.

We can go back in time here, but obviously that bad blood just bubbled over in these remarks. What did you make of the timing of them on Rosenstein's part?

BROCK: Well, it is interesting, the night before the attorney general announced that he has selected U.S. attorney John Durham to look at the origins of the investigation.

CAVUTO: Exactly.

BROCK: So it's almost as though they may know that there's something there that needs to be looked at.

And so Mr. Rosenstein might have felt a little emboldened to make those comments with some -- with supreme confidence. Look, we have got a former FBI director acting as no other FBI director ever has, to Mr. Rosenstein's point, going out on a book tour and holding town halls and being so public in his statements, caustic statements.

It really does give those of us who spent a career in the FBI pause.

CAVUTO: For Rod Rosenstein, though, obviously, he will be expected to testify at any one of the myriad of hearings.

You know how this drill goes in Washington far better than I. But would that be a mistake then, that he has just stirred the pot, and whatever justification he might have in his remarks -- and many like yourself maybe agree with the sentiment -- but it could come back to bite him?

BROCK: Yes, but you almost can't blame him.

There is some bad blood there. Rosenstein authored the memo that eventually led to James Comey's firing. So...

CAVUTO: Oh, no, you're right. It's very, very obvious.

This investigation of the investigation and now with looking -- going back to what started it, where do you see that all going?

BROCK: I see it as not particularly ending well for the investigative team that was assembled to look at the Trump campaign, to do that investigation out of FBI headquarters, unprecedented.

There are early indications that there may have been some coloring outside the lines, maybe not following the attorney general guidelines in all the way from the initiation of the case , to using certain investigative techniques, like confidential human sources, undercover investigators, as they call them, and, of course, the FISA application itself.

So it will be -- it's going to be very telling.

CAVUTO: All right.

We shall see. Kevin Brock, a real pleasure having you. Thank you for stopping by.

BROCK: All right, you bet. My pleasure.

CAVUTO: Kevin Brock.

Again, just to update you, at the corner of Wall and Broad, where we had stocks up on the day, making up a little less than half the ground lost yesterday, on optimism that they're going to renew trade talks. We just don't know when.

This time, it would be the U.S. delegation led by Steve Mnuchin going to China. Whether any more progress is made is anyone's guess.

Here comes "The Five."

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