Greater urgency to cut rates much more aggressively, but for now at least it seems the central bank is planning to take its own sweet time with only gentle rate cuts likely in the fall. The u. S. Economy, meanwhile, continues to perform well. With unemployment near a 50year low and wages rising. But theres a lot of uncertainty out there. The biggest source concerns the global economy. Now, when hes not picking on jay powell, the fed chair, the president s been going after china, raising tariffs on that countrys exports to the u. S. Beijing, of course, has retaliated. This weekend a new round of higher u. S. Tariffs is due to go into effect, although this week President Trump did say that the two sides were till talking, raising some hopes in Financial Markets that perhaps tariff increases by both sides might be averted. Now, this trade battle continues to keep businesses on edge, but the president says its essential to get china to change its unfair ways in the way it goes about doing business. Some economists are worrying that the turbulence and the uncertainty could trigger a global recession. On top of that, there are fears about the larger strategic relationship between the u. S. And china. The worlds two most dominant economies and, of course, geopolitical powers. So this week well be taking a deeper look at the u. S. china relationship. Could all these tariff wars signal real economic pain to come for china and for the u. S. , or might there now be a deal to be had where we can avoid those pains . And can President Trump and xi jinping of china reach some kind of larger day tent, or are detaint, or are we headed for a new cold war between the two superpowers . Joining me now is former secretary of defense under president obama and former senator chuck hagel. Thank you, gerry. Gerry the president is getting criticized over the trade war, over tariffs, but he says china was allowed to get away with cheating in the global system. We accommodated its ways for too long under president obama, under who you served, also president bush and president clinton. He has a point, doesnt he . Didnt we let china get away with a bit too much . I think he does have a point, and its an important point. But then you take it to next step, what do you do about it and how do you respond. That becomes a rather tricky process, and i dont think, in my opinion, the approach that President Trump has taken is the correct approach when we confront china oneonone, the two worlds greatest economic powers, without first having the support of allies and alliances. And using all the structures and the benefits and advantages we have that china doesnt have. So thats where i have a problem. Not that it hasnt been an issue and that he has been, President Trump, the first to start to address it. But how were doing it. Because it could lead to catastrophe for the world economy. Youve got Security Issues and all facets of our relationship are connected to this. Gerry how do you think the trade wars going so farsome do you think were winning the trade war . If is chinaing with hurt more than being hurt more than the u. S. , or is it a draw . Well, i dont think thats the way you should look at it. I disagree with the president when he said theyre trade wars are easy to win. I dont know what history books hes referring to, but thats never the case. There are severe consequences in a trade war for everyone. If we start to approach this on whos winning, the u. S. Or china, thats the wrong approach. Thats a dangerous approach. Because it continues to divide you in a very dangerous way where no matter what im going to win, and theyre going to lose. Zero sum game. Thats not the way it works. Not a global, liberal, free trco thats not the way it works. It work on the chinese in that way, not the way to go, you said you do agree china needs to change its ways, how do we get a country like china which doesnt play by the rules to change their ways . Well, you use all the levers of power and consequence that you have. First, lets look at the International Organization that was created after world war ii, general agreement on tariffs and trade. General agreement on tariffs and trade which is now the wto. Theyve been totally dismissed in this process. First of all, we should start there, using our alliances, our relationships. In asia, in the pacific. One of the big mistakes i think President Trump made that put us partly in this problem is when he pulled out of the transpacific partnership, the tpp. That was a huge advantage for the United States with those asianpacific powers. Then tariffs are a part of it. I mean, yes, you can use tariffs, but not just using tariffs only to threaten and then that drives the chinese into a response where theyre going to respond and here we go. Gerry let me just quickly show you the president s been talking this week, he was addressing some remarks made by senator toomey of pennsylvania. I think we can pull up the remarks. Senator toomey criticized the president in pennsylvania. Here, we have the remarks. Theres no question the trade uncertaintys contributing to the slowdown by the economy. Were in a very good place, the danger is where are we going to be a year from now if concerns about trade continue to be and lets just hear what the president said in response to that while talking on fox, fox news radio. What does pat toomey want me to do, does he want me to say let me put my hands up, china, continue to rip us off. When pat toomey says, oh, i dont like that, that only means one thing, that means raise your hands and get used to paying 500 a bill to china plus billion dollars a year to china plus, plus, plus. Gerry is he right, the president , are we just putting our hands up if we dont take them on with tariffs . No, of course not. You have more than just one alternative in how you deal with this issue. I mean, lets look at the facts here. The United States still is the most dominant power in the world. By any measure and any means. And you be smart. You take it on not win or lose, but you take it on like i mentioned here just a minute ago, using the advantages and the levers of power that you do have. And and you do it the smart way. Now, there are things that need to be corrected, structural problems in china. Their economy, their government. But weve got a fundamental issue here thats probably bigger than any of the issues that we cant do anything about, and thats china is a communist, authoritarian government. Now, they dont cohabitate very well with the liberal free trade world. Somethings going to happen. So when you have that basic communist authoritarian government controlling everything, thats a structural problem beyond our ability to negotiate. Gerry were going to take a quick break, and when we come back, i want to broaden the topic and conversation to get a sense of just how big secretary hagel thinks that china is, how big a threat it poses to u. S. National security. Dont go away. Kevin, meet your father. Kevin Kevin Kevin KevinKevin Kevin KevinKevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond JamesFinancial Advisor can do for you. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice lettuce. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. But how do i know if im im getting a good deal . I tell truecar my zip and which car i want and truecar shows the range of prices people in my area actually paid for the same car so i know if im getting a great price. This is how car buying was always meant to be. This is truecar. Gerry im back with former secretary of defense chuck hagel. Secretary hagel, thank you very much again for joining us. Are we facing a new cold war with china . I think we very well could be. You know, our conversation that we had on trade a few minutes ago, that is one dimension of a relationship with another great power. China is a great power, it will continue to be a great power. We dont want to get into a cold war with china or russia because it drains resources, it is very unsafe for a hairtrigger world that is going to put two billion more people on the face of the earth by 2045. So china has to be dealt with smartly. Yes, they i think they could well be a threat. They are developing substantially their military capabilities, their blue water capabilities gerry [inaudible] sorry to interrupt you, but how to we meet that threat, deal with that chinese threat . Well, we deal with it first by keeping our forces and our defense capabilities strong, strong as strong as we can possibly keep them. Thats number one. Number two, alliances. The relationships with japan, south korea are absolutely essential. Relationships all over asia and pacific. We have the base in guam. But also those other countries that are not aligned with us militarily are really critically important to keep the independence of the waterways everywhere. Its all of those things together. And the commercial relationships we have with countries is important too, because we give them options. Not just china, but they have options with us. Gerry should we warn the chinese, hands off taiwan . Thats been a big issue for them historically, and weve been supportive of taiwan. Should we continue to do that . Well, i think we have. I think obama was clear on that, clinton, bush, trump has been clear on that. Thats one good example of staying strong and committed to our a allies and to our relationships, and its all of those factors and those advantages that we have right now that we need to monopolize. Gerry were just running out of time but one very topical issue is hong kong. China hong kong is in uproar at the moment, challenging Chinese Authority there. Chinas promised to keep the system separate from mainland china, at least for another 20 years or so. If china were to attack, try to impose its rule over hong kong, what should the United States do . Well, if there is an attack on hong kong by the Chinese Military gerry a Tiananmen Square type event. Yeah. Thats serious, and i know the deferent options that a president and his team have to go through on what we would do, how we would respond to that. Gerry very quickly are, what should it be . Sanctions . Yeah. Thered have to be more i dont think theres going to be a military response to that. But sanctions, i mean, all kinds of economic and diplomatic differences which just make this bigger issue of trade and confrontation and win or lose, makes it bigger and deeper and wider and more dangerous for the world. Gerry secretary, im going to have to stop you there. Wish we had more time. Coming up next, how is the trade war with china hitting the american consumer, and what could it mean for the u. S. Economy in the longer run . Well be right back. Their bearnaise sauce here is the best in town. [ soft piano music playing ] mm, uh, what do you do for fun . Not this. Oh, what am i into . Mostly progressives name your price tool. Helps people find Coverage Options based on their budget. Flo has it, i want it, its a whole thing, and shes right there. Yeah, shes my ride. This dates lame. He has pics of you on his phone. Theyre very tasteful. He has pics of you on his phone. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Gerry joining me now from washington, d. C. Is jared bernstein, senior fellow at the center for budget and policy priorities and former economic adviser to Vice President joe biden. Thanks for joining us. My pleasure. Gerry lets talk about the Economic Impacts of this trade war. So far weve seen it in the markets particularly, market every time especially every time the rhetoric gets ramped up, react, doesnt like it. Has there been actually much direct impact on the American Economy from this trade war so far . Because the economy seems to be in pretty good shape. There hasnt been a ton, but theres been some. Is so our Manufacturing Sector has actually been contracting if you look at real output in manufacturing, thats been going down for about six or seven months. So thats one indicator. But beyond that, youve seen some impact on consumer prices, but its very marginal, and theres all these other moving parts that are holding inflation way down. I think the broad estimate is at this point the trade wars costing u. S. Consumers something around 500 a year which isnt nothing, but if it escalates, itll be a lot more. Gerry President Trump says, of course, its china thats paying the tariffs. You point out, of course, the consumer pays, but who is getting hurt more here . Is it china . And is it going to force them to change track or, actually, is this rebounding and hurting americans worse . Well, theres a lot in there. Let me unpack some of it. First of all, or even President Trump himself doesnt believe explicitly that china is fully paying the cost of these tariffs because youll recall that he recently suspended the implementation of the tariffs so that u. S. Consumers wouldnt be whacked too hard around the holiday time. So its widely understood that tariffs are paid by the company that imports those goods. They then try to push those costs forward to consumers. Now, you asked some other questions in there, what were they . Gerry whos being hurt more, the chinese finish. Right. Gerry chinese businesses are being hurt, presumably, because their goods are more expensive and suffering competitive disadvantage. Right. I think the key there is your basic premise is correct. The key this is that we import over four times more from china than they import from us. So its this old thing, you know, if you owe the bank 100, they own you. If you owe the bank 10 million, you own them. Because china is so much more dependent on our consumers than we are on theirs, we kind of have more degrees of freedom to ding them in this front. So no question, this is hurting the chinese economy. Gerry and there is some evidence that american businesses are thinking again about their activities in china, if theyre going to be subjected to tariffs, then maybe they should be elsewhere around the world . Right, and its not just in china. Heres where i think you really see an important impact thats been small but could be growing. If you look at the u. S. Accounts, our national accounts, in the Second Quarter of the year Business Investment was actually down. It was down about half a percent. Thats not a huge number, but were in the midst of were still in the midst of a strong recovery, and the cost of investments, the capital costs Interest Rates are very low, investment is cheap. And yet our businesses are actually contracting on that front. I am certain that has to do with the problems caused by the trade war of the type you just articulated. So, for example, businesses have to find new supply chains depending on how long this goes. And thats a tricky business. Gerry let me just ask you about the politics of this quickly because, unfortunately, were running out of time. One thing the democrats disagree with President Trump on a lot of things. I think weve seen that in the last two and a half years, almost everything. One thing they seem to be supportive of is his taking on china. Should they be taking that line or do you feel they basically agree democrats you worked for Vice President biden agree the president s doing the right thing here . No, they dont. If you look at some of the proposals coming out from the candidates on trade, talking about ending trumps tariffs day one. So i think they agree that we need a china strategy and that both democrats and republicans have failed in that regard in the past, but trumps got a wrong one, and they have alternatives. Gerry thank you very much, indeed. Enjoy your labor day weekend. Well, up next, well be looking overseas and asking was there really a coup in the United Kingdom this week . My thoughts on the developments over there. Well be right back. At synchrony, were changing whats possible every single day. But what does changing whats possible mean anyway . Well. If you run a business, it means a lot. For starters, we provide you with Financing Options for your customers. That way, you can help them buy the things they love instantly and pay over time. And that turns them into serious fans. Hang on, theres more. Want Customer Insights . Weve got those, too. We use data to show you what your shoppers have already bought so we can tell you what they might consider buying next. And you can offer them the perfect products. That ceo gets it. From adding unique capabilities to your companys apps to bringing you loyalty programs, our technology and Financial Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . That a speaker is just a speaker. Or that the journey cant be the destination. Most people havent driven a lincoln. Its the final days of the lincoln summer invitation even. Right now, get 0 apr on all lincoln vehicles plus no payments for up to 90 days. Only at your lincoln dealer. Plus no payments for up to 90 days. Managingaudreys on it. S . Eating right and staying active . On it audrey thinks shes doing all she can to manage her type 2 diabetes and heart disease, but is her treatment doing enough to lower her heart risk . Maybe not. Jardiance can reduce the risk of cardiovascular death for adults who also have known heart disease. So it could help save your life from a heart attack or stroke. And it lowers a1c. Jardiance can cause serious side effects including dehydration, genital yeast or urinary tract infections, and sudden kidney problems. Ketoacidosis is a serious side effect that may be fatal. A rare, but lifethreatening bacterial infection. In the skin of the perineum could occur. Stop taking jardiance and call your doctor right away if you have symptoms of this bacterial infection,. Ketoacidosis, or an allergic reaction. Do not take jardiance if you are on dialysis or have severe kidney problems. Taking jardiance with a sulfonylurea or insulin may cause low blood sugar. Lower a1c and lower risk of a fatal heart attack . On it with jardiance. Ask your doctor about jardiance. Liberty mutual customizes your car insurance, so you only pay for what you need. I wish i could shake your hand. Granted. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. Gerry you might have heard, if youve been reading some of the more agitated News Coverage, socalled News Coverage from the United Kingdom, that thered been a coup there. Yes, apparently, thats right. If you follow the media commentary, youd see that democracy has died when bos johnson, the new boris johnson, announced a plan to get the queen to prorogue parliament. That means roughly to bring to an end the parliamentary session, start a new one. So whats happened . Is he getting rid of the elected parliament . Not quite. This is something that the government does just about every year x theres a short gap usually until a new session starts, in this case, in mid october. Now, its true that the gap this year is a little longer than usual, and its also true that the Prime Minister is using this very standard constitutional procedure to limit the amount of time members of parliament have to try to keep blocking the u. K. From leaving the european unii dont union. The reaction from opponents, much of the media and luminaries of British Society was, of course, as you would expect, absolutely hysterical. A best selling author tweeted when i hear the name boris johnson, some reason rope p and nearest lamp post come to mind as well. You might want to remember that when you hear its only rightwingers who incite violence. But the truth is that the real democratic outrage is this rich people voted three years ago to take their country out of the European Union. An organization that most brits have diseased infringes too much on their national sovereignty. And yet here we are three years later, the u. K. Is still a member. Time after time, members of parliament those of whom oppose leaving the cure peen union the European Union have extended the departure debt. Those who lost the democratic vote are now trying to stop the will of the voters from being implemented. Thats dangerous stuff. Thats it for us this week. Be sure to follow me on twitter, facebook and instagram, and ill be back next week with more indepth interviews on the wall street journal at large. Thank you very much for joining us. Have have a great labor day weekend. Weekend. Thank you for joining us today. Be safe out there. Go to church. Yes. Fox news alert on two major developing stories that we are following at this hour. Welcome to sunday morning futures everyone. Im Mike Emmanuel in for maria bartiromo. On the right side of your screen, Hurricane Dorian strengthening into a catastrophic category 5 storm as it bears down on the bahamas and is expected to impact the u. S. Mainland. On the left a gunman in west texas killing at least four people and wounding at least 20 before police shot and killed him. Investigations are underway at multiple crime scenes in the cities of odessa and midland as we await more details on a mass shooting that apparently started with a routine traffic stop. We will speak with Texas Attorney general ken paxton