hope you will join us every morning. that does it for now from everyone hear we wish you a happy and prosperous 2019. i will see you next year. . >> hello. the clock is running down on 2018 and we find ourselves simultaneously looking backward and forward. back every year that was plenty of regret and forward but with a little and trepidation of what may come in 2019. above all a good year for the us economy it may prove it was the best year in more than a decade the nation was largely

at peace overseas president trump sat down with north korean leader a breakthrough that has not been matched by any substantive progress china and us held off on a full-blown trade war for now but at home was another year of divisive issues and rhetoric a hotly contested midterm election that almost perfectly catches the part of the divided nation and the democrats took the house by a comfortable margin while republicans increase their majority in the senate in the meantime fighting from the mueller investigation to the supreme court nomination to funding for the wall and the mexican border and a host of other issues where passions run hot even pulled out the lyrics of a popular christmas melody what will 2019 bring a have no idea but it's too much

to hope for an outbreak of civility the least we could hope for continued american prosperity us expansion will be ten years old next summer making it the longest ever let's hope it lives to me 11 and bill beyond but what continues to define her life not talking about partisan politics but what worries me is between the leaders political corporate and courtroom one - - cultural elites and the people responsible for the so-called populism that elected trunk two years ago shows no sign to get any narrower politicians don't seem to be paul paying attention like immigration and health care the academia and media elites focused on their own agendas so many companies exercise a huge sway over our lives technology finance and

elsewhere unaccountable corporations as competition diminishes my fear is if we don't address this gap the resentment that people feel will get worse with troubling consequences so our guest is here helping us to look back and the head we began with former treasury secretary larry summers who was the very first person to appear on the show a few weeks ago we discussed at length the risks of the trade dispute. >> are we in the early stages? . >> of a trade war with china? . >> i hope not but on both sides of the rhetoric that they are getting more and more confrontational there is no reason why we need to have a cold war with china the world could accommodate our

greatness and unfortunately right now it looks very confrontational in the economic realm in the security realm. >> president trump says china doesn't play fair he said just this week i just want our country to be treated fairly and he has a point. >> sure. sure of time some of china's practices of intellectual property historically have been problematic there are stories about commercial espionage certainly there are examples where china has broken the rules with respect to subsidies but no nation has an unblemished record on trade

no nation with unproblematic practices and usually we work towards conversion with an idea that works for everybody what is extraordinary that degree of confrontation in which president trump has sought to engage on trade issues not just with chinana but with the world. talking about national security tariffs against canada and massive automobile tariffs against europe. so i think there is an extraordinary part of the united states that is quite problematic in terms of international relationships and our objective with china not to excuse the chinese but

they don't exempt us from that obligation to have a strategy. >> there is something different not just where you could argue dumping on the world markets that china seems to follow a fundamentally different economic model. >> china has grown spectacularly they have developed more sophistication. but if we are to suppose tremendous success of a company like ali baba is a reflection then that's just not right. >> so that challenge that is posed to us in artificial intelligence primarily because they cheated is wrong if the reason china has grown more rapidly and longer is per my one - - primarily about cheating that would be wrong

to we in the united states need to be very clear we are entitled and we are right to reject chinese cheating and a violation of the rules and rules that don't cover unfair practices we are right to be against d that but when our position is that china is not allowed to succeed because it's wrong for them to succeed that is an untenable position for us politically and economically and i see too many voices in this country who are slipping into that position. my friend hank paulson warned about an economic iron curtain coming down and i think that was valid but i would also warn about a new mccarthyism

with respect to china where we lose our objectivity and accuracy. >> i get it that when china joined the wto you went to congress to get congress to approve that relationship so the real belief at that time china was on a different path so i will quote what you said to congress when you recommended the trade deal we can strengthen the hand of those of the reforms within china and make it more difficult for china to turn back the clock with it needs to become a market base more protective of commercial freedoms we also thought that erchina was on that path it was the end of the cold war of liberal democracy? but it didn't happen.

>> china is much more marketable than it was american firms have much more access to the chinese market than they did there is far more flexibility and commercial freedom than there was in 1999 and that's what i spoke about in the quote that you read there were people who believed that somehow china would become a jeffersonian democracy through trade and that view in retrospect certainly does look naïve but that core argument was about economic liberalization and great economic opportunity for the united states and china and supporting economic reform in china. there is a ton of confusion about the wto debate and your

shows a good place to be clear on this united states had granted china most favored nation with the same rules we extended to australia or honduras it was extended to china that was the early eighties we threatened to take it away in the early 19 nineties at the beginning of the clinton administrationn then they rightly backed off of the threat so whatever benefits the united states gave countries china was getting those with no prospect of being taken away by admitting china into the wto we had a whole set of concessions that substantially improved commercial access for us firms in china that was the right thing to do. >> next social security advisor john bolton talks

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and about falling in love. >> the president has established a very strong personal relationship with kim jong-il and he had a lunch that we have to take a picture together because i will take it back to north korea to tell my hardliners that you're not such a bad guy.y he said the same thing to him sure. [laughter] so we will pursue this if the north koreans follow through president trump will get the nobel peace prize he open the door now they have to walk through it. they have not lived up to the commitments so far that's why the president thinks another summit would be likely. >> even if they have no indication to meet their

commitments? . >> they will discuss this and have a discussion how they will accomplish those commitments and until that happened there will not be a release of the economic sanctions. >> i think after the - - after the first of the year january or february. >> continuing its aggression most people would agree against ukraine last weekend we saw the seizure of ukrainian vessels continuing war going on as russia continues to provoke so what can the west do to deter these acts? . >> to be very clear what we

found what happened and was unacceptable he canceled a meeting with president putin that very much wanted in fact, before the g 20 he called my counterpart to say they are releasing the ships this meeting is in jeopardy unless that happens they didn't do it we canceled the meeting of course, they wanted the dinner to basically say the same thing we need a little more resolve on our european friends to keep the sanctions in place for that annexation of crimea. but this kind of behavior makes it difficult if not impossible to see progress with russia on other fronts and that's what the president has made clear in his conversations with european allies. >> with the g 20 summits what else can you do crack. >> a lot of sanctions are already in place the president

has repeatedly said germany should cancel the pipeline looking for a variety of things we could do there and a lot of possibilities the russiansel would not be open to like we declared we would get out of the arrangement of the forces treaty and secretary pompeo will be addressing that that's important to the russians. >> european seem to be more concerned. >> i think the european allies. >> as the defense minister saidmi the russians were already way one - - already withdrawn by ten years of violations in addition by russia ballistic missiles no other country in the world except the united states and russia the russians are violating which means the only country that's bound by inf is us china is not our

estimates are between one third or half of the ballistic missile capability would violate the treaty iran has extensive bandwidth capability they just tested more this past weekend, it is a very real threat enormously concerned about our nato allies that we have global responsibilities in asia and the middle east to be responsive thereto coming up next we take a look at the possibility of a recession in 2019. don't go hi.i just wanted to tell you that chevy won a j.d.power dependability award for its midsize car-the chevy malibu. i forgot. chevy also won a j.d. power dependability award for its light-duty truck the chevy silverado.

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. >> about the end of the year for wall street after the stocks hit all-time highs they took a hard turn south the chief investment strategist at charles schwab says concern of a possible downturn of the economy last year i asked her why that so many economic indicators suggest c otherwise. >> when it comes to economic fundamentals in the stock market what trips up investors quite often of main street people were investors we think of economic data and gdpr job i

growth and level terms good or bad or healthy or unhealthy? the stock market tends to pick up on the rate of change that's why say better or worse is more than good or bad that's why underlined the deterioration these potential inflection points that tell you we might may see growth rollover we see a strong gdp growth a lot of that was activity front running the institution of the tariffs we should have borrowed and expectations a little more than 2 percent in the fourth quarter and not terribly strong growth in 2019 but the other factor is the earning growth story which is very important is deteriorating quite a bit we no longer have the euro reader growth from the tax cuts perspective and a lot of potential hits of 2019 tariffs and trade also a contraction of oil prices that is yet to be reflected so

that's another weak part of the story in 2019. >> everybody is worried but even if you get into a trade war the amount of trade is a very small part of the overall economy may be fractions of a percentage point of growth why would those concerns push the economy into a recession crack. >> it is a large concern taking into consideration if we go to the full 25 percent tariff amount everything we import from china the follow-up question is because us companies pay that additional tax, how do they reflect that moving forward? to the eat that with the profit margin or pass on the cost to the end consumer? contract to their business looking ahead hold off on

capital spending? . >> i'm just trying to understand why. >> if you look at the consensus across many economists if we go to the full 25 percent of the goods that we import from china it's a little more than one percentage point of gdp that is a direct impact on the economy if at a 2 percent growth rate if you cut that and half that is a meaningful impact which does not take into consideration the rippleth effect through business and consumer confidence channels the potential inflation so the simple numbers the objective luck is a pretty meaningful impact on gdp not just the percent of trade but the dollar amount divided into gdp as a percentage point.

>> i get it is a tax increase on the usns consumer because then you pay that is negative to growth of getting a sense of scale. but this extraordinary expansion over the last 25 years with the supply chain that could be a risk and that's ais concern? . >> it is a much more complicated global supply chain why the impact on us companies and why smaller cap companies are underperforming larger cap companies because they are more exposed given the global supply chain and how intricate it is and what people assume to be the caseum when we first started down the path to tariffs. >> what probability would you rate the recession next year? . >> i do think trade holds the key the key is a length of runway between now and the

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welcome to the special edition of the journal. and from the contentious confirmation of his second supreme court justice. to a trade war with china it is set to continue into the new year. here's a look at the in ministrations accomplishments and setbacks. okay, let's start with