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U.S. Reaches Deal with China's ZTE; Trump Heads for G7 Showdown Over Trade Tensions; Interview with Senator Jeff Flake; CNN: DOJ inspector general expected to fault Comey, Lynch; DOJ to show top lawmakers classified materials on FBI source; "WaPo": Trump veered off topic in closed-door FEMA talk; Trump angers US allies ahead of G7 summit. Aired 9-9:30a ET

Aired June 7, 2018 - 09:00   ET



BRIANNA KEILAR, CNN ANCHOR: Good morning. I'm Brianna Keilar in Washington and we start with breaking news.

The Trump administration striking a deal with Chinese telecom giant ZTE, a company that has violated U.S. sanctions and one that the Department of Defense has said poses a national security threat. Now the company has to pay a hefty, hefty fine.

CNN's Christine Romans joining me now.

What else is in this deal, Christine, and why is it so controversial?

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Good morning, Brianna. Well, Wilbur Ross, the Commerce secretary, just said this deal was struck at 6:00 a.m., just a few hours ago, and he was hailing this as the first time a foreign company is going to have a U.S. chosen compliance team right there making sure that they are following export restrictions from the United States.

There's going to be a big fine here as well. A $1 billion penalty for ZTE, $400 million has to go into escrow in case there are any violations to be a preventive measure that compliance team imbedded at ZTE to make sure they're not violating sanctions and within the next 30 days the board must completely change, an entirely new executive team be appointed here.

You'll recall this has become -- this company that makes smart phones has become a flash point in the overall China trade debate. It was just a few weeks ago really that the White House and the Commerce Department said that, you know, they were not going to allow U.S. companies to sell parts to ZTE anymore because of its bad behavior and lying about breaking sanctions, really important U.S. sanctions.

And so then the president backtracked and said no, he would give a lifeline to ZTE because there were so many Chinese jobs at stake. You have people like Senator Marco Rubio and others in Congress who've been saying that, no, this is about national security. You know, the Pentagon in April banned the sale of ZTE phones on military bases because there are concerns they could be used to spy on American citizens.

But instead the president with this big team inside, the compliance team inside the company, a big fine is going to let ZTE stay afloat -- Brianna.

KEILAR: Very interesting. Christine Romans, thank you so much for that report.

The administration's new tariffs on America's closest allies and their new tariffs on the U.S. making for a tense G7 summit due to start tomorrow in Canada. That's right, Canada, the country that President Trump this week accused of torching the White House in the war of 1812. It wasn't Canada. It was Britain and actually since then, the U.S. and Britain have patched things up largely.

But that aside, "The Washington Post" says the president sees the G7 as one big distraction from a big meeting that he has in just days with North Korean dictator Kim Jong-un.

CNN's Kaitlan Collins is at the White House for us. What's up, Kaitlan?

KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Well, Brianna, the president does see it as a distraction. He often doesn't even enjoy going on trips like the G7 where he has to do these meetings with other world leaders especially not at a time when he's preparing to sit down face-to-face with Kim Jong-un and at a time when he's getting stiff pushback in Washington even from Republicans over these new trade moves that he's made in recent days.

And now he's going to have to travel to Canada, sit down face-to-face with some of these leaders that he's already had very testy conversations and phone calls with over these recent moves with the steel and aluminum tariffs. And these leaders have spoken out against him. Not just from Canada with Justin Trudeau, the prime minister there, but also the French president, Emmanuel Macron as well, speaking out against these moves that the United States has made because the president sees this as the world is tilted against the U.S. essentially as far as trade is concerned.

So that is something that we need to watch while he is in Canada. Sparks could certainly fly there. The president's main trade adviser Larry Kudlow saying yesterday it's more of a family dispute, these quarrels over this. He was really seeking to downplay the tension between the United States and some of our closest allies. But certainly going to be a lot of tension there that's going on.

Meanwhile, still the president is looking ahead to that North Korea summit. Some worry he's overlooking the G7 because he's looking to it so much. And you can see that today, he's meeting with the Japanese Prime Minister Shinzo Abe here at the White House. They'll have a working lunch and a press conference. And really Abe's main goal while he is here is to convince President Trump to take a hard line when he does sit down with Kim Jong-un in Singapore on Tuesday. KEILAR: So, you know, one of the concerns, Kaitlan, of watchers of

this summit with North Korea has been that perhaps the president isn't going to be as prepared as he should be going into it. They're hoping that he's spending a whole lot of time preparing.

Do you know -- do we have a sense of what all he has been doing especially since there is a lot of diplomatic work that has not been done as per usual on the front end of this meeting?

[09:05:06] COLLINS: That's right, Brianna. The president has been having several meetings with his National Security adviser, the secretary of Defense, his secretary of State, all of that but that really does not seem to compare to what past administrations have done to lead up to a summit that would be of a historic nature like this one that the president is going to sit down in on Tuesday.

So that is the question of what his level of preparedness is and what he's going to go in there and ask for from him. Of course this is a president who largely operates off the cuff in a situation where people do not encourage you to operate off the cuff. So that is what critics are concerned about, what the president is going to walk into that meeting looking for. Is it going to still be that denuclearization that the administration has repeated time and time again over the last few months, or is he going to change his language as we saw him do whenever he said that the summit was back on and he didn't want to use terms like maximum pressure anymore?

So that's what people will be looking to see on Tuesday -- Brianna.

KEILAR: He is indeed not scripted. All right. Kaitlan Collins at the White House. Thank you.

And joining me now is Republican Senator Jeff Flake from Arizona. He is a member of the Foreign Relations Committee, also the Judiciary Committee.

Sir, thanks so much for being with us this morning.


KEILAR: You have a big day on the Senate floor. You are -- and I do want to talk to you of course about a number of things, tariffs, ZTE, the North Korea summit but I want to talk to you about what you're going to be doing this morning. You're going to speak on the Senate floor. You put out some excerpts, previewing some of what you're going to say.

FLAKE: Right.

KEILAR: And it's a really -- it's a rebuke of these tariffs. It's a rebuke more largely of the president's protectionist policies and you are going to say, according to what you put out, quote, "This is not grownup leadership." You're going to talk about his, quote, "incoherent policy utterances," and you will warn that the U.S. is turning its backs on allies it has spent decades cultivating. Why did you feel compelled to go ahead and do this today?

FLAKE: Well, more recently the tariffs that the president has announced have been really not against our adversaries, that's problematic enough, they're against our allies. So you have Canada asking how is it a national security issue with regard to the importation of steel or aluminum.

Mexico is asking the same thing. So the president's use of 232, Section 232 of the Trade Act of the '60s to justify protectionist policies is simply not consistent with conservative or Republican policy. And more broadly on trade and security, we have had an incoherent strategy and our allies are left baffled, and that's not the way to conduct foreign policy.

KEILAR: What are the -- your substantive concerns? I mean, I hear you're saying that. You're --

FLAKE: That's right.

KEILAR: The administration is striking a deal with ZTE, a Chinese telecom giant, on one hand.

FLAKE: Right.

KEILAR: And then imposing tariffs on allies. We've heard the frustration from Justin Trudeau.


KEILAR: You -- in these excerpts you talk about your long-term concerns. What are you worried gets undone by these actions?

FLAKE: We do have significant national security concerns regarding ZTE. They actually confessed or agreed that they had violated the sanctions that -- I'm sorry, the trade act that was there and that sanctions were imposed and the president seems to be willing to set that aside to use that kind of as a bargaining chip. Then on the other hand, you bring up a national security issue simply because that's an area of the act that you can go to without congressional approval and use that as a way to enact protectionist barriers to make goods more expensive for Americans and spark a trade war that were -- although the president says trade wars are easily won, they're not.

Trade wars are only lost and this whole liberal international order in terms of rules based trade that we have helped establish over the past 70 years, we are now running away from and I think our allies are certainly scratching their heads and saying where are they going, and in this case of, for example, the Transpacific Partnership, that the president exited the negotiations on early on, those countries are not saying, oh, all right, we'll wait until they come back to the table.

They're moving on and leaving us behind. That's no position we want to be in because if we want to have economic growth in the future, it involves trade and so we're going to have to enter into many more multi-lateral and bilateral trade agreements. KEILAR: You're backing a bill that Senator Corker has put out that

would curtail the president's abilities when it comes to tariffs. It would basically make him seek congressional approval. But your Republican leader Mitch McConnell is pretty much saying this is pointless. Let's listen.


[09:10:06] SEN. MITCH MCCONNELL (R), MAJORITY LEADER: Yes, I don't think we need to be trying to rein in the president through legislation. Number one it'd be an exercise in futility because he wouldn't sign it.


KEILAR: So you are speaking out, Senator Corker is speaking out, in fairness you're retiring, how effective can retiring members of Congress who are unencumbered by re-election fights really be in taking on the president the way Corker is and the way you are today?

FLAKE: Right. It's not just myself and Bob Corker, Senator Corker, obviously is also not running for re-election but I think there are about a dozen senators, some of whom are up for re-election this time or certainly will be in 2020 who are standing up and saying, we are asserting our congressional prerogative. The Constitution gives Congress the primary role in regulating trade and certainly tariffs, not the president. So the president is using an exemption that was never intended for that purpose.

Now let me tell you how significant this is. This is the first time that a number of senators have actually stood up -- a number of senators, from the president's party and said, no, you can't do that and we're going to pass legislation to rein this in and so that is our prerogative. That's what we should be doing, that's what we should have been doing sooner than now.

KEILAR: But your leader --

FLAKE: So I'm glad to see it today.

KEILAR: Your leader poured cold water all over it and he controls the floor, so what do you do?

FLAKE: Well, we'll see. As soon as -- I mean, we have an NDAA, a bill that's coming up. Every senator has significant leverage because you have to have unanimous consent to move ahead to consider the bill. So we'll see what happens in the next couple of days. But there is significant momentum because -- I mean, something like trade and tariffs, if there has been any Republican orthodoxy or something that we have had consensus in this country on is that we do better, the rest of the world does better with significant trade and investment and using the international organizations that we helped establish for this purpose as the arbiters between trade disputes, not the president simply acting at whim to punish this country or that one. That moves away from the rules based order on trade that we've had

that has been so successful over the years. Republicans have believed that and this now is a significant departure from conservatism and from what Republicans have believed in.

KEILAR: Yes, he's in a very different place than Republican orthodoxy for sure. What time will we see you on the floor, Senator?

FLAKE: 11:15 Eastern Time.

KEILAR: OK. All right. We'll be looking. All right. Senator Jeff Flake, thank you so much.

FLAKE: Thank you.

KEILAR: So what is the North Korea summit, airplane deals and coal have in common? Well, they're all topics that the president brought up in a FEMA briefing on hurricane preps. Why? Plus the top watchdog for the Justice Department expected to fault former FBI and DOJ officials over their handling of the Hillary Clinton e-mail probe.

We'll have some really interesting details on that. And the stunning interview with ex-FOX News analyst Ralph Peters. Why he calls his former network a, "destructive propaganda machine."


KEILAR: This morning, new developments from the Justice Department. Sources telling CNN that the DOJ inspector general's report is going to sharply criticize former FBI Director James Comey and accuse him of failing to follow protocol in handling the investigation into Hillary Clinton's emails.

CNN's Laura Jarrett broke this news this morning and he's not the only one who's going to be criticized, even though we're really focused on that. What can you tell us?

Laura Jarrett, CNN Justice Reporter: Well, Brianna, this long awaited report is still not out yet, but sources tell us that it is exhaustive and that it will not hold back.

We expect that it will come down hard on former FBI Director James Comey, specifically assessing a variety of controversial moves that he made on the Clinton email investigation, including when he announced in July of 2016, without any Justice Department approval, all on his own, that he was recommending no charges in the case against Clinton, but at the same time calling her extremely careless.

As well as his move, as we all remember, just days before the November election, coming out, telling lawmakers that they were essentially reopening the Clinton investigation despite the fact the Justice Department officials had warned him that doing so would run counter to Department regulations that say you can't make any public announcements right before an election.

Now, he has said in the past he welcomes this assessment from the inspector general. He wants to air it all out.

But the big question, Brianna, is the extent to which the inspector general will assess the motives of all of these variety of officials.

KEILAR: And tell us about what we've learned about the DOJ getting ready to make an offer to the Gang of Eight when it comes to the FBI's confidential source that met with Trump campaign advisers during the 2016 election?

The president, of course, calls it "Spygate." He says that there was this spy put into his campaign by the FBI, which is unfounded. But what can you tell us about this?

JARRETT: Yes. No evidence of that, but this was a late breaking development last night. We learned that they will receive a briefing early next week, but we also learned, Brianna, that the documents had actually already been on the table at that Gang of Eight briefing in May.

So, the ship had already sailed on that, essentially, even though we had believed that the Justice Department was resisting the effort to turn over the documents, but, of course, this now comes on the heels of top GOP leaders like House Speaker Paul Ryan breaking with the president, saying there's been no evidence of FBI wrongdoing and they did exactly what they should have done in the handling of this FBI source, Brianna.

KEILAR: All right. Laura Jarrett, thank you so much.

Now, less than a week into this year's hurricane season, President Trump paid a visit to FEMA headquarters. He was accompanied by the first lady in her first open press event in 27 days.

[09:20:02] But natural disasters were not necessarily top of mind for the president. "The Washington Post" obtained audio from a closed door briefing that followed a public session.

And these are among the topics the president raised. His popularity, the summit with Kim Jong-un, his political endorsements, the GOP's fortunes, airplane deals, defense department purchasing guidelines, launch equipment on aircraft carriers and coal.

All of this bringing me to - where else? - CNN senior political analyst David Gergen and CNN political commentator Joe Lockhart.

Sort of my intro to you, does it really follow nor does what this briefing was supposed to be about and what the president actually ended up talking about, you guys.

I wonder what you think, Joe, especially considering the seriousness of what this should have been, right? The president did not address what is now believed to be the true death toll of Hurricane Maria in Puerto Rico.

As we understand it, it's almost 5,000, but the official toll is 64. What do you think about that? JOE LOCKHART, CNN POLITICAL COMMENTATOR: Well, I think it gives you a window into the president's character.

Remember, when he first came into office, he went to the intelligence community, the CIA, that he had criticized roundly during the campaign and went in as a moment where they could make peace and he talked about the electoral college and how many states he won and critiqued Hillary Clinton's campaign and strategy. So, it's pure narcissism. So, that isn't surprising.

It really, though, underlines the scandal, though, of FEMA, the administration and our response to Puerto Rico. This is part of the United States. Puerto Ricans are Americans.

It's now months and months and months without power. They are hiding the number of people who have died. The president treated his trip down there as a joke by throwing around supplies.

And I think probably the most troubling because the president is the president. The Republican leadership has totally abdicated their oversight role. We don't see the hearings. We don't see them holding their feet to the fire. They won't take on the president.

KEILAR: What do you think, David? Joe brings up the point of power. It is astonishing that, this far past the storm, you have thousands of people who still do not have power. I cannot imagine that in any place on the US mainland flying.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I agree with that. And I agree with most of what Joe just said, and said it well.

It's a national embarrassment. And more than that, it's a sense of unfairness, of injustice, of racism implied here that we have paid so little attention to Puerto Rico.

The gap between the official death count at 64 and some 5,000 is unbelievable. We've never had that. We've never encountered anything like that.

And I know there are a lot of reasons why people - officials give that they haven't been able to do more for Puerto Rico. There was so much devastation.

But even so, you would think that a country that believes in being fair to all its citizens - and Puerto Ricans are a part of the United States, as Joe Lockhart just said, that you would just think we would treat them with more respect and more urgency.

I just can't get over the fact that it is - we just seem to go from day to day to day as if it doesn't matter. It does matter to the lives of those people getting that island back on its feet economically. The tourism rate is terrible. They just don't have an economy.

I think this is one of a sad chapter in American history. KEILAR: It is certainly when you look at the death toll. I do want to ask you, David, about the tariffs that have been put in place on US allies.


KEILAR: It seems like the president's version of the line from "The Godfather", "keep your friends close and your enemies closer," seems to be keep your enemies close and your friends confused and angry.

GERGEN: Exactly.

KEILAR: When you look at this, what are your concerns about how he is treating US allies?

GERGEN: I have a very deep concern about whether the West is going to hold together as a coherent group of nations with shared values.

The way the United States is retreating from its leadership role, and just as importantly now, starting to bully its best friends is driving us apart.

And one of the great strengths of the United States and its international position has been that the West was seen as a powerful bloc of nations, as I said, with shared values with a belief in free markets and free peoples.

And to retreat from that and to have Europe now go increasingly with country after country, whether it's Poland or now in Italy, where you find that democracy is threatened, we're going to find that democracy is threatened here too unless we begin to treat our allies with some respect.

[09:25:09] And to go to Canada, these summits started between the - President Ford and Prime Minister Trudeau way back in the mid-70s.

And every year - I've been to a number of them. I'm sure Joe has been to a number of them. I can tell you, every year, there is an effort to come together and issue a joint communication showing solidarity.

And this time around, we're probably not going to have a communique because the other nations just don't want to sign on with President Trump on this, and that's really damaging for the country's reputation.

KEILAR: Joe, while I have a former White House press secretary, I have to ask you about something Sarah Sanders said on "Cuomo Prime Time" last night where she was talking about her initial denial that Trump had dictated this response, this message about the Trump Tower meeting of his son, Donald Trump Jr. Listen to what she said.


CHRIS CUOMO, CNN HOST, "CUOMO PRIME TIME": You seem to be in a position where you feel that you are constrained to not be able to - SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: We are

purposefully walling ourselves off and allowing the outside counsel to do their job. And we're doing ours.

CUOMO: But you did initially answer it, right?

SANDERS: I did. And, again -

CUOMO: Do you regret that?

SANDERS: No, I don't.


KEILAR: Trump initially - she said, initially, Trump said he did not dictate the response, then Trump's legal team says, oh, actually, he did. And then, she has sort of shut down on the whole thing.

She says, "no, I don't regret that." You've been in her position.


KEILAR: Should she regret that?

LOCKHART: Of course, she should. And it's a remarkable statement. I had that job 20 years ago and there's probably, I don't know, six, seven, eight men and women who have had that job since. And I had never uttered a public criticism of any of them even when I disagreed with what they were doing.

This is very different. This is the kind of thing you see in authoritarian propaganda machines. And their primary organ is Fox News. And they will tell you every morning the sun came up in the west if that's advantageous for them. It's Orwellian in its scope.

And she is trying to have it both ways. She talks about, we're walling off what the independent counsel is doing, and then she goes and attacks the independent counsel and calls it a witch hunt in the next sentence.

So, I think, ultimately, it's bad for the office of the presidency, for that job and bad for the country because if you can't believe what you're being told, then you do get into a situation where you're in - what people in Russia and people in authoritarian states where they - how they believe the news and their leaders.

KEILAR: David Gergen, Joe Lockhart, thank you so much to both of you.

And still ahead, sorry, not sorry. Rudy Giuliani defending his attacks on Stormy Daniels' reputation.

And also, we're just moments away from the opening bell. Futures up this morning on bank and tech stocks. So, Wall Street ignoring growing trade tensions ahead of the G7 Summit.