Full Episode: The U.S. economy surges to a 4.1% growth rate while the trade war persists

Jul. 27, 2018 AT 9:25 p.m. EDT

After the Commerce Department announced Friday that the economy grew at a rate of 4.1 percent, the panelists discussed the impact of the president’s trade policies on the economy.

The conversation also turned to the freeze on U.S.-EU trade tensions and the bombshell claims made by former Trump lawyer Michael Cohen.

And on Capitol Hill, leaders of the House Freedom Caucus call for the impeachment of Deputy Attorney General Rod Rosenstein.

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TRANSCRIPT

Notice: Transcripts are machine and human generated and lightly edited for accuracy. They may contain errors.

ROBERT COSTA: The economy roars, and so does the trade war. President Trump claims his policies are responsible for an uptick in economic growth and his critics wonder is it sustainable. I’m Robert Costa. We talk trade, taxes, and have the latest on Mr. Trump’s former lawyer Michael Cohen, tonight on Washington Week .

PRESIDENT DONALD TRUMP: (From video.) I am thrilled to announce that the United States economy grew at the amazing rate of 4.1 percent. We’re on track to hit the highest annual average growth rate in over 13 years.

MR. COSTA: President Trump touts a surging economy that grew during the second quarter at the strongest pace in nearly four years. He also took a victory lap over his recent trade discussions with the European Union.

PRESIDENT TRUMP: (From video.) As the trade deals come in one by one, we’re going to go a lot higher than these numbers.

MR. COSTA: But some Republicans on Capitol Hill are increasingly wary of the president’s moves, saying the just-announced $12 billion in aid for farmers is a federal bailout that proves the president’s policy has limits.

HOUSE SPEAKER PAUL RYAN (R-WI): (From video.) I don’t think tariffs are the right answer. I don’t – I don’t support tariffs. I think tariffs are taxes.

MR. COSTA: And leaders of the House Freedom Caucus call for the impeachment of Deputy Attorney General Rod Rosenstein, who oversees the ongoing Russia probe. It’s a move the attorney general does not support.

ATTORNEY GENERAL JEFF SESSIONS: (From video.) My deputy, Rod Rosenstein, is highly capable. I have the highest confidence in him.

MR. COSTA: Plus, Mr. Trump’s longtime attorney Michael Cohen accuses the president of having prior knowledge about a 2016 meeting at Trump Tower that included his son, campaign advisors, and Russians who were offering incriminating information about Hillary Clinton.

PRESIDENT TRUMP: (From video.) Just remember what you’re seeing and what you’re reading is not what’s happening.

MR. COSTA: We cover it all next.

ANNOUNCER: This is Washington Week . Once again, from Washington, moderator Robert Costa.

MR. COSTA: Good evening. President Trump held up today’s 4.1 percent growth report as vindication of his economic policies, and the president insisted the second quarter numbers are not a one-shot bounce.

PRESIDENT TRUMP: (From video.) As the trade deals come in one by one, we’re going to go a lot higher than these numbers. These numbers are very, very sustainable. This isn’t a one-time shot.

MR. COSTA: But the administration’s tariffs are startling – starting to rattle some farmers out in the Midwest and elsewhere who are seeing a decrease in international sales. Many Republicans say the $12 billion assistance plan for the industry is not enough or a long-term solution.

REPRESENTATIVE DAVID YOUNG (R-IA): (From video.) This is coming from the effect of what the administration has done, and it’s an admonition that tariffs are harming agriculture and harming farmers, and so it’s not what they prefer.

MR. COSTA: But the president has pulled back from an all-out trade war with the European Union, agreeing to adjust his proposals.

PRESIDENT TRUMP: (From video.) This was a very big day for free and fair trade. We agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

MR. COSTA: Joining me tonight, Ana Swanson of The New York Times – welcome to Washington Week ; Josh Green of Bloomberg Businessweek, our old friend here; Nancy Cordes of CBS News, another; and another, Vivian Salama of The Wall Street Journal .

Ana, it’s great to have you here at our roundtable. The president took a lot of credit today for these growth numbers. Can he take credit for this economic growth?

ANA SWANSON: That’s right, he did. Well, in general I think that presidents tend to take too much credit both in good times and in bad for the cycles that the economy goes through. We are seeing very strong growth right now, 4.1 percent in this quarter, and GDP growth this year could rise to 3 percent for the first time in over a decade. So those are very strong numbers for the president.

On the other hand, the question is how long do these numbers last? And we think some of this is the effect of the tax cut. And economists see that fading somewhat into next year. And then also we had some very interesting numbers with trade as well, with the trade tariffs increasing growth now but not in the way that the president probably wanted. Actually pulling forward purchases, so people were trying to buy goods ahead of those tariffs going into effect. So that’s likely to drop off as well in coming quarters.

MR. COSTA: So you’re saying maybe there’s a frenzy of activity before next quarter. So this will this frenzy of economic activity, all this growth, be sustainable if people are trying to buy now and do different deals now before the tariffs kick in?

JOSHUA GREEN: Well, Trump says yes. Most economists say no. I mean, as Ana alluded to, what happened was a lot of foreign buyers of U.S. agricultural goods, like soybeans, moved forward a lot their purchases that would have been made in the – in the next three months in the third quarter into second quarter in anticipation that these products were going to be hit by tariffs, as they were on July 6 th . And so that added about – a little bit over a percentage point to GDP growth, which gave us this big headline number today.

But if you think forward to what’s going to happen over the next three months, you know, those purchases are now gone. They’ve already happened. And so it’s going to be tough for Trump to figure out a way to fill in that gap and produce, as he says he will, a sustainable number in the 3 percent, 4 percent range.

MR. COSTA: Nancy, we’ve been looking at reports from different campaign forecasts. And the Democrats seem to be gaining momentum ahead of the midterm elections, but Republicans must like this report as they try to tout the tax cut and rally ahead of November.

NANCY CORDES: Sure, I mean, they’ll take it. Regardless of what the reason for the surge is, they can now get out there on the campaign trail. Republicans heading home for that five-week recess in the House. And they’ll be, you know, talking about 4.1 percent everywhere they go. That’s a great number for them. And even if it does fall off in the third quarter, that’s only two weeks before the midterm elections. A lot of people have made up their minds by then.

The problem for Republicans is that people tend to vote more on whether wages are rising or falling than what the overall GDP looks like. That’s a number that people don’t really feel. And wages have basically been stagnant. If you think back to 2014, President Obama had great GDP numbers, even better in the second and third quarter. And Democrats did terribly in those midterm elections. They lost control of the Senate.

MR. COSTA: So the president’s happy about these numbers. But he’s also getting some pushback from Republicans on trade. And we saw some movement this week. You were at the White House, Vivian, reporting on the West Wing, deep inside, about how the president seems to be taking a few steps back on trade with his deal with the EU.

VIVIAN SALAMA: That’s right. And unlike a lot of meetings where when they go into these meetings generally speaking a lot of the details are already ironed out, this was something that was touch and go until the very end. And it was fascinating for us to watch and report on, where literally as of Tuesday night they started to say, wait, maybe we can actually come together and work something out. And all through their meetings on Wednesday, between President Trump and the European Commission President Jean-Claude Juncker, they were really – it was really unsure until the very end if they were going to do it.

And so President Trump obviously coming out super excited about the fact that he was able to say, hey, I brought you guys something. I’m doing a deal. I’m helping our farmers. And he really didn’t go into these meetings expecting that much. And so the White House was really excited about that, and especially, A, because they could deliver something to the Republicans who are now going back to their home states and campaigning ahead of midterms, but also coming off of a really rough week last week. A lot of backlash after the president’s meetings with President Putin in Helsinki.

They felt like this really kind of turned things around for them. And so it was a good momentum for them to go in. And now the GDP numbers coming out today just capped that week off for them.

MR. COSTA: But what’s actually in the deal with the EU? Is it an actual deal? Because sometimes the details matter. It’s not just about the president claiming credit for some kind of broad-stroke agreement.

MS. SWANSON: Right. Well, both the Americans and the Europeans called this a deal, but I would characterize it more as a deal to begin talking about a deal. (Laughter.) And the details were pretty vague right now. The highlights were that the president said the European Union had agreed to purchase more natural gas and more soybeans. We have to see how exactly that would work and when those purchases would go into effect. In addition, the two governments will be talking about reducing tariffs on a variety of goods, including industrial goods.

And then the two sides also agreed to talk about reforms at the World Trade Organization, a lot of which seemed specifically aimed at China. And many people interpreted that as a good sign, that the United States and the European Union were once again on the same side with regard to China’s unfair trade practices.

MR. COSTA: So that’s one high level, Josh, about where this whole trade debate’s going, and the president working with the EU. But what about down where it matters for people day to day? And it’s not just the Midwest. I mean, it could be lobstermen in Maine who are dealing with the effects of this trade war.

MR. GREEN: Yeah, I think the immediate effects of Trump’s trade war are not going to be economic in the macro sense. Most economists aren’t really worried yet about the effects of the trade war because the tariffs are such a small percentage of the overall U.S. economy. Where I think it’s going to hit, though, is individual states and industries, especially states that voted for Trump, and all sorts of localized areas. So we’ve heard plenty about soybean farmers in Iowa, and it’s certainly going to hurt there.

But these tariffs are spread across all sorts of different industries. You mentioned lobstermen in Maine. I mean, they’re subject to a Chinese seafood tariff, but their lobster traps have also gotten more expensive because they’re made with Canadian steel. And so all across the country – whether it’s, you know, Alaska, Minnesota, Iowa, South Carolina – places where there are competitive House races this fall. These tariffs are becoming localized issues in the way that we may not see on the national news every night, but that voters in these states absolutely see and feel.

MR. COSTA: So why aren’t Republicans speaking out more publicly? We hear it, Nancy, privately. They’re free trade Republicans. They don’t like where this is going. But they’re reluctant to say much.

MS. CORDES: Right. And it’s interesting because on the campaign trail, you’re starting to hear some Democratic challengers say: You’ve got to get off the fence and say where you stand on this. And South Carolina is a perfect example, because the entire South Carolina Republican delegation has basically either stayed mum or has said, you know what, maybe you need some short-term pain for long-term gain. The president is going to negotiate something that is better in the long run for U.S. businesses. The problem is that he has shown an ability to start a lot of negotiations over all types of things – trade, and immigration, and everything else – not as much of a track record on actually completing those negotiations.

MR. GREEN: Well, and this is what Republicans privately say they’re very worried about. They are furious that Trump started this fight four months before the midterm elections. And what you see, just anecdotally talking to autoworkers, talking to farmers, is a lot of them are sticking with Trump for now. They’re saying, well, we got to give him room to negotiate. But we’ll need to watch over the next couple months. Do these – do these farmers and autoworkers peel away as the bite of this tariff starts to take effect?

MR. COSTA: Well, the president’s throwing them a $12 billion trade package. Is that enough, inside of the White House?

MS. SALAMA: Well, it’s a lot of money, but the point is, is that no one is convinced that it’s going to yield any long-term solutions. And the problem from the White House perspective is that, yes, it’s before midterm elections, but one of the issues that President Trump takes issue with most is that he feels like Congress, on this issue in particular, is starting to undermine his authority to make these trade deals. And when they sit there and push back, and they don’t kind of trust his instincts to go for these long-term deals, he feels like they’re basically trying to derail any of his efforts to help these voters down the line.

MR. COSTA: Final thought on this. Ana, the president may be having a handshake with the EU, but his trade war with China seems to continue.

MS. SWANSON: That’s right. So there are trade wars on many different fronts right now. So we’ve seen a step back with the European Union. However, that could be a temporary step back. And meanwhile, we still have negotiations with the North American Free Trade Agreement with Canada and Mexico, and a very big, potentially damaging conflict with China that needs to be resolved. So there’s a lot on the administration’s plate when it comes to trade.

MR. COSTA: Are those countries expecting any movement? They see the president moved with the EU. Do they expect him to maybe move before the midterms on their own deals, their own agreements?

MS. SWANSON: Well, potentially. There is some discussion about trying to finish the NAFTA agreement before the end of August. But it’s still pretty much up in the air. It’s possible that this could prove to be a blueprint for these other agreements. But it’s also possible that other negotiations could be a blueprint for how this goes. We did see with China the two sides come to what seemed like tentative agreements and then actually have the president decide that those weren’t tough enough measures and walk them back. So could that happen with the EU as well? We’ll have to see.

MR. COSTA: It is fascinating. You had a great tick-tock, Vivian, about how everyone’s trying to evaluate President Trump. How do you get him to move, to budge on this signature issue of trade? And we’ll come back to this next week.

But let’s turn our attention to New York City, and the saga of Michael Cohen, the president’s longtime lawyer and loyal advisor, who is now signaling his willingness to cooperate with federal investigators looking into Russian interference in the 2016 presidential campaign. At The Washington Post , I’ve been reporting on Mr. Cohen’s legal maneuvers all week. Here’s what you need to know.

Cohen is under siege, under federal investigation in the Big Apple for bank fraud, and the FBI is looking into his business dealings in New York. His break with the president has been dramatic. A week ago The New York Times reported that Cohen secretly recorded a conversation with then-candidate Trump in which they discussed payments to a former model who said she had an affair with Mr. Trump. The tape is one of many the FBI seized in a raid on Cohen’s office earlier this year.

Then, last Sunday, CNN obtained that recording we just talked about and broadcast it. Mr. Cohen can be heard briefing Mr. Trump on financial arrangements and Mr. Trump is engaged in the discussion.

Here’s why all of this matters – it’s a lot, I know. Trump’s campaign ahead of the election had denied the candidate had any knowledge of payments to the model, Karen McDougal. It also raises questions about possible campaign finance law violations. And it shows Cohen is willing to share tapes of his old boss.

Josh, we’ve been covering President Trump for some time. We’d go up to Trump Tower; there would be Michael Cohen, the fixer, the confidant. To see him break like this, to release the recording, what does it mean for this White House?

MR. GREEN: Well, it’s shocking, first of all, because Cohen has been associated as Trump’s, you know, fixer, protector, lackey, and attack dog, including with reporters, for – you know, going back years. So the fact that he’s broken and is kind of openly flouting the material he claims to have on Trump – not just this one tape that CNN had, but according to news reports over a hundred tapes of recorded conversations – means that he’s potentially a very valuable witness against Trump should Bob Mueller, the special counsel, and his investigators decide to bring him in and try and offer him some kind of a deal to testify or provide damaging material about Trump.

MR. COSTA: Is the White House considering a pardon, Vivian, when they watch this spectacle, they watch Cohen make all of these moves?

MS. SALAMA: Well, frankly, they don’t even want to touch the issue. Every time we ask, they refer us to President Trump’s outside counsel, Rudy Giuliani, and others. Frankly speaking, though, it’s fascinating to watch because, again, it’s like what Josh was saying, this was the man who a year ago was saying he would take a bullet for President Trump, and now we see him turning in this way. But President Trump, remember, takes loyalty very seriously. And something like this, someone who was so loyal to him for so long, could really, you know, just upset him in a way that we’ve not seen before and question those who are closest to him because they could flip.

MS. CORDES: What’s really amazing about this saga is it’s such a stark reminder that so many people who are involved feel so little responsibility to the truth. I mean, Michael Cohen, after Don Trump Jr. was interviewed, said I’m so glad that he told the entire truth about his meeting in Trump Tower and, you know, obviously, the president knew nothing about it. Now Michael Cohen said, actually, the president did know all about it. Rudy Giuliani a few weeks ago said Michael Cohen is an incredibly honest man; I trust him. Now he says he’s been a liar his entire life. When you’re hearing this from both sides, it makes it very difficult –

MR. COSTA: They were trying to keep him contained, and then he explodes out with all this information.

MS. CORDES: Right. But, you know, at the same time, you know, if people are willing to change their stories not a little bit – you know, this is not tweaking around the margins. These are 180-degree turns. And it really makes you wonder who, if anybody, is telling the truth.

MR. GREEN: Well, to me it makes the existence of tapes all the more important because, as you said, you’ve had Rudy Giuliani calling him a great lawyer and a terrible lawyer. You’ve had Trump defending – or you’ve had Cohen defending Trump and going against him. I’m not sure who’s really got credibility to be able to sort of testify, but if there are tapes or something that investigators can draw on to establish, you know, contemporaneous truth of what actually happened, I think that’s going to be important.

MR. COSTA: There aren’t tapes about one of the big things that came out. CNN then reported that Michael Cohen has knowledge of President Trump’s awareness, his prior knowledge, Cohen alleges, of that 2016 meeting at Trump Tower where Donald Trump Jr. met with Russian figures. They discussed dirt on Secretary Clinton’s campaign. Cohen is now saying he’s aware of some exchange between Donald Trump Jr. and then-candidate Trump about the occurrence of that meeting in the summer of 2016. President Trump issued a rebuttal, let’s be clear, on Friday via Twitter. It read in part: “I did NOT know of the meeting with my son, Don jr.” The president added: “Sounds to me like someone is trying to make up stories in order to get himself out of an unrelated jam.” Cohen, of course, is facing a bank fraud investigation up in the Southern District of New York.

But there’s another thing, Ana, this week that really caught my interest. I know Cohen’s the headline for most of us, right, but Allen Weisselberg, the longtime CPA accountant for The Trump Organization, gets subpoenaed to testify as part of this Cohen investigation in New York, and he has the keys to the kingdom in understanding that Trump financial network worldwide.

MS. SWANSON: That’s right. So he’s been handling the family’s finances for decades, running – including some of the campaign finances, as well as the charity. In the tape that you played, he’s referred to as the person who is setting up that payment. And so he, you know, would have very deep knowledge of The Trump Organization and its various activities abroad. We’ve seen a little bit in – of a dive into that with reporting from around the world, as well as leaks like the Panama Papers – things like, you know, offshore financial accounts, shell companies. But, yeah, he’s somebody who would certainly know where the financial bodies are buried.

MR. COSTA: That’s the whole thing everyone’s always wondering. It’s about the possible obstruction of justice with President Trump with the Russia investigation. It’s about Michael Cohen and what he may know about what the president discussed with Donald Trump Jr. But it’s also – it comes back to The Trump Organization: Donald Trump’s finances, the tax returns.

MR. GREEN: Well, it does. And it’s significant, too, because Trump said explicitly a year ago that Mueller should not cross this red line of investigating Trump Organization’s finances, and that is absolutely what’s happening now. So this has to be a source of great angst to the president. You know, you wonder, talking to advisors, if this isn’t part of what’s fueling these Twitter outbursts and the kind of defensiveness that we saw this morning when he was claiming I didn’t know anything about this meeting with Don Jr. and listening to him attack Mueller on practically a daily basis, as he does now.

MS. SALAMA: And how far have we come from the days of nondisclosure agreements where the president basically guided all of his, you know, dealings with nondisclosure agreements, and suddenly it’s all kind of coming out in the open. It’s definitely, definitely making a lot of angst, as you say, for the president.

MR. COSTA: And we still don’t know if President Trump’s going to sit with Robert Mueller for an interview. I asked Mayor Giuliani this week, the president could provide some clarity if he sits down with Bob Mueller, and Mayor Giuliani said we haven’t made any decision, that’s a biased group, the typical answer he’s given to reporters for the last few months. But that’s the kind of thing we’re all waiting to see, will he sit down with Mueller.

But let’s go to Capitol Hill, because Freedom Caucus leaders in the House GOP Mark Meadows and Jim Jordan introduced a resolution this week amid all the controversy about Michael Cohen to try to impeach Deputy Attorney General Rod Rosenstein, who oversees the special counsel’s Russia probe. They argued Rosenstein should be removed because of what they call the Justice Department’s, quote, “stonewall” of congressional subpoenas. But after meeting with GOP leaders, Meadows and Jordan backed off, and they said they would instead potentially pursue contempt of Congress measures this fall, something a little bit below the threshold of impeachment. This is just the latest example of GOP leaders trying to contain the president’s allies on Capitol Hill as the Russia probe continues. It’s becoming a pretty tough fight for Speaker Ryan there’s so much anger you must be detecting among Trump’s allies in the – in the Congress.

MS. CORDES: Sure, but a lot of anger among Republican rank-and-file that these Freedom Caucus members went this route. You know, after all, Republicans have been arguing don’t elect Democrats, don’t let them lead the House, because all they want to do is impeach President Trump, and then their own members go ahead and say that they want to impeach the deputy attorney general who was hired by President Trump. So they didn’t think it was a good look. They were very frustrated. And Meadows essentially admitted to us on Thursday that this was sort of a strategy to try to force Republican leadership into collaborating with them on that lesser contempt charge. DOJ says we’ve given you thousands of documents, we can’t give you every document you want because some of them pertain to an ongoing investigation. Freedom Caucus members like Meadows want every document they can get their hands on because they’re looking for evidence that this investigation was pursued wrongheadedly.

MR. GREEN: Nancy, do you get a sense – I mean, do Republicans think that part of this effort is meant to remove Rosenstein so that Trump can fire Bob Mueller and try and stop or impede the special counsel investigation?

MS. CORDES: Sure, yes. I mean, Meadows insists that that’s not his goal, that he hasn’t talked to the president about that, he’s not encouraging the president to do that, but obviously, you know, there has been a concerted effort. And it’s not just on his part, but there are a few people in Congress, you know, who are – who are really interested in looking for ways to discredit the investigation and the investigators.

MR. COSTA: When you’re at the White House, Vivian, why isn’t the president, who says a lot of things on Twitter, is happy to rally against the Mueller investigation – why isn’t he pushing to impeach Rod Rosenstein or fire Rod Rosenstein? Is it because he’s wary of the obstruction of justice charge at some level?

MS. SALAMA: Well, definitely conversations with his lawyers, everyone saying just take a step back, take a deep breath, and just let this play out without your interference in it. And, obviously, you know, going back to the whole experience with what happened with FBI – former FBI Director Jim Comey and how a lot of people felt that he – that was a potential violation and a potential case of obstruction of justice, they’re telling him to just kind of calm down and let it go for now. But, you know, anything can happen, and we are seeing his now including with Bob Mueller looking at the president’s Twitter feed for possible obstruction of justice. At the end of the day, President Trump is alone with his phone sometimes without – (laughter) – you know, he’s tweeting without consulting his lawyers sometimes, and so you honestly never know what to expect. And so it’s not that surprising that Mueller would look at the tweets.

MR. COSTA: How long can this last? Paul Manafort, the former campaign chairman, his trial starts next week. Michael Cohen is making all of these moves. A movement in the House to impeach Rosenstein.

MR. GREEN: Well, I think it’s really up to Bob Mueller and his investigators. I mean, there’s a – there’s a school of thought that says he’s not going to come in with any charges before the midterms, so we don’t know.

MR. COSTA: It’s up to Bob Mueller. That’s the answer for most of the end of this program, it’s true. (Laughter.)

Thanks, everybody, for joining us. Our conversation will continue on the Washington Week Extra . We’ll look back at Secretary of State Mike Pompeo’s congressional testimony this week and find out what it revealed about U.S. foreign policy. You can find that later tonight at PBS.org/WashingtonWeek.

I’m Robert Costa. Thanks for joining us.

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