Ari Fleischer: Trump wanted a trade war, he's getting one

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Ari Fleischer: Trump wanted a trade war, he's getting one

Fox News contributor says President Trump is taking a huge risk with trade.

This is a rush transcript from "Your World," July 2, 2018. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, and we will be going to that briefing very shortly. No doubt some questions on trade will be coming up, because this has been a remarkable day for that.

Do you remember this trade war that started over aluminum and steel? And suddenly it's grown to include everything from pork and cheese and apples and cherries and maple syrup. I'm telling you, if they throw Ring Dings into the mix, that's it, America.

But we're on top of that, the single biggest event and focus of our day, barring, of course, whatever comes of this press conference.

But, right now, ahead of Sarah Sanders, we're going to go to Deirdre Bolton, spelling out the rather jolting news when it comes to trade.

DEIRDRE BOLTON, FOX BUSINESS CORRESPONDENT: Billion-dollar businesses here, Neil. So roughly this $13 billion trade tiff is full on between the U.S. and Canada.

So the Trump administration, as you referenced, put tariffs on Canadian aluminum and steel, 10 percent, 25 percent. Americans are going to be paying more as of yesterday for any product that has those two ingredients.

But here's the retaliation list. You are going to see a lot, because Canada imposed tariffs on metals, but also this slew of wide-ranging products. As of yesterday, you can see there's the metals, but also American whiskey, coffee, maple syrup, ketchup.

And really the unknown here is that Canada said it targeted American goods for which there's a Canadian alternative. If you take a look at ketchup or you focus on that idea, if a Canadians' favorite ketchup is Heinz, a Canadian is going to pay 10 percent more for that product or buy a Canadian brand.

What is unclear is if sales slow for Heinz, is Heinz going to pass that along to American consumers?

Here are some of the other goods that were targeted by the Canadian government against U.S. imports, if you like, so, chocolates, plywood, dishwashers, gas stoves, motorboats. So, if any Canadian wants to buy any of these, they just have to pay more.

Now, as far as the U.S. trade tiff with China, the one that we have against China comes in two ways. And the first is going to apply to more than 800 Chinese goods worth about $34 billion. That goes into effect this Friday.

Second wave, close to 300 goods, another $16 billion. That still doesn't have an implementation date -- implementation date, rather, still subject to public comment.

But here is what the Chinese are putting against U.S. goods.

So, again, if a Chinese consumer wants to pay more for any of these things to have American quality products, they will have to pay more. So you can see obviously by the category it's a lot of food, it's a lot of agriculture products, it's a lot of things to eat.

We're going to show you a second screen as well, but it is a continuation on the theme.

And as far as what we're doing with China, Neil, the difference is that we're not really focused on any of their farm products or any consumables.

We're actually trying to limit their influence in the areas that they most want to grow, so industrial categories. The whole made in China 2025 plan, that's what we're trying to block. So it's not too many things affect U.S. consumers day to day. It's more big industries. Aerospace is a big example.

CAVUTO: But a long way from steel and aluminum. Right?

BOLTON: A long way from steel and aluminum.

So far, people are absorbing this, but if it goes higher to those $200 billion figures that we have talked, then we will see.

CAVUTO: Amazing. Amazing.

And, again, to Deirdre's point, just to put this in perspective, we started out with those two items. And when all is said and done, if all these other countries, including China, including Canada, including the European Union, including India, all follow up with tariff actions of their own, we're talking better than 880 products.

And that's just for starters.

Garrett Tenney with more on how all of this is being handled in Washington -- Garrett.

GARRETT TENNEY, FOX NEWS CORRESPONDENT: Well, Neil, throughout this process, the White House has really reiterated that the whole end goal here is better trade deals all around.

And as we have seen over the last few months, the president views tariffs as one of his greatest weapons to force other countries into making better deals.

So now with the E.U. and Canada considering additional tariffs on the U.S. in response, President Trump is again threatening to slap a 20 percent tariff on all cars coming into the U.S., which would be a massive blow to the E.U. in particular.

This weekend, the president told Maria Bartiromo that, despite all of the public blowback he's gotten from our allies, his strategy is working.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: We lose with everybody.

We are going to make it reciprocal. We are going to make them fair. And I will tell you that you don't know about this, but every country is calling every day, saying, let's make a deal, let's make a deal.

It is all going to work out.

(END VIDEO CLIP)

TENNEY: The White House is not showing any signs of backing down in these trade disputes either.

And it in fact may be ramping things up. This weekend, actually, it was reported on a draft bill the administration is working on that would allow the president to raid tariffs -- to raise tariffs at will, without congressional approval.

Now, the White House isn't denying this. And in response, spokeswoman Lindsay Walters said: "It is no secret that POTUS has had frustrations with the unfair imbalance of tariffs that put -- put the U.S. at a disadvantage. He has asked his team to develop ideas to remedy the situation and create incentives for countries to lower their tariffs. The current system gives the U.S. no leverage and other countries no incentive."

Now, the White House also stressed that this draft bill has not been reviewed, and there are not current plans to roll it out. But it does give us some insight into what options and strategy the president may be considering going forward -- Neil.

CAVUTO: Garrett, thank you very, very much, Garrett Tenney in Washington.

What is interesting ahead of this White House briefing, by the way -- any second, we will be getting it in. They will address, no doubt, some of these trade issues.

But the market was fascinating, down about 200 points, on the belief that this was going from bad to worse, and rebounding by day's end on the idea being that maybe we can avoid all of that.

Now, again, there was also a comeback in technology issues for a separate reason. So, I want to posit that one day doesn't a trend make or an up day or a down day define this market here. But it's safe to say that it trades on the prospect of trade. The worse it looks for a deal, the worse it looks for stocks. The better it looks potentially for a deal, the better.

All right, Kathryn Rooney Vera with Bulltick Capital Markets and Fox News contributor John Layfield.

Welcome to both.

Kathryn, what do you expect is going to happen on all of this, when everything is said and done?

KATHRYN ROONEY VERA, BULLTICK CAPITAL MARKETS HOLDINGS: Well, I think that it is in fact a negotiating tactic. It is a dangerous one, Neil, without a doubt.

But I do believe that China has been -- and it's a fact -- has been clearly cheating for decades. The U.S. has been incapable of curbing the theft of intellectual property, incapable of improving the trade imbalances with regard to unfair terms of trade.

And I think that is in fact an negotiating tactic, and in fact it can get some -- we have gotten some -- we have made some territory with the Chinese since the threats have been made.

Of course, I'm not going to say that a full-blown trade war is -- that the global economy can rub that off. That's certainly not the case. But I do think that this a negotiating tactic. And I think that the administration is pragmatic. And hopefully we get better terms and not the worst-case scenario, which is obviously a full-blown trade war.

CAVUTO: All right, you know, it's interesting, John Layfield.

We were looking at GM a second ago. And that's one of the issues and one of the companies that has warned and telegraphed, if this drags on, jobs could suffer, business could suffer, we could suffer, this country could suffer.

What do you think of that?

JOHN LAYFIELD, FOX NEWS CONTRIBUTOR: I think GM is a perfect test case for this.

You look at GM, they have about three million cars that are consumed in the United States, and you have four million that are built and sold in Asia right now. So they get around these tariffs by putting production overseas.

And I think that's what you're going to see. I hope that Kathryn is right about this being a negotiation. However, it's different to threaten these tariffs as it is to actually put these tariffs on, which is what has just happened.

You hope it's a negotiation tactic. But they're playing an incredibly dangerous game. This slippery slope of you digging your heels in and getting into a trade war, we now don't -- we don't have any friends.

We now have Canada, Mexico and the E.U. getting together to negotiate how they're going to deal with us. We have Asia as a bloc. That is $28 trillion of GDP in Asia, 4.5 billion people, not just China, getting together about how they are going to deal with us.

We are really isolating ourselves. To me, this is not America first.

ROONEY VERA: I will jump in.

LAYFIELD: This is isolationism, and it's scary.

ROONEY VERA: I will jump in there, because we did get data today, and the U.S. economy is blowing all the other economies out of the water and the markets are outperforming them in a tremendous way.

LAYFIELD: Yes.

ROONEY VERA: So I wouldn't say that the U.S. is losing here.

In fact, the U.S. ISM manufacturing number came out above 60, best we have had in awhile, Germany lower, China lower, U.S. equities doing fantastic.

So, look, I think the combination of tax cuts, improvement with regard to trade policy, we have to contend, we have the face facts here. The U.S. economy is doing great, markets are doing fantastic.

And I would contend that decades of failure with regard to the Chinese manner of trade...

(CROSSTALK)

CAVUTO: Well, you might be right on that.

(CROSSTALK)

CAVUTO: But, Kathryn, what worries me...

(CROSSTALK)

CAVUTO: No, you have made your very good point.

But, John, what worries me is that -- the possibility of unintended consequences here. And you touched on it. I mean, our markets have held up, to her point, very well. And, of course, the Chinese market, of course, well into bear market territory, back to early 2016 lows, hence the president's argument they need us a lot more than we need them.

But they don't appear to be budging. And I'm wondering where you see this going.

(CROSSTALK)

CAVUTO: John first.

Go ahead.

ROONEY VERA: Yes.

LAYFIELD: I hope that this is a negotiation and these things are going to go away.

This administration has had these bellicose statements come out, and they have backed off of it. That's been the history. That's what the market is hoping right now.

But when you look at our economy, we -- our economy is doing great. That's what you wish this market was trading on. The GDP numbers right now that's going to come out, it's going to be huge.

The reason it's going to be huge, one of the big reasons is because you're getting a lot of these goods shipped before the tariffs go. So you are going to see that come off in the following two quarters.

That is not going to be a sign that the economy is doing gangbusters. It's a sign that people are scared of these tariffs. We're hurting our American business if we start a trade war with the entire world. And that is the fear.

CAVUTO: Kathryn, we talk about the GDP. That's -- the latest read on the second quarter could be over 4 percent, some say 4.5 percent. The Atlanta Fed seems to be very confident it's going to be a strong number. Are you?

ROONEY VERA: Look, Neil, let's -- I just want to throw something out there.

The U.S. is no longer a big manufacturing powerhouse. The U.S. is an intellectual property, big exporter of electronic content. For example, that's the biggest point in the NAFTA renegotiation. And that's what we expert. That's being stolen. Right?

We know this. It's been decades. Bill Clinton, this was a bipartisan issue. President Bill Clinton also complained about this decades ago. So, this is something that I think the Trump administration is trying to attack.

And, hey, I'm in favor of it. I'm not in favor of tariffs at all, but I'm in favor of improved terms of trade. Free trade is fantastic. I agree with it. I'm an economist, professor of economics. I agree with it.

But we have to get real. Free vs. fair trade. With regard to NAFTA, we just had just -- just for your audience to keep in mind, Sunday, we had -- yesterday, we had the elections in Mexico. We have a populist U.S. president, a populist Mexican president, the two biggest most power -- powerhouses in the NAFTA organization.

And they're both populists. This is going to make for some noisy noise in the future with regard to free trade in North America.

CAVUTO: And we're getting that now. We're getting a lot of that populist noise right now.

Guys, thank you both very, very much.

I want to bring in Ari Fleischer and get his sense of this ahead of hearing from one of his successors, Sarah Sanders.

Ari, you know, when -- oh, wait a minute.

I will go first to Sarah, and then you, Ari, when this is over.

(WHITE HOUSE PRESS CONFERENCE)

CAVUTO: All right, not a lot of news broken there, but it was interesting on when it came to trade, something we got into here as this escalates.

And Blake Burman of Fox Business fame was looking at the expanded list of countries that have gone way beyond China that are now targeting the U.S. for tariffs of their own.

That includes the European Union and Canada and Mexico, and even India. One of the first questions that Indian correspondent seem to be asking was about moves that India might take in that regard.

Be that as it may, the administration trying to make it clear that there's no set deadline or timetable for these talks or to see improvement, but the president indicating he's optimistic that the worst can be avoided.

The read from President George W. Bush's press secretary, spokesman, Ari Fleischer.

Ari, thanks for your patience.

ARI FLEISCHER, FOX NEWS CONTRIBUTOR: Thank you, Neil.

CAVUTO: What did you make of this, and this trade thing, that does seem to be escalating, does seem to be widening, but the president trying to assure people, and again Sarah Sanders as well, that things can be avoided?

FLEISCHER: Well, the president wanted a trade war, and he's getting one. I think that's clear.

The president has a philosophy that is not keeping with mainstream economists or people who used to be in Washington. It is very much the point of view he espoused as a candidate. And that is, the United States is being taken advantage of and he's the only guy who's outsider enough to do something about it.

It's a huge risk, Neil. And we're seeing that now. And I don't think any of us are smart enough to know how it's going to turn out. Donald Trump may be right, and maybe all those nations are going to blink at some point down the road. Maybe they won't, and prices for Americans are going to go up. We don't know.

CAVUTO: One thing we do know -- and your old boss and other presidents have dealt in varying degrees with countries who either try to stiff us or try to pull a fast one on us.

But this is being done very publicly for all the world to hear and see and witness and play out in all of their respective markets. Now, his notion, the president's notion and approach has been, we're in a position of strength, our economy's doing the best, our markets are holding up the best.

He's right on both of those counts. But Americans, I don't think, ever are prepared for the possibility that a lot of their favorite items are going to go up dramatically in price. And that has not been explained to them.

FLEISCHER: It depends on how much it goes up in price.

And it also depends. Some people would be willing to pay more because they think Trump is right. Some people think that China has been cheating taking advantage of us, reaching into our pockets and stealing everything, including intellectual property.

CAVUTO: Right. But I'm going to beyond China. I'm going to beyond China.

FLEISCHER: Sure.

CAVUTO: And I'm wondering if part of the strategy here should be to prepare Americans for that possibility.

FLEISCHER: I don't -- I wouldn't do that if I'm Donald Trump.

If I'm Donald Trump, I just hammer on the other guy. And I say the other guys tariffs are unfair, and that's why we have to fight fire with fire.

It's not the intellectual argument, but Donald Trump make those type of arguments.

CAVUTO: Right.

FLEISCHER: He makes the emotional, from-the-gut argument. And if someone's taking advantage of us, he's probably right, that's a stronger case to make.

Look, here's what I don't understand, though, Neil. I think China is the big one. And I salute the president for taking on China, something no insider would do. What I don't know is why he didn't unite Europe with us and the rest of Asia, Japan, India, against China.

They don't like the way China does business either. But by going to war, trade wars with every ally around the world, I think he gave up leverage he could have used against China by uniting everyone against China's practices. And we probably would have been more successful.

He wants a trade war with everybody. He's getting it. And we will just have to ride this tiger and see how it comes out.

CAVUTO: All right, Ari, very good seeing you. Thank you. I'm sorry for that interruption there, but always good having you, my friend.

Let's get the read on this from CKE Restaurant CEO Andy Puzder. He joins us on the phone.

ANDREW PUZDER, PRESIDENT & CEO, CKE RESTAURANTS: OK.

CAVUTO: Andy, one of the things the president was mentioning is that countries are calling him and talking to him every day, wanting to get a deal with the United States, despite all of these headlines and dramas you see playing out on TV.

What did you make of that?

PUZDER: Well, think that's exactly what he expected to happen.

Look, these tariffs are a tool in the negotiation process. They're the stick. The carrot is a lucrative trade agreement that is fairer than the existing agreement, but nonetheless lucrative, or we go to these tariffs.

And these countries have gone along with trade deals that are -- very much tilt against the United States and tilt towards our trading partners for decades. They don't want to give that up. You got to have a stick to get them to negotiate. And this is the stick.

CAVUTO: We're watching some of the footage earlier today, the president hosting the leader of the Netherlands and, of course, part of the European Union that is considering slapping its own tariffs on the United States.

You think cooler heads -- I think your thrust is, cooler heads will prevail, there's been some good in this, in that it's revealed how even some of our friends take advantage of us.

But are you concerned that this could spiral out of control, that something that started with aluminum and steel has now spread to orange juice and yogurt and soup and maple syrup and chocolate and ketchup, even -- even whiskey, Andy? Whiskey? So, what do you make of it?

(LAUGHTER)

PUZDER: I think there's always risks when you take a hard stance.

And I think our allies are counting -- our trading partners are counting on the fact that an election coming up, and that this a high-risk strategy politically, as well as economically, to try and get this president to back off.

Presidents in the past -- the Iran deal is the perfect example -- where presidents say, these are non-negotiable points. Then, when you get close to an election, they negotiate them all away.

I think what our trading partners are learning, and what Kim Jong-un learned in North Korea is this -- that's not this president. When this president says this is a non-negotiable point, he means it's a non- negotiable point.

And when they come to grips with that, I think they will realize that the economic reality favors a deal and then we will get people dealing. These are rationale people in most of these countries. And I think they will realize that the arrangements need to change.

CAVUTO: Let's say it takes awhile for them to come to the realization, if you give them the benefit of your argument there.

GM is already concerned that it's not happening, and some jobs could be lost and business could be impacted. And Polaris and a host of others are indicating the same.

So, obviously, they're concerned enough now to say this is a real and present danger to them.

PUZDER: Yes, I think American businesses -- and having been a former CEO, I can tell you this for sure.

American CEOs and American businesses are trained to react to quarterly problems. And when you see a quarterly problem, even though you may not believe it's long-term, you need to come -- you need to let your shareholders know that you're concerned about the problem and you need to let them know you have a long-term solution to solve that problem.

So, I think what -- a lot of what you're hearing here is people that are concerned about next quarter or the quarter after that, because it's what their jobs depend on.

I think the president is more concerned with the long-term disadvantage of having these massive trade deficits. And I think that's the right thing for the president to focus on.

I think these CEOs are focusing on what the market tells them to focus on, which is how they're going to look this quarter and next quarter. And doing that, you end up with some short-term strategies. What the country really needs is a long-term strategy. We haven't had once since the end of World War II on trade. And we need to have one now.

CAVUTO: But, you know, Andy, I always look at this issue and say whether we're being a little hypocritical here, not the president, per se.

But the United States also has its double-digit tariffs on vehicles that come from -- particularly SUVs from abroad and all. So, we play this game as well.

So, the best way to compare various countries and regions is average tariffs. And we have about 3.5 percent in our country, which is very low.

But Canada, who we have been vilifying for what they're doing with lumber and dairy, they're at 4.5 percent. yet we have painted them out to be these loathsome individuals who are trying to take advantage of us. Is that a good strategy?

PUZDER: Neil, I -- I can't tell you that it's a good strategy with Canada or even Mexico, to tell you the truth.

But I think Canada and Mexico need to know that the president is serious. They need to know that, even with an election coming up and even with the political risks, he's not going to back off.

And, really, the vitriol that has been flowing across the border hasn't just become -- hasn't just been coming from the United States. It's been coming from Canada as well.

And they have done some things that just aren't fair, that just aren't right or rational. They're a smaller country. We allowed them to get away with it for years. And the president is saying, look, it's a time to put an end to that.

Steel and aluminum are different. The president genuinely believes that, without a steel sector in this country, we don't have a national defense. And I think that's a huge concern to him. Defense issues are a big concern.

So, I think steel and aluminum are different. But it has spread. And it's unfortunate, because Canada has been such a great ally for such a long time.

CAVUTO: All right, Andy, thank you very, very much. Good seeing you, or hearing you.

PUZDER: Thank you, Neil.

CAVUTO: All right.

All right, in the meantime, as he was speaking there, we're get confirmation that Secretary of State Mike Pompeo plans to be leaving soon for his third trip to North Korea on July 5.

Of course, all of this at a time we're getting indications that the North Koreans may be playing fast and loose on that promise to denuclearize, including a nuclear facility where they're beefing up operations and another facility where it looks they're adding to them here.

So, perhaps this has to do with that and the secretary of state's interests in seeing exactly what's going on. The president stands by that agreement and his chat with Kim Jong-un, and the talk that there's going to be another one, maybe in New York and maybe later this year.

But Mike Pompeo plans to go to North Korea to check up on all of this.

And we will have more after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BLAKE BURMAN, FOX NEWS CORRESPONDENT: Is the United States winning this battle? And if so, how?

SARAH SANDERS, WHITE HOUSE PRESS SECRETARY: Again, the president is focused not on the short term but on the long term, and he wants to make sure that we're doing things that help protect American workers and protect American industry.

And he is going to keep pushing to make sure that we have good trade deals. We have been in trade deficits with nearly every country across the globe for years, and the president wants to ensure that that doesn't continue.

BURMAN: But how long is the long term? Because if there's -- for the folks who are actually impacted by this, and they just hear, Well, we're in it for the long term -- is the long term weeks, months, years? How long is the long term?

SANDERS: Look, we're not setting a timetable, and there are a lot of different negotiations going on.

(END VIDEO CLIP)

CAVUTO: All right, and at that point, Blake Burman's White House press credentials were destroyed.

(LAUGHTER)

CAVUTO: No.

But it was a good series of questions here. Where is this going? How widespread is this going to be?

Let's get the read from Charles Payne and Gary B. Smith.

Charles, the impact is real, like, now. And it spreads to a lot of things now that might be well worth it in the end, if we get some of this stuff under control. But it is palpable, right?

CHARLES PAYNE, FOX NEWS CONTRIBUTOR: It is.

Of course, last -- on Friday, I think Toyota said the average price of a Camry will go up $1,800. On the eve of July 4, we're hearing that a can of soda, at least the aluminum part of it, can go up 24 cents.

But the real biggest hit so far -- and a lot of people don't realize this - - we have already had tariffs on Canadian lumber. And since January of last year, it's added $9,000 on average to the cost of a single family home. So, that is real right now.

And, of course, all the other stuff we're talking about could happen. So, there's no doubt the anxiety is there. And, at some point, Americans could and will feel the pinch.

CAVUTO: You know, Gary B., that is what I was raising a little earlier with Andy Puzder, that do you think it is necessary -- now, the president has made it very obvious that the long-term battle here is to level the playing field. That's his view. This is important.

But a lot of Americans, when they start seeing these increases in a variety of items -- and by the end of the week, it could be better than 1,000 of them -- they are going to want to know why and they are going to have to have it explained to them in a way that might make it a politically brave thing to do, but they will do it. A good many will.

But others will be kind of shell-shocked. What happens?

GARY B. SMITH, FOX NEWS CONTRIBUTOR: Yes, exactly. And that's going to be Trump's real question.

I think he's doing this primarily because he views himself as a man of the people, and he thinks that that is what the people want. I think the recent poll I saw is that most people, to your point, don't want these tariffs.

Now, certainly, in certain industries, steel and some of the others, you know, those people will be all for it. But is the pain spread out enough, as Charles says, that people are going to be up in arms, and then he has to do a 360 on this -- or I guess at least a 180?

I don't know. I think Trump is very serious about these tariffs. He feels like he's a Wal-Mart, and everybody else out there is a vendor, and he can impose his -- the U.S.' strength and might and dollar power on these countries. I think he might be right.

CAVUTO: Well, it has not happened yet, though, right?

So Charles, is it your sense that -- and I use the markets oftentimes as a proxy for this. If they rise, they're less concerned about it and they're confident we will get through this. If they tank, they're getting very worried about it. They came back from a 200-point deficit today.

What are we to read into that? I don't like to go to day-by-day gyrations.

PAYNE: Sure.

CAVUTO: But, well, what do you make of that?

PAYNE: It was a remarkable reversal today. It's data -- a week that is going to be interrupted by a major holiday. And a lot of folks are away.

By all rights -- we were down 400 points. We already had the storyline written. Right? We come, in Mexico has got a new socialist governor -- government, rather. Canada launched their tariffs. And on Friday was a big D-Day for China and America. So, the story were written. The headlines were written.

The only thing that changed was a remarkable reversal in the markets. And I got to tell you what else was interesting. Manufacturing data out today, everybody who took this survey talked about their concern of tariffs, but the manufacturing data itself blew away consensus and it points to an amazing manufacturing renaissance.

So, two things existing -- co existing, reality is, we have got a juggernaut of an economy, and the other part of it is people -- there's a growing economy.

CAVUTO: Would you still tell people to stay in this market, Gary, or to ignore the trade stuff, what?

SMITH: Both.

I would ignore the trade stuff and I would stay in the market. I'm very bullish on the market, mainly because of the foundation that Trump has built with his tax plan, the tax cuts, the corporate cuts going down.

I think he's, you know, a shake-them-up kind of guy. There's one only president in history who wrote a book called "The Art of the Deal." And that is Donald Trump.

So, this whole tariff thing, I think, is in his wheelhouse. Generally, I'm not in favor of it. But I think he's going to get it done. I think there's so much positive out there with employment, with GDP, with new technologies coming on board, like artificial intelligence, robotics, all that stuff, I think the U.S. economy is in great shape right now.

PAYNE: You know, and just to add to that, Neil, I think we have crossed the Rubicon.

I don't think President Trump can turn around. I don't think he can blink right now. I think the game is on. And, to Gary's point, we are the world's largest consumer. We are going to have to play tough. We're going to have to use the muscle that we have and not fold.

CAVUTO: Yes.

PAYNE: And I think the president is on board with that, and a lot of his supporters are.

CAVUTO: All right, well, it's Rocky-Apollo Creed now, guys. That's all I...

(LAUGHTER)

CAVUTO: Just a little Rocky analogy there.

All right, when we come back here, there's a populist south of the border who is going to soon be the leader of Mexico.

(BEGIN VIDEO CLIP)

ANDRES MANUEL LOPEZ OBRADOR, MEXICAN PRESIDENT-ELECT (through translator): Viva Mexico! Viva Mexico!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CAVUTO: All right, well, Andres Lopez Obrador, the third time is the charm. He wins a landslide to become Mexico's next leader.

And the left has full run of the table here. What does that mean as far as any relations with the United States? Apparently, he and President Trump spoke for half-an-hour today, was considered a cordial conversation.

Let's get the read from Democratic Texas Congressman Henry Cuellar.

Congressman, good to have you.

Is it your sense that these two can maybe cobble together a NAFTA deal?

REP. HENRY CUELLAR, D-TEXAS: I hope so, because this is the first time since 1929 that Mexico elects a candidate that's not from the PAN, which is a conservative party, or the PRI, which is center-left.

CAVUTO: Right.

CUELLAR: This is somebody on the left.

But he's been giving an indication that he wants to move to the middle. And, hopefully, that conversation that he had with President Trump will lead us to making sure that we focus on NAFTA, that we focus on security and migration issues that are important to both countries.

CAVUTO: It would seem on paper, Congressman, that they would be opposites. But opposites can attract. Apparently, he has said of the president that he's erratic and arrogant. He campaigned about his bullying tactics when he was running for the Mexican leadership.

Now what?

CUELLAR: Well, you're right. He did say those words about the president.

But, you know, President Trump does have a way of working with somebody that comes out stronger. The current president is a little bit more diplomatic. I think Obrador is going to be a little bit more aggressive and push back if things don't go his way.

But I'm hoping that both of those presidents can keep in mind that the relationship between the U.S. and Mexico is extremely important for trade, security and migration.

CAVUTO: Is it your sense that the fact that the president has more Democratic support on getting tough on these trade deals than he does Republican support, maybe there's a common bond there?

CUELLAR: Well, you know, I have had the U.S. Chamber in my office. I have NAM, the National Manufacturers Association.

CAVUTO: Well, the U.S. Chamber is not happy.

CUELLAR: Well, no.

And I have had businesses have had come in.

CAVUTO: Yes.

CUELLAR: And I have always said, you know, we have to make sure that we work something to make sure this is good for the economy. And you're right. The Chamber is not happy.

In fact, if you look at their interactive map that I have been looking at, my state of Texas would be hit pretty hard. So, we have got to make sure that whatever we do, that it's a bipartisan approach...

CAVUTO: Right.

CUELLAR: ... because Democrats are not going to be supporting trade as an overall caucus.

CAVUTO: Congressman, it's always good catching up with you. I apologize for the brevity here with all the breaking news.

Good seeing you again, Congressman Henry Cuellar.

All right, the fallout from all of this tomorrow.

"The Five" is next.

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