Transcript: Nightly Business Report – August 16, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Business rift. The
president`s advisory council made up of influential CEOs have been
disbanded. What that could mean for the economy and the White House pro-
growth agenda.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Tough trade talk.
Negotiations have started on a path that connects the North American
economy, and two industries in particular have an awful lot at stake.

MATHISEN: Split addition. Federal Reserve policymakers are divided over
interest hikes, leaving investors to navigate an uncertain path.

Those stories and more on NIGHTLY BUSINESS REPORT for Wednesday, August 16.

HERERA: Good evening, everyone, and welcome.

A business backlash at the White House. For the past several days, we`ve
been telling you about the CEOs who have decided to step down from the
president`s Manufacturing Advisory Council in the wake of the president`s
remarks on the deadly rally in Charlottesville. Well, today, the council
has come to an abrupt end. Also disbanding is the president`s separate
Strategy & Policy Forum, which was led by Blackstone`s CEO Steve Schwarzman
and whose members included the CEO of Wal-Mart (NYSE:WMT), the nation`s
biggest employer, GM`s chief and the head of JPMorgan (NYSE:JPM) Chase.

And all of this happened in dramatic fashion. Eamon Javers is following
the story for us tonight from outside Trump Tower in New York City.

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: After the fireworks
and the press conference here at Trump Tower yesterday, this morning began
very calmly at Trump Tower this morning. We saw a few members of the Trump
family coming in and out, but no high ranking members of the administration
were spotted here at Trump Tower.

Then in the early afternoon, the first hint of what would become a deluge.
The CEO of 3M (NYSE:MMM) saying he was in fact leaving the president`s
advisory council. And after that, we got word that there was a conference
call being held of an advisory council of elite CEOs led by Stephen
Schwarzman of Blackstone Group.

Once that conference call got under way, we learned in fact they had
decided to disband that council. Moments later, we saw a tweet from the
president of the United States, saying: Rather than putting pressure on the
business people of the Manufacturing Council and Strategic and Policy
Forum, I am ending both. Thank you all.

The president there insinuating that it was his decision to end both of
these councils, although we had had reporting that the CEOs on that
conference made the decision themselves before the president`s tweet.
Throughout the afternoon, we got additional statements from members of all
of those CEO advisory councils, distancing themselves from President Trump
in one way or another, until we got the statement from Aetna`s CEO that he
was ashamed of the president`s behavior, some of the toughest criticism
from a CEO throughout the day.

At the end of the day, the president left Trump Tower. He`s headed to
Bedminster, New Jersey, to his golf course there. And we`ll see what
tomorrow brings.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers at Trump Tower.

(END VIDEOTAPE)

MATHISEN: In just the past two weeks, the president has had two very
public ruptures, one with the GOP leader in the Senate and now with top
business figures. How enduring are these splits and how much harder, if it
all, do they make for progress on the president`s agenda.

Jeff Bush is a partner at the Washington Update.

Jeff, welcome. Good to have you with us.

You know, it is easy to say things like the president has lost business or
his presidency is collapsing. But my question for you is whether the
country and businesses beyond Manhattan, beyond the Beltway, and beyond the
Fortune 500 see it this way. What do you think?

JEFF BUSH, PARTNER, THE WASHINGTON UPDATE: Well, I think that`s great
insight. And certainly, there have been a lot of challenges with the
president over the last several weeks. And I think once you get outside
the Fortune 500 companies, I think there`s still an appreciation for the
long-term agenda of the Republican Party, lower taxation and lower
regulation. And that`s why I think there`s going to be — while a
disconnect here in the interim, I think the long run, businesses will still
support the Republican agenda.

HERERA: So, do you think that the president will be able to push that
agenda through with Republicans on the Hill?

BUSH: The Republicans ran on the same platform as Donald Trump, of lower
regulation, lower taxation, and so forth. And so, they know they`ll be
judged on that in the midterm 2018 elections. Therefore, they`ve got to
get something going or they`ll have to answer to the voters next November.

MATHISEN: Does getting those things done, those agenda items, those
platform items done become — how much more difficult do they become if the
president becomes in some ways an untouchable or a pariah to some views?

BUSH: Yes. Well, the president hasn`t been overly hands on with the
legislative agenda thus far. So, I`m not sure this changes that dynamic
tremendously. The legislation starts within the legislative branch. And I
think that will continue given the current agenda of the Republicans.

I think the one exception to that would be the Affordable Care Act repeal
and replace effort. The president and his administration wanted to put
additional effort on that here in September. And I think that`s where we
could see a little diminished gravitas around the Hill and so forth, in
trying to push that Affordable Care Act repeal agenda.

HERERA: Jeff, are you surprised that we haven`t seen more volatility in
the market as — because of the headlines that have been coming out? I was
certainly. We did a little bit of a sell-off in the stock market, but then
it came back. What`s your read on that?

BUSH: Well, interestingly we had said since January of this year to
anticipate an increase in volatility in the months of September and early
October as it relates to death selling and the budget issue. The budget
issue is the real issue. I think all this current ancillary things,
including North Korea and the discussion, the press conference Donald Trump
held earlier this week, those things amplify the increased volatility that
we anticipated around those fiscal dialogues later this month.

MATHISEN: All right. Jeff, thank you very much. Jeff Bush, with the
Washington Update tonight in Tulsa.

BUSH: Thank you.

HERERA: Also in Washington, the president`s top trade adviser demanded
major changes to the North American Free Trade Agreement, known as NAFTA.
Robert Lighthizer didn`t mince words about the 23-year-old pact that the
president has blamed for job losses to Mexico.

(BEGIN VIDEO CLIP)

ROBERT LIGHTHIZER, U.S. TRADE REPRESENTATIVE: The views of the president
about NAFTA, which I completely share, are well known. I want to be clear
that he is not interested in a mere tweaking of a few provisions and a
couple of updated chapters. We feel that NAFTA has fundamentally failed
many, many Americans, and needs major improvement.

(END VIDEO CLIP)

HERERA: As negotiations of that trade pact begin, we have two reports
tonight on two industries that could be impacted by any changes.

Aditi Roy reports on what`s at stake for the agricultural sector, but we
begin tonight with Phil LeBeau on the auto business.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Be
honest, do you know where your car or truck was built? Most people don`t.
And increasingly, they`re coming from south of the border.

This year, Mexico is expected to export more than 4 million autos with the
majority winding up sold in the U.S.

KRISTIN DZICZEK, CENTER FOR AUTOMOTIVE RESEARCH: NAFTA negotiations are
pressured in all sorts of ways, but certainly having that growing footprint
and growing capacity in Mexico is one of the pressures on the negotiators
at the table.

LEBEAU: The Trump administration wants more of what`s sold in the U.S. to
be built in the U.S., so it`s likely to push for automakers to use more
parts and components made in America or in the NAFTA region. Otherwise,
they could be hit with a tax that could add hundreds of dollars to the cost
of a vehicle. And despite the president threatening 35 percent tariffs on
autos built in Mexico, most in the industry expect any changes in the trade
deal to be less dramatic and taking years to implement.

DZICZEK: The automakers and suppliers have timelines that go much longer
than what we`re looking at for the NAFTA renegotiation, plus once we know
what`s coming out of NAFTA, there`s a period of time before things start to
phase in.

LEBEAU (on camera): So, if you`re looking to buy a new car or truck in the
foreseeable future, these NAFTA talks will not change what you end up
paying. But depending on what happens, in a couple years, vehicles built
in Mexico or Canada could come with a higher sticker price.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Farmers are also watching the talks. Many have benefited from
the trade deal. But they also have a wish list of improvements.

Aditi Roy is in America`s garlic capital, Gilroy, California.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Harvest
season is in full gear at Uesugi Farms in Gilroy, California. The bell
peppers are shiny, red and in perfect shape to go to vendors and ultimately
customers` dinner tables.

(on camera): Has it been a good season so far?

UNIDENTIFIED MALE: Yes, so far so good. You know, production has been
good. The markets have been good.

ROY (voice-over): But in a few months, when these peppers aren`t in
season, Uesugi Farms owner Pete Aiello says he relies heavily on farms in
Mexico to supply bell peppers so he can stay in business year round.

PETER AIELLO, OWNER, UESUGI FARMS: There`s a four-month window in there
where we can`t produce in California. It`s too cold. The days aren`t long
enough. So, it`s a big part of our program.

ROY: As the Trump administration enters renegotiations with the Mexican
and Canadian governments over NAFTA, some farmers like Aiello are anxiously
awaiting the outcome.

For Aiello, added tariffs on Mexican agricultural imports could in the
short run affect up to a fifth of his revenues.

AIELLO: Doing business with Mexico is a very important of doing business
here in the United States for producers like us, and that revenue all gets
generated up here in the U.S. Everything gets imported, sold up here, puts
food on the tables for everybody up here.

ROY: The American Farm Bureau says Canada and Mexico are critical markets
for U.S. agriculture. Since NAFTA was enacted, the organization says U.S.
agricultural exports to those countries have risen more than 300 percent to
about $38 billion last year, or about a third of total U.S. ag exports.

The American Farm Bureau says that helps boost farm incomes, which have
been cut in half since 2013 because of low prices.

VERONICA NIGH, AMERICAN FARM BUREAU: We`re looking at different
opportunities to increase demand, but we certainly don`t want to lose one
of our most important markets and our important customers in Canada and
Mexico.

ROY: Still, there are some items on farmers` wish lists for NAFTA talks.
Some poultry and dairy farmers want more access to Canadian markets,
somewhat less red tape to registers genetically modified crops and they
want a reduction in wait times at the border, which sometimes causes them
to lose perishables.

AIELLO: It`s the unknown that`s worrying us.

ROY: But Aiello says he would just be happy if things stay the same.

AIELLO: That would be the best-care scenario.

ROY (on camera): If the talks result in higher tariffs or other
protectionist measures, some trade groups warn that in the long run,
consumers might have to shoulder the burden by paying high prices for
produce like this at the grocery store.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Gilroy, California.

(END VIDEOTAPE)

HERERA: The top GOP tax writer says Congress is forging ahead with the tax
reform package. House Ways and Means Committee Chairman Kevin Brady
(NYSE:BRC) said members of Congress are making progress on one of the
Republican Party`s top priorities.

(BEGIN VIDEO CLIP)

REP. KEVIN BRADY (R), TEXAS: 2017 is our year to deliver to make history
on tax reform. We`re on that time table. In fact, while we may have not
be in Washington, we are working — our tax teams are meeting sometimes
twice daily.

(END VIDEO CLIP)

HERERA: Congressman Brady (NYSE:BRC) added that the tax committee will
update the White House on their progress soon.

MATHISEN: Potential reforms out of Washington being watched very closely
by the Federal Reserve. But according to the minutes of the last meeting,
persistently low inflation is dividing policymakers at the central bank.

Hampton Pearson has more.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a split
among monetary policymakers over exactly when there should be another Fed
interest rate hike. Monetary policymakers struggling to balance concerns
about the decline in inflation with signs of a job market that continues to
tighten.

One faction expects inflation to be at or below the Fed`s 2 percent target
for the next 12 months. And they observe, quote, they can afford to be
patient in deciding when to increase the Fed funds rate. The other set of
policymakers, if you will, are concerned about pressure from a labor market
that is already at full employment and could tighten further.

The other piece of news from the Fed minutes, still no exact date as to
when the Fed begins to plan to launch of reducing its $4.5 trillion bond
portfolio. They decided instead to wait until the next meeting when they
would have more information about overall economic conditions going
forward, although at that late July meeting, there were Fed members that
wanted to announce a date certain for the beginning of the bond buyback
program.

Turning now to concerns about the overall economy and possible speed bumps,
there is concern about the lack of action on fiscal policy, whether it`s
the Trump White House or Congress. Monetary policymakers are concerned
about the lack of action on fiscal policy, trade and health care. They say
the inaction is slowing down spending and hiring in the private sector,
which would helped boost overall economic growth. But they remain largely
positive about the overall economic, especially jobs and increased consumer
spending.

Next up for the Fed, the annual economics symposium next week in Jackson
Hole, Wyoming, the next meeting of the FOMC happens in late September. At
the Fed, I`m Hampton Pearson for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: On Wall Street, stocks struggled to hold on to their gains after
the release of those minutes of the last Fed meeting. Some strategists
also say the tension surrounding the White House may be contributing to
uncertainly in the market. The Dow Jones Industrial Average rose 25 points
to 22,024. The NASDAQ added 12. The S&P 500 was up 3 1/2.

MATHISEN: Still ahead, what Target (NYSE:TGT) did that most other
retailers can`t.

(MUSIC)

HERERA: Target`s turnaround may be taking hold. The retailer was able to
bring back shoppers to its stores in the most recent quarter, something
that its rivals are having a hard time doing. Sales rose, profits beat
expectations and the company issued an upbeat outlook. That sent the stock
higher.

Courtney Reagan has more on this bright spot in retail.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Seismic shifts are happening in retail and it`s wrecking many retailer
sales and profits. But there are also retailers still surpassing
expectations, even under pressure. And this quarter, Target (NYSE:TGT) is
one of them. The big box retailer breaking its four-quarter losing streak
for comparable sales, thanks to the highest store foot traffic in it 2 1/2
years and online sales growth of more than 30 percent.

While Target (NYSE:TGT) is now more confident about its sales and profit
expectations for the rest of the year, it says it`s still being prudent.

KATE MCSHANE, CITIGROUP: We have seen this with Target (NYSE:TGT) before,
though, where we`ve seen good quarters with good traffic and good ecommerce
and sometimes it hasn`t been that consistent.

So, I think it`s a step in the right direction and I think they`re doing a
lot to improve their business, but I think we need to see more sustainable
improvement for us to feel better about the direction they`re moving in.

REAGAN: Target (NYSE:TGT) paid a price for the quarter stronger sales. It
costs Target (NYSE:TGT) more to fulfill online orders and it lowered prices
to better compete. As a result, profits fell.

While sales growth at the company was broad, grocery is still struggling to
find growth. The problem, because grocery is what gets customers into the
store, the retailer has recently hired two new executives to help, one from
General Mills (NYSE:GIS) and one from Walmart.

(on camera): As part of a three-year plans, Target (NYSE:TGT) is spending
$7 billion to billed new smaller stores, remodel existing stores, improve
its Website and delivery speed and add new brands. Earlier this week,
Target (NYSE:TGT) bought Grand Junction, a technology transportation start-
up it hopes will help it deliver online orders more efficiently.

So, while Target (NYSE:TGT) exceeded expectations, it`s not yet a trend,
just one quarter, and the most important part of the year is still ahead.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: Sales fell for seventh consecutive quarter at Cisco
(NASDAQ:CSCO) Systems and that`s where we begin tonight`s “Market Focus”.

After the bell, the technology company said weaker performance in its
switches and routers business was the reason behind the revenue slip.
Those results still managed to top analyst expectations, however, earnings
fell as well, but they matched estimates. Shares initially fell in the
extended session, but they did finish the regular day up fractionally at
$32.34.

L Brands reported stronger than expected revenue after the bell, even as
the parent of Victoria`s Secret suffered lower sales due to its decision to
no longer sell swimwear. Profit also was ahead of street targets, but the
company cut its outlook for the full year and gave weak guidance for the
current quarter, and that initially sent shares lower in the after-hour
session. They did finish the regular day higher by 1 percent at $39.55.

Urban Outfitters (NASDAQ:URBN) shares rose following the retailer`s better
than expected results after the bell yesterday. Same-store sales fell at
the company`s namesake and Anthropologie brands, but growth at Free People
helped to offset those declines. Urban Outfitter said it is rolling out
several initiatives it believes could lift those falling sales. Shares
rose more than 17 percent to $19.76.

HERERA: United Healthcare said its president, David Wichmann, would take
on the role of CEO as the current chief executive transitions to the
position of executive chairman. Shares fell fractionally to $193.77.

And Kansas City Southern (NYSE:SO) (NYSE:KSU) raised its quarterly dividend
more than 8 percent to 36 cents a share. The yield on that stock is now
more than 1 percent. The railroad operator also replaced its current share
buyback program with a new $800 million plan. Shares rose 1 percent to
$107.49.

MATHISEN: PayPal will bar users from accepting donations to promote hate
and violence. This comes following revelations that the company played a
key role in raising money for the white supremacist rally last weekend in
Charlottesville. In a blog post, the company outlined its policy of not
allowing its services to be used to advocate racist views.

HERERA: Visa (NYSE:V) and MasterCard (NYSE:MA) are coming under pressure
to do the same. But other companies are popping up to take their place.

Contessa Brewer takes a look at what some call the alt-economy.

(BEGIN VIDEOTAPE)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the chaos in
Charlottesville unfolded, the white supremacist website Daily Stormer found
itself in the thick of the action. It had heavily promoted the rally, even
offered rides of what they called the hate van, an alternative to Uber,
which had refused service to white supremacists.

Daily Stormer was promptly refused service from its web host, Go Daddy.
Google (NASDAQ:GOOG) followed suit. Now, Daily Stormer has moved to a
Russian domain.

As American companies moved to distance themselves from white supremacists,
they leave a void, increasingly being filled by clone alternatives.

The alt-right is largely self-funded. Members of the movement donate to
their favorite organizations. If Go Fund Me won`t host them, WeSearchr
will. Many of the postings now ask for legal defense funds for white
supremacists and neo-Nazis. Daily Stormer has raced more than $150,000 on
this site alone. Supporters can pay with credit cards or bit coins.

PayPal is not an option at this point. Counter.fund will offer an
intermediary wall between extremists and the credit card process and
PayPal. It even converts bitcoin to cash, all for a hefty 20 percent fee,
which is funneled in part back to the alt-right.

Its founder Pax Dickinson told me: We can`t trust these companies, because
they`re controlled by the left. We need to build our own systems, need to
build a shadow economy. We can`t rely on any of these companies.

Dickinson pictures Counter Fund as a grocery co-op with members buying from
each other and job boards where applicants would have no fear of being
fired for controversial views.

When YouTube changed the way it compensates content creators, many artists,
filmmakers and journalists joined Patreon. With this summer, Patreon
kicked off right wing journalist Lauren Southern (NYSE:SO), sparking a
backlash.

Enter Hatreon, it offers a platform to pay creators who push even the most
extreme speech, as much as 15 percent of its revenue comes in bitcoin to
allow anonymity and cut out the middle man. Hatreon founder Cody Wilson
insists he`s not a white supremacist. He says he`s simply committed to do
open discourse. He told me: We`re at a post-political moment where you can
have all the opinions you want as long as they`re the right ones.

Gab welcomes all opinions. It`s a social media alternative to Twitter and
Facebook (NASDAQ:FB), which have cracked down on hate speech. It`s raised
more than half a million in just 36 days and counting, with more than
200,000 users around the world, Gab is not only protecting defense, but
planning a new crypto currency to compete with bitcoin and even bigger
plans to launch alt-economy businesses.

UTSAV SANDUJA, GAB CHIEF COMMUNICATIONS OFFICER: If PayPal is listening,
hi, PayPal, we`re going to replace you PayPal and we`re going to replace
you straight and we`re going to whole system. We`re also going to replace
credit cards and all the little bank transaction fees these big banks
taking. Gab is not about left or right. It`s an economy populist
movement.

BREWER: And a movement that`s making money and becoming more sophisticated
all the time.

Contessa Brewer, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Coming up, is Apple (NASDAQ:AAPL) using its massive cash pile to
become a player in Hollywood.

(MUSIC)

MATHISEN: Apple (NASDAQ:AAPL) will take on Hollywood and it is reportedly
investing a billion dollars to make sure it`s a real market competitor in
the crowded market for original content.

Julia Boorstin has more.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Apple (NASDAQ:AAPL)
has set a budget of about $1 billion to produce and license original
content over the next year, according to “Wall Street Journal.” Expected
to include those shows in a new video-focused offering that would launch in
addition to Apple`s $10 a month subscription app, Apple (NASDAQ:AAPL)
Music.

TONI SACCONAGHI, ANALYST, SANFORD BERNSTEIN: The billion dollar number is
significant, but in the grand scheme of Apple (NASDAQ:AAPL), it`s pretty
modest. Apple (NASDAQ:AAPL) has $225 billion in revenue. They will spend
about $12 billion in R&D next year. And so, this is a relatively small
number for Apple (NASDAQ:AAPL), given its huge size.

BOORSTIN: So far, Apple`s investment in original content has been limited,
and tied to Apple`s core focus on music and apps, such as Carpool Karaoke
and Planet of the Apps. That makes this push into the kind of scripted
content like “Game of Thrones” that you`d find one HBO and Netflix
(NASDAQ:NFLX), a big departure.

(on camera): Apple (NASDAQ:AAPL) declined to comments, but it`s hired some
big name Hollywood veterans here in Los Angeles, including Sony (NYSE:SNE)
TV chief Jamie Erlicht and Zack Van Amburg to run its video efforts, also
tapping the former head of WGN America and Tribune Studios to head its area
for original development.

(voice-over): If Apple (NASDAQ:AAPL) invests a billion dollars in content,
that`s still just about half what Time Warner`s HBO spends annually, and
about as much as Amazon (NASDAQ:AMZN) spends in 2013, its first year
investing in originals. Now, Amazon (NASDAQ:AMZN) reportedly spends about
$4.5 billion, and Netflix (NASDAQ:NFLX) will spend $6 billion this year.

SACCONAGHI: This position of sort of starting later in the game is not
unusual for Apple (NASDAQ:AAPL). Now, whether they will be ultimately
successful or not remains to be seen. I mean, they certainly have the war
chest to win. I mean, they have more cash than anyone else, and they
generate more cash flow than anyone else.

BOORSTIN: Apple (NASDAQ:AAPL) will not want to jeopardize its
relationships with HBO and Netflix (NASDAQ:NFLX). Apple (NASDAQ:AAPL)
earns 30 percent of subscriptions obtained through the App Store for the
first year, after which its take is 15 percent. One advantage Apple
(NASDAQ:AAPL) has it becomes a frenemy to those media companies, Apple
(NASDAQ:AAPL) could immediately launch its exclusive content globally
through the App Stores` reach to 155 countries.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. We hope you
have a great evening. We`ll see you tomorrow.

END

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