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QUEST MEANS BUSINESS

U.S. Sanctions Russian, Chinese Groups; Some Remains Of 10 Missing sailors Found; Dow Posts Strongest Rally In week; Wife Of U.S. Treasury Secretary Caught In Instagram; Hacked Robot Turned Into Stabbing Machine; Two Barcelona Terror Suspects Charged. Aired 4-5p ET

Aired August 22, 2017 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[16:00:02] PAULA NEWTON, CNN HOST: Caught a few people by surprise. The Dow eyeballing 22,000 again. It's had a 200 point gain as we reach the end

of trading in Tuesday the point the 22nd of August.

Tonight the United States flexes it's financial muscles on North Korea. Now Russia and Chinese groups are being sanctioned. The bulls are back in

town, the Dow is heading for its best day in week, and political drama for the real wives of Washington. The treasury secretary's wife, gets into an

Instagram argument. I'm Paula Newton. This is "Quest Means Business."

And good evening. The Trump administration is dialling up economic pressure on firms and individuals accused of aiding Kim Jong-Un's nuclear

program. Now the U.S. Treasury Department slapping sanctions on six Chinese companies including three coal importers.

The surprise here is that no Chinese banks have been targeted. Also on the blacklist one Russian company and four Russian individuals.

Now, a Chinese government official said last month that its trade with North Korea was worth about $2.6 billion in the fit half of this year.

CNN's Dianne Gallagher joins us in Washington with the story.

In terms the intended effect, what message is the administration trying to send?

DIANNE GALLAGHER, CNN CORRESPONDENT: You know, really seems to be a two pronged effect, Paula. The Treasury Department announcing those new

sanctions on the people and businesses who are mostly out of China and Russia. They're accused of helping North Korea boost it's nuclear and

ballistic missile programs.

There were 16 total list of today by the Trump administration, 100 entities, six individuals, including like you said energy companies, coal

and oil traders, labor exporters. Those are the primary targets. Those three Chinese coal companies you talked about, the Treasury Department says

that they were collectively responsible for importing nearly half a billion dollars worth of North Korea coal just between 2013 and '16.

So all of those sanctions now coupled with the U.N. Security Council resolution that was passed earlier this month, they're working to basically

further isolate any person or company that's outside of North Korea providing any kind of support for Pyongyang's nuclear ambition. Of course

the latest move from the U.S. to pressure North Korea to give up on its nuclear goals.

But really, Paula, whether this latest round of sanctions can slow Pyongyang's rapidly developing nuclear missile programs or at least bring

them to the negotiation table still remains to be seen, especially in light of their claim that they've successfully miniaturized a nuclear weapon.

Now, U.S. Secretary of State Rex Tillerson just this afternoon noted that the DPRK hasn't conducted any new missile launches or test since the UNSC

resolution passed. He added that he holds -- this is the start of a signal from North Korea that they're ready to restrain from provocative act and he

said, I want to quote here, perhaps we're seeing a pathway through sometime in the near future having some dialogue. So, that is a change at least in

the past couple of weeks here, Paula, but not stopping the treasury department from continuing to slap these new sanctions.

NEWTON: Yes. And we have to warn with sanctions. You know, I've looked into U.N. reports on sanctions whether or not they're effective and whether

or not Russia and China are abiding by it. So we have to take it all with the (INAUDIBLE). Is there an indication that they will go further than

this an incremental member? Wasn't that long ago that we have Treasury Secretary Mnuchin come out with his own round of sanctions?

GALLAGHER: Whether or not the U.S. is going to go further in this is sort of still to be seen. Hearing that type of talk from Rex Tillerson

especially relying on the UNSC and those particular sanctions could show some sort of working together that the United States is ready do here.

Obviously this round was something that we were expecting to see. But with Rex Tillerson saying that, Mnuchin coming out with these sanctions, and of

course the fact that it was unanimous decision with the UNSC. China and Russia both voted to slap those sanction additional ones on North Korea.

So we could be looking at the U.S. maybe partnering a little more instead of going out on its own. But remember, as you said, Secretary Mnuchin said

nothing is really off the table and making sure we can use what we have to see that North Korea does not project and continue its nuclear program.

NEWTON: OK. I appreciate it, Dianne. Appreciate you looking this for us. Now meantime, these new moves North Korea come just hours after President

Trump laid out his plan to win the war in Afghanistan. Now critics say the speech lacked specifics, but its clear Mr. Trump is using t same tactic

he's used on everything from North Korea and NAFTA. He's hoping to use the economic power of the United States.

(BEGIN VIDEO CLIP)

DONALD TRUMP, UNITED STATES PRESIDENT: Another fundamental pillar of our new strategy is the integration of all instruments of American power --

diplomatic, economic, and military -- toward a successful outcome. America will work with the Afghan government as long as we see determination and

progress. However, our commitment is not unlimited, and our support is not a blank check.

[16:05:16] The government of Afghanistan must carry their share of the military, political, and economic burden.

(END VIDEO CLIP)

NEWTON: A closer look now at that economic pillar of Mr. Trump's strategy posses Asia.. Now he promises to take part in economic development in

Afghanistan to help defray the cost of the war. He wants pressure on Pakistan to do more to fight terrorism referencing billions and billions of

dollars the U.S. is paying Pakistan. He also calls on Pakistan's rival India to do more. Take a listen.

(BEGIN VIDEO CLIP)

TRUMP: We appreciate India's important contributions to stability in Afghanistan, but India makes billions of dollars in trade with the United

States, and we want them to help us more with Afghanistan, especially in the area of economic assistance and development.

(END VIDEO CLIP)

NEWTON: Now, notably absent from Mr. Trump's speech, and he mention at all of China. Beijing will not welcome the greater role that Mr. Trump wants

for India. China is Afghanistan's third largest trading partner and Beijing is investing billions of dollars in Pakistan.

I want to take closer look at what Mr. Trump's revised strategy for Afghanistan particularly the economic leverage he hopes to bring to bear in

the region.

Chris Kolenda is a former senior adviser on Afghanistan and Pakistan and he joins me now. You know, not to make too fine point of it, but the

president does believe that money talks. Does that really translate in Afghanistan?

CHRIS KOLENDA, CENTER FOR A NEW AMERICAN SECURITY: Well, it does talk and the question is how much leverage do you actually get for your investment.

And historically, the United States has paid a lot of money for variant little return. And this is been one of the ongoing challenges in

Afghanistan. And it's unfortunate that in the options that the president was given yesterday, he was only given really two options to lose and one

option to maintain the status quo. And of course that's the one that he chose.

NEWTON: And when we say -- you say the status quo and yet many are billing in as a change in strategy and Mr. Trump said it was a change for him.

What don't you see changing here?

KOLENDA: Well, really it's the same approach as the Obama Administration and the Bush Administration had before him with some -- with some tweaks.

So both President Bush and President Obama talked about getting tough on Pakistan, talked about getting tough on corruption within the Afghan

government which has been tremendous problem, and he found at the end of the day the United States did not have the understanding or the leverage

either to get Afghanistan to dismantle its kleptocracy or to get Pakistan to turn against the Afghan Taliban.

So you do have some important nuance, President Trump has said no timelines but he also said conditions but left those conditions very, very vague. So

what I'm hoping to see is we go forward that as National Security Council presents him with three reasonable options for success that they can then

debate and choose the one based on actual merits.

NEWTON: So you're saying there's potential here for this to go in the right direction, and I notice that in writing before that you said that,

look, one of the things that needs to happen is need to be the removal of a deadline. So he's done that. What point do you think the economic

leverage that he's talking about could actually work?

KOLENDA: Well, there's only so much economic leverage that we have when, for instance, with Pakistan when they look at their national security

interests, they fear that Afghanistan and India are going to team up to dismantle the Pakistani state. So, we can remove aid and we give them now

$742 million a year in aid. We can remove that or curtail that, but the question is that going to be sufficient compelling for them to turn against

the Afghan Taliban?

And what we have seen for the past 16 years is that it has not. The same way with economic aid and leverage in Afghanistan, we often say, look,

we're going to condition aid based on countercorruption, but at the end of the day you are at risk of cutting off your nose to spite your face because

the Afghan government needs the aid to be able to continue to exist, you threaten to cut off the aid you might be mortgaging your interests.

So, a much more productive approach would be to look at sanctions against spoilers and blockers of economic and political reform rather than trying

to condition aid.

NEWTON: Interesting. I want ask you, you know, you've been this a long time in terms of trying to crack that would bring Afghanistan to a more

peaceful nationhood here.

[16:10:09] You know, you've had some success with using your policies in Afghanistan and getting to a better way. I think when we weren't paying

attention, perhaps in the last two or three years, the Taliban now seizes as the upper hand if you were sitting in the Oval Office, what would you

say to President Trump knowing that you have been in that position before?

KOLENDA: Sure. I'd say Mr. President, there are three ways that these kind of wars end successfully. You can get a decisive military victory,

you can get a negotiated outcome that meets your interest, or you can build a host nation capacity and then transition the war to them and then leave.

And then evaluation each of those three options based on the merits. And I think what he find is that getting a third party facilitator to begin

laying a foundations for a peace process is probably a good first step to begin to explore whether option number two would have any capability going

forward.

NEWTON: Yes, and duly noted that would involved the Taliban as the President alluded. Mr. Kolenda, thanks so much for being here and we

appreciate your insights.

KOLENDA: Thank you very much.

NEWTON: Now we are expecting to see Donald Trump later this hour. He's due to land in Arizona where he'll meet with border patrol officers and

then head for a campaign rally. Once we see Air Force One land, we are going to bring you that live, just to listen in because sometimes he does

say something on the tarmac.

Now, the U.S. Navy says it has found some remains of the ten sailors missing from t "USS John McCain. Malaysian Navy divers located one body at

sea and U.S. divers found more remains in sealed compartments aboard the ship. The U.S. Navy official told CNN the warship suffered a steering

failure just before a collided with a tanker.

Investigators have not ruled out possibility that a cyberattack could be to blame although they say there's no such evidence so far. The warship has

docked in Singapore. You are just looking at that gash in that ship recently. CNN's Matt Rivers has seen it for himself. He's tracking the

latest developments.

Yes, Matt, I have tell to you, you're looking at the gash in the ship and then you're talking about, you know, the search and rescue clearly now it

is just a search. You know, if you're a family member at home right now of one these sailors, you've got to be thinking of the terror that ensued

there in peace time on one of the most sophisticated warships in the world.

MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, and the questions that surrounding it as well. just how did this actually happen. And don't

forget this isn't the first time that this has happened to the U.S. Navy this year. In fact, it happened just a few months ago, seven sailors

aboard USS Fitzgerald (INAUDIBLE) when that destroyer, the same similar type of ship to the USS John S. McCain crashed into a container ship.

And so, there's a lot of questions right now within the U.S. Navy about what's going on. And we'll go to what they're doing about that in a

second, but for now, of course, the operations to continue to try. They still call it a search and rescue at that point, although each hour that

goes by that, of course, makes the likelihood of finding survivors that much less, although the Navy still had some hope.

But they spent the entire day yesterday in the water going into those compartments that you mentioned, the Malaysian Navy out in the waters where

it happened. They did find the remains, although the U.S. Navy has not said exactly how many of those missing sailors have been identified at this

point.

And then a couple of hours when the sunrises again here in Singapore they're going to go back at it to try and find those sailors that remain

missing. So that remains the priority, but moving forward, going back to those questions, the navy needs to know. Doesn't have a systemic problem

here? And to be fair they've been quite transparent doing a press conference in fact right in front of that damaged ship saying we might have

a problem here and we're going to get to the bottom of it.

They're saying they're going to do a comprehensive review over the next several weeks and that concludes actually standing down on operational

level. Each different command across the entire U.S. Navy fleet for one day at a time over the next several weeks at each command's discretion to

figure out what is going on but clearly you've had these multiple incidents, where multiple sailors have lost their lives for, you know, in

peace time, not in any sort of combat mode. They're jobs are dangerous enough, the navy needs to figure out and they know that what is going on

here and can it be fixed.

NEWTON: And in terms of the investigation, I mean, a cyberattack, how plausible could that be?

RIVERS: Well, what we've heard from experts today is that it's not that plausible. We've heard it from CNN analysts I think this could just be a

lot of speculation in terms of what exactly caused this. What the Navy has said, different officials including at the press conference that I was at,

with the commander of the U.S Pacific Fleet, he said, look, at this point there's no evidence that that occurred. We haven't seen anything to

suggest that there could be some sort of cyberattack or nefarious activity here from outside actors.

[16:15:14] However, they're not going to leave any stone unturned in their words, and they're going to examine all possibilities, which mean at this

point they're not taking anything off the table as the possible cause for what happened here.

NEWTORN: Yes, and thanks Matt for noting just exactly how blunt and transparent the Navy has been while you've been on the ground. Matt,

thanks so much. We'll continue to follow this investigation for us.

The USS John McCain is, as you just heard from Matt, the fourth navy ship to suffer a major accident in Asian waters this year. Three vessels

collided with commercial ships and fourth warship run aground offer the coast of Japan. Now the latest crash happened in the world's second

busiest waterway, tens of thousand of ships of all sizes and types transit the Strait of Malacca each year. This narrow waterway is a crucial artery

that carries third of the world's crude oil and half of global trade to and from Asia. Now the commander of the U.S. Pacific Fleet said the latest

incident just can't be viewed in isolation.

(BEGIN VIDEO CLIP)

ADMIRAL SCOTT SWIFT, U.S. PACIFIC FLEET COMMANDER: One tragedy like this is one too many and while each of these four events is unique, they cannot

be viewed in isolation. I welcome the broad comprehensive review announced by our chief of naval operation. I talked this morning with Admiral

Davidson on the phone and look forward to working with him as to senior surface warfare officer in the navy to find out whether this is -- there is

a common cause at the root of these events and if so, how we solve this.

(END VIDEO CLIP)

NEWTON: Now experts say the navy will need to examine whether cost-cutting was to blame. Retired Rear Admiral John Kirby served as a spokesperson for

the Pentagon and the State Department. He's now CNN senior military and diplomatic analyst. And thanks for joining us. Look, whether you're an

admiral as yourself or you're the father of a sailor, you've got to be asking yourself what the heck is going on. You know, from perspective as

you mold (ph) this over, I mean what do you think?

ADMIRAL JOHN KIRBY (RETIRED), CNN NATIONAL SECURITY ANALYST: Well, look, I am the father a sailor as a matter of fact and like every dad of very

sailor out there, every parent, I am concerned when I look at -- and I look at the spate of accidents here that we've had in just the last eight months

and one particular part of the world. But more critically so is navy leadership. And you saw that with the press conference that Admiral Swift

just gave, you saw that in comments with Admiral Richardson announcing this comprehensive review in its operational pause.

They are taking this very seriously and they're willing to concede that possibly there's a thread that can be pulled through all these incidents.

They're all ship handling related. You just detailed them very well, three collisions, one grounding. So there's all some kind of ship handling

aspect to this. Maybe there's something that the fleet needs to focus on itself whether it's training, whether it's leadership, whether it's the

budget uncertainty that the Navy said to deal with for the last several years, there might be something there.

Then again they're also willing to concede that maybe there isn't. Each one is an isolated incident, each one needs to be investigated on its own

and they'll do that. They'll let the facts take them where they may. But I applaud the navy for not only how transparent they have been but how

accountable they have been to themselves over making sure that they get to the bottom of this.

NEWTON: Can you just describe for us what at stake here? I mean we hear a lot about what's been going on obviously in North Korea. You know, you've

got the disputes and those islands with China. You know, let's throw in Taiwan for a good measure and all the other defense commitments in that

area. How much does if bother you that these, you know, I know that there is a lot of redundancy but still when you look at it, what is at stake in

terms of the that they do find that common thread you're talking about?

KIRBY: Yes. You know, you raised a great question and something I didn't bring up in my last answer and that's the up tempo in that part of the

world. I mean this is an area of the world where the navy has been increasingly focused in last fiver six years. They have now 60% of the

United States Navy stationed or operating in the pacific at any one time. That is where the future for maritime security is largely going to be and

they are -- and they're running hard out there.

And you just cited some of the tensions in the South China Sea, then you have the issues with North Korea, they are busy out there, they're working

very, very hard. And Admiral Swift who is now the Pacific Fleet commander used to be the Seventh Fleet commander himself, he knows how hard the

forward deployed naval forces are running. And so maybe there's an issue with up tempo here as well.

Now to the issue of capacity, I'm not that concerned. Don't get me wrong when you have a destroyer like this, multibillion dollars asset, that's

taken off the line, it's going to be in repairs for a long, long time. In addition to one just two months ago, you know, that certainly creates a gap

in your capabilities but the navy has redundancy, they have flexibility, they're going to be able to make sure that had he can continue to meet all

the requirements of the pacific commander and our allies and partners.

[16:20:09] They won't let any commitment go unserved. They certainly won't neglect to answer every bell. But yes, look, it's going to make it a

little bit harder for them for sure.

NEWTON: OK. And retired Rear Admiral John Kirby, I owe you big apology, I've now called you Ken twice. Let's see if we can get this right this ,

admiral, second, third time lucky. Apologies again.

KIRBY: Not at all.

NEWTON: In terms of -- we were just talking about the extended traffic in this area. We've talked about this before and it doesn't matter where you

are in the world, shipping traffic has increased. You know, I've been so struck by the fact that this is not military to military. It's clearly

something that's happening in these shipping lanes where you've got a oft traffic. Could it be something that simple?

KIRBY: Well, you know what? If very well could be. I mean, again, until we get both of these investigations one on the Fitzgerald and now the

McCain we won't really know. In both situations it was areas where there is heavy maritime traffic. In this particular case with the McCain it

happened at the entrance to a traffic separation scheme.

So if you want to think about like you're on a five-lane highway and you're narrowing down to go on a two-lane bridge or a two-lane tunnel, that's kind

of what this area looks like. You've got a lot of merchant and maritime traffic trying to enter this passway and every has to sort of self-identify

themselves and make clear what course, what speed, what direction they're going in so that you can avoid these kids of collisions.

They're very, very rare. Now I know that sounds odd f| me to say because we just had two in two months with U.S. Navy warships but collision at sea

are really rare, because of the rules are so clear going in these traffic separation schemes.

But, look, I have no doubt that has the navy examines both these cases. They'll run everything to ground and if it's about traffic, more

importantly about ship handling and seamanship in heavy traffic, they'll get to the bottom of that too.

NEWTON: Yes, at least there's a measure of comfort for military families like yours that are looking at this with the Navy and saying they are being

transparent and are going to absolutely look at everything.

KIRBY: Absolutely, yes.

NEWTON: Yes. OK. John, thank you so much. Really appreciate your time.

KIRBY: My pleasure.

Donald Trump helps push defense stocks higher and the markets rally in the U.S. We'll have a look at why they're climbing so high.

(COMMERCIAL BREAK)

NEWTON: It's a positive day for markets here in the Unite States. The Dow's gains are into the triple digits. It's jumped 196 points, the

biggest rally in four months and defense stocks have been boosted by President Trump's pledge to beef up the American military presence in

Afghanistan. CNNMoney's Paul La Monica joins me now. I mean Paul, as we've been seeing this, it wasn't that long ago I was talking to you about a very

bad day on Wall Street, one of the worst and here we are. Why has it change seemingly so quickly?

PAUL LA MONICA, CNNMONEY CORRESPONDENT: Yes, I think part of it, Paula, you mentioned defense stocks, Boeing was one of the leaders, other defense

stocks also did well today so of course President Trump's speech last night talking about Afghanistan, that clearly has people buying the defense

sector. But that's just one sector.

[16:25:04] We saw tech another big winner today and I think there you have some hope that maybe tax repatriation is back on the table, if you get tax

reform and you get companies like Apple, Oracle, Google, Microsoft, Cisco being able to bring all these trillions of dollars of cash, that they have

on their balance from overseas to the U.S. and maybe they paid bigger dividend, they buy stock and they even hire workers and build plants,

that's a good thing for the U.S. economy and that's why interesting in that sector.

NEWTORN: And in terms of where you go next and so much of the sector news, you know, a lot of the sector news have been good. I mean it's been good

all around.

LA MONICA: Yes, earnings have by in large been pretty decent so I think that is something that goes to show the resilience. It's an overused term.

But Corporate America doesn't seem to be all back concerned about the drama in Washington and neither are consumers. Consumer spending has been pretty

strong, we saw that with a lot of retailers reporting decent earnings that Home Depot that company that raised -- did extremely lows, they're big

rivals could be reporting tomorrow. We'll see if they also had a big quarter.

NEWTON: And does it seem like we can in fact finally put down those rumors of merger between Fiat, Chrysler, and perhaps the Great Wall of China.

LA MONICA: Yes, I think the Fiat-Chrysler rumor it always struck me as a bit odd that was being circulated. I can understand the great wall has an

interest pretty good in the Jeep brand but I find it hard to believe that this administration in particular, let alone any U.S. administration would

look kindly on a deal where China would be buying a part of one of the iconic big three automotive companies, even though it is a big three

company they already as part ownership through Fiat.

NEWTON: And let's listen now to Paul Ryan talking to Foxconn. Remember Donald Trump big thing was jobs for Americans. Let's listen in.

(BEGIN VIDEO CLIP)

PAUL RYAN, U.S SPEAKER OF HE HOUSE: So what I worry about it's not just the skills get that we've been talking about all this time. But I worry

that Wisconsin manufacturing will not stay on the cutting edge and by getting Foxconn I think that really helps us do that. That makes Wisconsin

a magnet for other like kind of jobs.

And the problem we've had in Wisconsin, we've had this brain drain. Wee had a lot of young people getting educated here, growing up here and going

for up to this elsewhere. We want to keep them here. We want to keep our sons and our daughters or our kids and our grandkids in Wisconsin. And l

think brining a sector like this to Wisconsin is a long-term solution to helping making sure that people can stay and have great jobs in Wisconsin.

13,000 jobs and 10 million over 15 years of payroll ain't nothing to sneeze at. I think that's really good for us. And that's why I think it's an

exceptional deal, and by the way, it was going to go to another state if it didn't go to Wisconsin and then there would be no tax base whatsoever. It

was going to go to North Carolina or Indiana or some other place. I'm glad it came to Wisconsin.

(END VIDEO CLIP)

NEWTON: So he's defending the fact that, you know, some taxpayer money is used to attract that company there at all. Do you think those jobs ought

to come to fruition? They're not there yet.

LA MONICA: No, they're not To be fair to, you know, Paul Ryan and the governor of Wisconsin, this is a clearly good thing to have jobs coming to

America that otherwise could have been outside the United States. The question is, is this too much of a sweetheart deal? Are they getting such

a big tax break, Foxconn that it may take some people have estimated over 20 years before this can really pay off economically in the long term for

the state of Wisconsin. I think that's going to be the key question. Is Wisconsin giving up too much to attract a company like Foxconn.

NEWTON: Yes. And it's a continuing debate right around North America in terms of how many incentives the government gives. One day, Paul, we are

also going to get to the fact of whether or not we're going to have a labor shortage in this country, sooner or later the rates (INAUDIBLE). Paul

thanks so much. Appreciate it.

LA MONICA: Thank you.

NEWTON: Now news remained positive in Europe as well as markets closed up for the day. 15 (ph) to Dax, to CAC and the SMI all gaining on the day.

However, less positive note a survey found business confidence falling in Germany on the back of the emission scandal engulfing the car industry

there.

Now, we will be back with more "Quest Means Business" in just a moment.

(COMMERCIAL BREAK)

[16:31:29] NEWTON: Hey there, I'm Paula Newton. Coming up in the next half hour of "Quest Means Business", Steve Mnuchin's wife apologizes after

getting into an online argument about the cost of her wardrobe.

And President Trump is due to land in Arizona for a campaign rally any minute now. We'll bring you those pictures as soon as he arrives.

First, these are the top news headlines we're following this hour.

Now, some breaking news just into CNN. Two suspects connected to the terror cell behind attacks in Barcelona and Cambrils last week have been

formally charged with membership of the terrorist organization murder and explosives possession. Now this comes after a preliminary hearing on

Tuesday.

According to a court document, one suspect has been remanded into custody for further questioning and one has been released but has to appear in

court ever Monday. This comes less than 24 hours after police killed the suspected driver of the van that plowed into crowds in Barcelona killing 13

people.

The U.S. Treasury Department has slapped sanctions on 16 Chinese and Russian entities accused of supporting North Korea's nuclear program. Now,

they include energy companies, coal and oil traders, and others suspected of helping the North export workers and evade sanctions.

The U.S secretary of state says President Trump's new Afghanistan strategy will turn the tide of what's been a losing war. Rex Tillerson spoke at a

news conference in Washington. He says Mr. Trump's approach is meant to send a message to the Taliban militant group that it will not win a

battlefield victory.

(BEGIN VIDEO CLIP)

REX TILLERSON, U.S. SECRETARY OF STATE: The effort is, again, a reasonable effort, put pressure on the parties to understand that this

fighting is going to take everyone nowhere. And it's time to begin a process, it might very well be a lengthy process of reconciliation and a

peace accord.

And Afghanistan as the president said can choose its form of government that best suits the needs of its people. As longs it rejects terrorism,

never provides territory in Afghanistan to provide safe haven for terrorists, and accommodates all represented inside of Afghanistan. Ethnic

groups and others.

(END VIDEO CLIP)

NEWTON: Now, three young brothers including a baby are safe after being trapped beneath the rubble of a deadly earthquake. Great video really

there of the moment of celebration when he comes out.

Now it struck the Italian island Ischia, as rescuers worked through the night to save those boys. Their parents, including their pregnant mother

were also rescued but the quake left at least one person dead and 39 others injured.

In the U.S. State of Missouri, a convicted killer slated to die in a few hours gets a stay of execute from the governor. Marcellus Williams had

been sentenced to death for a brutal murder back in 1998. But new evidence indicates someone else's DNA may be on that murder weapon. The governor

says a board of inquiry will reexamine the case.

Embattled comedian, Bill Cosby now has three new lawyers for his assault retrial set for next March. The attorney has successfully defended Michael

Jackson against child molestation charges is one of them. A Pennsylvania judge allowed Cosby's previous team to withdraw. In June, Cosby's trial

ended in a mistrial because the just was deadlocked.

[16:35:03] Now to a bizarre story from Denmark. Police there have found human remains and they're trying to see if the remains are of a

Swedish journalist who disappeared after boarding a private submarine for a story. David McKenzie explains.

(BEGIN VIDEOTAPE)

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice-over): These, the last images of Swedish Journalist Kim Wall. In the tower the submarine

Nautilus near Copenhagen.

Captaining the privately built submarine, Peter Madsen, a well known Danish inventor. Kim reported from hotspots across the world. She went missing

just miles from her childhood home.

Something had gone horribly wrong. Just hours in, the Nautilus sending out a distress signal. Rescuers saved Madsen from the sinking submarine but

there was no sign of Kim.

Police say that Madsen first claimed he dropped her on shore but investigators now believe that the sub was deliberately sunk. Police say

Madsen changed his story.

BETINA HALD ENGMARK, PETER MADSEN'S ATTORNEY: My client has told the police and in the court meeting that Kim Wall has died on the submarine,

Nautilus because of an accident.

MCKENZIE: Madsen says he disposed off the body at sea and Danish authorities rapidly deployed search divers and Sonar boats to find the

missing journalist.

THOMAS DJURSING, FRIEND OF PETER MADSEN (through translator): We are dealing with a tragic case and there appears to have been an attempt to

somehow cover it up.

MCKENZIE: Peter Madsen faces charges of manslaughter which he denies. Police now saying a passing cyclist found a headless torso on the southwest

side of the Amager Island.

JENS MOLLER JENSEN, CHIEF INVESTIGATOR (through translator): We can now inform you the status that we are dealing with a way torso where head, legs

and arms have been deliberately cut off.

MCKENZIE: Several calls have come in from people spotting body parts. Police can't confirm whether it is Kim Wall. DNA tests should give a

definitive answer. Yet still, many questions left unanswered.

David McKenzie, CNN, London.

(END VIDEOTAPE)

NEWTON: And we'll be right back with more of Quest Means Business in a moment.

(COMMERCIAL BREAK)

NEWTON: UBTECH its Alpha 2 assistant the first humanoid robot for the family. This is a video UBTECH wants to you see, a friendly assistant that

can walk, talk, and engage with its owners.

Security research though at IOActive say they can hack it and turn it into this.

(LAUGHTER)

[16:40:11] Yes, you saw it right, it is stabbing a tomato with a screwdriver. Now, the same researchers hacked into the feed from another

robot's cameras and microphones. The researchers say they reported the vulnerabilities to the manufacturers before going public.

UBTECH calls the video exaggerated and claims the issues have been fixed. Lucas Apa is IOActive's principal security consultant and he joins me now

from Singapore.

I mean, needless to say, it doesn't take -- well, to use a term, a computer engineer to figure out that that's a bad, bad thing. But why do you think

this is happening?

LUCAS APA, IOACTIVE PRINCIPAL SECURITY CONSULTANT: Hello Pau, how are you?

So, basically we realized that we discovered several critical cyber security vulnerabilities on many robotics companies that started to produce

robots. In the last years they started being adopted by different industries and as very groundbreaking technology, every technology that

arises, sometimes they need funding, they need -- they prioritize marketing or they prioritizes logistics rather than putting a security, right.

And this -- we always see this in different older technologies and since we are very concerned about our future, we usually try to get ahead of that

future trying to identify the potential threats. So what we did was to audit 13 different robots to see which is the situation of the current

robotics in the world right now.

And what we discovered is really alarming. We discovered more than 50 vulnerabilities and very critical ones that could allow attackers to

compromise these robots and control them. They can control them for a violating privacy as for something we already know in computers, the most

current you can do is just get information or get a sensitive data.

But in this side we are talking about machines, we are talking about something that can move, that can hurt, right. So, on the other side, we

try to see which are the potential threats that these robots can have. And this actually depends on the force that these robots have.

As you saw on the video, we were trying to demonstrate how (INAUDIBLE) can compromise lady, a very small robot, right. But these attacks also work

with the biggest ones that we identified which are nearly two meters tall and really --

NEWTON: Right.

APA: -- it's really scary when you see this in industrial environment.

NEWTON: And understood and the point is, OK, if it's you or me we might know what to do. The point is, if you have a small child in the family

they may not necessarily do -- be able to know how to react in that situation.

But on the other end of the scale -- I mean, it makes for a great headline, killer robots and this has been a topic of conversation on this show and

others. I mean, if we want to show one of the headlines, these paper headlines talking about that.

But at the same point in time, is it exaggerated? Is the threat exaggerated because that's certainly the response that we got from the company?

APA: Yes, well, robots actually are rarely seen over the last years and many different accidents, especially with medical robots, with military

robots and of course with industrial ones. Why?

Because these are bigger, these can move faster, right. With the ones that are smaller that are in your homes, maybe if you see the video you don't

believe that this robot can actually hurt you, right. But the trend is that robots are going to get more mainstream in the future so the thing is

that, by getting more mainstream they will start adding capabilities and force and speed and will grow in size, right. So this is something that we

want to address now before it's too late.

NEWTON: And very quickly Lucas, just what do you want the companies do? Do you want them to do more of the hacking themselves so that they can flag

these problems before they happen?

APA: Well, first I think everything comes with awareness of the companies by us exposing these problems. And we hope that the companies will be

aware of the possible threats and start doing actions. And by actions I mean, locating their employees, locating the public as well as how is the

proper way of using these robots, right.

And from the other side, the customers need to be aware that the robots they are buying, they need to be secure.

NEWTON: Right. OK, thanks so much. I appreciate it.

APA: Thank you very much.

[16:45:05] NEWTON: Well, some video there.

And we now are looking at live pictures from Arizona where President Trump is landing ahead of a campaign rally later tonight. We should say it's not

without controversy. The mayor of Phoenix has said it is like lighting a match. He's asked the president not to arrive.

Protesters are already in position and we will see the president saying -- we all know that he likes these kind of campaign style rallies and he's

decided he's going to continue with that and other events in Arizona. We will continue to watch this for you because at times he will be on the

tarmac and he will actually -- as we were saying, the mayor of Arizona, Greg Stanton saying that he would in fact be upset to see the president

here and here he is.

He asked him to cancel this campaign appearance but did not and we will continue to watch those controversies there.

We want to try and now we're just going to go to -- we're going stick with these pictures, Tom? OK. Tom's telling me we're going stick with these

pictures and I believe we can now speak to Mr. Chalian, David Chalian is here.

Thanks so much for coming in.

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Hi, Paula.

NEWTON: You've got great and impeccable timing, I better tell you.

CHALIAN: I always timed my arrival to the (INAUDIBLE) with Air Force One.

NEWTON: I'll tell the president (INAUDIBLE). He'll be thrilled.

In terms of -- you know, we've just set this up in terms of this political rally just saying that, look, the mayor had said as early as last week,

saying, we just don't want to you come here. He is a Democratic mayor, that has to be said.

But Donald Trump was very -- he tweeted this rally out last week. He was obviously very excited to get back on the campaign trail. He gets a lot

out of it.

CHALIAN: He had a couple quite ruckus rallies in Arizona during the campaign. He definitely has a bond, no doubt, with his core base in

Arizona and I think we're sort of seeing the second step of the Trump two- step this week.

Last night, we saw the speech on Afghanistan in full commander-in-chief mode really trying after a week of having sort of his credibility as

president questioned because of his response to Charlottesville. Get out there in the command-in-chief role, make a presidential announcement.

Follow that now with the more unscripted Donald Trump free willing campaign rally. And remember, this is a campaign rally paid for by his campaign.

No president has ever been running for re-election as early as Donald Trump has.

NEWTON: Listen, I've already, this week talked to two people on that campaign committee, it's crazy. It really is in full throttle there and

yet, as we said, it tends to actually spur, let's say the, you know, the sensitivities, let's say, that Donald Trump has to his campaigns. He likes

this adoration. He likes being in campaign mode.

CHALIAN: Oh, he loves it. I don't think he's as happy in this job anywhere as is he when he's is at a rally, campaign rally, a rally with his

core supporters, sticking to his -- you know, we expect that he's going to touch on some of the big ticket fall agenda items that he wants to push

through. Tax reform, clearly immigration and the border will no doubt be a part of this although we've just learned from White House Press Secretary

Sarah Huckabee Sanders that the talk about Joe Arpaio, that very controversial sheriff from Maricopa County in Arizona.

There were -- you know, Donald Trump talked to Fox News about 10 days ago saying, I might pardon Joe Arpaio. Well, that would be like lighting a

match into an already -- into a tinderbox of controversy around this issue. Arpaio is a very, very controversial figure and we've learned today that

there will be no action on Joe Arpaio announced by the president in this rally.

NEWTON: So, at least that controversy won't happen there. Having said that, many people have made the point, we had teleprompter Trump last

night. You know, what are we going to get today.

And I will point out that the last time he was on teleprompter he made, you know, some conciliatory remarks about Charlottesville but then completely

obliterated that with off the cuff remarks right after. So -- I mean, what are you hearing in terms of we've got General Kelly now as a chief of

staff. Is he having an impact?

No one talk to you. I can talk to you about this before but what do you think. Do you think you see slowly but surely his impact on this

administration?

CHALIAN: On the administration. I don't think General Kelly is going to have an impact on the president and I don't think actually General Kelly

even considers that quite frankly to be his job. I think General Kelly is there to instill discipline into the West Wing structure, into the way that

the White House information flow to the president runs. Really, the chief of the staff.

I don't think he sees it to sort of control the president's modes or what the president is tweeting about. He doesn't see that really as part of the

job description. He thinks that he can build apparatus around the president that serves him in a way that might cause him to behave in more

accepting ways than controversial ways. That would be a good thing no doubt.

I do think though, this is not going to be same tone as last night. But it was interesting that he began those remarks last night all about unity, and

can we find peace and love over division. And now, it's up to the president to live up to those words.

[16:50:08] He set that out, you know, behind that presidential seal at Fort Meyer, part of the speech that he's doing laying out the Afghanistan

strategy and clearly eluding the controversy of Charlottesville the week before. But now, let's see if this campaign rally, if the president lives

up to his own words about how we should conduct ourselves.

NEWTON: And we talked about what usually happens at a rally especially in a place like Arizona. I think just see him talking again, saying, who's

going to pay for that wall. And you know what he gets back, something that he hasn't actually been able to get much traction on. And yet, can you

really see a tone down Donald Trump at a rally like this?

CHALIAN: Right. And now when they chant back Mexico, we've now actually remember, heard or read the transcripts to the conversations with the

Mexican leader where President Trump said, you got to help me out on this wall. It's impurely -- I have been out there for a year and a half saying

you're going to pay for it.

Yes, the red meat is certainly going to be rolled out at this rally. This is to stoke the base. Remember, last night, and this I find so fascinating

too. If you look at Breitbart headlines, the conservative website where Steve Bannon, the former chief strategist now back on his old perch. They

called Donald Trump a flip flopper in their coverage last night because they wanted full withdraw from Afghanistan.

They didn't want to see him up there sort of following what his predecessor's need to add troops there. So what -- where is he today after

he knew he was making announcement that may rub some in the real conservative wing, the Breitbart wing and the party the wrong way? He's

back out today on the campaign trail, no doubt going to give them the red meat that they love.

NEWTON: David, how do you see it in terms of Steve Bannon's role? I mean, obviously lot have been said within hours apparently, he was in editorial

meeting at Breitbart. First of, I'm not even sure how's that for love. But it is -- but OK, how do you see it?

CHALIAN: I mean, Steve Bannon is going to be a thorn in the side of the administration at times. I think he is less likely to take the president

on. I know it's (INAUDIBLE) to the fact that his website called the president a flip flopper.

But, I think he was prosecuting editorially through Breitbart, the arguments he had been making inside against McMaster and General Mattis at

the Defense Department. He really opposed them on this Afghanistan decision.

I think Breitbart is going to be a thorn in the side of a lot of the people around the president, right. What Breitbart -- what Bannon refer to as the

globalists. Gary Cohn, the national economic council adviser, Jared Kushner, Ivanka Trump. These people who Bannon does not see at all as part

of the fuel and energy that actually countable to Donald Trump to the White House.

So I think you'll see him take on policy decisions to if he feels those folks are winning the day out with the president more so than really kind

of tear the president back.

NEWTON: So, in fact just trying to continue have influence in that Oval Office (INAUDIBLE) longer in the way.

CHALIAN: Without a doubt.

NEWTON: Interesting. You know, we are not going to let you go without talking about a story that, my gosh, it set everybody on fire. One minute

though, I just want you to know that we are continuing to wait for the president to land there for that rally in Arizona.

But in the meantime, the wife of the U.S. Treasury secretary is apologizing for an Instragam post flaunting the couple's wealth. A statement from

Louise Linton's publicist says, "I apologize for my post on social media yesterday as well as my response. It was inappropriate and highly

insensitive."

Linton and Steve Mnuchin were traveling to Fort Knox in Kentucky where U.S. gold reserves are stored draped in luxury goods with tags of series of top

designers. A mother of three from Oregon found the post insensitive and wrote, "Glad we could pay for your little getaway. Hashtag, "deplorable."

Linton responded that she and her husband had contributed more to the economy in taxes and self-sacrifice, and calls her critic, adorable out of

touch.

Now, dressing like a Mnuchin or a Linton does not come cheap, Tom Ford sunglasses will suit back for about $415. And you could even watch and

cooks on them. The Hermes scarf in another $400. Roland Mouret pants will take your breath away at $925. And unless, we can find a steel on eBay,

those Valentino heels go for a cool $1,000.

I got to throw in there that the bag that she have was probably close to $10,000. About what people in Arizona might pay for health insurance in a

year.

David, look, this is not hard to understand and yet, it was difficult -- she apologized which is great. And yet, at that moment, she didn't really

understand what she was doing.

CHALIAN: This was a 24-hour from the wrong impulses, the wrong approach, a post that never should have happened. And then like a take down of a

comment on that post. It should now, you know, less than 24 hours later really an apology because she realized it had gone off the rails.

I mean, it was completely discordant, not just with sort of how any human being really should be responding to another.

[16:55:07] But discordant with Donald Trump's core message about the middle class in this country and some of his core supports.

So, it clearly was a P.R. error when they move to clean up quickly. I believe the Treasury Department also put out a statement today saying that

in fact, she will be reimbursing the government for her part of the travel to Kentucky.

NEWTON: And let's be clear. That price will be on economy tickets from probably Washington D.C. to Kentucky. Not a heck of lot of money but she

is going to reimburse it and that's standard policy when you're a family member on that trip.

Look, obviously, it's pretty plain as to the problem that she made but, you know, we've heard Donald Trump just a few weeks ago, David, saying a line

that he likes. Look, do you want me to hire poor people. Well, look, I could hire rich people as well as I could hire poor people. But, come on,

you'd rather have the rich people on these jobs, right?

What's the (INAUDIBLE) of that. Here you have a very rich person and do you think Americans are feeling that confidence that these people know

where they come from and know what their daily lives are all about?

CHALIAN: Actually, Paula, I think this is one Donald Trump's great successes in politics. Is that, here is this billionaire, real estate

developer from Manhattan, not very relatable resume to most Americans and was able to draw magnetically a lot of middle class, lower middle class

Americans to his cause and to his campaign.

I don't know many billionaires that would be able to pull that off because of the life they live and not wanting to be out on the campaign trail.

Donald Trump despite his wealth, despite his privilege, was able to form a connection. And I think that's why this look so bad to have something in

the administration unable to do that because it is so discordant from what Donald Trump is actually able to do.

It's -- I think one of his most sort of unique qualities in American politics.

NEWTON: Yes, and I think some people will often said, look, is that what you want. You want a bunch of politicians. In politics, sometimes it is

good to take from all sectors of society and see what they can bring to the table.

Having said that, it has been startling that the American people have been given the entire Trump family such a buy on their wealth because they see

it as a family working hard for this wealth. You know, Ivanka Trump has kind of step in it a few times and she -- she's been criticized. And yet,

do you really see this as being a -- here we go, David, we have the president again arriving in Arizona. We'll see if he does say anything on

the tarmac.

He's on his own and set for that campaign rally.

Actually David, these campaign rallies are still pretty popular on the ground aren't they?

CHALIAN: Oh, they are indeed. And he's on his own here descending from the Air Force One but he will not be on his own at the rally. I believe

Vice President Pence is also going to be joining him, his running at this rally. So, it really it's the whole affair.

NEWTON: Yes, and something as we've often said, he takes a lot of energy from. In terms of, again, though getting back to regular folks in Arizona.

As you said, there's going to be a lot of regular people on that audience, absolutely cheering him on and saying that, you know, he's fighting for

their cause.

Do you think he's lost any, you know, of those residents?

CHALIAN: Yes. We've seen a little bit of erosion in his poll numbers with some, certainly independents who actually was -- because he won

independents in 2016. Some more mainstream Republicans, sort of country club Republicans, some have drifted away. But for -- his bread and butter,

his core supporters, the ones that are showing up to a rally, those folks have never waver. They're still with him --

NEWTON: And what about that recent poll that showed, you know, Michigan, Pennsylvania, losing some stain there. Do you think that's (INAUDIBLE)?

CHALIAN: Yes, that's what I think is the evidence where he has lost some of the ground. Remember, those three states propelled him to the Oval

Office. He's in the 30s in his approval rating and all three of those states largely because independents have totally drifted away. Some

Republicans lost.

But, again, his core supporters, the kind of folks that show up at rallies -- I mean, they're going to love every minute of this.

NEWTON: Yes. And we will now wait to see, David, whether or not he actually dives back in or (INAUDIBLE) as Trump -- Donald Trump will be a

little bit more subdued. Maybe with the VP there, he'll be a little bit more well-behaved. He hasn't been before but you never know.

David, thanks so much for answering these. Appreciate it.

CHALIAN: Thank you. Thank you for having me.

NEWTON: Now, if you've missed parts of today's show, you can now download our show on a podcast. It's available from all three main providers or you

can listen in at cnn.com/podcast.

That's all of Quest Means Business. I'm Paula Newton. Our coverage of Donald Trump's visit to Arizona continues now with Amara Walker.

END