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Dow Drops 400 Points after Trump Sparks Trade War Fears; Source: Mueller Wants to Learn What Hope Hicks Knew about Russian Contacts. Aired 5-6p ET

Aired March 01, 2018 - 17:00   ET

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

TAPPER: Always an honor to have you here and an honor to know you. Thank you so much for being here. Appreciate it.

[17:00:05] That's it for "THE LEAD." I turn you over to Wolf Blitzer in THE SITUATION ROOM. Thanks for watching.

WOLF BLITZER, CNN ANCHOR: Happening now, breaking news.

Tanking the market. President Trump sends stock markets into a tail spin. The Dow dropping more than 400 points as his sudden announcements of import tariffs has Wall Street deeply worried about a trade war and infuriates fellow Republicans. Is it another sign of White House chaos?

Asking about Hope. She's leaving the White House. But Hope Hicks has been one of the president's closest confidants. Now Special Counsel Robert Mueller wants to know what Hope Hicks knows about the Trump campaign's contacts with Russia.

"Not that I know of." Sources say President Trump is furious that the attorney general, Jeff Sessions, has pushed back in his latest insult, but asked if the president plans to fire Sessions, White House press secretary Sarah Sanders says -- and I'm quoting -- "not that I know of."

And Putin's power play. Russia president, Vladimir Putin, boasts of the new arsenal that he says will render U.S. and NATO defenses completely useless. With talk of a hypersonic missile and an underwater nuclear drone, is Putin impressing the Pentagon or his own voters?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Breaking news, as the special counsel's investigation closes in, the White House is lurching from crisis to crisis, with increasing scrutiny of the president's son-in-law, a feud between the president and his own attorney general, and now an unplanned last-minute announcement of import tariffs, which has sent stock markets plummeting.

I'll speak with Congressman Adam Schiff. He's the ranking member of the Intelligence Committee. And our correspondents and specialists are all standing by with full coverage.

Let's go straight to our chief White House correspondent, Jim Acosta.

Jim, another rocky day for the White House and for Wall Street.

JIM ACOSTA, CNN CHIEF WHITE HOUSE CORRESPONDENT: That's right, Wolf. It's a day ends in "Y," so that is the case.

Publicly, aides to the president are pretty tight-lipped about what the internal state of affairs is over here at the White House, but every day, it seems, a tide of fresh drama washes over the president's team. Even Mr. Trumps policy announcements are misfiring, especially among fellow Republicans.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): With the White House seemingly in a state of constant chaos all week long, President Trump tried to get back on track by turning to policy, announcing new trade tariffs are coming soon against imports of steel and aluminum. The result? The president angered Republicans, and the stock market immediately tanked.

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: What's been allowed to go on for decades is disgraceful. It's disgraceful.

ACOSTA: It was another miscalculation for a West Wing that is reeling after days of bombshells, from the resignation of communications director Hope Hicks to the security clearance downgrade for the president's son-in-law, Jared Kushner. One of the latest damaging reports, a "New York Times" investigation revealing Kushner's' family received hundreds of millions of dollars in loans after the president's son-in-law held meetings with financial heavy hitters.

SARAH HUCKABEE SANDERS, WHITE HOUSE PRESS SECRETARY: Jared's still a valued member of the administration, and he's going to continue to focus on the work that he's been doing.

ACOSTA: White House chief of staff John Kelly offered some four-star deadpan as the retired general rolled his eyes and joked that he should not have left his previous job as secretary of homeland security.

JOHN KELLY, WHITE HOUSE CHIEF OF STAFF: One of the great honors of my life, being the secretary of homeland security, but I did something wrong, and God punished me, I guess.

ACOSTA: White House communications director Anthony Scaramucci, who was fired by Kelly, blasted the chief of staff, saying the general has lost control of the West Wing.

ANTHONY SCARAMUCCI, FORMER WHITE HOUSE COMMUNICATIONS DIRECTOR: If the current situation and the current culture inside the administration stays exactly the way it is, and there's literally no change, there will be a lot more departures, yes. The morale at an all-time low, and it's trending lower. ACOSTA: Sources tell CNN the president is outraged over the staff

turmoil, but he's also directing his fury at Attorney General Jeff Sessions, who appears determined to push back on the president's attempts to politicize the Russia investigation inside the Justice Department.

"The Washington Post" reported the president has referred to Sessions as the short-sighted, elderly cartoon character Mr. Magoo.

UNIDENTIFIED FEMALE: Does the president want to get rid of his attorney general?

SANDERS: Not that I know of.

ACOSTA: But the White House chaos is something Mr. Trump's GOP rivals warned about during the campaign.

JEB BUSH (R), FORMER FLORIDA GOVERNOR: Donald, you know, is great at the one-liners, but he's a chaos candidate. And he'd be a chaos president. He would not be the commander in chief we need to keep our country safe.

ACOSTA: Even when the president tries substance, he raises eyebrows, like advocating the death penalty for drug dealers, the kind of punishment handed out in less Democratic countries.

TRUMP: The drug dealers, the drug pushers, are -- they're really doing damage. They're really doing damage. Some countries have a very, very tough penalty, the ultimate penalty.

ACOSTA: And conservatives are still cringing after the president's comments on gun control when he said firearms should be confiscated from mentally ill people before they've had any due process.

[17:05:08] TRUMP: Take the guns first, go through due process second.

ACOSTA: The NRA didn't like the sound of that.

DANA LOESCH, NRA SPOKESPERSON: Among the things that NRA leadership stressed to the president on Sunday is that due process must be respected.

(END VIDEOTAPE)

ACOSTA: Now, the White House has yet to offer any kind of clarification of the president's comment that it would be OK for people to have their firearms confiscated from them if they are mentally ill before any due process.

And as for the departure of Hope Hicks, Wolf, the White House was pressed on this during the daily briefing today. At this point, they said there's no plan yet for her replacement, and so the turmoil continues, Wolf.

BLITZER: Certainly does. All right, Jim Acosta, thank you very much. The communication director, Hope Hicks, who announced her resignation

yesterday, has been one of the president's closest aides, and that sparked the interest of the special counsel, Robert Mueller.

Let's bring in our justice correspondent, Jessica Schneider. Why the interest right now, intense interest in Hope Hicks?

JESSICA SCHNEIDER, CNN JUSTICE CORRESPONDENT: Intense interest, Wolf. And this latest line of inquiry, it revolves around comments that Hope Hicks made to "The New York Times" two days after the election in 2016. She said no one in the campaign had met with any foreign entities, but of course, over the past year plus, it's come out that numerous people with the campaign did meet with Russian officials or Russian nationals, so now Hope Hicks's comments, they're getting a closer look by the special counsel.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Tonight, Hope Hicks may be on the way out of the White House, but she's still under scrutiny in the special counsel's Russian investigation.

MICHAEL ZELDIN, CNN LEGAL ANALYST: It's not ending any time soon. That's one thing we know for certain.

SCHNEIDER: Two days after the 2016 election, Hicks told "The New York Times" no one on the campaign had any contact with Russian officials. She said, "We are not aware of any campaign representatives that were in touch with any foreign entities before yesterday, when Mr. Trump spoke with many world leaders."

A former Trump campaign aide tells CNN Mueller's team has asked about this comment in interviews. Specifically if it was accurate, given the numerous contacts with Russians that have since come to light, and whether Hicks was aware of any of those contacts when she made the denial.

The list of Russian meetings that took place during the campaign, and were disclosed over the past year or more, includes that Trump Tower meeting with the Russian lawyer in June 2016 attended by Donald Trump Jr., Paul Manafort and Jared Kushner; Jeff Sessions meeting with then- Russian ambassador Sergey Kislyak at the Republican National Convention in July 2016 when Sessions was still a senator but a top surrogate of the Trump campaign; Trump campaign advisers meeting with Kislyak at the RNC; an additional Sessions meeting with Kislyak in his Senate office in September 2016; and George Papadopoulos's series of meetings, phone calls, and e-mails with Russians and people contacted to the Kremlin during the campaign.

Hicks denied knowing about the Trump Tower meeting during her House Intelligence interview this week, according to a source.

Meanwhile, the "Washington Post" reports Mueller's team has been investigating the period of time last summer when the president seemed determined to fire Attorney General Jeff Sessions. The president, livid at Sessions for recusing himself from the Russian investigation, repeatedly unleashes his fury at him on Twitter. Legal experts say it could play into the obstruction of justice piece of the Russia probe.

ZELDIN: If his venting is toward a corrupt purpose of eliminating an investigator, firing an attorney general, sending out a false narrative, that speaks more to corruption of intent, and that is what is under Mueller's inquiry.

(END VIDEOTAPE)

SCHNEIDER: And this questioning about the president's comments about the attorney general, this has been going on for the past few months, according to "The Washington Post." Mueller's team has asked witnesses about the president's private comments about the attorney general and the president's state of mind in late July and early August of last year when, of course, the president furiously tweeted, belittling Jeff Sessions. And then, of course, Wolf, there was that tweet just yesterday where the president also lashed out at Jeff Sessions, but of course, the attorney general yesterday coming out and pushing back in that statement.

BLITZER: Yes. He used the word "disgraceful," the president yesterday, in referring to Jeff Sessions, his attorney general. All right, thanks very much, Jessica Schneider, for that report.

Joining us now, the top Democrat on the House Intelligence Committee, Congressman Adam Schiff of California.

Congressman, thanks for joining us.

REP. ADAM SCHIFF (D), RANKING MEMBER, INTELLIGENCE COMMITTEE: Good to be with you, Wolf.

BLITZER: Do you believe the president's apparent attempts to force the attorney general out of his job amount to obstruction of justice?

SCHIFF: Well, it certainly could be evidence of a corrupt intent to try to affect the course of the Russian investigation. This is a problem that the president has had with the attorney general ever since he took the advice, frankly, of department lawyers and ethics lawyers to recuse himself, as he should have.

But the president thinks that this is not America's Justice Department. It's his Justice Department. His attorney general shouldn't be looking out for the interests of the public or the interests of justice; they should be basically watching his back. Now, that's not the job of the attorney general, and Jeff Sessions is exactly right to resist that.

[17:10:05] But he hasn't resisted it completely. I mean, I'm concerned even with an inspector general investigation into supposed FISA abuse, when it seems to be based on nothing more than a memo the Department of Justice itself said was extraordinarily reckless, and the FBI said was false and misleading. But nonetheless, it wasn't far enough for the president's satisfaction, so we see this renewed attack on the attorney general.

BLITZER: Let me get your reaction, Congressman, to the stunning resignation of Hope Hicks, just one day after she testified behind closed doors with your committee for some nine hours, telling lawmakers she occasionally tells what she called -- described as "white lies" on President Trump's behalf, but that she never lies about anything in her, word, "substantive." Do you believe her?

SCHIFF: Well, you know, first of all, I think it was unfair to Hope Hicks that conversations as part of her testimony were leaked out of the committee. In fairness to her, I think that we should wait until we release the full transcripts of our witnesses to be talking in detail like that.

The main issue that I had, frankly, with Hope Hicks' testimony was the operating instructions from the White House. She was told don't talk about -- initially don't talk about anything that took place during the transition and don't talk about anything during your time in the administration. They were forced to relent on her time in the transition, because she had testified to that in the Senate. But there's no privilege that covers such a broad period of time.

And we, obviously, had a deep interest in knowing about one particular false statement, that she allegedly may have had a role in, and that was the false statement about that meeting in Trump Tower with the Russians and the president's son and son-in-law and campaign manager. So we need to have her back, by subpoena if necessary, and we can't allow the White House to simply say, "We'd rather not have the committee learn the truth about these things."

BLITZER: Congressman Tom Rooney, he's a Republican; he's a member of your Intelligence Committee, he says that leaked details from Hope Hicks' testimony may have driven her resignation, and that the Russia probe needs to come to an end. He says it's been going on for a year. He says enough is enough. What's your response to his charge?

SCHIFF: Well, first of all, Mr. Rooney was calling for an end of the probe well before Hope Hicks came in to testify, and as other Republican members of our committee have said publicly, they're under enormous pressure to shut down our investigation.

I certainly agree, as I mentioned earlier, that I don't think Hope Hicks' testimony should have been leaked. Unfortunately, Mr. Rooney went and made that problem worse by going and talking about it in great detail.

But nonetheless, there is an effort to shut down the House investigation, to use any pretext they can. They don't want, frankly, to follow the evidence wherever it leads as they committed to do earlier, and that's a grave disservice to the public.

We still have dozens of witnesses that we need to bring in and many that we need to bring back in who, like Hope Hicks, like Corey Lewandowski, like Steve Bannon, refuse to answer broad categories of questions.

And there are large categories of documents we need. There are phone records, for example, around the Trump Tower meeting that would shed light on whether son talked to father and father talked to son or other people communicated and who was in the know about that meeting that we ought to get.

There are records from Twitter, communications between people like the president's son and Roger Stone, who communicated privately, secretly with Guccifer 2.0 or WikiLeaks, and we should seek records for. Those steps haven't been taken. And you can't do a credible investigation unless you do those things.

BLITZER: According to a new report in the "New York Times," Congressman, the Senate -- Senate Intelligence Committee has determined that Republicans on the House Intelligence Committee leaked private messages exchanged between Senator Mark Warner, the top Democrat on the Senate Intelligence Committee, and a lawyer connected to Russia.

Senate Richard Burr -- he's the chairman, the Republican chairman of the Intelligence Committee -- denies that his committee has reached that conclusion. Do you have any reason to suspect Republicans on your committee leaked those private messages?

SCHIFF: Yes. And we received a letter from the counsel, not from the majority, but private counsel, basically setting out much of those facts. Ad unfortunately, it's part of a pattern we have seen with the majority, where they will often go to an outlet of their choice, often the "Washington Examiner," sometimes FOX, and give them material that we haven't even seen. And, obviously, they could only be the source of that.

So much as they protest leaks from the committee, they have been all too often in the business of doing exactly that.

And these are designed, generally, to further the narrative they want to tell, which is "Don't look at what Russia did; don't look at the Trump campaign did. Let's put the government on trial. Let's put the FBI on trial, the Department of Justice on trial."

That isn't what we're supposed to be doing. We're supposed to be investigating Russian interference in our affairs and the role of U.S. persons. But it is part of a pattern that began with the chairman's ill-fated midnight run to the White House, almost one year ago.

[17:15:16] BLITZER: So was Devin Nunes, the chairman of your committee, responsible for that leak?

SCHIFF: You would have to ask him, but it clearly came from the majority and was a part of trying, you know, to, again, in a very partisan way, derail the investigation. It's, you know, just such a disservice to the public.

We need to keep our focus where it belongs, but it's part of a pattern that included the memo that was so misleading, and ironically, failed [SIC] to omit key facts while accusing the Department of Justice of omitting key facts that, in fact, they had included in their presentation, the FISA court. So, there is, of course, the hypocrisy to this, as well as the effort to distract attention from where we need to keep it.

BLITZER: Congressman Schiff, thanks so much for joining us.

SCHIFF: Thank you, Wolf.

BLITZER: There's breaking news we're following. A sudden move by President Trump, over the objections of key advisers, raising fears of a new trade war and sending stock markets plunging.

And CNN is learning that the Trump administration is weighing military action against North Korea if Kim Jong-un's regime develops a nuclear missile capable of reaching the U.S.

(COMMERCIAL BREAK)

[17:20:57] BLITZER: Breaking news: The Dow drops more than 400 points as President Trump' sudden announcement of tariffs on steel and on aluminum imports sparks fears of a trade war.

The president ignored serious warnings from corporate leaders, some of his own advisers, and a whole bunch of Republicans up in Congress that tariffs could hurt the overall U.S. economy. GOP lawmakers right now, they are furious, deeply disappointed in the president.

Let's go to our CNN business correspondent, Richard Quest. So why is Wall Street, first of all, Richard, so worried?

RICHARD QUEST, CNN BUSINESS CORRESPONDENT: They're worried because of a tit for tat. What will happen when retaliation takes effect?

Let's look at the stocks that were truly beaten up. Boeing down 3, 3.5 percent. Caterpillar. Those companies that use large amounts of steel or aluminum and may now have to pay higher prices for their raw materials as a result of all of this.

Tariffs, Wolf, is a very dangerous game. A, because you just don't know whether you're going to hit the right tariff in the right way; and, B, because of the tit-for-tat retaliation.

We've already heard from the Brits. We've heard from the Canadians. We've heard from the Mexicans. We've heard from the -- the Mexicans, as well. They're all saying the same thing: "If you introduce these tariffs, we will retaliate." And that's what you've seen in the market today.

And one other point. Look at these two charts, Wolf. It shows the president talked about China, but China is not even in the top ten of sources of steel imports. Canada is, an ally. Brazil, an ally, South Korea. Same for aluminum: Canada, Russia, the UAE. This is why this is such a risky strategy to announce in such a way.

BLITZER: Will this hurt American consumers? In other words, will prices on all sorts of products go up?

QUEST: The history of tariffs shows that that's exactly what happens, and it will certainly be the case when you're talking about an instrument, a raw material that is part of the manufacturing process. So, yes, Wolf, you may find certain steel companies benefit, they

become more competitive. They certainly arguably will make greater profits. But think about all the other companies that buy imported steel that will now be paying higher. Those higher prices will be passed on to the supply chain and, yes, the conventional wisdom is that eventually, higher prices is the answer.

BLITZER: Yes. That's one of the reasons why so many Republican lawmakers are very upset right now. The speaker, Paul Ryan, through a spokesman, issuing a statement: "The speaker is hoping the president will consider the unintended consequences of this idea and look at other approaches before moving forward."

You're getting -- we're getting a lot of statements like that from Republicans up on Capitol Hill. We'll watch to see if the president actually goes forward next week with just 25 percent steel tariff and a 10 percent aluminum tariff. If he does, that will cause of lot of concern.

Thanks very much, Richard, for that report.

QUEST: Thank you.

BLITZER: Coming up, CNN is learning that the Trump administration is weighing military action against Kim Jong-un's regime if North Korea develops a nuclear missile that could reach the U.S.

And Russia president, Vladimir Putin, is boasting of a new arsenal that he says will render U.S. and NATO defenses, quote, "completely useless." What is the U.S. saying about Putin's claim of invincible missiles?

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

[17:29:25] BLITZER: We're following multiple breaking stories, as President Trump's allies up on Capitol Hill and elsewhere described what they called a sense of meltdown and surreal events over at the White House. We're told the president wants to take action to turn the page, but after he called in cameras today to announce new tariffs on steel and aluminum imports, the market went into a tailspin.

Let's bring in our correspondents and analysts. And David Axelrod, you know your way around the West Wing. You spent a few hours there during the Obama administration. Is this the way things are supposed to work?

DAVID AXELROD, CNN SENIOR POLITICAL COMMENTATOR: Ha-ha, I'm going to treat that as a rhetorical question, Wolf.

Yes, I know my way around the West Wing, but I don't think anybody who's worked in previous administrations would be familiar with the West Wing as it operates or doesn't operate today.

I mean, you have constant turnover. We've seen more of it in the last 48 hours. You know, President warring with his own Attorney General because the Attorney General apparently has the temerity to follow procedure. You've got President overruling his -- most of his economic advisers, and maybe just to change the story, announcing -- essentially launching what could be a trade war, and we saw the results of that, and the list goes on and on.

You know, we were told at the beginning of all of this that, you know, Donald Trump was -- he was comfortable with chaos. That's how he's accustomed to operate. Well, that might be OK if you're running a small family branding business, but when you're in the most important office on the planet, it can has grave consequences and we saw perhaps some of it today in the way the market reacted. So, you know, this is not a West Wing that I'm familiar with, and I don't know anybody who worked there in the past who would be.

WOLF BLITZER, CNN HOST: Yes, he didn't only overrule his economic advisers, most of them, he overruled his national security advisers.

AXELROD: Exactly.

BLITZER: His defense secretary, his diplomatic advisers, his Secretary of State, national security team as well. They're deeply worried about the military, national security, economic, and diplomatic ramifications of this decision he's going to announce formally next week. You know, Rebecca, a year or so ago, February of last year, the President was pushing back on reports of turmoil in the White House at that early stage, just as the Michael Flynn scandal was just beginning to erupt. Listen to what he said then.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I turn on the T.V., open the newspapers, and I see stories of chaos, chaos. Yet, it is the exact opposite. This administration is running like a fine tuned machine.

(END VIDEO CLIP)

BLITZER: All right. That was more than a year ago, February of last year. Is the administration right now running like a fine tuned machine?

REBECCA BERG, CNN POLITICAL REPORTER: Wolf, it wasn't true then, and it's not true now. And it's worth remembering that the President is the biggest agent of chaos in this administration. It's not the staff in the White House, it's not the cabinet, it is the President of the United States, Donald Trump. And he knows exactly what he is doing. I mean, we can say that some of these tweets, perhaps, he doesn't anticipate the reaction he's going to get, but for the most part, he knows the reaction, he thrives off of chaos, he thrives off of drama, he loves to see us on cable news every day dissecting something he tweeted or said or did, acting shocked at what he decided. And so, the President is totally responsible for the chaos in this White House. It's an environment that he has created himself and encouraged even as his staff have tried to reign him in and John Kelly among them. BLITZER: Check out this picture we have. This is the swearing in ceremony just after the President took office. The fine-tuned machine, all those individuals there, this is January 22nd of 2017, two days after the inauguration. They were there then, but you see who's no longer there now at that moment. You know, it's also amazing, you know, Sabrina, when you look at how the President is treating the Attorney General of the United States, referring to him as Mr. Magoo, saying it's -- he's been a disaster in many respects. Today, the White House Press Secretary, Sarah Sanders, was asked if the President wants to fire the Attorney General, and she said, not that I know of. I mean, what kind of statement is that, about the Attorney General? What kind of vote of confidence is that?

SABRINA SIDDIQUI, POLITICAL REPORTER, THE GUARDIAN: Well, it's certainly not a vote of confidence. And this isn't the first time that we've seen this feud play out between the President and his Attorney General. Last summer, you might recall, the President was making a series of disparaging remarks about Jeff Sessions on Twitter, and it's actually ironic because if there has been a cabinet official who's been one of the more effective enforcers of Trump's agenda on immigration, on curtailing Obama's criminal justice policy, on defending his travel ban, it has been Jeff Sessions who's really been the godfather of all of those ideological policies, but it underscores that the President is singularly focused on Russia, the root of his frustration is in the way that Jeff Sessions has handled the Russia investigation, and tried to maintain some degree of independence since he was forced to quit last year, to recuse himself due to his own conversations that he failed to disclose with the Russian Ambassador.

BLITZER: Jim, let me get your analysis on this New York Times report that Jared Kushner, the President's son-in-law, senior adviser, that his family real estate business in New York actually received hundreds of millions of dollars in loans from two financial institutions shortly after Kushner met with top executives from those institutions at the White House. What are the ethical and potential national security ramifications of that?

[17:35:06] JIM SCIUTTO, CNN NATIONAL SECURITY CORRESPONDENT: It is so clearly and transparently a conflict of interest. I just can't imagine a more clear one. I'm not saying it's illegal. I'm not a lawyer. I don't know the, you know, the exact financial ethical rules, but it's a clear conflict of interest to meet with senior executives and then later have them walk out and benefit your businesses after you host them in the White House. It just, as a matter of comparison, if you go in for a senior government position or not even a particularly senior one, you will often get recommendations from ethics lawyers there to divest yourself from individual stocks, right? And I'm talking about like owning AT&T and Exxon, right? Not having a, you know, indebted major property in New York City in which you're seeking funds for to keep it afloat, just to -- just to stick in -- stick in mutual funds, right?

So, that you don't have an obvious situation where, say, an executive for one of those companies come in, and you might have influence on a decision that would affect an individual company. You might be told, get out of your individual stocks, just go with mutual funds, et cetera, that's the safest way to go. Nothing close to that has happened with this administration, and they have had no reticence or reluctance to have high level meetings with corporations or even foreign countries that could benefit their businesses. And it appears in this case, to have benefited his business.

BLITZER: Yes, hundreds -- $500 million in loans. That's a significant sum. Standby, everybody standby. There's more news right after this.

(COMMERCIAL BREAK)

[17:41:03] BLITZER: Before we continue our discussions, we have some breaking news. CNN has learned that Trump administration is considering the possibility of military action against North Korea in response to Kim Jong-un's growing missile and nuclear weapons threat. Our Chief National Security Correspondent, Jim Sciutto, has got some details, what are you learning?

SCIUTTO: Wolf, my colleague, Dana Bash, and I, in short, are told that those threats by the President you've heard in recent months about fire and furry, et cetera, they're not bluster. Internal deliberations, senior national security officials see both the threat of a nuclear ICBM capable of hitting the U.S. and the expectation that North Korea would share such technology with other states and non- state actors as an unacceptable threat to the U.S. And as a result, while the potential cost of a shooting war with North Korea are enormously high in human terms, that risk is considered less worrisome, less of a threat to the U.S. than a nuclear North Korea would be.

BLITZER: So, is any action imminent?

SCIUTTO: Well, let's make this clear. The administration intends to exhaust any and every diplomatic solution or possible diplomatic solution, and its focus remains, for now, on maximum economic and diplomatic pressure. They are also doing everything they can now to prevent North Korea from perfecting a nuclear ICBM, and that includes covert and cyber means. In addition, there are, we should make clear, military options short of war including the possibility of imposing a naval blockade. However, as Senator Lindsey Graham who has spoken with the President about North Korea told Dana and I, this is a red line for the administration, and the Trump administration will not be satisfied with containing the North Korean threat because, Wolf, simply, they don't believe that containment would work with North Korea, and that proliferation threat in particular is one that they will not tolerate.

BLITZER: Yes, that's a very, very serious development. David Axelrod, during the Obama administration, North Korea was seen as a big threat as well. Were national security officials then considering then similar action?

AXELROD: Well, let's -- first, let's stipulate that North Korea has frustrated successive administrations, Republican and Democrat, for several decades here. So, they've stormed toward this nuclear program, and, you know, the job of the military is to prepare for different agencies. I can't say that it went as far as table top exercises has been reported now, but we also didn't face the degree of threat that we face now. Here's what I was wondering, though, these stories are now leaking about what is going on, and there are only one of two explanations. The first is that they want the North Koreans to know that this is ratcheting up in order to increase the pressure on the North Koreans to come to some sort of accommodation.

And the second is that they're being leaked because they want to rein the President in. Because I can -- what I can tell you about my experience is everybody around the national security apparatus was very aware of what the cost of a military conflict with North Korea would be to our troops, but also, and especially to our allies in the area of South Koreans, the Japanese. And so, it really is catastrophic as Secretary Mattis has said if such a thing were to happen. And I wonder, you know, you see the President starting -- so casually starting a potential trade war today. I wonder if his national security advisers are worried about him being too casual about this. And so, these leaks are now flowing out as a way of kind of reining him in.

BLITZER: Yes, that's a fair point there, Rebecca, because we've come -- we've gotten used to the President throwing around some casual insults as far as the North Korean leader, Kim Jon-un is concerned, but this raises it to a whole new dimension.

[17:44:53] BERG: Right. This is a very delicate situation, obviously, Wolf, with North Korea, but the word "delicate" is not really in the President's lexicon, it's not how he operates, he's always a bull in a China shop. And so, you wonder, how does that impact what potentially happens with North Korea? Does he think strategically? Does he make his decisions deliberately, or does he go about this the way he goes about everything else and the treated Kim Jong-un so far via Twitter in a way that's very heavy handed, that he's using a hammer instead of, you know, a fine tooth comb.

BLITZER: Because remember when the President took office, he said he was going to end the Obama administration's policy of what he called strategic patience as far as North Korea was concerned, and this would sort of underscore that.

SIDDIQUI: Yes, and what the President has done is he's created a great feel of uncertainty because there hasn't been a lot of coherence in terms of his policy toward North Korea. As Jim said, the administration still want to exhaust all diplomatic options. That is the position of Rex Tillerson, of Jim Mattis but the President has frequently been escalating conflict by engaging in some of these bellicose rhetoric.

One more thing, one of the State Department's top diplomats, Joseph Yun, who had to focus on North Korea, told CNN he was retiring this week, and that is one of the more senior people who was involved in shaping North Korean policy, and also, who had more of a diplomatic approach and so it leaves yet another void that could be filled by someone who's more hawkish and who might appease to the President's impulses. SCIUTTO: And before Joseph Yun, you had Victor Cha who was the leading candidate to be the ambassador to South Korea. He left from that position after it appears a disagreement over the possibility of a "bloody nose strike."

BLITZER: Very serious. All right, guys. Good reporting. Thank you very much.

Before we move on, a quick programming note, but be sure to tune in this Saturday for David Axelrod's excellent program "THE AXE FILES." His special guest, Republican Senator Jeff Flake of Arizona. Watch "THE AXE FILES" this Saturday 7:00 P.M. Eastern right here on CNN.

Coming up, more breaking news from the White House. New pushback after Vladimir Putin claims Russia has developed what he's describing as invincible missiles that can penetrate U.S. defenses.

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[17:51:41] BLITZER: Breaking tonight, the White House accuses Russia of violating its treaty obligations by developing destabilizing weapons systems. The harsh criticism comes after the Russian President Vladimir Putin today made new and alarming claims about the capabilities of Russia's nuclear weapons.

Let's bring in our own Brian Todd. So, what is Putin saying, Brian and what's the reality?

BRIAN TODD, CNN CORRESPONDENT: Wolf, Putin is saying his new weapons are "invincible," and that America's defenses against them are "useless." The reality? Well, that depends on who you talk to. Some U.S. officials say Putin is talking a better game than he can play with these weapons. But some military expert say he's closer to being able to actually deploy them than you might think.

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TODD: At an old writing school for Russian Czars, a space big enough to accommodate his giant video screens, Vladimir Putin pounded his chest like only he can.

VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): Russia still has the greatest nuclear potential in the world. But nobody listen to us. Listen now.

TODD: Putin unveiled a battery of new weapons that he says will render U.S. and NATO defenses "completely useless." Playing animations as part of his propaganda, Putin showed off a cruise missile which can fly low to the ground, weave around obstacles like enemy radar powered by a nuclear engine on board with range Putin called unlimited.

The U.S. official with knowledge of the weapon tells CNN the U.S. has seen some of the tests of this missile that they've all crashed. And the official says there's doubt that these missile or others that Putin showed off today, are anywhere near operational. But one expert on the Russian military says the cruise missile could be deployed within the next few years.

MICHAEL KOFMAN, RUSSIAN MILITARY EXPERT, CNA: Typically, all missiles and tests crash until they stop crashing and they begin to work, right? There's no reason why, given how advance the Russian technology is in nuclear energy and how advance they are in missile technology. They can marry the two.

TODD: Other weapons in Putin's presentation, a hypersonic missile launch glide vehicle that he says can steer around enemy defenses and unmanned underwater drone launched from a submarine which could carry a nuclear warhead at high speed emerged from the water and strike in enemy's city.

KOFMAN: It would be used in retaliation for what will be a potential strike by the United States and Russia. There's a vengeance aspect to this weapon.

TODD: Analysts say even if Putin is not on the verge of deploying these weapons, this demonstration is all about intimidation of the U.S. and its allies.

ANTON FEDYASHIN, EXECUTIVE DIRECTOR OF THE INITIATIVE FOR RUSSIAN CULTURE, AMERICAN UNIVERSITY: He is playing the best hand that he believes he can get with a fairly weak deck of cards. Certainly, one weaker than the one that United States possesses, both in terms of its military budget and in terms of its economic performance and economic clout.

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TODD: Another big part of Putin's motive for this demonstration today, his re-election bid in just a couple of weeks. He's arranged the political landscape to ensure a win. But analysts say he still feels the need to convince Russians that only he can stand up to America's own stepped up military capability. Wolf?

BLITZER: All right, Brian. Thank you. Brian Todd reporting.

Coming up, there's breaking news. President Trump sends stocks plummeting. The Dow dropping more than 400 points as this sudden announcement of import tariffs has Wall Street deeply worried about a trade war.

[17:55:00] (COMMERCIAL BREAK)

BLITZER: Happening now, breakings news. Bad reaction. The Dow plummets more than 400 points after a surprise announcement by the President who boast about boosting the stock market. We're tracking the economic and political backlash to the President's plan for new trade tariffs.

Questioning Ivanka Deal. The President's daughter facing new scrutiny by U.S. counterintelligence officials over an international business deal. Why is the financing for at least one foreign project raising red flags? Cold war heating up. Vladimir Putin threatened the U.S. with growing military power claiming he has an invincible new missile and simulating a nuclear strike on President Trump's home away from home. New White House reaction tonight to the Russian leader's ominous warning.