CNBC Transcript: Commerce Secretary Wilbur Ross Speaks with CNBC’s “Squawk Box” Today
WHEN: Today, Tuesday, September 18, 2018
WHERE: CNBC’s “Squawk Box”
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
Joe kernen: president trump announcing tariffs on $200 billion in chinese goods. Joining us now from washington, squawk newsmaker, Commerce Secretary Wilbur Ross. Mr. Commerce secretary, thanks for joining us today. Do you — we’ve been talking about these tariffs and an off-ramp, and how it finally works. The markets are up today – the equity markets, although they were off a little bit yesterday. We are trying to understand the response on whether the markets don’t believe it’s going to be long lasting or whether, as the president said yesterday, there hasn’t been large effects on prices at this point. But how do you see it? How long is this going to last? Will the worst-case scenario come to pass or is this all a bargaining ploy?
Commerce Secretary Wilbur Ross: well, there’s a whole lot of questions in that. But the purpose of the tariffs is to modify china’s behavior. Especially in technology transfers and other abuse of tactics such as subsidies and market limitations. The real purpose is not to end up with tariffs. The real purpose is to end up with a level playing field so that American firms can compete properly.
Kernen: who speaks for the administration right now, Wilbur? I mean, who would I ask about the ongoing negotiations? Is it Treasury Secretary Mnuchin? Is — other people say Navarro has got a lot of sway into the president’s mind. You’re there. What’s — is it a — is everyone putting their heads together? How is it working?
Ross: it’s very much a collaborative effort. We meet at least once a week as a trade group. And we meet at least once a week in the oval with the president. So this is not a rash thing. This is a carefully thought through exercise. And that’s why, as you know, the original list had some 6,000 items on it. Now it’s been trimmed. And the reason it got trimmed is we had six days of public hearings, there were 350 witnesses testifying, and we had over 6,000 submissions, ideas about which products to add then which to subtract. So the important thing for everybody to understand is this is not a shot from the hip. This is something carefully thought through.
Becky quick: Mr. Commerce Secretary, it may not have been a shot from the hip, but it does seem like there’s randomness as to what made it on the list and what didn’t. I can understand highchairs being taken off, maybe the argument being that you don’t want to raise prices on baby goods for Americans who are going to be needing some of these items, but why did things like smart watches not go on?
Ross: well, we were trying to do things that would be the least intrusive on the consumer. And there was no particular need to do smart watches at this time, to do Bluetooth or anythings like that. So we really went item by item, trying to figure out what would accomplish the punitive purpose on china and yet with the least disruption in the u.S.
Kernen: Mr. Secretary, if china doesn’t blink and if we don’t blink, do you see the possibility — the actual possibility that we could have 25% tariffs on a half trillion dollars — all the goods coming from china? Is that — if we don’t get what we want, are we willing to go to the mat and have 25% tariffs on everything coming from china? And what do you think the effect on the global financial system or global trade – what would that do? How would that play out?
Ross: well, as for the latter question about global trade, now the EU and japan have joined us very much in the pursuit of behavior modification on the part of china. We have jointly issued three trilateral proclamations against china since the old tariffs went into effect. In addition the EU and Japan have both asked to join us in the WTO consultation process against china and the eu has also found its own separate one. So it may seem strange, but the imposition of these various tariffs has actually brought us closer together to those two major allies than we were before.
Andrew Ross Sorkin: Mr. Secretary, the average American family making $50,000 a year, let’s say. How much do you expect these tariffs will impact them? Meaning, have you done the math so you know what an average family in America will pay once these tariffs go into effect?
Ross: well, you can do the numbers this way. If you have a 10% tariff on another $200 billion, that’s $20 billion a year. That’s a tiny, tiny, tiny fraction of 1% total inflation in the u.S. Because it’s spread over thousands and thousands of products, nobody’s going to actually notice it at the end of the day.
Kernen: I think it’s $61,000 now. $62,000, actually. You’re back living a few years ago – you’re back in that last update, yeah. I think we’re —
Ross: it’s 6,000 objects are the ones these tariffs will be on. Actually, a bit less than 6,000.
Kernen: hey — and at that point, the difference between what china’s able to respond with versus, you know, what we’re doing, is it $100 billion? $200 billion? How much is it at that point?
Ross: well, china doesn’t have enough imports from us to make a reciprocal tax.
Kernen: that’s what I mean.
Ross: we sell them less than $150 billion a year. So in that sense, they’re out of bullets. And that’s why they had announced before that if we actually did impose the $200 billion as we are doing now starting on September 24th, that they would match it with $60 billion. Their rationale was that our 200 is about 40% of their total exports to us. $60 billion is about 40% of our total exports to them.
Quick: just to be — oh, sorry. Go ahead.
Ross: but they don’t have enough imports from us to match the whole 200.
Quick: just to be clear, if they do what they are saying they will do with the response of $60 billion, our administration has already said it will go ahead with the entire rest of the tariffs. That’s the plan: if they do what they said, then we will follow through with this next move?
Ross: well, there’s also the feature that these tariffs on the $200 billion start out at 10% on September 24th, but they go to 25% automatically on January 1st. So what we’re trying to do is to have an incentive to have near term, constructive discussions about the big issues.
Kernen: so did this latest move affect the — whether Vice Premier Liu is coming? Where does that stand now? Are there still low level negotiations going on to try to bring him here for higher level talks?
Ross: well, this shouldn’t be very surprising to the Chinese. There was plenty of advance warning. As I mentioned, there were thousands of witnesses who sent proclamations and comments into us.
Kernen: do you know if they’re still coming, Mr. Commerce secretary?
Ross: we’ll have to see we’ll have to see what the Chinese reaction is.
Kernen: we don’t know. Okay.
Quick: Mr. Secretary, I’d also read in the analysis that part of the reason for saying that we would start at 10% and move up to 25% was not just for the Chinese, for trying to motivate them for some of these talks but also to give u.S. Companies time to prepare for some of that. What do you expect or anticipate u.S. Companies will be doing? Are you thinking of companies like a Walmart trying to figure out how much they’re going to raise prices? Or are you thinking of companies like apple where you’re talking about potentially moving the supply chain?
Ross: well, I think it all depends. The manufacturers who have very lengthy international supply chain undoubtedly will be giving some reconsideration to just how they want that constituted. A Walmart really has to make a somewhat similar decision, but their decision is from what end producer to buy things.
Kernen: where are we — are we going to do NAFTA before this other stuff is finished? Are we going to have Canada on board? What do you think? Where are we on this?
Ross: well, the USTR already filed with the congress the notice regarding the transaction with Mexico.
Ross: and very shortly, the details of that should be released to the public after we’re through the consultation period with the congress. The filing also indicated that we’re totally happy to have Canada join if they wish. And if they don’t, we will go ahead, simply, with Mexico.
Kernen: so we’re going to let you go. We only have a few minutes left. You think we’re going to hear today, tomorrow — will we hear this week about whether it’s still on with china? In terms of delegations coming over here.
Ross: well, as I said in the beginning, our purpose is to have constructive negotiations with the Chinese to resolve the fundamental issues. So the question about whether or when to have a discussion is very importantly in their ballpark. It’s a little disappointing that the earlier tariffs haven’t resulted in more constructive dialogue, but we hope these will.
Kernen: alright, secretary, thanks again for coming on this morning. We appreciate it whenever you do come on the show. Thank you.
Ross: thank you very much for having me on.
Kernen: you’re welcome. Commerce secretary Wilbur Ross.