Treasury Secretary Steven Mnuchin on the outlook for the U.S. economy after President Trump's preliminary trade deal with China, and the impact of tariffs on steel and aluminum in an interview with FBN's Maria Bartiromo on 'Mornings With Maria.'
"There’s 142 structural items we’ve discussed in great detail," Mnuchin said about the deal. "This is not about making commitments the things that you know are pie in the sky over the next two or three years. Our expectation is there will specific deliverables, there will be specific timelines and that we have an agreement that there will be penalties if China does not meet those timelines and those commitments."
MNUCHIN: Well, we have a lot of work to do but I think this is the first time you’ve had a direct agreement between the two Presidents, President Xi and President Trump. I think President Xi made some very strong commitments on changing structural and non structural issues and if we can get this negotiated and get a real agreement, I think this is the single biggest opportunity for U.S. business and U.S. workers.
BARTIROMO: It sure is. Talk to us about the issues here because we’ve been talking a lot over the last year and a half as the President has and yourself about the intellectual property theft, about the force transfer of technology, about the idea that China has to open up its markets. But then of course there’s the whole trade issue and China buying more stuff from the United States, do you expect those other big issues like the transfer of technology, like the theft of IP to be addressed over the coming, whether it’s 90 days or beyond?
MNUCHIN: Maria let me be clear on this, because I think there’s been some confusion. I think President Trump has always been focused on the structural issues including IP and technology and forced joined ventures and what he’s always said and we’ve said to China, is that if we can correct these issues and they open their markets the trade deficient will take care of itself. So, there are both specific discussions, this has to be about making structural changes.
This isn’t just about creating purchase orders but having said that there are also specific commitments in the near term on agricultural, LNG, industrial products, auto’s that China has come back with specific targets that they think they can meet and I think those are very big commitments. They put on the table as I mentioned, additional purchases of 1.2 trillion dollars and if that’s real, and again we have to have a negotiated agreement and have this one paper but if that’s real that will close the trade deficient and it will be the structural changes that lead to U.S. companies to compete fairly in what’s a growing China middle class and this is a great opportunity for them economically and for you U.S.
BARTIROMO: Well that’s a big number, so in other words they verbally agreed to buy $1.2 trillion of more things from the United States?
MNUCHIN: They have said that these are targets and that that is their expectation. And that in the short term there would be some very specific commitments. We’re in the process of now trying to go over the agricultural commitment, that will be the first thing that gets addressed in the next few weeks and Bob Lighthizer will be leading the specifics of actually negotiating this as U.S.T.R. and putting it into a legally binding agreement.
BARTIROMO: And I recognize Secretary these things do not happen overnight, you’re talking about a bureaucracy of China that really looks at things over the long term. So, how long will you give it in terms of a change in behavior on the other things like the theft of intellectual property and opening up their markets to foreigners?
MNUCHIN: There’s 142 structural items we’ve discussed in great detail. Our expectations is that phase one will be implemented immediately and when I say immediately that’s part of the 90 day negotiation with specific time frame, specific commitments and phase two will be very quickly as well, so again we expect that during the 90 day period we can lock in very specific commitments and these were representations that were made by President Xi directly to President Trump. President Trump will stay involved in the negotiation and again this is an agreement between the two Presidents that we now have to execute.
BARTIROMO: That’s terrific and just the fact that this is being dealt with on the presidential level speaks volumes, what is phase two specifically?
MNUCHIN: Well there are a series of structural issues. Some of them can be implemented very quickly some of them I expect will be implemented on a rolling basis. But this is not about making commitments the things that you know are pie in the sky over the next two or three years. Our expectation is there will specific deliverables, there will be specific timelines and that we have an agreement that there will be penalties if China does not meet those timelines and those commitments.
BARTIROMO: And the penalty is being what? The tariffs to go back in place?
MNUCHIN: I assume that will be tariffs but without reciprocal tariffs you know attacking us. So, again this will be a real agreement again and not that we can accomplish everything in 90 days but we expect to make a lot of progress and President Trump will be directly involved, we met with him yesterday. The team updated him, worked on a game plan going forward and we will be updating him weekly.
BARTIROMO: We know this is a really big deal, which is why the markets were rallying yesterday on this news. There’s also the Mexico, Canada agreement the President signed, the U.S.M.C.A. along with the leaders of Mexico and Canada at the G20 as well, which was quite impressive. But people are wondering if in fact that gets ratified with the new Congress. There are a number of Democratic Congressman, Secretary that have said look we can’t sign this the way it is right now. Is the President prepared to make changes to U.S.M.C.A. come the new Congress?
MNUCHIN: Well let me comment, I think Ambassador Lighthizer has done a great job on this agreement and there are very, very significant changes. Again structural changes, not just U.S. content on auto’s which is important but there’s IP protection, there’s financial services protection, there’s issues on pharmaceuticals, this is an incredibly complex deal that Ambassador Lighthizer negotiated in a year and a half. The deal was signed by the U.S., Canada, and Mexico and I think that this is going to be an agreement that President Trump expects is going to be taken to Congress and passed. And as he said on Air Force One, if it’s not passed he’s going to terminate the existing agreement. So, for those who think they can get a better agreement this is a very, very good agreement and Lighthizer has done a great job negotiating this and making big changes whether it’s agricultural, auto’s, or IP, or financial services. This is a big change and people who say this is just NAFTA 2.0 don’t understand the details.