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Commerce's Wilbur Ross accuses Mexico of taking advantage of NAFTA rules in trade with China

  • "Mexico's trade deficit with China is approximately equal to their trade surplus to us. It's not an accident," the Commerce secretary says.
  • Wilbur Ross calls on Congress to give notice to begin formal talks to renegotiate the North American Free Trade Agreement.
  • On another matter, the U.S. needs to investigate whether the flood of aluminum imports jeopardize national security, Ross says.

Commerce Secretary Wilbur Ross told CNBC on Thursday that Chinese goods dumped in Mexico are finding their way to the United States.

"Mexico's trade deficit with China is approximately equal to their trade surplus to us. It's not an accident," Ross said on "Squawk Box."

"The rules of origin in NAFTA need some tightening," he added. "Rules of origin are what let material outside of NAFTA to come in and benefit from all the taxes and tariff reductions within NAFTA."

"It was a silly idea to let a lot of outside stuff in. The whole idea of a trade deal is to build a fence around participants inside and give them an advantage over the outside," he continued. "So there's a conceptual flaw in that, one of many conceptual flaws in NAFTA."

Despite earlier indications, President Donald Trump, in separate Wednesday afternoon phone calls with Mexico and Canada, agreed not to terminate the North American Free Trade Agreement "at this time."

Ross told CNBC on Thursday that Canada and Mexico are ready to start renegotiating NAFTA. "If we could only get Congress to release the 90-day letter, we'll be going on our side as well," he added, referring to the 90 days notice that must be given before beginning formal talks on NAFTA.

Trump also tweeted about the trade deal on Thursday morning.

Ross, a billionaire who made his fortune investing in distressed assets, told CNBC two days ago that the White House was putting Canada on notice with a new import tariff on what it calls Canadian subsidies for lumber and a warning on Canadian trade practices the U.S. claims hurts American dairy farmers.

On another trade matter, Trump is set to sign a memo on Thursday afternoon authorizing an investigation into whether a flood of aluminum imports from China and elsewhere jeopardize national security. The move is similar to one last week for imported steel.

"We're down to two smelters in the whole country. Imports are now 55 percent of the total aluminium market here," Ross said on CNBC.

"In many critical things such as the very high purity of the aluminium we need in aerospace, we only have one producer," he said, arguing "that's not a good formula."

In January, the Obama administration filed a complaint with the World Trade Organization alleging that Chinese aluminum producers receive artificially cheap loans, contributing to the country's excess capacity.

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