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Here's the scariest part of NAFTA, according to Commerce Secretary Wilbur Ross

Key Points
  • Ross says autos and auto parts make up nearly all of the U.S. trade deficit with Mexico and Canada.
  • The third round of NAFTA renegotiations is set to kick off Friday.
  • Trump — on the 2016 campaign trail and as president — has said he would ditch the 23-year-old pact unless major changes in are made.
Wilbur Ross: Autos and auto parts make up more than 100% of trade deficit

Commerce Secretary Wilbur Ross told CNBC on Friday that autos and auto parts are a key area in overhauling the 1994 North American Free Trade Agreement.

The "scariest part" of NAFTA as it's currently written is that autos and auto parts make up nearly all of the U.S. trade deficit with Mexico and Canada, Ross said on "Squawk Box."

"Without that there would be a surplus," he said.

Autos and auto parts from areas outside of the U.S., Mexico and Canada coming into the trade bloc are a big problem, said Ross — a billionaire, who before joining the Trump administration, made his fortune investing in distressed assets.

"The sharp growth is parts coming in from outside NAFTA, from China, from Southeast Asia," he said, stressing a free trade zone is supposed to benefit the principals, not outside nations.

Mexico and Canada "should be against substituting U.S.-made parts for ones coming in from outside of NAFTA," he argued.

With the third round of NAFTA renegotiations kicking off this weekend, Ross pushed the urgency to get a new deal done.

"In 2018, the U.S. Trade Promotion Authority, the so-called fast track, runs out. And given the nature of Congress, we don't know if that will be renewed," he said. "Without fast-track, it would be very hard to get any trade deals."

Another complicating factor is key elections next year in the U.S., Canada and Mexico, he said. "If you get too much into 2018, the political calendar will overwhelm the trade calendar."

Despite repeated attacks against NAFTA by President Donald Trump and his administration, a new IPSOS poll showed strong support among Americans, Mexicans and Canadians for cooperation among their nations. Fifty-eight percent of Americans, 79 percent of Mexicans and 74 percent of Canadians support the idea of their countries participating in one of the world's biggest trading blocs.

On the 2016 campaign trail and as president, Trump has said he would ditch the 23-year-old pact unless major changes are made.

Canada last month suggested it could walk away if the U.S. pushed to remove a key dispute-settlement mechanism. However, that's viewed as a last-ditch measure.

Mexico's foreign minister last week told Reuters that if NAFTA were to vanish "there would be no leap into the abyss," adding Mexico would deepen trade with other nations.

Meanwhile, the White House has been softening its stance on trade in the hopes of preserving GOP votes on tax reform, sources indicate to CNBC.

Responding to that report, Ross said in Friday's "Squawk Box" interview, "What we don't want to do is things that will unnecessarily irritate the Senate, because we need the votes there."

— Reuters contributed to this report.

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