WHEN: Today, Thursday, May 31, 2018
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a FIRST ON CNBC interview with U.S. Commerce Secretary Wilbur Ross on CNBC's "Squawk on the Street" (M-F 9AM – 11AM) today, Thursday, May 31st. Following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2018/05/31/us-commerce-sec-wilbur-ross-tariffs-apply-to-small-percentage-of-us-economy.html?play=1.
All references must be sourced to CNBC.
SARA EISEN: DIANA, THANK YOU VERY MUCH. LAST DITCH TALKS BETWEEN EUROPE'S TOP TRADE OFFICIALS AND U.S. COUNTERPARTS. WILBUR ROSS AND ROBERT LIGHTHIZER COMING UP SHORT THIS MORNING. THE TRUMP ADMINISTRATION JUST MOMENTS AGO ANNOUNCING THAT IT WILL IMPOSE STEEL AND ALUMINUM TARIFFS ON THE EU, CANADA AND MEXICO. IT BEGINS AT MIDNIGHT TONIGHT. JOINING US NOW FIRST ON CNBC LIVE FROM PARIS THIS MORNING, COMMERCE SECRETARY WILBUR ROSS. MR. SECRETARY, THANK YOU FOR JOINING US.
WILBUR ROSS: WELL THANK YOU FOR HAVING ME ON.
EISEN: SO DID WE JUST DECLARE A TRADE WAR ON SOME OF OUR CLOSEST TRADING PARTNERS AND ALLIES?
ROSS: NO, NOT AT ALL. AS YOU KNOW, THIS HAS BEEN UNDER DISCUSSION FOR QUITE A LONG TIME IS AND IT'S A VERY SMALL PERCENTAGE OF THE RESPECTIVE ECONOMY. A FRACTION OF 1%.
EISEN: TALK TO US ABOUT HOW IT'S GOING TO WORK. IT SEEMS LIKE IN THE STATEMENT YOU LEFT THE DOOR OPEN FOR MORE NEGOTIATIONS. HOW WOULD EU, CANADA OR MEXICO GET OUT OF THE TARIFFS ON STEEL AND ALUMINUM AT THIS POINT? WHAT DO YOU NEED TO HEAR FROM THEM?
ROSS: WELL, AS YOU KNOW, THERE ARE OVERALL DISCUSSIONS LONG UNDERWAY REGARDING NAFTA. SO THIS WOULD PRESUMABLY BE PART OF THAT CONTINUING DISCUSSION. AND SIMILARLY, WE'VE HAD PERIODIC DISCUSSIONS WITH THE EU.
EISEN: SO DO YOU EXPECT THE EU GO TO GO THROUGH WITH THEIR THREATS TO IMPOSE THEIR OWN TARIFFS ON MORE THAN $3 BILLION WORTH OF U.S. PRODUCTS, INCLUDING PEANUT BUTTER AND BOURBON AND JEANS AND OTHER SIGNATURE U.S. GOODS?
ROSS: WELL, YOU'D OBVIOUSLY HAVE TO TALK TO THE EU, BUT THINK ABOUT HOW SMALL IN NUMBER $3 BILLION OF PRODUCT IS RELATIVE TO OUR $18 TRILLION ECONOMY. IT'S A TINY, TINY FRACTION OF 1%.
DAVID FABER: SECRETARY ROSS, IT'S DAVID FABER. IS THIS ABOUT EU STEEL OR IS IT REALLY ABOUT OVERCAPACITY IN CHINA IN TERMS OF PRODUCTION OF STEEL AND A GLUT AROUND THE WORLD?
ROSS: WELL, THERE'S OVERPRODUCTION OF STEEL AND THERE'S OVERCAPACITY THROUGHOUT THE WORLD. AND SO WE HAVE NEEDED TO DEAL WITH IT IN A VERY GLOBAL MANNER. YOU CAN'T JUST DEAL WITH IT DEALING WITH ONE COUNTRY.
FABER: AND SO WHAT DOES THAT MEAN? HAVE WE NOW SOLVED THIS IT PROBLEM? ARE WE GOING TO MAKE OUR OWN STEEL MAKERS MORE COMPETITIVE? AND WHAT ABOUT THE COSTS, WE'VE DISCUSSED THIS WITH YOU IN THE PAST, OF COURSE – I REMEMBER FAMOUSLY WHEN YOU CAME ON WITH THE COCA-COLA CAN AND I THINK THE BEER CAN AT ONE POINT, BUT WHAT ABOUT THE COST TO THE AMERICAN CONSUMER NOW THAT THIS IS ACTUALLY TAKING PLACE?
ROSS: WELL, AS I SAID, THE TARIFFS ARE A FRACTION OF 1% ON PRODUCT. THE BEER, SOFT DRINK AND SOUP CANS, IT'S ALL A FRACTION OF A PENNY ON EACH OF THOSE. IN TERMS OF AN AUTOMOBILE, THAT'S ALSO A FRACTION OF 1%. AND FOR THE ECONOMY OVERALL, IT'S A VERY SMALL FRACTION OF 1%. REMEMBER WE'RE AN $18 TRILLION ECONOMY.
CARL QUINTANILLA: MR. SECRETARY, IT'S CARL. I'M OUT IN CALIFORNIA AT A CONFERENCE WHERE CHINA TRADE REMAINS A BIG PIECE OF THE CONVERSATION, I WANTED TO PLAY A PIECE OF SOUND FROM YOU FROM YESTERDAY WHERE AN ALIBABA EXECUTIVE ESSENTIALLY ACCUSES THE U.S. OF TRYING TO HOLD CHINA BACK. LET'S PLAY THAT PIECE OF SOUND.
JOE TSAI, ALIBABA CO-COUNDER: THERE'S NOTHING WRONG WITH A COUNTRY WANTING TO UPGRADE ITS OWN MANUFACTURING SECTOR – GO MORE – GO HIGHER TECH, BE MORE INNOVATIVE. BUT THEN, FROM THE CHINESE PERSPECTIVE WHAT WE'RE SEEING IS THERE ARE A LOT OF PEOPLE IN AMERICA THAT WANT TO STOP CHINA FROM DOING THAT.
QUINTANILLA: HE REFERRED TO IPHONE PRODUCTION AND THE AMOUNT OF MONEY THEY MAKE BY MAKING IT AS OPPOSED TO THE AMOUNT OF MONEY OF APPLE GETS FROM THE I.P. HOW MUCH DOES CHINA DESERVE TO UPGRADE THEIR MANUFACTURING VERSUS SOME OF THE ABUSES WE HAVE TALKED ABOUT ALL THE TIME REGARDING I.P. AND JV?
ROSS: WELL, WE HAVE NO OBJECTION TO COMPETING WITH ANY COMPANY, ANY COUNTRY IN ANY PRODUCT AREA AS LONG AS IT'S A LEVEL PLAYING FIELD. BUT WHEN THERE ARE CYBER SECURITY BREECHES, WHEN THERE ARE FORCED TRANSFERS OF TECHNOLOGY, WHEN THERE IS STEALING OF INTELLECTUAL PROPERTY, THAT'S NOT RIGHT. AND WE WILL CONTINUE TO FIGHT VERY VIGOROUSLY AGAINST SUCH ABUSES.
EISEN: SECRETARY ROSS, YOU KNOW THERE – TARIFFS, NO MATTER HOW YOU LOOK AT IT, END UP BEING A TAX ON AMERICAN CONSUMERS AND AMERICAN BUSINESS. I KNOW YOU'RE MAKING THE POINT THAT IT IS SMALL AND WHEN IT COMES TO STEEL AND ALUMINUM AS A PERCENTAGE OF THE OVERALL PRODUCTS THAT WE IMPORT IN THIS COUNTRY, BUT WHAT KIND OF STRATEGY IS THIS?
ROSS: WELL, REMEMBER, YOU'RE ONLY LOOK AT ONE SIDE OF THE EQUATION WHICH IS THE PRICE SIDE. U.S. STEEL HAS ANNOUNCED IT'S REOPENING 1 MILLION 500 THOUSAND TON FACILITY. CENTURY ALUMINUM IS PUTTING HUNDREDS OF MILLIONS OF DOLLARS INTO STARTING POP MINE. THERE ARE DOZENS OF OTHER STEEL INDUSTRY AND ALUMINUM INDUSTRY PLAYERS, ALL OF WHOM ARE ADDING EMPLOYMENT AND OPENING FACILITIES AS A RESULT. SO WHEN YOU'RE THINKING ABOUT THE OVERALL ECONOMY, IT'S NOT JUST THE TRIVIAL INCREASE IN PRODUCT PRICES, IT'S ALSO THE INCREASE IN EMPLOYMENT AND THE STRENGTH OF THE ECONOMY OVERALL.
FABER: SECRETARY ROSS, THE DECISION TO ALSO IMPOSE TARIFFS ON CANADA AND MEXICO -- IS THAT A REFLECTION OF A LACK OF PROGRESS ON THE NEGOTIATIONS OVER NAFTA?
ROSS: WELL, IT'S A REFLECTION THAT THE DISCUSSIONS DIDN'T GET FAR ENOUGH TO JUSTIFY ANOTHER POSTPONEMENT OVER EXEMPTION.
EISEN: WE'RE JUST GETTING RESPONSE IN FROM OUR ALLIES, COMMERCE SECRETARY ROSS. I WANT TO SHARE WITH YOU FROM THE EU, JEAN-CLAUDE JUNCKER SAYING HE WILL INTRODUCE COUNTERBALANCING MEASURES IN THE COMING HOURS. CLEARLY, OUR ALLIES AND FRIENDS ARE NOT HAPPY WITH THIS DECISION. THEY WANTED THAT EXEMPTION TO CONTINUE. I THINK THE FEAR HERE IS THAT THEY WILL RETALIATE AND THEN POTENTIALLY, WE WILL RETALIATE AND THIS ISN'T JUST A SMALL FRACTION OF GOODS THAT WE IMPORT AND EXPORT – IT BECOMES AN ALL OUT TIT FOR TAT TRADE WAR.
ROSS: WELL, EVEN IF THE EU DOES RETALIATE AND EVEN IF SOME OTHERS DO, IT STILL WILL REMAIN UNLIKELY TO BE AS MUCH AS 1% ON OUR ECONOMY. REMEMBER JUST BECAUSE THEY PUT TARIFFS ON SOME OF OUR PRODUCTS DOESN'T MEAN THOSE SALES WILL GO TO ZERO. AND IN THE CASE OF AGRICULTURE, THEY MAY VERY WELL FIND OTHER MARKETS THAT ARE JUST AS GOOD.
QUINTANILLA: MR. SECRETARY, YOU OFTEN SAY THERE'S ONE VOICE THAT MATTERS IN U.S. TRADE POLICY AND THAT'S THE PRESIDENT. I WAS JUST LOOKING BACK AT HIS ORIGINAL TWEET AT THE BEGINNING OF MARCH WHERE HE SAID TRADE WARS ARE GOOD AND EASY TO WIN. DOES THE ADMINISTRATION STILL BELIEVE THAT? DOES THE PRESIDENT STILL BELIEVE THAT?
ROSS: WELL I THINK WHAT THE PRESIDENT WAS REFERRING WAS THAT THE FACT THAT WE OPERATE AT A BIG TRADE DEFICIT. SO BY DEFINITION, ANY COUNTERPARTY WHO HAS A SURPLUS WITH US HAS MUCH MORE TO LOSE IN THE EVENT OF A DISPUTE THAN WE DO. I THINK THAT'S VERY MUCH WHAT HE WAS REFERRING TO.
FABER: SECRETARY ROSS, LAST WEEK IT WAS AROUND NEW TARIFFS ON AUTOMOBILES. AGAIN UNDER 232, THE 1962 – 62 ACT IN TERMS OF TRADE EXPANSION, THE ADMINISTRATION IS SAYING THAT IT CAN DEFINE AT LEAST NEW TARIFFS UNDER A NATIONAL SECURITY – OR FOR NATIONAL SECURITY REASONS. WHERE DOES THAT STAND RIGHT NOW? THIS CERTAINLY SEEMS TO HAVE GOTTEN THE ATTENTION OF OUR ALLIES IN EUROPE. I WOULD IMAGINE THAT A NEW TARIFF ON AUTOMOBILES WOULD ONLY EXACERBATE THIS CURRENT CONCERN ABOUT A TRADE WAR.
ROSS: WELL, THE INVESTIGATION WAS JUST LAUNCHED ABOUT A WEEK AGO. IN ROUGHLY 30 DAYS THERE WILL BE A TIME FOR PUBLIC HEARINGS, PROBABLY A COUPLE DAYS OF THEM. THERE ALSO WILL BE A MECHANISM FOR PUBLIC COMMENTARY. AFTER WE RECEIVE THOSE, WE'LL CONDUCT OUR ANALYSIS AND COME WITH A REPORT THAT WILL MAKE RECOMMENDATIONS TO THE PRESIDENT AND THEN ET HE WILL DECIDE WHAT HIS COURSE OF ACTION, IF ANY, IS.
EISEN: ARE YOU STILL GOING TO CHINA THIS WEEKEND?
ROSS: I'M – I'M SCHEDULED TO GO FROM PARIS TO CHINA TOMORROW.
EISEN: AND WHAT'S YOUR AGENDA? WHAT ARE YOU HOPING TO ACCOMPLISH WITH CHINA, WITH THE LOOMING THREAT OF ANOTHER $50 BILLION IN TARIFFS ON CHINESE IMPORTED GOODS?
ROSS: WELL, THE OBJECTIVES HAVEN'T CHANGED. OUR BASIC OBJECTIVES WITH CHINA ARE TO SELL THEM MORE PRODUCT, GET LESS IN THE WAY OF TARIFF AND NON-TARIFF TRADE BARRIERS AND THEN ULTIMATELY, AND MOST IMPORTANTLY, THROUGH THE 301 MECHANISM DEAL WITH THE PROBLEMS OF INTELLECTUAL PROPERTY, TECHNOLOGY TRANSFERS, THE WHOLE LITANY OF HIGH-TECH THINGS AND OTHER INTELLECTUAL PROPERTY THAT YOU HAVE HEARD SO MUCH ABOUT.
EISEN: WE'LL WAIT FOR WORD ON THAT. MEANTIME, SECRETARY ROSS, TALK TO INVESTORS, THE MARKET -- THE DOW IS DOWN 170 POINTS. CLEARLY INVESTORS ARE SPOOKED BY THIS IDEA THAT THE U.S. CONTINUES TO IMPOSE TARIFFS ON OUR MAJOR TRADING PARTNERS, ON MAJOR ECONOMIES. ITS HARD TO FIGURE OUT WHAT'S HAPPENING. LESS THAN TWO WEEKS AGO, THE TREASURY SECRETARY CAME OUT AND SAID THE TRADE WAR IS ON HOLD. TARIFFS ARE ON HOLD. THEN WE GET THE CHINA THREATS. AND NOW WE GET THIS LACK OF EXEMPTION FOR EUROPE AND CANADA AND MEXICO. EXPLAIN THE STRATEGY. WHO SHOULD WE LISTEN TO? AND WHAT SHOULD INVESTORS DO? WE KNOW THE PRESIDENT WANTS THE MARKET TO GO UP. IT'S GOING DOWN, PARTLY ON A REFLECTION OF SOME OF THESE TRADE WORRIES.
ROSS: WELL, WE DON'T KNOW WHAT IT'S GOING DOWN AS A RESULT OF. YOU MENTIONED THE HOME SALES WERE A LITTLE BIT ON THE WEAK SIDE. BUT 170 POINTS IS NOT VERY CATACLYSMIC IN ANY EVENT. NATURALLY IF THE MARKET, TO THE DEGREE IT WAS SURPRISED, IT'LL HAVE TO ADJUST TO THAT. BUT MARKETS ADJUST TO FACTS.
FABER: AND FINALLY, MR. SECRETARY, BACK TO CHINA FOR A MOMENT. ZTE, WHICH HAS BECOME A SIGNIFICANT ISSUE, WHERE DO THINGS STAND RIGHT NOW? I KNOW WHEN YOU WERE ON WITH US LAST WEEK, YOU TALKED ABOUT YOUR DECISION TO IMPOSE WHAT WERE THE ARDER PERHAPS PENALTIES ON THAT COMPANY AT THE TIME, IN PART TO TRY TO CHANGE THEIR BEHAVIOR. HAVE THEY BEGUN TO CHANGE THEIR BEHAVIOR? IS ZTE GOING TO BE ALLOWED TO SURVIVE AND START BUYING U.S. COMPONENTS FOR THE PHONES IT MANUFACTURES AGAIN?
ROSS: WELL, I HAVE TAKEN THE POSITION WHICH IS MY CONTINUING POSITION THAT THE OBJECTIVE IS TO MODIFY THE BEHAVIOR. TO THE DEGREE THAT WE CAN WORK OUT AN ADEQUATE SOLUTION THAT DOES NOT INVOLVE SHUTTING THEM DOWN, WE WILL EXPLORE THAT.
EISEN: AND FINALLY SINCE YOU'RE IN PARIS, JUST WANTED TO ASK ABOUT THE STATUS OF OUR RELATIONSHIP WITH THE EUROPEANS. WE PULLED OUT OF THE IRAN DEAL. THEY DIDN'T WANT THAT. WE PULLED OUT OF THE PARIS CLIMATE ACCORD. THEY WEREN'T PLEASED WITH THAT DECISION EITHER. AND NOW THESE NEW STEEL AND ALUMINUM TARIFFS. WHAT'S THE STATUS OF OUR FRIENDSHIP?
ROSS: I DON'T THINK THAT – THESE ARE BLIPS ON THE RADAR SCREEN. I DON'T THINK THEY CHANGE THE FUNDAMENTALS OF RELATIONSHIP. EVERYBODY HAS SPATS EVERY NOW AND AGAIN. EVERY FAMILY DOES, EVERY COUNTRY DOES WITH OTHERS. THERE'S NOTHING WEIRD ABOUT THAT. I THINK EVERYBODY WILL GET OVER THIS IN DUE COURSE.
EISEN: AND JUST TO CLEAR IT UP SO WE HAVE THE STORY STRAIGHT, WHEN DID THE PRESIDENT MAKE THIS DECISION -- TO ELIMINATE THESE EXEMPTIONS?
ROSS: WELL, HE MADE THE DECISION IN TIME FOR US TO MAKE THE ANNOUNCEMENT THIS MORNING.
EISEN: WHAT DOES THAT MEAN? LIKE THIS MORNING HE MADE IT?
ROSS: WELL, IT'S AN EMINENT DECISION. I DON'T SIT WITH HIM 24 HOURS A DAY. BUT WE WERE INFORMED OF IT THIS MORNING AS A FINAL DECISION.
EISEN: WE ALWAYS APPRECIATE YOU COMING ON TO TALK THROUGH THESE DECISIONS. WILBUR ROSS, THE COMMERCE SECRETARY OF THE UNITED STATES IN PARIS, HEADING TO CHINA NEXT FOR TRADE TALKS. THANK YOU.
ROSS: THANK YOU VERY MUCH.
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