WHEN: Today, Wednesday, April 10, 2019
WHERE: CNBC's "The Exchange" – Live from Washington D.C.
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Steven Mnuchin and CNBC's Sara Eisen on CNBC's "The Exchange" (M-F 1PM – 2PM) today, Wednesday, April 10th. The following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2019/04/10/mnuchin-i-expect-a-strong-year-for-the-us-economy.html.
All references must be sourced to CNBC.
KELLY EVANS: We'll continue to monitor this hearing for you, but in the meantime, we want to go to a different part of Washington, D.C., where our Sara Eisen is sitting down right now with the Treasury Secretary, Steven Mnuchin, who joins us for an interview. Sara, take it away.
SARA EISEN: Kelly, thank you very much. I am here at the IMF World Bank Meeting with the Treasury Secretary. Mr. Secretary, thanks for taking the time.
TREASURY SECRETARY STEVEN MNUCHIN: Thank you. It's great to be here with you.
SARA EISEN: So, we've just been showing hours and hours of testimony from the big bankers in front of the House of Financial Services Committee. One question, and it was my favorite question that they were asked, was what is the biggest risk, as they saw it, to the financial system? Mostly cyber and global growth. How would you answer that question?
STEVEN MNUCHIN: I would agree that cyber is an issue. As a matter of fact, I'll be meeting with the bankers and we'll be having a meeting at Treasury to talk about the cyber issues. We feel comfortable that the financial system is secure, but this is an area we all need to stay on top of. And it's really a public private partnership making sure that we keep the financial infrastructure safe.
SARA EISEN: We did watch your testimony yesterday before the same committee. It got very fiery at the end in an exchange that you had with the Chair, Chairman Maxine Waters. What happened there?
STEVEN MNUCHIN: Yeah, it was really an unnecessary ending. I offered I would be happy to come back to the committee and answer all their questions, so I look forward to seeing them in May. I think it's important that all of the Congress people have the appropriate time that they have their questions answered. And I knew we weren't going to be able to do it all in one session. So, it was really just a silly ending.
SARA EISEN: Silly ending. Do you feel that you were treated without respect, at that hearing?
STEVEN MNUCHIN: I'm not going to go there on that. I think it was an unnecessary ending. I was prepared to come back and spend as much time as they wanted. And I had been there for over three hours and 15 minutes, which was longer than any Secretary had been in a very long period of time. And I would just also comment, I was there to talk about the NAC. I don't think I get one question on the NAC report, I would just comment.
SARA EISEN: So political theater?
STEVEN MNUCHIN: Little bit of political theater, as you saw.
SARA EISEN: Well, certainly one point that investors are interested in. You did say that you were having a conversation last night with the Chinese Premier. What can you tell us about that discussion?
STEVEN MNUCHIN: I did. It was very productive. Ambassador Lighthizer and I had been conducting these meetings on an ongoing basis. And let me just say, I think him and the entire USTR team have been doing a great job. We have an enormous amount of staff at USTR and in the interagency process working on this. We went late into last night. We have another call scheduled for tomorrow morning. We're alternating between nights and mornings. And I think we still have some important issues to address, but both sides are working very hard on this agreement.
SARA EISEN: On the time frame, President Trump said we'll see if we can make a deal in four weeks. That brings us to about three weeks from tomorrow. Is that realistic?
STEVEN MNUCHIN: President Trump has been very clear, he wants to make sure we have the right deal. He's more focused on the right deal. We have this documented correctly. As soon as we're ready and we have this done, he is ready and willing to meet with President Xi and it's important for the two leaders to meet. And we are hopeful we can do this quickly but we're not going to set an arbitrary deadline. What I will say is, if we can complete this agreement, this will be the most significant changes to the economic relationship between the U.S. and China in really the last 40 years. And the opening of the Chinese economy will be a tremendous opportunity with structural changes that will benefit U.S. workers and U.S. companies and will help China.
SARA EISEN: What are the sticking points right now in getting there?
STEVEN MNUCHIN: I wouldn't say there is any one sticking point. I think, as we've talked about, this is a 150-page document that goes through multiple chapters. Some of the chapters are close to finish. Some of the chapters still have technical issues. We have pretty much agreed on an enforcement mechanism. We've agreed that both sides will establish enforcement offices that will deal with the ongoing matters. So, this is something that both sides are taking very seriously.
SARA EISEN: So, you've agreed on the enforcement mechanism. What does that mean for tariffs? If there is a deal, do the tariffs that are in place go away?
STEVEN MNUCHIN: I am not going to comment on the specifics of the tariffs and what would stay in place and what would go away. But I would just say, we're really focused on the execution of the documents and, as I said, Ambassador Lighthizer and a very large team across all the agencies, is – we're really working around the clock.
SARA EISEN: At the same time the administration is now proposing new tariffs against certain European exports like cheese and olives in retaliation for the Airbus subsidies. Why escalate tensions with Europe right now?
STEVEN MNUCHIN: Well, this is really, this is a case we have won on Airbus. And there is an appropriate response. I think, as you know, the President is very determined on trade. We couldn't be more pleased with the USMCA agreement. I hope that he speaker brings it to the floor quickly. I think this will pass. I don't know why it has not been scheduled yet. So, we look forward to her bringing it to the floor. We look forward to continuing these discussions with China and we look forward to continuing discussions with Europe and others. These are ongoing changes that are just really, really important to American companies.
SARA EISEN: But with Europe, in particular, some wonder, you know, there is already tariffs back and forth over the steel and aluminum tariffs, there are constant threats of auto tariffs from your administration. Why pick a fight with one of our closest allies, economically and militarily?
STEVEN MNUCHIN: Well, this isn't really about picking a fight. This is a specific situation on an Airbus case about subsidies that something that's been won through the legal process.
SARA EISEN: Just today, ECB President Mario Draghi referenced the tariffs. He said the repeated voicing of tariffs actually does hurt confidence, which hurts the economy. So, do you feel responsible?
STEVEN MNUCHIN: The President has been very clear with the G7 and the G20 that we'd like to have an environment where there were no tariffs, there were no subsidies, there were no blockage of trade. Trade is something that has been very important to the U.S. economy. But we need to have fair trade. We can't have one-sided trade where all these goods come into the United States and we can't compete fairly abroad. And that is really what this is about. So, I'll obviously see a lot of my counterparts over the next few days and this will be a major part of the discussions.
SARA EISEN: We are here at the IMF. You're here for the IMF World Bank Meeting, where the IMF just downgraded its forecast for global growth to the lowest level since the financial crisis. Do you feel that the tariffs and the trade fights have played a major role in the lower growth outlook?
STEVEN MNUCHIN: I don't. I think we're in an environment where the U.S. is the bright spot of economic growth. There's no question that the President's economic plan, tax cuts, regulatory changes and trade are really helping propel the U.S. economy. And there's no question that growth has slowed down in China. Growth has slowed down in Europe. That will have some impact on the U.S. economy. But this is really, this is not about trade. This is about issues slowing down in Europe and abroad.
SARA EISEN: Do you worry about the resilience of the U.S. recovery? We did come off a strong growth year last year and the forecasts keep coming down for this year in the U.S.
STEVEN MNUCHIN: Well the economic policies in the U.S. are working. And we're seeing tremendous investments in the U.S. We're seeing lots of capital come back. We're seeing inflation remains very low. So, we're really seeing all the key ingredients that continue to have a very robust outlook for the U.S. economy. And that's really one of the reasons why we continue to see a lot of money, continue to flood in to investments in the U.S, relative to the rest of the world.
SARA EISEN: Though, the forecast, I mean, they're up for debate. The IMF puts it in the high twos, 2% growth for the U.S. this year. The Fed is at 2.1%. And the administration is still at 3%, according to the latest budget. Why the gap there in expectations?
STEVEN MNUCHIN: Well, I would just comment, last year we had plenty of gaps and we outperformed everybody else. I expect we're going to have a very strong year this year and we'll see where it comes out. But we have every reason to believe the U.S. economy is still the bright spot in world growth.
SARA EISEN: If we're going to have a very strong year, then why is the President suggesting that we need a half a percentage point rate cut from the Federal Reserve right now?
STEVEN MNUCHIN: Well, I think, as you know, in my position as Secretary of Treasury, I feel obligated to respect the independence of Fed monetary policy and I am just not going to comment on it one way or another.
SARA EISEN: Still, I mean, the President has voiced frustration all the time with the current Fed Chairman. Do you feel like you picked the wrong person?
STEVEN MNUCHIN: I don't feel like I picked the wrong person, but I respect the President's views and his views of the economy where's he's had tremendous insight.
SARA EISEN: What would you say to people who are now actually worried about the independence of the Federal Reserve with some of the proposed nominees, Steven Moore and Herman Cain. They're very close political allies to the President.
STEVEN MNUCHIN: I don't think there is any reason whatsoever to be concerned about the independence of the Fed. It's the President's right and obligation to nominate people to the board. These are two people that the President has confidence in that he's picked and they will go through the normal Senate confirmation process. And, if and when these people are confirmed, I'm sure that they will have the responsibilities on the Fed board as do all the other Fed board members to uphold the mandate of the Fed.
SARA EISEN: So, you're saying Cain should be confirmed based on his past and all the questions that surround him?
STEVEN MNUCHIN: Again, I'm not going to make individual comments on individual people. I know Steven Moore well, I don't know Cain very well, but I have every reason to believe the President supports him and feels strongly. So, yes, I would think he should be confirmed.
SARA EISEN: Meantime, the market has been racing ahead in 2019. Near record highs. I mean, you've said before you think this is a mark-to-market business. Do you think it is a reflection of the President's policies? Or what do you think has been driving the recent optimism?
STEVEN MNUCHIN: I do, indeed. But I've also commented on you need to look at the market over a period of time. You can't look at it in any one day. I felt at the end of the year, the market had overreacted on the down side in an extreme that didn't make sense. That the fundamentals were very strong. Earnings were very strong. So, I think the recovery –
SARA EISEN: Liquidity was it good as you said.
STEVEN MNUCHIN: Liquidity was good as we know.
SARA EISEN: That was a little controversial.
STEVEN MNUCHIN: Only very little. I would just comment –
SARA EISEN: Was that a mistake, saying that?
STEVEN MNUCHIN: No, I don't think it was a mistake whatsoever. It's something that – it's part of the job of the Secretary of the Treasury to make sure when are market moves that there aren't surprises. But, I think the market today reflects the long-term focus of the U.S. economy. And it has been a great place for U.S. investors.
SARA EISEN: What do you think the inverted yield curve, which we're starting to see in key parts of the bond market, reflects?
STEVEN MNUCHIN: So, on the one hand, I think markets are good long-term predictors. In the short term, markets always have corrections and everything else. So, I am not at all concerned with the yield curve in predicting anything. Obviously, what the yield curve is predicting, it's the market's prediction of – that they think interest rates are going to come down. So, I think it's really just a function of where you see the market inverted. Now, some people will say that could be a prediction of a recession. I don't see it that way and I would also say the market has never been a good predictor of recession. So, I think it's the market's expectation that interest rates will be coming back down.
SARA EISEN: Is it still your view and the administration's view that there is no recession in sight?
STEVEN MNUCHIN: I don't see anything that would predict that.
SARA EISEN: What about your performance in general? I mean how is your relationship and your performance with the President? And I ask because you are one of the few remaining original cabinet members.
STEVEN MNUCHIN: Well, that's not true – I'm one of the few remaining. First of all, as you know, I have known the President for a very long period of time. I campaigned with the President. I think one of the things that prepared me very well for this job was I traveled the entire country with the President. I understood why he was elected. We met with literally thousands and thousands of business people, small business, big business. I helped develop the President's economic plan from day one. I was obviously part of passing the tax cuts, which are critical to economic growth. I speak to the President at least one time a day. And, as I've said, the reason I feel comfortable when I don't agree with the President and telling him that, but I fully respect, he is the President and he was elected and it's my job to serve him and the American people.
SARA EISEN: When do you not agree?
STEVEN MNUCHIN: Oh, there are -- there could be issues of different things. And, again, I tell the President what I think. But at the end of the day, I'd say mostly all the time we agree. We agree on all the economic policies. But, again, it's a great honor to serve the President and serve the cabinet.
SARA EISEN: Which brings us, I mean, you made big news yesterday when you revealed that White House lawyers have been in touch with Treasury lawyers over the release of the President's tax returns. Can you just clarify your position on this matter and whether you would stand in the way of the Treasury and the IRS, which you oversee, releasing the tax returns to the Democrats?
STEVEN MNUCHIN: Well, let me fist say, I don't know why it should be big news at all. And I went out of my way of being clear, although that I had not headed any discussions, I wanted to be very clear. I think it is appropriate. This is a significant legal issue. I think it is appropriate that we would consult with White House Council. And, again, that's consult. We're not taking direction. We will consult with the Department of Justice. This isn't about just the President's return. This is really about the issue of protecting American taxpayers and make sure that we enforce the laws correctly. As I've said, we will follow the law. But this is a very important issue. This isn't just about the President and congressional oversight. As I said yesterday, can you imagine if Kevin Brady, when he was Chairman, he had requested tax returns of prominent Democrats, not the President who had disclosed it, but prominent Democrats, the cabinet, members of Congress, prominent contributors? Again, we want to make sure that we follow the law properly.
SARA EISEN: So, you think this is political?
STEVEN MNUCHIN: I am not going to comment on the specifics of that. What I will say is we want to be very careful. I take this very seriously. And, as I've said, we will follow the law.
SARA EISEN: Mr. Treasury Secretary, thank you very much.
STEVEN MNUCHIN: Thank you.
SARA EISEN: That is our Treasury Secretary Steven Mnuchin here at the IMF. We'll send it back to you guys in the studio.
KELLY EVANS: Alright, Sara. Thank you so much.
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