CNBC Transcript: Treasury Secretary Steven Mnuchin Speaks with CNBC's "Squawk Box" Today

WHEN: Today, Wednesday, July 24, 2019

WHERE: CNBC's "Squawk Box"

The following is the unofficial transcript of a CNBC interview with Treasury Secretary Steven Mnuchin on CNBC's "Squawk Box" (M-F 6AM – 9AM) today, Wednesday, July 24th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/07/24/treasury-secretary-steven-mnuchin-full-interview-trade-tech-debt-ceiling-squawk-box.html.

All references must be sourced to CNBC.

ANDREW ROSS SORKIN: Let's get to the Treasury Secretary. The interview of the morning. Sources telling CNBC that American trade negotiations will be heading to China either late this week or sometime next week for face-to-face talks—though a final trade deal could still be months away. Joining us right now is U.S. Treasury Secretary Steven Mnuchin and we're thrilled to have him here. Good morning to you. We want to get your take. Right now,– just we want to start off on sort of with what is going to happen in this next week and exactly what you think the timeline looks like.

STEVEN MNUCHIN: Well, good morning. It's great to be here with you. The timeline on the budget or the timeline on China?

ANDREW ROSS SORKIN: I want to go to China first, given that markets this morning, both in China and the U.S. seem to be moving on this expectation that there's going to be a team, including Lighthizer and potentially yourself, headed there.

STEVEN MNUCHIN: Right. So, Ambassador Lighthizer and I will depart on Monday. We will spend Tuesday and Wednesday in Shanghai. The reason why we're going to Shanghai is that the host country, China, has invited us there. There's a significance to them of the Shanghai communique and the symbolism, obviously, of that important agreement. So, hopefully I'll take that as good news that we'll be making progress next week. But I would say there's a lot of issues. So, my expectation is that this will be followed up with a meeting back in D.C. after this. And hopefully we will continue to progress.

ANDREW ROSS SORKIN: Mr. Secretary, can you explain sort of where the White House is with Huawei at this point? Because that seems to be such a pivotal chess piece in these conversations. There are U.S. companies that clearly want to do business with Huawei. Huawei yesterday just announced that they're laying off 600 people in the United States and I wanted to get your thoughts on that.

STEVEN MNUCHIN: Well, I think, as you know, the President hosted a group of tech CEOs in the Oval Office. He also had Secretary Ross, myself, Ambassador Lighthizer, Director Kudlow. We had a very good discussion. Part of the discussion was obviously on Huawei. Part of the discussion, actually, was on other important technology issues and immigration issues. But the Huawei issue is being driven out of Commerce. And what Commerce has said is that they will issue waivers for items that don't impact national security. So, where there are commodity products or issues that don't impact national security, Commerce will be proceeding with that. And I think it was a very productive two-way discussion for the President.

ANDREW ROSS SORKIN: Related to that, and I think this has to do with national security, but also, corporations being patriotic. You probably saw the comments late last week from Peter Thiel saying that he thought that Google, that Alphabet was treasonous. And then President Trump said that he was going to look into those comments. There was a -- there's some people in – both Chinese officials and Chinese executives who, at least have said to me, how is that any different than what Huawei is relative to the U.S. -- to the Chinese government in terms of that relationship?

STEVEN MNUCHIN: Well, let me just say the President did look into that. as well as I. The CEO of Google is with us this week. We both had very direct discussions. They assured us that there is very, very limited work. The only work that they're doing is some minimal open source work. They continue to do work with us in certain areas of DOD. And I think, you, Google is an American company that wants to help out the U.S.

ANDREW ROSS SORKIN: So, Peter Thiel's comments were misguided?

STEVEN MNUCHIN: I don't see any area -- again, the President and I did diligence on this issue and we're not aware of any areas where Google working with the Chinese government in a way that in any way raises concerns.

ANDREW ROSS SORKIN: Okay. Let's pivot real quick to the debt ceiling and the debt deal. I want to read you a comment, this is from FreedomWorks, about this deal that has all been struck. It says, 'Washington has all but abandoned economic sanity. With this deal GOP leadership has ceded the ground on fiscal responsibility for which years -- which for years was supposed to be the core tenet of the party.' What do you make of that critique?

STEVEN MNUCHIN: Well, first thing I'd say is that spending is an issue that has to be a bipartisan agreement. So, this can't be an issue of just what the President wants to do, what the Republicans want to do or what the Democrats wanted to do. It wasn't just because of the debt ceiling. I mean, we're very happy that we got a 2 1/2 year extension to the debt ceiling, including our special powers. But any spending required bipartisan agreement. So, the first issue is that the President was very determined to fund the military and make sure that we funded veterans. So, we held expenses to a modest 2% increase a year, which is in line with inflation. So, I think we were very careful on the spending issues. We think we'll grow revenues in excess of 4% over this period of time a year. And, you know, this had to be a bipartisan agreement. So, people who said we should have increased military and decreased nonmilitary, you know, one, we had to take care of our vets and two, we needed bipartisan support. That's a cost of losing the house.

BECKY QUICK: Mr. Secretary, can we go back to what you were talking about with Google and both you and the President kind of looking into those claims? We had Ash Carter on the show last week, the former Defense Secretary. And he had said, when we asked about those same questions about whether Google was cooperating with the Chinese government in ways that could be considered treasonous, he kind of demurred from that but then focused on the idea that he's been disappointed with some of the companies in the Silicon Valley, the idea they have not wanted to do work for defense department, the idea that they've kind of caved to some of their employees with those feelings. He seems to be of the belief that if you're an American company you have benefited from the government and what this country has done for you and you should be willing to do work for the government in turn. Do you share those thoughts?

STEVEN MNUCHIN: Well, I do share those thoughts. But, you know, I would also balance that -- I want to be careful because a lot of companies cooperate with the Defense Department. Some of our most important critical technology companies. And, as I just mentioned, in my conversations with Google and we researched this, there are areas. They're cooperating. Having said that, private businesses do have the right to make decisions. They're owned by shareholders, they have boards that control them. But I do think it's important and I would say almost all the technology -- leading technology companies in the U.S. do cooperate with the government in very significant ways.

ANDREW ROSS SORKIN: Mr. Secretary, related to technology, the Department of Justice said yesterday that they're going to look into some of the big tech companies that were at the White House yesterday, in fact, and consider the anti-trust issues that are involved. What's your take right now? Do you believe that these big companies, and I'm thinking of the Facebooks and the Googles and the Apples and the Amazons of the world, do you believe that they are -- that they're hurting competition?

STEVEN MNUCHIN: Well, let me just say I think it's good that the Attorney General is going to look into this. I think it's an important issue and I look forward to him reporting back to the President and hearing his recommendations. I think, as you know, if you look at Amazon, although, you know, there are certain benefits to it, they have destroyed the retail industry across the United States. So, there's no question they have limited competition. There's areas where they have really hurt small businesses. So, I don't think this is a one size fits all. And I don't – you know, I don't have an opinion going in, other than I think it's absolutely right that the Attorney General is looking into these issues and I look forward to listening to his recommendations to the President.

BECKY QUICK: Is Amazon's competition any different than what Walmart used to be a decade ago?

STEVEN MNUCHIN: It is different. In a way, it's the same and in a way, it's different. I mean, people had the concerns about Walmart. I think, as you see, Walmart developed a business where small businesses could continue to keep -- compete with them. And look, Walmart ceded a lot of the retail business to Amazon. So, these are important issues I look forward to hearing from the Attorney General.

ANDREW ROSS SORKIN: How do you weigh the size and scale issue of some of the big U.S. companies versus when you think about how we compete internationally? One of the things that you hear out of Silicon Valley from the Silicon Valley executives is, they say, 'Look we're trying to compete aggressively with China, which you're going to negotiate as well on trade. And if we become smaller or hemmed in and have to limit ourselves, it's actually going to become harder to compete.'

STEVEN MNUCHIN: Well, I think that's a very important statement. And that's why I think there's not a one size that fits all approach. So, people talk about the FAANG stocks like they're all the same. Each company is very different. Apple competes head-to-head with Huawei, with Samsung, with other companies. So, I think there's no question, the size and scale of Apple is very important. They also have an ecosystem. So, you know, I don't think you can talk about competition amongst all of these companies in the same way.

JOE KERNEN: Mr. Treasury Secretary, the President has overtly actually talked about a weaker dollar being in our best interests and in terms of -- on moves by Jay Powell and the Fed. And how he feels we're not on a level playing field with the rest of the world in terms of the Central Banks and accommodation. In the past, we have never had a Treasury Secretary do anything other than say we have a strong dollar policy and we advocate a strong dollar policy. So, you could be the first one in history to say we have a weak dollar policy. Is that in your view something that would benefit the United States if we could weaken the dollar for exports?

STEVEN MNUCHIN: Well, let me just comment that although Treasury Secretaries have always said that they believe in the strong dollar, Treasury Secretaries have also been particularly careful about commenting on the dollar. And, you know, I remember last year-

JOE KERNEN: We did that to you in Davos. I know. I thought you forgot.

STEVEN MNUCHIN: Davos -- my limited comments got misinterpreted, okay, all over the place. So, let me just clarify this. I think the dollar is the reserve currency of the world. It's in our interest, we want to maintain it. A stable dollar is very important. And over the long-term period of time, again, the long term, I do believe in a strong dollar which signifies a strong U.S. economy, a strong stock market and particularly because of the President's economic policies. We have growth in the U.S. that has outpaced everywhere else. We have a ton of money, as a result of tax cuts, regulatory relief coming in to the U.S. So, just as the stock market has gone up as a result of these policies, there's also -- these markets are the largest traded markets in the world. So, you know what I would say is that the dollar trades as much as anything in the world every day and there's buyers and sellers. And right now, there's a lot of people who want to invest in the U.S. and that creates a lot of demand for dollars.

JOE KERNEN: Wow. That's a really nuanced answer that you give. So, you don't advocate a weak dollar policy near term, per se?

STEVEN MNUCHIN: I am not going to advocate a weak dollar policy near term as the Treasury Secretary.

JOE KERNEN: Although the President seems to be in some respects.

STEVEN MNUCHIN: I think the President is very focused on a lot of issues. He is focused on our trade issues. He is focused on our economic issues. I think you know where he is on the Federal Reserve. I don't need to make any comments on that.

JOE KERNEN: Right.

STEVEN MNUCHIN: But the President is very pleased with the economic performance. And, you know, the next election is really going to be an election about two different views. You know, our view is about growth, growing revenues, faster than expenses. Having free markets. Making sure the U.S. economy grows creating job opportunities. And the other view is very different. So, if you have concerns about, you know, our budget deal, you can imagine what a Democrat-controlled White House would look like.

JOE KERNEN: Right. Well, it's hard to tell the difference, though.

STEVEN MNUCHIN: --in terms of tax and spend. That's not fair at all--

JOE KERNEN: Some people – some people think it is. Well --

STEVEN MNUCHIN: We cut taxes –

JOE KERNEN: -- definitely celebrating the deal that was -- in the second -- if there is a second term, we have heard rumor that maybe spending cuts are going to be something that the administration would focus on. Are you still going to be here for the next –

STEVEN MNUCHIN: I'm definitely going to be here with the President for the second term and the President is determined on a bipartisan basis, we look at expense controls. So, whether it's something like Reagan did, you know, we're going to look at -- again we want to look at how we spend money on the military but we want to do it efficiently. So, we'll want to look at how we spend in the military. And, you know, as I said, our job is cut taxes, grow revenues faster than expenses, grow the economy. And that's what the President is doing.

BECKY QUICK: Secretary Mnuchin, I know it's difficult, we keep asking you to explain the President's thought process with some of these things. Maybe you can, maybe you can't on this issue. But, if he's convinced this is a great economy, why does he also want the Fed to cut rates?

STEVEN MNUCHIN: Well, again, I want to be careful because these are the President's views. Because you know as Treasury Secretary I'm not going to comment on interest rates.

BECKY QUICK: Right.

STEVEN MNUCHIN: But the President believes that we have very low inflation. So I think when the fed – I think he believes when the Fed raised rates, they had much higher inflation expectations. And because we have had very low inflation that we should cut rates so they're more in line with the rest of the world. And, you know, again, when you look at interest rates in the United States, everybody will agree, you have to look at real interest rates. So, you know, the Fed has models. We have models. Sometimes these models turn out to be right. Sometimes they turn out to be wrong. And, again, without me commenting on what the fed is going to do, obviously, the market expects the Fed to cut. So, I -- if they do that, I think you'll see a continued improvement in the economy throughout the year.

ANDREW ROSS SORKIN: Mr. Secretary, two other quick questions. Boeing announced their earnings this morning. There are still questions about when that 737 Max plane is going to get into the air. How concerned are you about the international reaction to Boeing right now?

STEVEN MNUCHIN: Well, Boeing is a great American company. And they obviously -- they have a big Defense Department business. They have a big commercial business. There's no question—this is very important to us. We compete, Boeing versus Airbus, every day. I think, as you know, the President has said he's concerned about the 737 Max. Quite frankly he thinks they should bring back the 757 and look at selling 757s. We want to absolutely make sure that before the 737 Max flies that it's safe. But I think there's no question, Boeing has the financial capacity to fix this. But I think we need to make sure they're fixed and we need to figure out how they continue to compete against Airbus. Because they are a leading U.S. company.

JOE KERNEN: Secretary, would the fiscal restraint in the second term include entitlements? Which the President never talks about, I don't think, in terms of the unfunded liabilities which some people think -- I don't know, I hear $80 trillion, $100 trillion. Something eventually -- it's not a great subject to talk about in an election, I understand that. Medicare, things like that. But would that ever be on the President's plate, or would you put it there? Do you worry about entitlement -- not being able to deliver on all these promises?

STEVEN MNUCHIN: Well, I have not spoken to the President about this issue. We're really focused on the economic issues today. So, this is just my own personal thoughts and in no way, do I want to attribute them to the President.

JOE KERNEN: You keep saying that a lot.

STEVEN MNUCHIN: I think we need to make sure that we guarantee people who we had promises that we keep those promises. So, that's very important. But we have a $4 trillion expenses— discretionary is just part of it. There are many things in the nondiscretionary part of the budgets that we can look at without, in any way breaking promises to the people who rely on these: our seniors, veterans and other areas. And, again, this will need to be looked at on a bipartisan basis. You know, hopefully we'll take back the house but even with the house you need bipartisan support in the Senate to get these things done with 60 votes.

ANDREW ROSS SORKIN: And Mr. Secretary, we could not leave this interview without asking you at least a question about crypto. The last time we had you on, I think Joe tried to convince you about the merits of bitcoin. You talked about regulating or the need to regulate Libra. And the question I ultimately sort of land with is do you think that all cryptocurrencies will ultimately have to be regulated like -- I don't know, like a commodity or like a currency? Meaning that especially digital currencies like a bitcoin that don't actually have a central organizer will have to have the same kind of regulations and how that would happen?

STEVEN MNUCHIN: Well, all cryptocurrencies today in the United States are subject to regulation. They're subject to the Bank Secrecy Act, they're subject to our Money Laundering and they're subject to the same issues that physical. So, whether you're Moneygram or whether you're Western Union or whether you're trading bitcoin, you are subject to that. And I can tell you there was 100% agreement from the G7 Finance Ministers and Central Bank Governors, those rules we will enforce throughout the world. So, we will make sure that cryptocurrencies are not used for bad activities. I think, as I have said in the past, I am concerned that bitcoin is used for a lot of illicit activities. We have a working group to combat that. And I'm concerned that consumers don't understand the speculative issue of these things. And as it relates to Libra, we have made very clear to Facebook that before they start this, this needs to be something that passes our regulations. And again, there was 100% support at the G7 on these issues. So, we support -- we like payment systems that reduce costs. But we don't support unregulated bad actors using anything – any type of currency or cryptocurrency.

ANDREW ROSS SORKIN: When you talk about the working group looking at bitcoin, what specifically are you looking at and what do you think the options are in terms of what you can do?

STEVEN MNUCHIN: Well, we're looking at all of the crypto assets. So, I mean, we talk about bitcoin just because it's the largest. But it has to be a level playing field. And this is a working group that includes all the regulators: the Fed, the OCC, the Consumer Protection Bureau, The S.E.C., the CFTC. So, we'll look at it, whether you're trading a derivative, whether you're trading cash, whether you're looking at it in a payment system. We're going to make sure we have a unified approach. And my guess is that there are going to be more regulations that come out from all of these agencies to make sure that we keep the U.S. financial system safe.

ANDREW ROSS SORKIN: You think we'll be talk about bitcoin in ten years from now?

STEVEN MNUCHIN: I won't be talking about bitcoin in ten years. I can assure you that.

JOE KERNEN: But you might be in at least six years as the Treasury Secretary, as you just said.

STEVEN MNUCHIN: Exactly. I would bet even in five or six years I'm no longer talking about bitcoin as Treasury Secretary. I'll have other priorities.

JOE KERNEN: You'll be loaded up on bitcoin. And a gazillionaire.

STEVEN MNUCHIN: I can assure you, I will personally not be loaded up on bitcoin.

JOE KERNEN: Never say never.

ANDREW ROSS SORKIN: It sounds like the Secretary is not convinced about bitcoin. Mr. Secretary, we appreciate you taking the time to speak with us this morning. We hope to see you very soon.

STEVEN MNUCHIN: Thank you.

ANDREW ROSS SORKIN: Thank you.

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