First On CNBC: CNBC Transcript: Treasury Secretary Steven Mnuchin Speaks with CNBC's "Squawk Box" Today
The following is the unofficial transcript of a FIRST ON CNBC interview with Treasury Secretary Steven Mnuchin on CNBC's "Squawk Box" (M-F 6AM - 9AM) today, Monday, October 14th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/10/14/watch-cnbcs-full-interview-with-secretary-steven-mnuchin-on-china-trade-progress.html.
All references must be sourced to CNBC.
BECKY QUICK: For more on the trade talks, let's bring in our newsmaker of the morning, Treasury Secretary Steven Mnuchin. Mr. Secretary, thank you for being here today.
STEVEN MNUCHIN: Good morning. It's good to be here with you.
BECKY QUICK: Can you fill us in on what you think about all of these news reports at this point. A lot of headlines that are out there today suggesting that the deal we thought we had is still a long way from being finalized, before we can even call this the first phase of the deal. What do you think?
STEVEN MNUCHIN: Well, I wouldn't pay too much attention to all the daily headlines that speculate things one way or another. What I will tell you is we made substantial progress last week in the negotiations. We have a fundamental agreement, it is subject to documentation, and there's a lot of work to be done on that front. But it includes intellectual property rights, it includes financial services, it includes currency and foreign exchange, and it also includes very significant structural issues in agriculture on top of significant purchases. So, I would describe phase one as quite substantial. And as the President has said as soon as we get phase 1 complete, we'll move to phase 2.
BECKY QUICK: The one substantial thing that we've seen, the concrete thing is that the additional tariffs that were due to be imposed on October 15th have been put off by our side. Is there anything that you can concretely say that this is going to be done by the Chinese as a result of this or does everything still need to be finalized on paper?
STEVEN MNUCHIN: No, China has agreed on agriculture, that they're going to take off tariffs on agriculture and they're going to start purchasing agriculture. And they had been in the market but they had been stepping that up. And we'll be working very closely with them over the next few weeks to try to get this agreement to a signing in Chile.
BECKY QUICK: One of the things I read over the weekend, in terms of the agricultural purchases, is that the Chinese side already seems to be laying some conditions to that, saying that any purchases would have to align with the need of Chinese companies or state-owned businesses, that they didn't think it would be fair to be asked to divert purchases from other countries like Brazil in order to make these purchases, and, this is rich, they also think it should be up to WTO standards—to not affect or influence any of those markets. Was that your understanding in terms of what they've been doing from an agricultural buy point?
STEVEN MNUCHIN: Well, we did not discuss specifically whether they're diverting sales or not. Diverting sales -- that's obviously up to them. We did discuss very specific targets. They're very big targets. I think they had some concerns as to whether our farmers could meet those numbers. We think they can. But we expect this is a great deal for our farmers.
BECKY QUICK: I'm guessing you mean the $50 billion that they had agreed to, at least that's our understanding of it. Was that an up to $50 billion? Like when a company says they're going to buy up to $5 billion back in stock? Or is that your idea that these targets would be targets that they would hit?
STEVEN MNUCHIN: It's 40 to 50 billion and that's the range that we would expect them to hit, although there is some scaling up to get to that given the amounts.
BECKY QUICK: Mr. Secretary --
STEVEN MNUCHIN: And, again, short-term scaling.
BECKY QUICK: Short-term scaling. Let's talk a little bit about the additional tariffs for December 15th that are also still being threatened to be imposed by The United States if there is not a deal that's reached between now and then. Would those tariffs take place if there's not a deal that's actually signed?
STEVEN MNUCHIN: I have every expectation if there's not a deal those tariffs would go in place. But I expect we'll have a deal.
BECKY QUICK: What else can you tell us? I know you had laid out there were things like intellectual property and some other issues that were hard -- that were negotiated during this. What can you tell us about the overall structure and what you think will actually take place?
STEVEN MNUCHIN: Well, I think, you know, we've always talked about there's multiple chapters. So, in this case we've closed out several of the chapters. In the case of services, we broke it into a financial services and non-financial services. The financial services will close out this time. The rest of the services we'll deal with in phase 2.
BECKY QUICK: Meaning closed out, meaning that's not going to be renegotiated?
STEVEN MNUCHIN: Meaning closed out, we've reached a fundamental agreement and now it's subject to making sure the document reflects that.
BECKY QUICK: How do you think that this will be enforced? What are your assurances there?
STEVEN MNUCHIN: Both sides have absolutely agreed to that there needs to be a dispute resolution and that it needs to have real enforcement mechanisms. It's something we've talked about extensively and I expect that the agreement we signed does have a dispute and enforcement provision.
BECKY QUICK: My understanding of those enforcement provisions in the past and the real sticking points came that the United States wanted to be able to basically unilaterally decide whether China was agreeing with this. China wanted to make sure they had a seat at the table. What's your understanding now of what that enforcement mechanism would look like?
STEVEN MNUCHIN: We've developed a very extensive process. There's still a few words that need to be agreed on. I'm into the going to go through the specifics of how the enforcement works. But what we have talked about before is that both sides will set up large offices to deal with these issues. And my expectation is that most of these issues will be dealt with from USTR and from China before it gets to actually an enforcement process.
BECKY QUICK: But can I just ask again. I realize you may not be able to tell me every word, a few words that are being negotiated there, but would this be an enforcement mechanism where United States would have the upper hand or where the two sides would sit jointly at the table?
STEVEN MNUCHIN: I know you want the specifics of the chapter. I'm not going to go through it. But what I will assure you is that it will have an enforcement mechanism that we can enforce and we're comfortable with.
BECKY QUICK: Does it sound to you -- to me at this point it sounds like we have agreed to not continue to escalate tensions between the two sides. But it does sound like there's still quite a ways before we get to some sort of a deal that we can say this is an actual deal.
STEVEN MNUCHIN: No, I don't think that's fair at all. There is a fundamental agreement in principle. We've gone through the chapters many times. There are still some issues that need to be worked out in wording. But I would say we have every expectation that phase one will close.
ANDREW ROSS SORKIN: Mr. Secretary, related issue -- a little bit different than trade specifically. But a lot of U.S. companies are watching both the trade war play out but also the situation with the NBA play out last week and they're thinking through what they can and cannot say when it relates to doing business with China and doing business with other countries, frankly. I'm curious where you land on whether you think a player or a team member or a member of the NBA or any U.S. Company can or should be able to speak freely about their views which might be at odds over this issue in Hong Kong with the Chinese government and the implications of that.
STEVEN MNUCHIN: Well, I think in this case you're dealing with issues of people at the companies, meaning the NBA, the NBA itself, it has processes in China. And this is up for them to work out. It's not for us to dictate what they should be doing. But I would hope they work out these issues.
ANDREW ROSS SORKIN: Mr. Secretary, I think part of the conundrum, of course, though is so much of what the United States represents is this idea of the first amendment and the idea that you can speak freely on these issues and yet obviously in china you can't and there are some people, including some of our guests earlier today who said, look, you know, from a values perspective, from a moral perspective they should be able to speak out and they should. What do you think of that?
STEVEN MNUCHIN: Well, what I think is there's no question there are values and morals that the United States stands for and we try to push around the world. On the other hand, there's different legal and political systems. And we're not looking to change china's legal and political system. What we're looking to make sure is that as it relates to the issues that we're focused on, there are laws. The laws are enforced. That people have property rights that. People can have contracts. But as it relates to the overall political system, obviously they have a very different political system than we do.
JOE KERNEN: What's planned at this point, Mr. Secretary, in terms of the next phase you going there? They're coming here? Any details on that?
STEVEN MNUCHIN: Well, the next phase is there is deputy level calls that will be going on this week. Ambassador Lighthizer and myself will have a principal level call next week with the Vice Premiere. My expectation is we'll have the deputies meet between now and Chile. And my expectations are that we will be meeting with the vice premiere in Chile before the presidents meet to finish the deal.
ANDREW ROSS SORKIN: Mr. Secretary, I want to pivot to just two other quick topics before we let you go. Because we've talked a lot with you historically about bitcoin and Libra. A number of the Libra associations or associate companies have dropped out including Visa, Mastercard, and Stripe in large part because Sherrod Brown and Brian Schatz and some other Congress people and policy-makers wrote them letters saying if you don't drop out you're going to receive a lot more scrutiny. Do you think that's a fair approach? Some people said those letters were threatening.
STEVEN MNUCHIN: Well, I wouldn't give them too much credit because at Treasury we wrote letters as well. And we've been very clear. I've met with the representatives of Libra multiple times. I think you know that we oversee FinCEN and we've been very clear with them, and you can call that threatening, that if they don't meet the standards of our money laundering standards and the standards that we have at FinCEN, that we would take enforcement actions against them. And I think they realized that they're not ready, they're not up to par and I assume some of the partners got concerned and dropped out until they meet those standards.
BECKY QUICK: Also, Mr. Secretary, can we ask you about Turkey? And the threatened sanctions there? Where does that stand right now?
STEVEN MNUCHIN: I met in the situation room yesterday. This is obviously an evolving situation. It's complicated. We are monitoring it daily. We'll be having another meeting in the situation room this morning with the national security team. We'll be updating the President later today and we'll be presenting different options. As I've said, the sanctions are ready when the President wants to move forward on them.
BECKY QUICK: At this point does it look like Turkey has gone well beyond what they had told us they'd be doing?
STEVEN MNUCHIN: I'm not going to comment on those discussions. But I would say it is a complicated situation. On the one hand we have Turkey, who is a full member of NATO and an ally with us, fighting the Kurds who have helped us on ISIS and obviously we are very concerned about the humanitarian issues and we're monitoring it very carefully.
BECKY QUICK: Secretary Mnuchin, thank you for your time today.
STEVEN MNUCHIN: Thank you.
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