Commerce Secretary Wilbur Ross told CNBC on Monday that U.S. trade tariffs are hurting the Chinese economy and Beijing's ability to create jobs to stave off "social unrest."
The economic slowdown in China is a "big problem in their context of having a very big need to create millions of millions of jobs to hold down social unrest coming out of the little villages," Ross said on "Squawk Box." He argued that Chinese workers going to cities for jobs are finding none and returning home. "That creates a real social problem," he said. "That's a very disgruntled group of people."
The Trump administration hopes that such a dynamic gives the U.S. leverage in trade talks that entered a new phase Monday in Beijing. Deputy U.S. Trade Representative Jeffrey Gerrish is leading a U.S. working team in China for two days of discussions. Meanwhile, China's foreign ministry said Monday both sides are expressing a will to work together in order to implement the consensus of their respective presidents.
Ross said on CNBC the talks are at an "appropriate level." The U.S. delegation is large due to the number of issues that need to be addressed, including eventual enforcement and compliance, he said.
On Sunday, President Donald Trump sounded optimistic about trade talks, in part because he believes China is motivated by its slowing economy to make a deal. "I think China wants to get it resolved. Their economy's not doing well," Trump told reporters at the White House, according to Reuters. "I think that gives them a great incentive to negotiate."
In early December, President Trump and Chinese President Xi Jinping agreed to a temporary tariff ceasefire, giving both sides until March to reach agreement on trade issues, including what the U.S. calls forced technology transfers. Trade tensions between the world's two largest economies escalated last year. The U.S. announced tariffs on $250 billion worth of Chinese goods, while Beijing countered with its own.
China faces a "binary decision," according to Ross, on whether to face tariffs or cut a deal. The U.S. exports much less to China than China does to the U.S., he pointed out. Beijing is finding out how much it depends on the U.S., he added. The Commerce secretary said companies are moving manufacturing out of China. It's not all coming to the U.S., he said, acknowledging some of it is moving to other Asian countries.
Before joining the White House, Ross made a fortune in the investment world, running W.L. Ross & Co., and buying stakes in distressed assets.
— CNBC's Evelyn Cheng and Everett Rosenfeld as well as Reuters contributed to this report.
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