U.S. Commerce Secretary Wilbur Ross on Friday said talks to update the NAFTA trade pact with Mexico and Canada are facing timing pressure in 2018 when various regional elections and other trade issues could overshadow negotiations.

"If you get much into 2018, the political calendar will overwhelm the trade calendar," Ross told CNBC in an interview, adding that auto parts are a key issue in the effort to overhaul the North American Free Trade Agreement. 

Ross also told CNBC on Friday that autos and auto parts are a key area in overhauling the 1994 trade pact.

The "scariest part" of NAFTA as it's currently written is that autos and auto parts make up nearly all of the U.S. trade deficit with Mexico and Canada, Ross told "Squawk Box."

"The sharp growth is parts coming in from outside NAFTA, from China, from Southeast Asia," he said, stressing a free trade zone is supposed to benefit the principals, not outside nations.

Meanwhile, despite Canada’s threats to walk away from NAFTA talks if necessary, its limited success in diversifying exports leaves the nation too reliant on U.S. markets to play hardball, government insiders and trade experts say.

Negotiators from Canada, Mexico and the United States will gather in Ottawa on Saturday for the third round of talks on modernizing the pact with many tough items yet to be broached.

U.S. President Donald Trump says he will ditch the pact unless major changes in are made. Canada last month suggested it could walk away if the United States pushed to remove a key dispute-settlement mechanism.

But insiders say leaving the table remains very much a last-ditch measure for the government of Liberal Prime Minister Justin Trudeau.

“The desire is 100 percent to modernize ... it is still true to say no deal is better than a bad deal but obviously that would be a pretty extraordinary set of circumstances,” said one person familiar with government thinking.

The United States accounts for 75 percent of goods exports from Canada, where firms flourish operating next to the world’s largest economy. Transport costs are low, both nations operate in English and employ the same business practices.

If NAFTA ceased to exist, Canadian and Mexican exports would in theory be subject to a 3.5 percent tariff applicable to members of the World Trade Organization.

A survey by Export Development Canada last year predicted that under such scenario, Canadian gross domestic product would shrink by 1.9 percent a year and many jobs would be lost.