U.S. Reaches New Trade Deal with Canada, Mexico
If all goes to plan, the North American Fair Trade Agreement (NAFTA) will be a thing of the past soon enough. In its place, a new agreement between the United States, Mexico, and Canada has been reached and will be aptly named the United States-Mexico-Canada Agreement (USMCA). As Vox reports, this comes as the lattermost country and the U.S. hammered out details over the weekend, with President Trump taking to Twitter early this morning to congratulate our neighboring nations on the deal.
Previously Mexico and the U.S. had reached a deal, then called the United States-Mexico Trade Agreement. At the time, President Trump announced that he was purposely ditching the NATFA moniker, citing the negative connotations surrounding the original agreement. As he put it, ” The United States was hurt very badly by NAFTA. We’ve made it better.”
In a joint statement announcing the deal, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland stated, “USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.” Meanwhile, President Trump expressed similar sentiments on Twitter before concluding, “The USMCA is a historic transaction!”
CNN Money reports that the news seemed to have a positive effect on this morning’s markets, with the Dow Jones Industrial Average gaining nearly 1% in its first few hours. However observers warn that the deal with Canada and Mexico shouldn’t distract investors from the real issue on the trade front: China. To this point, JPMorgan Funds chief global strategist David Kelly said, “While the U.S. has reached a new trade agreement with Mexico and Canada, growing trade conflict between China and the U.S. threatens economic growth in both countries.” Similary AB senior economist Eric Winograd noted, “The US relationship with China is much more complicated than its relationship with Canada. And of course the stakes are considerably higher when dealing with China—the Chinese have leverage over the US that Canada simply doesn’t have.”
It seems that all parties involved in the USMCA are calling it a victory. With that, the deal is also a relief to investors who had been concerned about tariffs and other trade issues in recent months. Unfortunately, although the agreement does show the President’s willingness to come to agreements on trade, it remains to be seen whether a deal with China will be reached anytime soon. Thus, in the meantime, certain verticals will have to continue finding a way to make due under the current circumstances and investors will need to stay the course through the ongoing fog of trade uncertainty.