Tags: Trump Administration | saving | nafta | milestone | victory | trump

Saving NAFTA: A Milestone Victory for Trump

two men's male hands about to shake in front of NAFTA in white letter with flags of United States Canada Mexico
(Alexei Poselenov/Dreamstime)

Monday, 01 October 2018 09:13 AM Current | Bio | Archive

U.S. and Canada negotiators have reached a deal that saves the North American Free Trade Agreement – NAFTA as a trilateral pact with Mexico that rescues the three-country $1.2 trillion open-trade zone, which had been about to collapse after nearly a quarter century and that now will be called “the United States Mexico Canada Agreement or USMCA.”

The deal is a milestone and victory for President Trump, who vowed in the 2016 election to renegotiate or terminate NAFTA.

The plan forward is now for the leaders of the three North American countries to sign the agreement before the end of November, after which it is to be submitted to Congress for ratification.

Investors must realize that it isn’t likely the USCMA won't become a reality until next year at the earliest. Trump also could face an uphill battle in winning support for the USCMA, if Democrats take over the House or Senate in November.

Highlights of the USCMA include:

  • Creating a more level playing field for American workers, including improved rules of origin for automobiles, trucks, other products, and disciplines on currency manipulation.
  • Benefiting American farmers, ranchers, and agribusinesses by modernizing and strengthening food and agriculture trade in North America.
  • Supporting a 21st Century economy through new protections for U.S. intellectual property, and ensuring opportunities for trade in U.S. services.
  • New chapters covering Digital Trade, Anticorruption, and Good Regulatory Practices, as well as a chapter devoted to ensuring that Small and Medium Sized Enterprises benefit from the Agreement.

“It’s a good day for Canada,” Prime Minister Justin Trudeau told reporters after a late-night cabinet meeting to discuss the deal, which triggered a jump in global financial markets.

In a joint statement, Canada and the United States said it would “result in freer markets, fairer trade and robust economic growth in our region.”

Fed Chair Powell to Speak on Tuesday before NABE

As Fed Chair Jerome Powell is scheduled to speak tomorrow at the 60th Annual National Association for Business Economics (NABE) Meeting in Boston it could be certainly of interest to see if the Fed Chair has any comments on the Augustus 28-Septemebr 17 poll of 51 forecasters that will be issued today, October 1, by the National Association for Business Economics (NABE).

The NABE survey informs that two-thirds of business economists in the U.S. expect a recession to begin by the end of 2020. About 10 percent see the next contraction starting in 2019, 56 per cent say 2020 and 33 per cent said 2021 or later.

David Altig, Federal Reserve Bank of Atlanta research director and NABE's survey chair, said in a statement that comes with the report: "Trade issues are clearly influencing panelists’ views."

41 percent of the respondents to the NABE survey questions said the biggest downside risk was trade policy while 18 percent of the respondents cited higher interest rates and the same percentage of respondents cited it would be a substantial stock-market decline or volatility.

Trade fears aside, economists were slightly more optimistic about the U.S. economy this year. The median forecast for ‘inflation-adjusted’ GDP growth rose to 2.9 percent from 2.8 percent as projected in the June NABE survey. The 2019 estimate remained at 2.7 percent.

Last week on September 26 the minutes of the August Federal Open Market Committee (FOMC) meeting Fed policy makers informed “risks to the economic outlook appear roughly balanced” while raising their 2018 growth estimate to 3.1 percent from 2.8 percent in prior forecasts and 2019 to 2.5 percent from 2.4 percent. They also raised the main interest rate by a quarter-point to a target range of 2 percent to 2.25 percent, this year’s third hike.

Respondents in NABE’s survey indicated they expect the Fed to raise interest rates once more this year and three times in 2019, which is consistent with the Fed’s projections. The poll’s median estimate for the target range midpoint at year-end rose to 2.375 percent, equivalent to one more 25-basis-point hike this year, from 2.21 percent seen in the earlier survey.

In the meantime, let’s wait and see if we will learn something.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Investors must realize that it isn’t likely the USCMA won't become a reality until next year at the earliest. Trump also could face an uphill battle in winning support for the USCMA, if Democrats take over the House or Senate in November.
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Monday, 01 October 2018 09:13 AM
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