uploads/2019/12/USMCA.jpeg

Will the USMCA Help Trump’s 2020 Reelection Chances?

By

Updated

  • The USMCA (United States–Mexico–Canada Agreement) was originally signed last year. The agreement was signed again on Tuesday to incorporate some of the changes that Democrats wanted.
  • Negotiating NAFTA, which the USMCA will now replace, was among the key planks of President Trump’s 2016 campaign. The deal’s ratification in the US looks more certain. The changes suggested by Democrats are part of the agreement. Will the USMCA lift President Trump’s reelection chances in 2020? Could the USMCA impact the China trade deal?
Article continues below advertisement

USMCA

During his 2016 campaign, President Trump talked about negotiating trade deals that he thought weren’t favorable to the US. He criticized NAFTA and also blamed China’s trade practices. The Trump administration finally completed the USMCA. The new agreement, which has some changes from the previous agreement, was signed on Tuesday. Most of the changes were made to appease the Democrats. The deal’s ratification in the US looks more certain. President Trump’s impeachment inquiry might delay the process. However, Democrats won’t want to delay a trade deal that House Speaker Nancy Pelosi termed “infinitely better” than the previous avatar of the USMCA.

What would USMCA mean to Trump’s reelection chances?

If the USMCA is ratified and comes into being, it would be a victory for President Trump. Even the Democrats said that the new deal is better than NAFTA. So, the amended trade deal supports President Trump’s rhetoric that the US has been tied down by some unfavorable trade deals. The USMCA ratification would help President Trump show his electorate that the administration won better trade deals for the country. Also, booming labor markets and a relatively strong economy increase President Trump’s reelection chances in 2020. Notably, the S&P 500 (SPY) and the Dow Jones Index (DIA) have risen sharply this year. They’re trading near their record highs.

Article continues below advertisement

What about the China deal?

During his 2016 campaign, President Trump lashed out at China and threatened to impose a 45% tariff on all Chinese imports. He also talked about labeling China as a “currency manipulator.” The US has imposed tariffs on billions of dollars of Chinese goods. The US officially termed China as a “currency manipulator” in August. Notably, the US and China are negotiating phase one of the trade deal. As part of the deal, China will likely increase its purchases of US agricultural goods. So far, the deal has been elusive despite months of hectic negotiations. USMCA ratification would help President Trump’s negotiations with China.

What about the Democrats?

Notably, after the USMCA, Democrats might want the Trump administration to extract more from China. However, the China trade deal looks much more complicated than the USMCA. The three North American neighbors don’t have a strategic rivalry. The US-China trade war is similar to the Cold War during the last century. George Soros also supported President Trump’s tariffs. In fact, he didn’t want the US to go soft on Huawei.

If the Democrats adopt a tough line on China, it would only delay the chances of a trade deal. Despite a slowing economy, China hasn’t been willing to accede to some of the US demands. A harder approach might complicate the situation.

Advertisement

More From Market Realist