New trade agreement a win-win: Trade lawyer
President Donald Trump celebrated a trade deal with Canada and Mexico to replace NAFTA as a “historic” win that vindicated his strategy of threatening tariffs on trade partners.
“Without tariffs, we wouldn’t be talking about a deal -- just for those babies out there that talk about tariffs,” Trump said Monday in a Rose Garden ceremony marking a successor deal to the North American Free Trade Agreement.
Trump called the accord “the most important trade deal we’ve ever made by far.” He predicted the renamed U.S.-Mexico-Canada Agreement, or USMCA, would “easily” pass Congress after he signs it by late November.
Read the full text of the new trade pact here
The new agreement makes modest revisions to a trade deal Trump once called a “disaster,” easing uncertainty for companies reliant on tariff-free commerce among the three countries. U.S. stocks climbed on Monday toward records, while the Canadian dollar and the Mexican peso gained. The S&P 500 Index climbed 0.6 per cent by 12:29 p.m. in New York.
Trump cited in particular provisions governing automobiles, raising the portion of their content that must originate within the region to 75 per cent, from 62.5 per cent, and requiring at least 40 per cent of a car to come from workers whose pay averages more than US$16 per hour. The president called those rules “the most important thing” for him.
“We will be manufacturing many more cars,” Trump said. “And our companies won’t be leaving the United States, firing their workers and building their cars elsewhere. They no longer have that incentive.”
Trump also called the agreement “a very, very big deal for our farmers.” He said the U.S. negotiated more favorable terms for exporting dairy and produce.
Trump said he would continue steel and aluminum tariffs on Mexico and Canada "until such time as we can do something different," adding that might include quotas, “so that our industry is protected.” The USMCA largely spared Canada and Mexico from threatened auto tariffs, which the Trump administration is still studying and hasn’t yet made a final decision.
The agreement could score political points for Trump ahead of the mid-term elections in November. Revamping NAFTA was a key promise of his 2016 election campaign.
Lawmakers from Trump’s Republican party expressed relief that the U.S. and Canada managed to salvage the trilateral pact. “The United States benefits when all three countries are held to the high standards laid out in Trade Promotion Authority,” House Speaker Paul Ryan said in a statement, referring to the U.S. process for amending trade deals in which Congress gets a yes-or-no vote.
Kevin Brady, chairman of the House Ways and Means Committee which has oversight of trade issues, said the agreement to modernize the three-way trading agreement produced a “big win” for American farmers and workers. He said the deal now faces scrutiny by lawmakers.
The deal could help ease trade tensions, which the International Monetary Fund warned on Monday have reached a turning point from rhetoric into actual trade barriers. IMF chief Christine Lagarde said the fund is poised to cut the global growth outlook, with its next update to the forecast due next week. Lagarde, speaking in Washington on Monday, said she’s encouraged by the deal over USMCA.
Goldman Sachs Group Inc. said keeping the trading bloc intact will ease uncertainty in financial markets. A risk to the pact’s future is that Trump could announce his intent to withdraw from NAFTA to pressure Congress into approving its replacement, USMCA. Any party can withdraw from NAFTA with six months’ notice.
Who is the biggest winner of the new trade pact?
“Of greatest importance for financial markets is the reduced uncertainty that a trilateral agreement poses, particularly for Canada,” Goldman economists wrote in a note on Monday. “Releasing the trilateral draft by the self-imposed soft deadline ensures that Congress considers a trilateral deal, rather than two bilaterals.”
Corporate America’s response to the deal has largely been one of relief that Trump didn’t scrap the entire trade alliance. Industry groups spanning retailers, textiles and consumer products commended the deal.
“We were concerned when hanging over our heads was total withdrawal from the agreement,” said Matt Priest, chief executive officer of the Footwear Distributors and Retailers of America. “To put that to bed is great and to have something that includes Canada, and not just Mexico, is fantastic.”
Trump on Monday praised Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau for their help in forming “a great partnership.” The praise contrasted with the heavy criticism Trump had earlier this year when he personally slammed Trudeau for being “meek” during a Group of Seven meeting. Trump acknowledged the relationship did get “a little bit testy” but that the trade deal has smoothed over their differences.
Trudeau tweeted on Monday that he and Trump had a “good conversation” in the morning, adding that the new trade deal will bring the countries “even closer together” and create new jobs and enhance prosperity across the continent.
U.S. and Canadian negotiators worked around the clock this weekend to secure an agreement just before a Sunday midnight deadline, to clear a procedural hurdle so leaders from those nations and Mexico are able to sign the pact by late November.
U.S. Trade Representative Robert Lighthizer, who spoke at the Rose Garden briefing with Trump, lauded negotiators from all three nations for concluding the deal, covering US$1.2 trillion of trade, at “warp speed” over 14 months from when the talks first began.
USMCA “will also serve as a template for our trade agreements under the Trump administration in the future,” said Lighthizer.