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US-Mexico Trade Agreement reached. NAFTA gone, stocks soar

Written By | Aug 27, 2018
President Trump announcing new US-Mexico Trade Agreement to partially replace NAFTA

President Trump announcing new US-Mexico Trade Agreement. Image: YouTube screen capture, AP/Voice of America video feed.

WASHINGTON.  Wall Street opened on a hugely positive note Monday morning. The reason why was not long in coming. The United States and Mexico announced this morning will effectively repeal and replace their end of NAFTA with a newly-negotiated US-Mexico Trade Agreement according to a CNBC report.

“The U.S. and Mexico struck a trade deal on Monday that paved the way to replace NAFTA, the current agreement between the two nations and Canada.

“President Donald Trump said the deal would be called The United States-Mexico Trade Agreement [USMTA], getting rid of the NAFTA name. ‘The name NAFTA has a bad connotation because the United States was hurt very badly by NAFTA,’ he said. Trump added that the deal will help farmers and manufacturers. ‘We’ve made it better’ for both countries….

“‘I’m certainly hopeful that we get a good agreement,’ Carla Hills, a former U.S. trade representative and chief NAFTA negotiator, said earlier Monday… NAFTA is ‘25 years old and it needs to be upgraded. I have my fingers crossed that we’ve done a good job and we get to NAFTA 2.0.’”




Wall Street rejoices over USMTA news

As of early Monday afternoon, Wall Street is in a party mood . At 1:05 p.m. ET, the broad-based S&P 500 is up 21.62 points, a gain of 0.75 percent. The tech-heavy NASDAQ, itching to recover from last week’s downdraft, is up 67.92 points, a gain of 0.85 percent. And the Dow Jones Industrial Average, an index that includes 30 of America’s biggest companies, is already in the stratosphere, up an impressive 256.95 points. It currently stands at 26,046.30, putting it up a full percent on the day thus far.

The biggest contributors to the Dow’s upward trajectory were a pair of good, old-fashioned industrial giants Caterpillar (symbol: CAT) and Boeing (BA). They were up 2.7 percent and 1.3 percent respectively. This would seem to indicate that Trump’s allegedly impossible goal of reviving America’s industrial and manufacturing industries might not be so impossible after all.

The MSM can’t resist from its impulse to diminish a positive new trade development

After a politically rocky week last week, at least according to the anti-Trump partisans in the MSM, it seems as if the Trump economic freight train is back on track. Of course, CNBC – unfortunately a wing of the rabidly partisan left-wing NBC network family – had to allude to a non-related political issue.

“[NAFTA] negotiations have dragged on for months. Officials had hoped to wrap up last week but that was before the distraction caused by the guilty plea entered Tuesday by Trump’s former lawyer, Michael Cohen, and the guilty verdict handed down against Trump’s former campaign manager, Paul Manafort.”

More of what’s in the new US-Mexico Trade Agreement

Despite that gratuitous dig, the Trump negotiating team did not appear “distracted” at all. Evidence? At least one bit of winning embedded in the US-Mexico Trade Agreement has already surfaced via the CNBC report.

“Trump said Mexican officials promised the country would start buying as much U.S. farm product as possible.”

The two “Tyler Durdens” at ZeroHedge add more details on what’s actually in the new US-Mexico Trade Agreement agreement.

“A key provision of the new deal is an increase in the mandated locally-sourced auto content from 62.5% to 75%, and that 40% to 45% of auto content would be made by workers earning average base wage of $16/hour. According to the US Trade Rep [USTR], the new rules will “incentivize billions annually” in additional U.S. vehicle and auto parts production” and help preserve and re-shore industry jobs and investment.

“The deal also maintains duty-free access in farm products, while the countries have also agreed to stronger rules-of-origin for industrial products such as chemicals, steel-intensive products, glass and optical fiber.



“A new ‘market access chapter’ will address non-tariff barriers in re-manufactured goods along with import/export licensing. The US and Mexico also agreed to new language on the textile and apparel trade, which will promote greater use of American-made fibers, yarns and fabrics, and limit the use of non-Nafta inputs for the industry, per the USTR.”

NAFTA on the way out. Are we sick of all the winning yet?

On the surface, at least, it looks like a win-win for both parties. The White House appears to get most of what it wanted in the US-Mexico Trade Agreement. The increasingly counter-productive NAFTA agreement is close to becoming history.

In addition, given Mexico’s agreement to significantly increase its purchases of U.S. agricultural products should make U.S. farmers happy. Nervous over China’s retaliatory tariffs on American farm products, farmers can now relax at least a bit. Good for them, and good for the GOP’s chances in November’s midterm elections.

Whoa, Canada!

As per the CNBC report, Canada’ current socialist government now appears ready to get back into post-NAFTA trade negotiations. More or less.

“‘Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,’ Chrystia Freeland, Canada’s foreign minister, said Friday. ‘And will be happy to do that, once the bilateral US-Mexico issues have been resolved.’

“Trump said negotiations with Canada had not started, adding that if Canada wanted to negotiate fairly, the U.S. would do that.”

USMTA puts America on the Road to Trade Nirvana. Just as long as Congress goes along

Today’s USMTA agreementt is potentially great news for American farmers and American businesses. That’s doubly true for the auto industry in particular.

As in all things transpiring in The Swamp, USMTA is another deal where “It ain’t over ‘til it’s over.”

Congress must next sign off on the deal. The US-Mexico Trade Agreement is, after all, a treaty or part of an evolving treaty. Barack Obama’s unconstitutional pen aside, whichever party leads Congress next January will demand its say before ratifying any trade treaty.

Finally, NAFTA appears to be on its way out. So for now, we’ll just consider the new, bi-lateral USMTA a great first step in the right, pro-US worker direction. And today at least, Wall Street seems to agree.

 

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17