Over the past two months, trade has been a hot issue in American politics. Politicians running for the Democratic ticket have been trying to find flaws in the soaring Trump economy, and the most obvious of those flaws came in the form of trade. After starting off his presidency by placing major tariffs on China, one of the United States’ largest trade partners, the market went into a panic. Trade with China was down, and for a long time, there was no hope in sight of a deal being reached. Additionally, Trump spent a large portion of his time on the campaign trail in 2016 slamming the North American Free Trade Agreement (NAFTA) between the U.S., Mexico, and Canada. Trump said he would renegotiate the flawed deal and if he couldn’t then the U.S. would leave the agreement. While most economists would agree it wasn’t an amazing deal for the U.S., it did help to slightly increase wages and increase the amount of trade between all three nations.
However, in the past year or so, signs of hope broke through. In November of 2018, it was announced that NAFTA would be replaced with the United States-Mexico-Canada Agreement (USMCA). This deal would provide multiple benefits to all parties and has been hailed as a great win for both the President and his opponents in the Democratic Party. The President and his trade advisors managed to create a deal that remedied bipartisan points of contention and gave wins to both Republicans and Democrats. In my opinion, this particular deal seems to be good for the U.S. as well as Mexico and Canada. This deal will help to increase car production in North America and as a result, increase jobs and wages. Additionally, labor rights should improve in Mexico, and there are more environmental protections that should level the playing field for manufacturing. I could go on about this deal for a while, but I think the point remains obvious: this is a good deal!
Additionally, a phase one trade deal has been signed with China. This deal is significantly more complicated — China is a very tricky trade partner. In the past, China has ignored parts of trade agreements, instead doing whatever it pleases. It will be interesting to see if this phase one deal holds up for the United States. While there are many safeguards in place to prevent China from going against the deal, there are never any certainties. If this deal works as planned, it should help the U.S. in its major intellectual property battle with China. For years, China has disregarded U.S. patents and simply stole them for their own benefit. Now, Chinese individuals will face punishment. Additionally, China agreed to purchase $200 billion of U.S. goods over the next two years. This will certainly provide a boost to the U.S. economy.
It is important to note that many major issues haven’t been addressed, and most of the tariffs Trump placed on China are still in place. This is good and bad. The U.S. still has leverage over China with the tariffs. However, there is nothing to address Chinese government subsidization of its markets and future technologies like 5G. This is of particular importance because of Huawei, the Chinese technology company trying to compete in the U.S.
So overall, I think trade is moving in the right direction and Trump is preparing for the 2020 election by getting these deals done now. Trade has been a hallmark of the Trump presidency since the 2016 U.S. presidential election. While these aforementioned deals are the largest by far, Trump has updated old deals with major U.S. trade partners like the European Union and South Korea. Combined, trade deals can really add up for the U.S. economy and continue to power the U.S. economic engine for years to come.
Trump’s economic policy will be the largest driver behind his 2020 re-election campaign. This isn’t surprising, considering that his handling of the economy is consistently the only positive poll for Trump. If Trump can continue to make this campaign about the economy, he will bury the Democrats in 2020. But, if he diverges too much, it will hurt his campaign and may cost him the election.
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