I have commented on a number of occasions about the issues related to the passage of USMCA, Mr. Trump announced this past weekend at the G-20 summit that he will terminate NAFTA placing the ball squarely in Congress’s lap. We will have USMCA or no agreement. A question that remains open is, can Mr. Trump unilaterally take this action without Congressional approval.
We are seeing some trends that are worthy of note for trade including the weakening of the Canadian dollar; the Canadian Stock Market moving upward (this seems somewhat counter-intuitive in light of weakening currency); growing concern on the part of manufacturers that the tariffs being imposed particularly as it relates to China are counter-productive with regard to job growth; oil prices are lower, but volatile.
The G-20 summit saw China and the US reach a cease fire and impose a moratorium until March 31, 2019 on tariffs between our two Countries. Issues that are still on the table with China include, but will be difficult to resolve: forced technology transfer by US companies doing business in China; intellectual property protection that the US wants China to strengthen; non-tariff barriers that impede US access to Chinese markets; and, cyber espionage. The Chinese have not acknowledged they accept the US agenda, or any deadlines for talks, nor purchasing more US goods or lowering auto tariffs as their statements to date have been vague and equivocal. The arrest of a top Huawei executive raises a new level of tension. Mr. Trump may again have gotten it wrong- Think North Korea. The March 31st deadline could result in the resumption of the existing level of trade war but also potentially increase it dramatically. Noticeably left out of the list of fixes is currency manipulation which in my view is China’s greatest trade sin.
We also saw an interesting development this week with GM announcing lay-offs of 14,000plus employees, as well as the closing of several plants in the United States.
A weakening global economy is impacting both US profits and trade with John Deere projecting that industry sales in the agricultural sector to be flat to up 5% in the US, Canada and South America.
The USMCA was signed at the G-20 summit, but don’t confuse that with passage, as there is no clear path in Congress.
Of course, it must be noted that the new Democratically controlled House will likely extract significant concessions from Mr. Trump for a favorable USMCA vote and any additional border wall funding. The latter, in my view, is a large waste of money, and one could likely accomplish much of the same goal by increasing the use of technology along the border and increasing the number of border officers and providing them with appropriate mobilization devices to be able to respond to information provided by the technology in order to capture illegal entrants into the US.
In all of this discussion, very infrequently is it acknowledged that fewer and fewer people are illegally crossing the border, and at the same time there is a growing dearth of workers to do the jobs that the migrants/illegals have been doing in the US for years. How do we fill that gap, particularly with our current employment numbers?
Mr. Trump has embarked on a number of high-profile projects, including North Korea, Iran, China, the wall and bringing jobs back to the United States.
Most of these endeavors have had much puffery and little substance. The USMCA is not materially different from NAFTA in terms of where manufacturing will be done, the North Korean process appears to be a complete bust, there has been no real movement in terms of the Iranian situation. Mr. Trump has used puffery and division in all of these situations, insulting the North Korean Chairman, insulting the Canadian Prime Minister, but beyond bolstering his own ego, the substantive changes that he has brought forward are extremely limited, having very little impact on those seeking better jobs in the rust belt nor any substantial economic impact on AG. Trade in 2019 will be a wild ride.
Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.
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