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Fresh off the “biggest deal anybody has ever seen,” President Donald Trump is expecting another soon.
“We’re doing another big one next week,” he said Wednesday at a White House ceremony attended by Chinese officials and business representatives before both nations sealed their phase-one trade accord.
The other big one is expected to be the U.S.-Mexico-Canada Agreement, an update of the 26-year-old Nafta deal that Senate Majority Leader Mitch McConnell said may be approved in his chamber as soon as today.
McConnell is expecting bipartisan support and said passage will be good for the country. It cleared the House last month with the backing of Democrats and most Republicans after negotiations changed provisions on labor, environment, enforcement and drug patent protection. The bill to implement the deal has sped through GOP-controlled Senate committees this week.
It’s been a lengthy legislative process. The leaders of the three countries signed the initial USMCA in November 2018. If it arrives on Trump’s desk next week — in the middle of his impeachment trial — he’ll be able to cloak himself in trade wins with five of the U.S.’s top six trading partners: Canada, China, Japan, Mexico and South Korea.
Left out so far are the European Union and the U.K., but they’re next in line this year and may want to review the president’s approach.
Like Trump’s China deal, the pact with Canada and Mexico was among his 2016 campaign pledges. In each case, he threatened and applied tariffs during the negotiations to extract concessions.
That’s important to keep in mind regardless of whether Trump gets an opportunity to sign USMCA next week because of another important item on the calendar.
France and the U.S. gave themselves a deadline of next Tuesday to find a compromise on a digital-tax dispute that threatens a transatlantic trade war. Without a resolution, Trump is threatening tariffs on $2.4 billion of French products in response to a 3% tax President Emmanuel Macron’s government instituted on the revenue of large tech companies including Google, Apple, Facebook and Amazon. The EU has vowed to retaliate against the U.S.’s retaliation.
As Trump reminded the crowd at the White House on Wednesday, he likes wielding tariffs because “otherwise we have no cards to negotiate with.”
Charting the Trade War
The agreement signed between the U.S. and China brings a pause in the trade war between the world’s two largest economies. However, doubts remain as to whether China can actually buy an additional $200 billion in goods and services, including $95 billion in commodities as promised. In order to achieve the increase in purchases, U.S. exports of goods and services would have to jump almost 56% this year from 2019 to reach the total laid out in the deal, according to Bloomberg calculations.
Today’s Must Reads
New normal | Trump promised more China negotiations to tackle some of U.S. companies’ most long-standing complaints would begin “very, very shortly,” a pledge that was quickly met with skepticism. Uneasy relationship | The EU is going to miss the U.K. when it’s gone: British officials played an important role rarely highlighted at home in helping the alliance function. Looking to India | Brazil’s president is set to visit India next week, aiming to boost trade with a rapidly growing market as ties with neighboring Argentina deteriorate. Roadblock | European companies have been largely excluded from the Belt and Road Initiative due to the dominant role of China’s state-owned enterprises and opaque bidding processes, the European Chamber said. Stephanomics podcast | Shawn Donnan and Stephanie Flanders discuss whether this week’s phase one agreement between the U.S. and China means the trade wars are ending, or if we’re really just at the beginning
Who won | China is the main beneficiary of the trade truce: Bloomberg Economics has raised its forecast for the country’s 2020 GDP growth to 5.9% from 5.7%. In the U.S., full delivery of China’s commitment to higher agricultural imports could deliver a 0.1 percentage-point boost to 2020 GDP growth. India’s slow recovery | The seventh straight month of declines in non-oil non gold imports — which tend to track domestic growth — reinforces Bloomberg Economics’ view that the economy’s recovery will be slow-going and shallow.
Jan. 17: Singapore exports, Italy trade balance Jan. 20: Taiwan export orders Jan. 21: South Korea 20-day exports Jan. 23: Japan exports Jan. 21-24: Business and government leaders meet at the World Economic Forum’s annual meeting. Stay on top of all of the action via Bloomberg’s Davos Diary newsletter. Click here to subscribe.
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–With assistance from Erik Wasson and Laura Litvan.
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