The Trump administration and House Democrats on Tuesday announced a deal on the United States-Mexico-Canada Agreement, the replacement for the North American Free Trade Agreement.
Replacing NAFTA was one of President Donald Trump’s major 2016 campaign promises.
House Speaker Nancy Pelosi has reportedly been negotiating with U.S. Trade Representative Robert Lighthizer for weeks to deliver a trade deal that includes labor protections. The new deal is backed by the American Federation of Labor and Congress of Industrial Organizations.
“There is no question of course that this trade agreement is much better than NAFTA, but in terms of our work here, it is infinitely better than what was initially proposed by the administration,” Pelosi said Tuesday.
The USMCA announcement comes the same day House Democrats unveiled two articles of impeachment against Trump.
Trump praised the USMCA deal in a tweet:
America’s great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody - Farmers, Manufacturers, Energy, Unions - tremendous support. Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!— Donald J. Trump (@realDonaldTrump) December 10, 2019
Why It’s Important
USMCA is a big deal for U.S. stocks that do cross-border business in Canada and Mexico, such as General Motors Company GM, Kansas City Southern KSU and Constellation Brands, Inc STZ.
The next step in the process will be for the Trump administration to submit ratifying legislation to Congress, potentially within the next several days. Once it has been submitted, there will be a 90-day window to approve the USMCA.
Democrats familiar with the matter have said Pelosi is eager to approve the deal by the end of December.
Progress on USMCA is bullish news for investors, but ongoing trade negotiations with China are the primary overhang for stocks at this point. Investors are hoping the North American trade deal will lead to progress on the China front as well.
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