By CCN.com: The Dow remains on edge as the Trump administration prepares for another round of trade negotiations with China, but it’s another trade deal – one largely forgotten by much of the American public – that suddenly zoomed back into focus last weekend and threatened to smack the stock market back down from its record highs.
The Dow Jones Industrial Average slumped to a weak open on Monday, rising a few points at the bell but failing to demonstrate conviction. As of 10:49 am ET, the DJIA had gained 6.48 points or 0.02 percent to trade at 26,549.81. The S&P 500 rose 0.08 percent to set a new intraday record, and the Nasdaq dipped 0.01 percent amid a muted day for US stocks.
On Friday, the Dow closed the weekly trading session with a solid 81.25 point gain, which raised the index 0.31 percent to 26,543.33. The S&P 500 and Nasdaq assembled similar rallies, jumping 0.47 percent to 2,939.88 and 0.34 percent to 8,146.4.
This morning, the Dow nervously crept into the US trading session following a Wall Street Journal report that the Democrat-controlled House of Representatives would not vote to ratify the revised North American Free Trade Agreement (NAFTA).
The revised trade deal, known as the US-Mexico-Canada Agreement (USMCA), represents one of Donald Trump’s signature political successes since he became president, though NAFTA tensions have long since been overshadowed by the Trump administration’s all-out trade war with China.
According to the US International Trade Commission, the USMCA would stimulate the US economy to the tune of $68.2 billion or 0.35 percent and bolster employment by around 176,000 jobs. That GDP jolt could prove to be a crucial catalyst for the Dow and its fellow major stock market indices, which already sit at or near record highs.
Speaking at an auto industry rally last week, Vice President Mike Pence declared that the revised NAFTA is also an “absolutely essential” tool to allow US companies to remain competitive in the global economy.
“The USMCA will actually impact more than two million American manufacturing jobs that depend on exports to Canada and Mexico,” Pence said. “It’s absolutely essential because the USMCA will finally give workers the level playing field and be able to compete and win on a global stage as never before.”
However, the Wall Street Journal reported that House Democrats led by Nancy Pelosi would not vote to ratify the USMCA without fundamental changes to worker protections, virtually assuring that the agreement would not take effect before the 2020 presidential election.
While the Trump administration conceded that these were valid concerns, they protested that Congress could address them in subsequent legislation that focuses on the implementation of the USMCA following its formal ratification.
By punting on NAFTA ratification until after 2020, Democrats would deny Trump a critical political victory ahead of what promises to be a historically-divisive election. They would also prevent that $68 billion in economic growth from rippling through the stock market and bolstering Trump’s claim that he is responsible for the feverish growth that Americans have seen in their retirement portfolios since he first took office.
Bernie Sanders hopes to take the USMCA fight even further.
As Fortune reported, the Democratic presidential candidate has called for Trump to scrap NAFTA altogether and replace it with a trade deal that prioritizes worker rights over corporate profits.
“For once in your life, keep your campaign promises…go back to the drawing board,” Sanders said at a recent campaign rally, alleging that the USMCA would incentivize companies to ship US jobs to Mexico.
If Sanders manages to complete his Democratic party takeover by winning the primary, next year’s presidential election could bear an eery similarity to the 2016 contest, with one candidate defending NAFTA and the other clamoring to rip it apart.
This time, though, the roles would be reversed, with Donald Trump finding himself in the unusual political predicament of being forced to defend the swamp-crafted NAFTA against an anti-establishment outsider.
Click here for a real-time Dow Jones Industrial Average price chart.
Last modified: July 2, 2020 8:24 PM UTC