House Speaker Nancy Pelosi says the USMCA is nearing ratification in the Democratically controlled House. Democrats say they want to be sure environmental and labor standards meet their expectations before striking a deal with Trump. One forex market analyst expects results that could be a…
Nancy Pelosi told reporters Thursday that House approval of the Trump Administration’s North American trade deal is “imminent.”
The House speaker seems pleased with the United States-Mexico-Canada Agreement (USMCA), calling it “a good template” for future trade deals. That might be good news for the U.S. stock market as the trade deal nears ratification.
The USMCA will update and replace the Clinton-era North American Free Trade Agreement (NAFTA). When the three signatory nations reached an agreement at the end of September, the Dow Jones Industrial Average rose nearly 200 points.
The gains were led by Dow companies sensitive to global trade news, while energy, materials, and industrials outperformed; the NASDAQ Composite declined the same day. Shares of Ford rose 0.8 percent and General Motors shares gained 1.6 percent. Boeing shares rose 2.8 percent.
There’s no wondering why the Dow Jones warmed to the trade deal. This April the U.S. International Trade Commission released a 400-page report projecting that the USMCA would increase real U.S. GDP by $68.2 billion (or 0.35 percent) and add a whopping 176,000 jobs to the economy.
After news broke that Pelosi sees ratification of the treaty right around the corner, one analyst told CCN in a note that the USMCA will boost the Mexican peso and Canadian dollar. Marc Chandler, Chief Market Strategist for Bannockburn Global Forex (a division of First Financial Bancorp), said:
The market reaction seemed minimal and obscured by the fact that Mexico’s central bank cut rates, but generally I would say it was a positive for both the Canadian dollar and the Mexican peso.
Chandler says the trade deal will strengthen the currencies of America’s neighbors and top trading partners because it “lifts uncertainty on the margins.” A stronger peso and Canadian dollar will be good for U.S. exports to these countries because it will make American exports more competitive in these foreign markets.
As the signed USMCA proceeds to ratification in the U.S. House, Democrats want to make sure labor and environmental standards in the treaty will be enforceable.
Chandler says that the odds of ratification ironically improved once the impeachment proceedings had begun because “NAFTA 2.0 would strengthen [Democratic] moderates and deflect the criticism of the do nothing Congress.”
For the more moderate Democratic leadership in the House, there’s a sense of urgency to secure ratification of the treaty soon. As the 2020 primary heats up, it will be less likely that Congress can get any major legislation passed.
This article was edited by Gerelyn Terzo.