The new Nafta is closer than we think

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05/24/2019 | 04:05 pm
Donald Trump has made some concessions to Canada and Mexico, removing tariffs on aluminum and steel. This is the latest sign that he is looking to close the deal.

Last week, Donald Trump announced that he was removing tariffs on aluminum and steel from Mexico and Canada, in a bid to accelerate the ratification of USMCA, the new free trade agreement between the United States, Canada and Mexico, replacing NAFTA.

While renegotiating the North American Free Trade Agreement (NAFTA), in June 2018, Donald Trump imposed a 25% tax on imports of steel and 10% on imports of aluminum from Canada and Mexico, which in return caused reprisals, particularly on American agricultural products.

But now, Canada and the United States have committed to eliminate these tariffs.

Tensions between Trump and the Democrats stand in the way

According to analysts at ING, this suggests the scope for ratification by the end of the summer is quite possible. However, it warns that the main Democrat objections to certain areas of the agreement haven’t gone away. “For instance, some lawmakers are concerned about the upward impact of USMCA on US drug prices.”

Furthermore, the escalation of the conflict between Donald Trump and House Speaker Nancy Pelosi is also reducing chances to ratify the agreement.

The Democrats accuse the White House of obstructing their investigations into the administration, while Trump criticizes Nancy Pelosi for stating that he was conducting a "cover-up operation".

As a result, discussions on a $2 trillion infrastructure investment project have been suspended indefinitely.

Pressure from Mike Pence

But Donald Trump repeatedly said that he wants the agreement to come into force quickly. Indeed, access to the Canadian and Mexican markets would be good news by American farmers amid escalating tensions between the United States and China. This will pressure the President into reaching an agreement with Nancy Pelosi.

Finally, ING believes that recent reports about US Vice President Mike Pence putting pressure on Congress to pass the deal by the end of the summer suggests that ratification before Fall is ultimately possible.
Romain Fournier
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