If you are a weekly reader of Supplierty News, the following article will come as no surprise.  According to Business Insider, there is increasing doubt that the new US-Mexico-Canada Agreement (USMCA) will pass under its current format.  The USMCA was agreed on by the three participating countries on September 30th to replace the former NAFTA agreement.

Ever since the deal was agreed on, I never thought it would pass through all three Congresses without some type of change.  Before the American Midterms, I was not convinced that the incoming Mexican Congress would back the deal and now, with a Democratic majority in the House, my suspicious have all been confirmed.

According to Business Insider, in order for the deal to be ratified in America, the following process has to commence:

  • In the US, Trump renegotiated NAFTA under what is known as Trade Promotion Authority, or TPA.
  • Under TPA, only a majority of lawmakers need to vote for the USMCA to pass.
  • But required waiting periods with TPA mean a vote will likely not come until the next Congress is seated in January.
  • So Democrats will have a chance to leave their mark on Trump’s agreement, since the president will need to win over at least a handful to pass the deal.

The current deal was created under a Republican led House.  “Losing 40 GOP members in the House would require more than 50 Democrats to flip and support the deal for it to pass, which is highly unlikely.”  Rep. Bill Pascrell, who could lead the critical House Ways and Means Committee next year, has already stated publicly that the deal in its present form will not get enough Democrat support.

“Rep. Nancy Pelosi, considered the frontrunner to be the next House speaker, has called for strengthening the pro-labor and environmental aspects of the deal by making them legally enforceable, instead of just guidelines.”

Now as pessimistic as I am, I do believe a deal will get done.  Not because I believe both parties will come to the table and work with one another to figure out what is best for America, but rather because President Trump will most likely threaten to pull the US out of NAFTA entirely if he doesn’t put a new agreement in place with his name on it.

In the end, America does need a new trade agreement with Mexico and Canada and we are leaning towards creating a better deal in the long run so this is heading in the right direction.  When this deal will get done and how it will affect the Stock market is another story.

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