Yahoo Finance New trade deal could become political football if Democrats take the U.S. House
If the Democrats take the U.S. House of Representative in next week’s midterm elections, they could put up some major hurdles for USMCA.
But victory doesn’t necessarily mean they will stand in the way of the revamped NAFTA.
A new trade deal has been one of Trump’s crowning achievements during his tenure. But trade lawyer Mark Warner says in a doomsday scenario the Democrats could put an end to USMCA.
“If they get a very large victory, which is not likely possible, the Democrats could hold together and not give Trump a victory,” Warner told Yahoo Finance Canada.
Warner says he doesn’t expect the Democrats to win big, but the world won’t know if his projections are correct until November 6.
The current breakdown of seats is 193 Democrats, 235 Republicans, and 7 vacancies. 218 seats are needed for control. In order to take control of the House, the Democrats would need a 23-seat flip.
“I think that Democrats are nervous about trade and see Trump’s approach appealing to many union voters they lost to Trump in the 2016 election,” Chris Sands, director of the Center for Canadian Studies at Johns Hopkins School of Advanced International Studies, told Yahoo Finance Canada.
Sands says the Democrats may use USMCA as a bargaining chip.
“Since it isn’t clear whether trade is a winning issue for Democrats, they may try to negotiate passage of USMCA for something else – perhaps more spending on their priorities, a few liberal judges, or support for an immigration bill,” says Sands.
Uncertainty weighs on investors
If the Democrats did make things murkier, companies and investors would likely be even more frustrated.
“The business community has been arguing for stability and the longer USMCA is delayed the worse for firms in all three countries; if they lobby publicly, it will be more costly for Democrats to delay,” says Sands.
There are bigger fish to fry for President Donald Trump. Since USMCA is virtually a done deal, he can set his sights on two major unresolved trade conflicts: the European Union and China.
“The one with China is the most serious, of course, but also the one that has the broadest support,” says Sands. “I expect that President Trump will use the State of the Union in January to call for passage of the USMCA and then talk tough on China trade. Linking the two will put more pressure on Democrats to act on USMCA, and Trump is after all a believer in maximum leverage.”
Like Warner, Sands is not convinced the Democrats will win control of the House, or that if they do, that it will be a very large majority.
“The polls giving Democrats the edge are from the same people who thought Clinton would win easily in 2016,” says Sands. “A lot more voters self-identify as independents than used to be the case, and I think political preferences are in play these days to a degree I haven’t seen before.”
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