For some time now, the uncertainty about trade relations — especially with China, but also with the United States’ North American neighbors — has caused company executives to hesitate in making location decisions. As Jay Rogers, partner at Nelson Mullins, says, “Uncertainty is the enemy of long-term capital investment.” Tariffs and counter-tariffs put into place give businesses short notice to adjust their supply chains. The good news is that proposals for some trade deals were announced as we went to press on this issue.
First, in early December, the U.S., Mexico, and Canada signed amendments to the United States-Mexico-Canada Agreement (USMCA), which seeks to modify the 25-year-old North American Free Trade Agreement (NAFTA) and bring it into the 21st century. Among the topics covered in the USMCA are intellectual property rights, digital trade and data storage markets, financial services markets, currency issues, as well as labor and environmental issues. The agreement still needs to be ratified by all three nations.
Shortly thereafter, the United States settled on the final terms of a partial trade deal with China, wherein President Trump agreed to significant reductions in tariffs he has already placed on $360 billion worth of Chinese goods in return for China’s commitment to purchase U.S. farm products, among other concessions. As part of the deal, the administration would also cancel new tariffs on $160 billion worth of Chinese imports that were scheduled to go into effect on December 15th. Business groups welcomed this “phase-one” deal as a sign of easing tensions in the trade war.
Of course, whether these new trade agreements actually go into effect — and whether they actually lower costs for businesses already hurt by counter-tariff measures — remains to be seen. But some positive economic news at year’s end is welcomed. We’ll deal with the fallout in 2020.