The renewal of NAFTA (with some important changes) between Mexico and the U.S. marks an important political victory for the President and a potential change in his strategy. The political victory will support Republicans in the upcoming mid-term elections in November. Mexico is a crucial trade partner for many large American enterprises, which have integrated it in their supply chains. The deal will allow Republicans to show their caucus that their President (a Republican) always achieves the best for his country, despite his crude methods.
The change in strategy can be a more important long-term signal. Trump may be trying to strengthen economic ties with US's traditional trading partners such as Mexico, Canada and the EU. This will allow the President to leverage an economic war against China, Russia and Iran, while still maintaining the economy and trade. This will solidify the US's position against its major economic foes. This means that the trade deal is a positive for Mexico but a negative for China. The renewal of NAFTA can serve as a base for the US to levy tariffs on the $200 billion in Chinese imports scheduled for September. Unless China completely shifts its stance on the economy and trade, it is unlikely we will see a truce between the U.S. and China.
Source: CNBC
Original post: The US-Mexico trade deal may be bad news for China
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