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Trade trifecta coming?

At the cost of being called a round-headed optimist or hopelessly partisan, it feels to me President Trump is on the way to scoring a trade hat trick by the middle of October.  Based on the politics and prose now surrounding the president’s trade agenda, he could have in hand by the time Congress recesses a trade trifecta: A ratified U.S.-Mexico-Canada Agreement (USMCA), a lucrative ag/auto-only trade deal with Japan, and very likely, détente with the Chinese over his seemingly never-ending tariff wars.

The fact that U.S. Special Trade Representative (USTR) Robert Lighthizer, Treasury Secretary Steve Mnuchin and a cast of hundreds are winging to Shanghai for two days of meetings beginning July 30, speaks volumes.  Both nations – the world’s first and second largest economies – want and need to end the tariff tussle that’s gyrated markets on both sides of the Pacific, started jacking other major economies and bankrupted farmers for the last year or more.  China’s economy is contracting, it’s growth trajectory is shorter, all while the U.S. is losing monster export markets it may never get back, threatening agriculture/agribusiness and manufacturing profitability, and putting Trump’s overall economic success at risk. 

The deal is effectively written, what remains is face-saving exercises for both sides of the table.  Both China and the U.S. have no doubt conceded more than they would have liked.  Chinese President Xi Jinping must mollify his hardliners in Beijing, while Trump and his team must own up to seriously underestimating China’s willingness to walk away.  The president needs to read this week’s press coverage of Xi’s recent state visit to Russia, Xi’s sit-down with Vladimir Putin about Russia becoming China’s primary soybean supplier – a huge win for both sides if they could pull it off – and Trump might understand what Secretary of Commerce Wilbur Ross meant when he naively advised farmers, “Hey, you lose one market, you buy/sell it somewhere else.”  Or words to that effect.

USMCA is also a given, it’s now all about the timing on the only pending trade deal Congress must approve.  The White House wanted the treaty ratified by August, but knew that would never happen given Democrat control of the House.  All Trump cares about now is getting it done before the November, 2020 election.  He wants the credit, the “win,” for rewriting what he once called the worst trade deal the U.S. ever signed. 

House Speaker Nancy Pelosi (D, CA) cannot for her caucus’s sake – or her own legacy – ignore the sheer economic importance of the nearly $40-billion tripartite trade treaty.  She, too, wants to keep USMCA as far away from the 2020 election as possible.  Make no mistake, the final treaty will be so festooned with side letters and annexes to deal with the “big four” Democrat concerns, namely labor, environment, drug pricing and enforcement, the pact will read as though she and Ways & Means Committee trade subpanel chair Rep. Earl Blumenauer (D, OR) were part of Lighthizer’s original U.S. negotiating team. Given the Senate will hold its nose over any House modifications, insiders figure September or October will see final USMCA ratification.

As for Japan granting increased trade concessions to U.S. agriculture, this is a no-brainer.  Once the U.S. agreed to accept no more trade preference than Japan has already ceded to its partners in what’s now the Comprehensive & Progressive Trans-Pacific Partnership (CPTPP), or what it’s agreed to in its bilateral trade deal with the European Union (EU), Japanese Prime Minister Shinzo Abe had Trump in a corner.  In exchange for the lushly lucrative Japanese market for beef, dairy, rice, corn, etc., Abe got Trump to cease threatening new tariffs on Japanese auto exports, Abe’s worst nightmare.  Ironically, Abe has pointed out to Trump on more than one occasion – quite publicly – the U.S. would already be in the same place with U.S.-Japan ag trade, absent all the negotiating, had the U.S. simply remained part of the CPTPP.   

Of course, all these predictions hinge on Pelosi putting the good of the nation ahead of her party and the 2020 election and the president doing the same, while not shooting himself in the foot at the 11th hour.  All it takes is one ill-advised 4 a.m. tweet…